REAL ESTATE INVESTMENT TRUSTS - INVESTMENTS & FUNDAMENTAL BUSINESS TRANSACTIONS

TEXAS BUSINESS ORGANIZATIONS CODE

INVESTMENTS

§ 200.351. INVESTMENTS.

A trust manager or officer of a real estate investment trust has complete discretion with respect to the investment of the trust estate unless the investment is contrary to or inconsistent with:

(1) this chapter;

(2) a provision of the Internal Revenue Code relating to or governing real estate investment trusts; or

(3) regulations adopted under a provision of the Internal Revenue Code relating to or governing real estate investment trusts.

FUNDAMENTAL BUSINESS TRANSACTIONS

§ 200.401. DEFINITIONS.

In this subchapter:

(1) "Participating shares" means shares that entitle the holders of the shares to participate without limitation in distributions.

(2) "Sale of all or substantially all of the assets" means the sale, lease, exchange, or other disposition, other than a pledge, mortgage, deed of trust, or trust indenture unless otherwise provided by the certificate of formation, of all or substantially all of the property and assets of a domestic real estate investment trust that is not made in the usual and regular course of the trust's business without regard to whether the disposition is made with the goodwill of the business. The term does not include a transaction that results in the real estate investment trust directly or indirectly:

(A) continuing to engage in one or more businesses; or

(B) applying a portion of the consideration received in connection with the transaction to the conduct of a business that the real estate investment trust engages in after the transaction.

(3) "Shares" includes a receipt or other instrument issued by a depository representing an interest in one or more shares or fractions of shares of a domestic or foreign real estate investment trust that are deposited with the depository.

(4) "Voting shares" means shares that entitle the holders of the shares to vote unconditionally in elections of trust managers.

§ 200.402. APPROVAL OF MERGER.

(a) A real estate investment trust that is a party to the merger under Chapter 10 must approve the merger by complying with this section.

(b) The trust managers of the real estate investment trust shall adopt a resolution that:

(1) approves the plan of merger; and

(2) if shareholder approval of the merger is required by this subchapter:

(A) recommends that the plan of merger be approved by the shareholders of the real estate investment trust; or

(B) directs that the plan of merger be submitted to the shareholders for approval without recommendation if the trust managers determine for any reason not to recommend approval of the plan of merger.

(c) Except as provided by this subchapter or Chapter 10, the plan of merger shall be submitted to the shareholders of the real estate investment trust for approval as provided by this subchapter. The trust managers may place conditions on the submission of the plan of merger to the shareholders.

(d) If the trust managers approve a plan of merger required to be approved by the shareholders of the real estate investment trust but do not adopt a resolution recommending that the plan of merger be approved by the shareholders, the trust managers shall communicate to the shareholders the reason for the trust managers' determination to submit the plan of merger without a recommendation.

(e) Except as provided by Chapter 10 or §§ 200.407-200.409, the shareholders of the real estate investment trust shall approve the plan of merger as provided by this subchapter.

§ 200.403. APPROVAL OF CONVERSION.

(a) A real estate investment trust must approve a conversion under Chapter 10 by complying with this section.

(b) The trust managers of the real estate investment trust shall adopt a resolution that approves the plan of conversion and:

(1) recommends that the plan of conversion be approved by the shareholders of the real estate investment trust; or

(2) directs that the plan of conversion be submitted to the shareholders for approval without recommendation if the trust managers determine for any reason not to recommend approval of the plan of conversion.

(c) The plan of conversion shall be submitted to the shareholders of the real estate investment trust for approval as provided by this subchapter. The trust managers may place conditions on the submission of the plan of conversion to the shareholders.

(d) If the trust managers approve a plan of conversion but do not adopt a resolution recommending that the plan of conversion be approved by the shareholders of the real estate investment trust, the trust managers shall communicate to the shareholders the reason for the trust managers' determination to submit the plan of conversion without a recommendation.

(e) Except as provided by §§ 200.407-200.409, the shareholders of the real estate investment trust must approve the plan of conversion as provided by this subchapter.

§ 200.404. APPROVAL OF EXCHANGE.

(a) A real estate investment trust the shares of which are to be acquired in an exchange under Chapter 10 must approve the exchange by complying with this section.

(b) The trust managers shall adopt a resolution that approves the plan of exchange and:

(1) recommends that the plan of exchange be approved by the shareholders of the real estate investment trust; or

(2) directs that the plan of exchange be submitted to the shareholders for approval without recommendation if the trust managers determine for any reason not to recommend approval of the plan of exchange.

(c) The plan of exchange shall be submitted to the shareholders of the real estate investment trust for approval as provided by this subchapter. The trust managers may place conditions on the submission of the plan of exchange to the shareholders.

(d) If the trust managers approve a plan of exchange but do not adopt a resolution recommending that the plan of exchange be approved by the shareholders of the real estate investment trust, the trust managers shall communicate to the shareholders the reason for the trust managers' determination to submit the plan of exchange to shareholders without a recommendation.

(e) Except as provided by §§ 200.407-200.409, the shareholders of the real estate investment trust shall approve the plan of exchange as provided by this subchapter.

§ 200.405. APPROVAL OF SALE OF ALL OR SUBSTANTIALLY ALL OF ASSETS.

(a) Except as provided by the certificate of formation of a domestic real estate investment trust, a sale, lease, pledge, mortgage, assignment, transfer, or other conveyance of an interest in real property or other assets of the real estate investment trust does not require the approval or consent of the shareholders of the real estate investment trust unless the transaction constitutes a sale of all or substantially all of the assets of the real estate investment trust.

(b) A real estate investment trust must approve the sale of all or substantially all of its assets by complying with this section.

(c) The trust managers of the real estate investment trust shall adopt a resolution that approves the sale of all or substantially all of the assets of the real estate investment trust and:

(1) recommends that the sale of all or substantially all of the assets of the real estate investment trust be approved by the shareholders of the real estate investment trust; or

(2) directs that the sale of all or substantially all of the assets of the real estate investment trust be submitted to the shareholders for approval without recommendation if the trust managers determine for any reason not to recommend approval of the sale.

(d) The sale of all or substantially all of the assets of the real estate investment trust shall be submitted to the shareholders of the real estate investment trust for approval as provided by this subchapter. The trust managers may place conditions on the submission of the proposed sale to the shareholders.

(e) If the trust managers approve the sale of all or substantially all of the assets of the real estate investment trust but do not adopt a resolution recommending that the proposed sale be approved by the shareholders of the real estate investment trust, the trust managers shall communicate to the shareholders the reason for the trust managers' determination to submit the proposed sale to shareholders without a recommendation.

(f) The shareholders of the real estate investment trust shall approve the sale of all or substantially all of the assets of the real estate investment trust as provided by this subchapter.

(g) After the approval of the sale by the shareholders, the trust managers may abandon the sale of all or substantially all of the assets of the real estate investment trust, subject to the rights of a third party under a contract relating to the assets, without further action or approval by the shareholders.

§ 200.406. GENERAL PROCEDURE FOR SUBMISSION TO SHAREHOLDERS OF FUNDAMENTAL BUSINESS TRANSACTION.

(a) If a fundamental business transaction involving a real estate investment trust is required to be submitted to the shareholders of the real estate investment trust under this subchapter, the real estate investment trust shall notify each shareholder of the real estate investment trust that the fundamental business transaction is being submitted to the shareholders for approval at a meeting of shareholders as required by this subchapter, regardless of whether the shareholder is entitled to vote on the matter.

(b) If the fundamental business transaction is a merger, conversion, or interest exchange, the notice required by Subsection (a) shall contain or be accompanied by a copy or summary of the plan of merger, conversion, or interest exchange, as appropriate, and the notice required by § 10.355.

(c) The notice of the meeting must:

(1) be given not later than the 21st day before the date of the meeting; and

(2) state that the purpose, or one of the purposes, of the meeting is to consider the fundamental business transaction.

§ 200.407. GENERAL VOTE REQUIREMENT FOR APPROVAL OF FUNDAMENTAL BUSINESS TRANSACTION.

(a) Except as provided by this code or the certificate of formation or bylaws of a real estate investment trust in accordance with § 200.261, the affirmative vote of the holders of at least two-thirds of the outstanding shares of the real estate investment trust entitled to vote on a fundamental business transaction is required to approve the transaction.

(b) Unless provided by the certificate of formation or § 200.408, shares of a class or series that are not otherwise entitled to vote on matters submitted to shareholders generally will not be entitled to vote for the approval of a fundamental business transaction.

(c) Except as provided by this code, if a class or series of shares of a real estate investment trust is entitled to vote on a fundamental business transaction as a class or series, in addition to the vote required under Subsection (a), the affirmative vote of the holders of at least two-thirds of the outstanding shares in each class or series of shares entitled to vote on the fundamental business transaction as a class or series is required to approve the transaction.

(d) Unless required by the certificate of formation, approval of a merger by shareholders is not required under this code for a real estate investment trust that is a party to the plan of merger unless that real estate investment trust is also a party to the merger.

§ 200.408. CLASS VOTING REQUIREMENTS FOR CERTAIN FUNDAMENTAL BUSINESS TRANSACTIONS.

(a) Separate voting by a class or series of shares of a real estate investment trust is required for approval of a plan of merger or conversion if:

(1) the plan of merger or conversion contains a provision that would require approval by that class or series of shares under § 200.262 if the provision was contained in a proposed amendment to the real estate investment trust's certificate of formation; or

(2) that class or series of shares is entitled under the certificate of formation to vote as a class or series on the plan of merger or conversion.

(b) Separate voting by a class or series of shares of a real estate investment trust is required for approval of a plan of exchange if:

(1) shares of that class or series are to be exchanged under the terms of the plan of exchange; or

(2) that class or series is entitled under the certificate of formation to vote as a class or series on the plan of exchange.

(c) Separate voting by a class or series of shares of a real estate investment trust is required for approval of a sale of all or substantially all of the assets of the real estate investment trust if that class or series of shares is entitled under the certificate of formation to vote as a class or series on the sale of the real estate investment trust's assets.

§ 200.409. NO SHAREHOLDER VOTE REQUIREMENT FOR CERTAIN FUNDAMENTAL BUSINESS TRANSACTIONS.

(a) Unless required by the real estate investment trust's certificate of formation, a plan of merger is not required to be approved by the shareholders of a real estate investment trust if:

(1) the real estate investment trust is the sole surviving real estate investment trust in the merger;

(2) the certificate of formation of the real estate investment trust following the merger will not differ from the real estate investment trust's certificate of formation before the merger;

(3) immediately after the effective date of the merger, each shareholder of the real estate investment trust whose shares were outstanding immediately before the effective date of the merger will hold the same number of shares, with identical designations, preferences, limitations, and relative rights;

(4) the sum of the voting power of the number of voting shares outstanding immediately after the merger and the voting power of securities that may be acquired on the conversion or exercise of securities issued under the merger does not exceed by more than 20 percent the voting power of the total number of voting shares of the real estate investment trust that are outstanding immediately before the merger; and

(5) the sum of the number of participating shares that are outstanding immediately after the merger and the number of participating shares that may be acquired on the conversion or exercise of securities issued under the merger does not exceed by more than 20 percent the total number of participating shares of the real estate investment trust that are outstanding immediately before the merger.

(b) Unless required by the certificate of formation, a plan of merger effected under § 10.005 or 10.006 does not require the approval of the shareholders of the real estate investment trust.

§ 200.410. RIGHTS OF DISSENT AND APPRAISAL.

A shareholder of a domestic real estate investment trust has the rights of dissent and appraisal under Subchapter H, Chapter 10, with respect to a fundamental business transaction.

 

Contact Information

Mailing Address

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

Telephone

(469) 630-2550

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