SHAREHOLDER RIGHTS AND RESTRICTIONS
TEXAS BUSINESS ORGANIZATIONS
§ 21.201. REGISTERED HOLDERS AS OWNERS; SHARES HELD BY NOMINEES.
(a) Except as otherwise provided by this code and subject to Chapter 8, Business & Commerce Code, a corporation may consider the person registered as the owner of a share in the share transfer records of the corporation at a particular time, including a record date set under § 6.101 or 6.102 or Subchapter H, as the owner of that share at that time for purposes of:
(1) voting the share;
(2) receiving distributions on the share;
(3) transferring the share;
(4) receiving notice, exercising rights of dissent, exercising or waiving a preemptive right, or giving proxies with respect to that share;
(5) entering into agreements with respect to that share in accordance with § 6.251, 6.252, or 21.210; or
(6) any other shareholder action.
(b) A corporation may establish a procedure by which the corporation recognizes as a shareholder the beneficial owner of shares registered in the name of a nominee.
(c) A procedure established under Subsection (b) must:
(1) determine the extent of the corporation's recognition of the beneficial owner as a shareholder; and
(2) include the nominee's filing of a statement with the corporation that contains information regarding the beneficial owner.
(d) A procedure established under Subsection (b) may set forth:
(1) the types of nominees to which the procedure applies;
(2) the rights or privileges that the corporation will recognize in a beneficial owner, to the extent that the rights or privileges are not inconsistent with § 10.361(g);
(3) the manner in which the procedure is selected by the nominee;
(4) the information that must be provided when the procedure is selected;
(5) the period for which the selection of the procedure is effective; and
(6) any other aspect of the rights and duties to be established under the procedure.
§ 21.202. DEFINITION OF SHARES.
In §§ 21.203-21.208, "shares" includes a security:
(1) that is convertible into shares; or
(2) that carries a right to subscribe for or acquire shares.
§ 21.203. NO STATUTORY PREEMPTIVE RIGHT UNLESS PROVIDED BY CERTIFICATE OF FORMATION.
(a) Except as provided by § 21.208, a shareholder of a corporation does not have a preemptive right under this subchapter to acquire the corporation's unissued or treasury shares except to the extent provided by the corporation's certificate of formation.
(b) If the certificate of formation includes a statement that the corporation "elects to have a preemptive right" or a similar statement, § 21.204 applies to a shareholder except to the extent the certificate of formation expressly provides otherwise.
(c) This § and §§ 21.204 through 21.208 do not invalidate or impair a corporation's right or power to grant an enforceable nonstatutory preemptive right in:
(1) a contract between the corporation and a shareholder or other person; or
(2) the governing documents of the corporation.
§ 21.204. STATUTORY PREEMPTIVE RIGHTS.
(a) If the shareholders of a corporation have a preemptive right under this subchapter, the shareholders have a preemptive right to acquire proportional amounts of the corporation's unissued or treasury shares on the decision of the corporation's board of directors to issue the shares. The preemptive right granted under this subsection is subject to uniform terms and conditions prescribed by the board of directors to provide a fair and reasonable opportunity to exercise the preemptive right.
(b) No preemptive right exists with respect to:
(1) shares issued or granted as compensation to a director, officer, agent, or employee of the corporation or a subsidiary or affiliate of the corporation;
(2) shares issued or granted to satisfy conversion or option rights created to provide compensation to a director, officer, agent, or employee of the corporation or a subsidiary or affiliate of the corporation;
(3) shares authorized in the corporation's certificate of formation that are issued not later than the 180th day after the effective date of the corporation's formation; or
(4) shares sold, issued, or granted by the corporation for consideration other than money.
(c) A holder of a share of a class without general voting rights but with a preferential right to distributions of profits, income, or assets does not have a preemptive right with respect to shares of any class.
(d) A holder of a share of a class with general voting rights but without preferential rights to distributions of profits, income, or assets does not have a preemptive right with respect to shares of any class with preferential rights to distributions of profits, income, or assets unless the shares with preferential rights are convertible into or carry a right to subscribe for or acquire shares without preferential rights.
(e) For a one-year period after the date the shares have been offered to shareholders, shares subject to preemptive rights that are not acquired by a shareholder may be issued to a person at a consideration set by the corporation's board of directors that is not lower than the consideration set for the exercise of preemptive rights. An offer at a lower consideration or after the expiration of the period prescribed by this subsection is subject to the shareholder's preemptive rights.
§ 21.205. WAIVER OF PREEMPTIVE RIGHT.
(a) A shareholder may waive a preemptive right granted to the shareholder.
(b) A written waiver of a preemptive right is irrevocable regardless of whether the waiver is supported by consideration.
§ 21.206. LIMITATION ON ACTION TO ENFORCE PREEMPTIVE RIGHT.
(a) An action brought against a corporation, the board of directors or an officer, shareholder, or agent of the corporation, or an owner of a beneficial interest in shares of the corporation for the violation of a preemptive right of a shareholder under §§ 21.203 and 21.204 must be brought not later than the earlier of:
(1) the first anniversary of the date written notice is given to each shareholder whose preemptive right was violated; or
(2) the fourth anniversary of the latest of:
(A) the date the corporation issued the shares, securities, or rights;
(B) the date the corporation sold the shares, securities, or rights; or
(C) the date the corporation otherwise distributed the shares, securities, or rights.
(b) The notice required by Subsection (a)(1) must:
(1) be sent to the holder at the address for the holder as shown on the appropriate records of the corporation; and
(2) inform the holder that the issuance, sale, or other distribution of shares, securities, or rights violated the holder's preemptive right.
§ 21.207. DISPOSITION OF SHARES HAVING PREEMPTIVE RIGHTS.
The transferee or successor of a share that has been transferred or otherwise disposed of by a shareholder of a corporation whose preemptive right to acquire shares in the corporation has been violated does not acquire the preemptive right, or any right or claim based on the violation, unless the previous shareholder has assigned the preemptive right to the transferee or successor.
§ 21.208. PREEMPTIVE RIGHT IN EXISTING CORPORATION.
Subject to the certificate of formation, a shareholder of a corporation incorporated before September 1, 2003, has a preemptive right to acquire unissued or treasury shares of the corporation to the extent provided by §§ 21.204, 21.206, and 21.207. After September 1, 2003, a corporation may limit or deny the preemptive right of the shareholders of the corporation by amending the corporation's certificate of formation.
§ 21.209. TRANSFER OF SHARES AND OTHER SECURITIES.
Except as otherwise provided by this code, the shares and other securities of a corporation are transferable in accordance with Chapter 8, Business & Commerce Code.
§ 21.210. RESTRICTION ON TRANSFER OF SHARES AND OTHER SECURITIES.
(a) A restriction on the transfer or registration of transfer of a security, or on the amount of a corporation's securities that may be owned by a person or group of persons, may be imposed by:
(1) the corporation's certificate of formation;
(2) the corporation's bylaws;
(3) a written agreement among two or more holders of the securities; or
(4) a written agreement among one or more holders of the securities and the corporation if:
(A) the corporation files a copy of the agreement at the principal place of business or registered office of the corporation; and
(B) the copy of the agreement is subject to the same right of examination by a shareholder of the corporation, in person or by agent, attorney, or accountant, as the books and records of the corporation.
(b) A restriction imposed under Subsection (a) is not valid with respect to a security issued before the restriction has been adopted, unless the holder of the security voted in favor of the restriction or is a party to the agreement imposing the restriction.
§ 21.211. VALID RESTRICTIONS ON TRANSFER.
(a) Without limiting the general powers granted by §§ 21.210 and 21.213 to impose and enforce reasonable restrictions, a restriction placed on the transfer or registration of transfer of a security of a corporation is valid if the restriction reasonably:
(1) obligates the holder of the restricted security to offer a person, including the corporation or other holders of securities of the corporation, an opportunity to acquire the restricted security within a reasonable time before the transfer;
(2) obligates the corporation, to the extent provided by this code, or another person to purchase securities that are the subject of an agreement relating to the purchase and sale of the restricted security;
(3) requires the corporation or the holders of a class of the corporation's securities to consent to a proposed transfer of the restricted security or to approve the proposed transferee of the restricted security for the purpose of preventing a violation of law;
(4) prohibits the transfer of the restricted security to a designated person or group of persons and the designation is not manifestly unreasonable;
(5) maintains the status of the corporation as an electing small business corporation under Subchapter S of the Internal Revenue Code;
(6) maintains a tax advantage to the corporation;
(7) maintains the status of the corporation as a close corporation under Subchapter O;
(8) obligates the holder of the restricted securities to sell or transfer an amount of restricted securities to a person or group of persons, including the corporation or other holders of securities of the corporation; or
(9) causes or results in the automatic sale or transfer of an amount of restricted securities to a person or group of persons, including the corporation or other holders of securities of the corporation.
(b) A restriction placed on the transfer or registration of transfer of a security of a corporation, on the amount of the corporation's securities, or on the amount of the corporation's securities that may be owned by a person or group of persons is conclusively presumed to be for a reasonable purpose if the restriction:
(1) maintains a local, state, federal, or foreign tax advantage to the corporation or its shareholders, including:
(A) maintaining the corporation's status as an electing small business corporation under Subchapter S of the Internal Revenue Code;
(B) maintaining or preserving any tax attribute, including net operating losses; or
(C) qualifying or maintaining the qualification of the corporation as a real estate investment trust under the Internal Revenue Code or regulations adopted under the Internal Revenue Code; or
(2) maintains a statutory or regulatory advantage or complies with a statutory or regulatory requirement under applicable local, state, federal, or foreign law.
§ 21.212. BYLAW OR AGREEMENT RESTRICTING TRANSFER OF SHARES OR OTHER SECURITIES.
(a) A corporation that has adopted a bylaw or is a party to an agreement that restricts the transfer of the shares or other securities of the corporation may file with the secretary of state, in accordance with Chapter 4, a copy of the bylaw or agreement and a statement attached to the copy that:
(1) contains the name of the corporation;
(2) states that the attached copy of the bylaw or agreement is a true and correct copy of the bylaw or agreement; and
(3) states that the filing has been authorized by the board of directors or, in the case of a corporation that is managed in some other manner under a shareholders' agreement, by the person empowered by the agreement to manage the corporation's business and affairs.
(b) After a statement described by Subsection (a) is filed with the secretary of state, the bylaws or agreement restricting the transfer of shares or other securities is a public record, and the fact that the statement has been filed may be stated on a certificate representing the restricted shares or securities if required by § 3.202.
(c) A corporation that is a party to an agreement restricting the transfer of the shares or other securities of the corporation may make the agreement part of the corporation's certificate of formation without restating the provisions of the agreement in the certificate of formation by amending the certificate of formation. If the agreement alters any provision of the certificate of formation, the certificate of amendment shall identify the altered provision by reference or description. If the agreement is an addition to the certificate of formation, the certificate of amendment must state that fact.
(d) The certificate of amendment must:
(1) include a copy of the agreement restricting the transfer of shares or other securities;
(2) state that the attached copy of the agreement is a true and correct copy of the agreement; and
(3) state that inclusion of the certificate of amendment as part of the certificate of formation has been authorized in the manner required by this code to amend the certificate of formation.
§ 21.213. ENFORCEABILITY OF RESTRICTION ON TRANSFER OF CERTAIN SECURITIES.
(a) A restriction placed on the transfer or registration of the transfer of a security of a corporation is specifically enforceable against the holder, or a successor or transferee of the holder, if:
(1) the restriction is reasonable and noted conspicuously on the certificate or other instrument representing the security; or
(2) with respect to an uncertificated security, the restriction is reasonable and a notation of the restriction is contained in the notice sent with respect to the security under § 3.205.
(b) Unless noted in the manner specified by Subsection (a) with respect to a certificate or other instrument or an uncertificated security, an otherwise enforceable restriction is ineffective against a transferee for value without actual knowledge of the restriction at the time of the transfer or against a subsequent transferee, regardless of whether the transfer is for value. A restriction is specifically enforceable against a person other than a transferee for value from the time the person acquires actual knowledge of the restriction's existence.
§ 21.214. JOINT OWNERSHIP OF SHARES.
(a) If shares are registered on the books of a corporation in the names of two or more persons as joint owners with the right of survivorship and one of the owners dies, the corporation may record on its books and effect the transfer of the shares to a person, including the surviving joint owner, and pay any distributions made with respect to the shares, as if the surviving joint owner was the absolute owner of the shares. The recording and distribution authorized by this subsection must be made after the death of a joint owner and before the corporation receives actual written notice that a party other than a surviving joint owner is claiming an interest in the shares or distribution.
(b) The discharge of a corporation from liability under § 21.216 and the transfer of full legal and equitable title of the shares does not affect, reduce, or limit any cause of action existing in favor of an owner of an interest in the shares or distributions against the surviving owner.
§ 21.215. LIABILITY FOR DESIGNATING OWNER OF SHARES.
A corporation or an officer, director, employee, or agent of the corporation may not be held liable for considering the person who is registered as the owner of a share in the share transfer records of the corporation at a particular time to be the owner of the share at that time for a purpose described by § 21.201, regardless of whether the person possesses a certificate for that share.
§ 21.216. LIABILITY REGARDING JOINT OWNERSHIP OF SHARES.
A corporation that transfers shares or makes a distribution to a surviving joint owner under § 21.214 before the corporation has received a written claim for the shares or distribution from another person is discharged from liability for the transfer or payment.
§ 21.217. LIABILITY OF ASSIGNEE OR TRANSFEREE.
An assignee or transferee of certificated shares, uncertificated shares, or a subscription for shares in good faith and without knowledge that full consideration for the shares or subscription has not been paid may not be held personally liable to the corporation or a creditor of the corporation for an unpaid portion of the consideration.
§ 21.218. EXAMINATION OF RECORDS.
(a) In this section, a holder of a beneficial interest in a voting trust entered into under § 6.251 is a holder of the shares represented by the beneficial interest.
(b) On written demand stating a proper purpose, a holder of shares of a corporation for at least six months immediately preceding the holder's demand, or a holder of at least five percent of all of the outstanding shares of a corporation, is entitled to examine and copy, at a reasonable time, the corporation's books, records of account, minutes, and share transfer records relating to the stated purpose. The examination may be conducted in person or through an agent, accountant, or attorney.
(c) This § does not impair the power of a court, on the presentation of proof of proper purpose by a beneficial or record holder of shares, to compel the production for examination by the holder of the books and records of accounts, minutes, and share transfer records of a corporation, regardless of the period during which the holder was a beneficial holder or record holder and regardless of the number of shares held by the person.
§ 21.219. ANNUAL AND INTERIM STATEMENTS OF CORPORATION.
(a) On written request of a shareholder of the corporation, a corporation shall mail to the shareholder:
(1) the annual statements of the corporation for the last fiscal year that contain in reasonable detail the corporation's assets and liabilities and the results of the corporation's operations; and
(2) the most recent interim statements, if any, that have been filed in a public record or other publication.
(b) The corporation shall be allowed a reasonable time to prepare the annual statements.
§ 21.220. PENALTY FOR FAILURE TO PREPARE VOTING LIST.
An officer or agent of a corporation who is in charge of the corporation's share transfer records and who does not prepare the list of shareholders, keep the list on file for a 10-day period, or produce and keep the list available for inspection at the annual meeting as required by §§ 21.354 and 21.372 is liable to a shareholder who suffers damages because of the failure for the damage caused by the failure.
§ 21.221. PENALTY FOR FAILURE TO PROVIDE NOTICE OF MEETING.
If an officer or agent of a corporation is unable to comply with the duties prescribed by §§ 21.354 and 21.372 because the officer or agent did not receive notice of a meeting of shareholders within a sufficient time before the date of the meeting, the corporation, rather than the officer or agent, is liable to a shareholder who suffers damages because of the failure for the extent of the damage caused by the failure.
§ 21.222. PENALTY FOR REFUSAL TO PERMIT EXAMINATION OF CERTAIN RECORDS.
(a) A corporation that refuses to allow a person to examine and make copies of account records, minutes, and share transfer records under § 21.218 is liable to the shareholder for any cost or expense, including attorney's fees, incurred in enforcing the shareholder's rights under § 21.218. The liability imposed on a corporation under this subsection is in addition to any other damages or remedy afforded to the shareholder by law.
(b) It is a defense to an action brought under this § that the person suing:
(1) has, within the two years preceding the date the action is brought, sold or offered for sale a list of shareholders or of holders of voting trust certificates for shares of the corporation or any other corporation;
(2) has aided or abetted a person in procuring a list of shareholders or of holders of voting trust certificates for the purpose described by Subdivision (1);
(3) has improperly used information obtained through a prior examination of the books and account records, minutes, or share transfer records of the corporation or any other corporation; or
(4) was not acting in good faith or for a proper purpose in making the person's request for examination.
§ 21.223. LIMITATION OF LIABILITY FOR OBLIGATIONS.
(a) A holder of shares, an owner of any beneficial interest in shares, or a subscriber for shares whose subscription has been accepted, or any affiliate of such a holder, owner, or subscriber or of the corporation, may not be held liable to the corporation or its obligees with respect to:
(1) the shares, other than the obligation to pay to the corporation the full amount of consideration, fixed in compliance with §§ 21.157-21.162, for which the shares were or are to be issued;
(2) any contractual obligation of the corporation or any matter relating to or arising from the obligation on the basis that the holder, beneficial owner, subscriber, or affiliate is or was the alter ego of the corporation or on the basis of actual or constructive fraud, a sham to perpetrate a fraud, or other similar theory; or
(3) any obligation of the corporation on the basis of the failure of the corporation to observe any corporate formality, including the failure to:
(A) comply with this code or the certificate of formation or bylaws of the corporation; or
(B) observe any requirement prescribed by this code or the certificate of formation or bylaws of the corporation for acts to be taken by the corporation or its directors or shareholders.
(b) Subsection (a)(2) does not prevent or limit the liability of a holder, beneficial owner, subscriber, or affiliate if the obligee demonstrates that the holder, beneficial owner, subscriber, or affiliate caused the corporation to be used for the purpose of perpetrating and did perpetrate an actual fraud on the obligee primarily for the direct personal benefit of the holder, beneficial owner, subscriber, or affiliate.
§ 21.224. PREEMPTION OF LIABILITY.
The liability of a holder, beneficial owner, or subscriber of shares of a corporation, or any affiliate of such a holder, owner, or subscriber or of the corporation, for an obligation that is limited by § 21.223 is exclusive and preempts any other liability imposed for that obligation under common law or otherwise.
§ 21.225. EXCEPTIONS TO LIMITATIONS.
Section 21.223 or 21.224 does not limit the obligation of a holder, beneficial owner, subscriber, or affiliate to the obligee of the corporation if that person:
(1) expressly assumes, guarantees, or agrees to be personally liable to the obligee for the obligation; or
(2) is otherwise liable to the obligee for the obligation under this code or other applicable statute.
§ 21.226. PLEDGEES AND TRUST ADMINISTRATORS.
(a) A pledgee or other holder of shares as collateral security is not personally liable as a shareholder.
(b) An executor, administrator, conservator, guardian, trustee, assignee for the benefit of creditors, or receiver is not personally liable as a holder of or subscriber to shares of a corporation.
(c) The estate and funds administered by an executor, administrator, conservator, guardian, trustee, assignee for the benefit of creditors, or receiver are liable for the full amount of the consideration for which the shares were or are to be issued.