REAL ESTATE INVESTMENT TRUSTS - DISTRIBUTIONS AND SHARE DIVIDENDS

TEXAS BUSINESS ORGANIZATIONS CODE

§ 200.201. AUTHORITY FOR DISTRIBUTIONS.

The trust managers of a real estate investment trust may authorize a distribution and the real estate investment trust may make a distribution, subject to § 200.202 and any restriction in the certificate of formation.

§ 200.202. LIMITATIONS ON DISTRIBUTIONS.

(a) A real estate investment trust may not make a distribution:

(1) if the real estate investment trust would be insolvent after the distribution; or

(2) that is more than the surplus of the real estate investment trust.

(b) Notwithstanding Subsection (a)(2), if the net assets of a real estate investment trust are not less than the amount of the proposed distribution, the real estate investment trust may make a distribution involving a purchase or redemption of its own shares if the purchase or redemption is made by the real estate investment trust to:

(1) eliminate fractional shares;

(2) collect or settle indebtedness owed by or to the real estate investment trust;

(3) pay dissenting shareholders entitled to receive payment for their shares under this chapter; or

(4) effect the purchase or redemption of redeemable shares in accordance with this code.

§ 200.203. PRIORITY OF DISTRIBUTIONS.

A real estate investment trust's indebtedness that arises as a result of the declaration of a distribution and a real estate investment trust's indebtedness issued in a distribution are at parity with the real estate investment trust's indebtedness to its general, unsecured creditors, except to the extent the indebtedness is subordinated, or payment of that indebtedness is secured, by agreement.

§ 200.204. RESERVES, DESIGNATIONS, AND ALLOCATIONS FROM SURPLUS.

(a) A real estate investment trust, by resolution of the trust managers of the real estate investment trust, may:

(1) create a reserve out of the surplus of the real estate investment trust; or

(2) designate or allocate in any manner a part or all of the real estate investment trust's surplus for a proper purpose.

(b) A real estate investment trust may increase, decrease, or abolish a reserve, designation, or allocation in the manner provided by Subsection (a).

§ 200.205. AUTHORITY FOR SHARE DIVIDENDS.

The trust managers of a real estate investment trust may authorize a share dividend, and the real estate investment trust may pay a share dividend subject to § 200.206 and any restriction in the certificate of formation.

§ 200.206. LIMITATIONS ON SHARE DIVIDENDS.

(a) A real estate investment trust may not pay a share dividend in authorized but unissued shares of any class if the surplus of the real estate investment trust is less than the amount required by § 200.208 to be transferred to stated capital at the time the share dividend is made.

(b) A share dividend in shares of any class may not be made to a holder of shares of any other class unless:

(1) the real estate investment trust's certificate of formation provides for the dividend; or

(2) the share dividend is authorized by the affirmative vote or the written consent of the holders of at least a majority of the outstanding shares of the class in which the share dividend is to be made.

§ 200.207. VALUE OF SHARES ISSUED AS SHARE DIVIDENDS.

(a) A share dividend payable in authorized but unissued shares with par value shall be issued at the par value of the shares.

(b) A share dividend payable in authorized but unissued shares without par value shall be issued at the value set by the trust managers when the share dividend is authorized.

§ 200.208. TRANSFER OF SURPLUS FOR SHARE DIVIDENDS.

(a) When a share dividend payable in authorized but unissued shares with par value is made by a real estate investment trust, an amount of surplus designated by the trust managers that is not less than the aggregate par value of the shares issued as a share dividend shall be transferred to stated capital.

(b) When a share dividend payable in authorized but unissued shares without par value is made by a real estate investment trust, an amount of surplus equal to the aggregate value set by the trust managers with respect to the shares under § 200.207(b) shall be transferred to stated capital.

§ 200.209. DETERMINATION OF SOLVENCY, NET ASSETS, STATED CAPITAL, AND SURPLUS.

(a) The determination of whether a real estate investment trust is or would be insolvent and the determination of the value of a real estate investment trust's net assets, stated capital, or surplus and each of the components of net assets, stated capital, or surplus may be based on:

(1) financial statements of the real estate investment trust that present the financial condition of the real estate investment trust in accordance with generally accepted accounting principles, including financial statements that include subsidiary entities or other entities accounted for on a consolidated basis or on the equity method of accounting;

(2) financial statements prepared using the method of accounting used to file the real estate investment trust's federal income tax return or using any other accounting practices and principles that are reasonable under the circumstances;

(3) financial information, including condensed or summary financial statements, that is prepared on the same basis as financial statements described by Subdivision (1) or (2);

(4) a projection, a forecast, or other forward-looking information relating to the future economic performance, financial condition, or liquidity of the real estate investment trust that is reasonable under the circumstances;

(5) a fair valuation or information from any other method that is reasonable under the circumstances; or

(6) a combination of a statement, a valuation, or information authorized by this section.

(b) Subsection (a) does not apply to the computation of any tax imposed under the laws of this state.

§ 200.210. DATE OF DETERMINATION OF SURPLUS.

(a) For purposes of this subchapter, a determination of whether a real estate investment trust is or would be made insolvent by a distribution or share dividend or a determination of the value of a real estate investment trust's surplus shall be made:

(1) on the date the distribution or share dividend is authorized by the trust managers of the real estate investment trust if the distribution or the share dividend is made not later than the 120th day after the date of authorization; or

(2) if the distribution or the share dividend is made more than 120 days after the date of authorization:

(A) on the date designated by the trust managers if the date so designated is not earlier than 120 days before the date the distribution or the share dividend is made; or

(B) on the date the distribution or the share dividend is made if the trust managers do not designate a date as described in Paragraph (A).

(b) For purposes of this section, a distribution that involves:

(1) the incurrence by a real estate investment trust of indebtedness or a deferred payment obligation is considered to have been made on the date the indebtedness or obligation is incurred; or

(2) a contract by the real estate investment trust to acquire any of its own shares is considered to have been made on the date when the contract is made or takes effect or on the date the shares are acquired, at the option of the real estate investment trust.

§ 200.211. SPLIT-UP OR DIVISION OF SHARES.

The trust managers of a real estate investment trust may authorize the real estate investment trust to carry out any split-up or division of the issued shares of a class of the real estate investment trust into a larger number of shares within the same class that does not increase the stated capital of the real estate investment trust because the split-up or division of issued shares is not a share dividend or a distribution.

 

Contact Information

Mailing Address

Chowins Law Firm, PLLC
1011 Surrey Lane #200
Flower Mound, TX 75022

Telephone

(469) 630-2550

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