VERNON'S TEXAS CIVIL STATUTES

CHAPTER 9. NON-PROFIT, COOPERATIVE, RELIGIOUS AND CHARITABLE





Art. 1396-1.01. Short Title, Captions, Parts, Articles, Sections, 
Subsections and Paragraphs

A. This Act shall be known and may be cited as the "Texas Non-Profit 
Corporation Act."

B. The division of this Act into Parts, Articles, Sections, 
Subsections, and Paragraphs and the use of captions in connection 
therewith are solely for convenience and shall have no legal effect 
in construing the provisions of this Act.

C. This Act has been organized and subdivided in the following 
manner:      

(1) The Act is divided into Parts, containing groups of related 
Articles.  Parts are numbered consecutively with cardinal numbers.

(2) The Act is also divided into Articles, numbered consecutively 
with Arabic numerals.

(3) Articles are divided into Sections.  The Sections within each 
Article are numbered consecutively with capital letters.

(4) Sections are divided into Subsections.  The Subsections within 
each Section are numbered consecutively with Arabic numerals 
enclosed in parentheses.

(5) Subsections are divided into Paragraphs.  The Paragraphs within 
each Subsection are numbered consecutively with lower case letters 
enclosed in parentheses.

Acts 1959, 56th Leg., p. 286, ch. 162, art. 1.01.                             




Art. 1396-1.02. Definitions                                                   

A. As used in this Act, unless the context otherwise requires, the 
term:    

(1) "Corporation" or "domestic corporation" means a corporation not 
for profit subject to the provisions of this Act, except a foreign 
corporation.

(2) "Foreign corporation" means a corporation not for profit 
organized under laws other than the laws of this State.

(3) "Non-Profit Corporation" is the equivalent of "not for profit 
corporation" and means a corporation no part of the income of which 
is distributable to its members, directors, or officers.

(4) "Articles of incorporation" means the original or restated 
articles of incorporation and all amendments thereto.

(5) "By-laws" means the code or codes of rules adopted for the 
regulation or management of the corporation, irrespective of the 
name or names by which such rules are designated.

(6) "Member" means one having membership rights in a corporation in 
accordance with the provisions of its articles of incorporation or 
its by-laws.

(7) "Board of Directors" means the group of persons vested with the 
management of the affairs of the corporation, irrespective of the 
name by which such group is designated.

(8) "President" means that officer designated as "president" in the 
articles of incorporation or by-laws of a corporation, or that 
officer authorized, in the articles of incorporation, the by-laws, 
or otherwise, to perform the functions of the principal executive 
officer, irrespective of the name by which he may be designated, or 
that committee of persons authorized, in the articles of 
incorporation, the by-laws, or otherwise, to perform the functions 
of the principal executive officer.

(9) "Vice-president" means that officer designated as 
"vice-president" in the articles of incorporation or the by-laws of 
a corporation, or that officer or committee of persons authorized, 
in the articles of incorporation, the by-laws, or otherwise, to 
perform the duties of the president upon the death, absence, or 
resignation of the president or upon his inability to perform the 
duties of his office, irrespective of the name by which he, or they, 
may be designated.

(10) "Secretary" means that officer designated as "secretary" in 
the articles of incorporation or the by-laws of a corporation, or 
that officer or committee of persons authorized, in the articles of 
incorporation, the by-laws, or otherwise, to perform the functions 
of secretary, irrespective of the name by which he, or they, may be 
designated.

(11) "Treasurer" means that officer designated as "treasurer" in 
the articles of incorporation or the by-laws of a corporation, or 
that officer or committee of persons authorized, in the articles of 
incorporation, the by-laws, or otherwise, to perform the functions 
of a treasurer, irrespective of the name by which he, or they, may 
be designated.

(12) "Insolvency" means inability of a corporation to pay its debts 
as they become due in the usual course of its affairs.

(13) "Verified" means subscribed and sworn to under the sanction of 
an oath, or such affirmation as is by law equivalent to an oath, 
made before an officer authorized to administer oaths.

(14) "Director" means a member of the board of directors of a 
corporation organized under this Act.

(15) "Ordinary care" means the care that an ordinarily prudent 
person in a similar position would exercise under similar 
circumstances.

Acts 1959, 56th Leg., p. 286, ch. 162, art. 1.02.  Amended by Acts 
1993, 73rd Leg., ch. 733, Sec. 1, eff. Jan. 1, 1994.




Art. 1396-2.01. Purposes                                                      

A. Except as hereinafter in this Article expressly excluded 
herefrom, non-profit corporations may be organized under this Act 
for any lawful purpose or purposes, which purposes shall be fully 
stated in the articles of incorporation.  Such purpose or purposes 
may include, without being limited to, any one or more of the 
following: charitable, benevolent, religious, eleemosynary, 
patriotic, civic, missionary, educational, scientific, social, 
fraternal, athletic, aesthetic, agricultural and horticultural;  
and the conduct of professional, commercial, industrial, or trade 
associations;  and animal husbandry.  Subject to the provisions of 
Chapter 2, Title 83, of the Revised Civil Statutes of Texas, 1925, 
and of such Chapter or any part thereof as it may hereafter be 
amended, a corporation may be organized under this Act if any one or 
more of its purposes for the conduct of its affairs in this State is 
to organize laborers, working men, or wage earners to protect 
themselves in their various pursuits.

(1) Charitable corporations may be formed for the purpose of 
operating a Dental Health Service Corporation which service 
corporation will manage and coordinate the relationship between the 
contracting dentist, who will perform the dental services, and the 
patient who will receive such services where such patient is a 
member of a group which has contracted with the Dental Health 
Service Corporation to provide dental care to members of that 
group.  An application for a charter under this Section shall have 
attached as exhibits (1) an affidavit by the applicants that not 
less than thirty percent (30%) of the dentists legally engaged in 
the practice of dentistry in this state together with their names 
and addresses have signed contracts to perform the required dental 
services for a period of not less than one (1) year, after 
incorporation, and (2) a certification by the Texas State Board of 
Dental Examiners that the applicant incorporators are reputable 
citizens of the State of Texas and are of good moral character and 
that the corporation sought to be formed will be in the best 
interest of the public health.  A corporation formed hereunder 
shall have not less than twelve (12) directors, nine (9) of whom 
shall be dentists licensed by the Texas State Board of Dental 
Examiners to practice dentistry in this state and be actively 
engaged in the practice of dentistry in this state.  A corporation 
formed hereunder shall maintain not less than thirty percent (30%) 
of the number of dentists actually engaged in the practice of 
dentistry in this state as participating or contracting dentists, 
and shall file with the Texas State Board of Dental Examiners each 
September the names and addresses of all contracting or 
participating dentists.  A corporation formed hereunder shall not 
(1) prevent any patient from selecting the licensed dentist of his 
choice to render dental services to him, (2) deny any licensed 
dentist the right to participate as a contracting dentist to 
perform the dental services contracted for by the patient, (3) 
discriminate among patients or licensed dentists regarding payment 
or reimbursement for the cost of performing dental services 
provided the dentist is licensed to perform the dental service, or 
(4) authorize any person to regulate, interfere, or intervene in 
any manner in the diagnosis or treatment rendered by a licensed 
dentist to his patient.  A corporation formed hereunder may require 
the attending dentist to provide a narrative oral or written 
description of the dental services rendered for the purpose of 
determining benefits or providing proof of treatment.  Diagnostic 
aids used in the course of treatment may be requested by the 
corporation, but may not be required for any purpose.

B. This Act shall not apply to any corporation, nor may any 
corporation be organized under this Act or obtain authority to 
conduct its affairs in this State under this Act:

(1) If any one or more of its purposes for the conduct of its affairs 
in this State is expressly forbidden by any law of this State.

(2) If any one or more of its purposes for the conduct of its affairs 
in this State is to engage in any activity which cannot lawfully be 
engaged in without first obtaining a license under the authority of 
the laws of this State to engage in such activity and such license 
cannot lawfully be granted to a corporation, except as provided by 
Subsection C.

(3) If any one or more of its purposes for the conduct of its affairs 
in this State is to organize Group Hospital Service, Rural Credit 
Unions, Agricultural and Livestock Pools, Mutual Loan 
Corporations, Co-operative Credit Associations, Farmers' 
Co-operative Societies, Co-operative Marketing Act Corporations, 
Rural Electric Co-operative Corporations, Telephone Co-operative 
Corporations, or fraternal organizations operating under the lodge 
system and heretofore or hereafter incorporated under Articles 1399 
through 1407, both inclusive, of Revised Civil Statutes of Texas, 
1925.

(4) If any one or more of its purposes for the conduct of its affairs 
in this State is to operate a bank under the banking laws of this 
State or to operate an insurance company of any type or character 
that operates under the insurance laws of this State.

C. Doctors of medicine and osteopathy licensed by the Texas State 
Board of Medical Examiners and podiatrists licensed by the Texas 
State Board of Podiatric Medical Examiners may organize a 
non-profit corporation under this Act that is jointly owned, 
managed, and controlled by those practitioners to perform a 
professional service that falls within the scope of practice of 
those practitioners and consists of:

(1) carrying out research in the public interest in medical 
science, medical economics, public health, sociology, or a related 
field;

(2) supporting medical education in medical schools through grants 
or scholarships;

(3) developing the capabilities of individuals or institutions 
studying, teaching, or practicing medicine, including podiatric 
medicine;

(4) delivering health care to the public;  or                                 

(5) instructing the public regarding medical science, public 
health, hygiene, or a related matter.

D. When doctors of medicine, osteopathy, and podiatry organize a 
non-profit corporation that is jointly owned by those 
practitioners, the authority of each of the practitioners is 
limited by the scope of practice of the respective practitioners 
and none can exercise control over the other's clinical authority 
granted by their respective licenses, either through agreements, 
articles of incorporation, bylaws, directives, financial 
incentives, or other arrangements that would assert control over 
treatment decisions made by the practitioner.  The Texas State 
Board of Medical Examiners and the Texas State Board of Podiatric 
Medical Examiners continue to exercise regulatory authority over 
their respective licenses.

Acts 1959, 56th Leg., p. 286, ch. 162, art. 201.  Amended by Acts 
1961, 57th Leg., p. 959, ch. 418, Sec. 1;  Acts 1983, 68th Leg., p. 
142, ch. 36, Sec. 1, eff. Aug. 29, 1983;  Acts 1989, 71st Leg., ch. 
1039, Sec. 4.07, eff. Sept. 1, 1989;  Acts 1999, 76th Leg., ch. 813, 
Sec. 2, eff. Aug. 30, 1999;  Acts 2003, 78th Leg., ch. 534, Sec. 1, 
eff. June 20, 2003.




Art. 1396-2.02. General Powers                                                

A. Subject to the provisions of Sections B and C of this Article, 
each corporation shall have power:

(1) To have perpetual succession by its corporate name, unless a 
limited period of duration is stated in its articles of 
incorporation.  Notwithstanding the articles of incorporation, the 
period of duration for any corporation incorporated before August 
10, 1959, is perpetual if all fees and franchise taxes have been 
paid as provided by law.

(2) To sue and be sued, complain and defend, in its corporate name.           

(3) To have a corporate seal which may be altered at pleasure, and 
to use the same by causing it, or a facsimile thereof, to be 
impressed on, affixed to, or in any manner reproduced upon, 
instruments of any nature required to be executed by its proper 
officers.

(4) To purchase, receive, lease, or otherwise acquire, own, hold, 
improve, use, or otherwise deal in and with, real or personal 
property, or any interest therein, wherever situated, as the 
purposes of the corporation shall require, or as shall be donated to 
it.

(5) To sell, convey, mortgage, pledge, lease, exchange, transfer, 
and otherwise dispose of all or any part of its property and assets.

(6) To lend money to and otherwise assist its employees and 
officers, but not its directors, if the loan or assistance may 
reasonably be expected to benefit, directly or indirectly, the 
corporation providing the assistance.  Loans made to officers must 
be:

(a) made for the purpose of financing the principal residence of the 
officer;  or

(b) made during the first year of that officer's employment, in 
which case the original principal amount may not exceed 100 percent 
of the officer's annual salary;  or

(c) made in any subsequent year, in which case the original 
principal amount may not exceed 50 percent of the officer's annual 
salary.

(7) To purchase, receive, subscribe for, or otherwise acquire, own, 
hold, vote, use, employ, mortgage, lend, pledge, sell or otherwise 
dispose of, and otherwise use and deal in and with, shares or other 
interests in, or obligations of, other domestic or foreign 
corporations, whether for profit or not for profit, associations, 
partnerships, or individuals, or direct or indirect obligations of 
the United States or of any other government, state, territory, 
government district, or municipality, or of any instrumentality 
thereof.

(8) To make contracts and incur liabilities, borrow money at such 
rates of interest as the corporation may determine, issue its 
notes, bonds, and other obligations, and secure any of its 
obligations by mortgage or pledge of all or any of its property, 
franchises, and income.

(9) To lend money for its corporate purposes, invest and reinvest 
its funds, and take and hold real and personal property as security 
for the payment of funds so loaned or invested.

(10) To conduct its affairs, carry on its operations, and have 
officers and exercise the powers granted by this Act in any state, 
territory, district, or possession of the United States, or any 
foreign country.

(11) To elect or appoint officers and agents of the corporation for 
such period of time as the corporation may determine and define 
their duties and fix their compensation.

(12) To make and alter by-laws, not inconsistent with its articles 
of incorporation or with the laws of this State, for the 
administration and regulation of the affairs of the corporation.

(13) To make donations for the public welfare or for charitable, 
scientific, or educational purposes and in time of war to make 
donations in aid of war activities.

(14) To cease its corporate activities and terminate its existence 
by voluntary dissolution.

(15) Whether included in the foregoing or not, to have and exercise 
all powers necessary or appropriate to effect any or all of the 
purposes for which the corporation is organized.

(16) Any religious, charitable, educational, or eleemosynary 
institution organized under the laws of this State may acquire, 
own, hold, mortgage, and dispose of and invest its funds in real and 
personal property for the use and benefit and under the discretion 
of, and in trust for any convention, conference or association 
organized under the laws of this State or another state with which 
it is affiliated, or which elects its board of directors, or which 
controls it, in furtherance of the purposes of the member 
institution.

(17) To pay pensions and establish pension plans and pension trusts 
for all of, or class, or classes of its officer and employees, or 
its officers or its employees.

(18) To deliver money to a scholarship fund for rural students.               

B. Nothing in this Article grants any authority to officers or 
directors of a corporation for the exercise of any of the foregoing 
powers, inconsistent with limitations on any of the same which may 
be expressly set forth in this Act or in the articles of 
incorporation or by-laws or in any other laws of this State.  
Authority of officers and directors to act beyond the scope of the 
purpose or purposes of a corporation is not granted by any 
provisions of this Article.

C. Nothing in this Article shall be deemed to authorize any action 
in violation of the Anti-Trust Laws of this State or of any of the 
provisions of Chapter 4 of Title 32 of Revised Civil Statutes of 
Texas, 1925, as now existing or hereafter amended.

Acts 1959, 56th Leg., p. 286, ch. 162, art. 2.02.  Amended by Acts 
1977, 65th Leg., p. 837, ch. 313, Sec. 1, eff. Aug. 29, 1977;  Acts 
1979, 66th Leg., p. 174, ch. 96, Sec. 1, eff. May 2, 1979;  Acts 
1989, 71st Leg., ch. 1199, Sec. 1, eff. Aug. 28, 1989;  Acts 1997, 
75th Leg., ch. 904, Sec. 5, eff. Sept. 1, 1997.




Art. 1396-2.03. Defense of Ultra Vires                                        

A. Lack of capacity of a corporation shall never be made the basis 
of any claim or defense at law or in equity.

B. No act of a corporation and no conveyance or transfer of real or 
personal property to or by a corporation shall be invalid by reason 
of the fact that such act, conveyance or transfer was beyond the 
scope of the purpose or purposes of the corporation as expressed in 
its articles of incorporation or by reason of limitations on 
authority of its officers and directors to exercise any statutory 
power of the corporation, as such limitations are expressed in the 
articles of incorporation, but that such act, conveyance or 
transfer was, or is, beyond the scope of the purpose or purposes of 
the corporation as expressed in its articles of incorporation or 
inconsistent with any such expressed limitations of authority, may 
be asserted:

(1) In a proceeding by a member against the corporation to enjoin 
the doing of any act or acts or the transfer of real or personal 
property by or to the corporation.  If the unauthorized act or 
transfer sought to be enjoined is being, or is to be, performed or 
made pursuant to any contract to which the corporation is a party, 
the court may, if all of the parties to the contract are parties to 
the proceedings and if it deems the same to be equitable, set aside 
and enjoin the performance of such contract, and in so doing may 
allow to the corporation or to the other parties to the contract, as 
the case may be, compensation for the loss or damage sustained by 
either of them which may result from the action of the court in 
setting aside and enjoining the performance of such contract, but 
anticipated profits to be derived from the performance of the 
contract shall not be awarded by the court as part of the loss or 
damage sustained.

(2) In a proceeding by the corporation, whether acting directly or 
through a receiver, trustee, or other legal representative, or 
through members in a representative suit, against the incumbent or 
former officers or directors of the corporation for exceeding their 
authority.

(3) In a proceeding by the Attorney General, as provided in this 
Act, to dissolve the corporation, or in a proceeding by the Attorney 
General to enjoin the corporation from performing unauthorized 
acts, or to enforce divestment of real property acquired or held 
contrary to the laws of this State.

Acts 1959, 56th Leg., p. 286, ch. 162, art. 2.03.                             




Art. 1396-2.04. Corporate Name                                                

A. The corporate name shall conform to the following requirements:            

(1) It shall not contain any word or phrase which indicates or 
implies that it is organized for any purpose other than one or more 
of the purposes contained in its articles of incorporation.

(2) It shall not be the same as, or deceptively similar to, the name 
of any domestic corporation, whether for profit or not for profit, 
existing under the laws of this State, or the name of any foreign 
corporation, whether for profit or not for profit, authorized to 
transact business or conduct affairs in this State, or a name the 
exclusive right to which is, at the time, reserved in the manner 
provided by the Texas Business Corporation Act, or the name of a 
corporation which has in effect a registration of its corporate 
name as provided in the Texas Business Corporation Act;  provided 
that a name may be similar if written consent is obtained from the 
existing corporation having the name deemed to be similar, or the 
person, or corporation, for whom the name deemed to be similar is 
reserved or registered in the office of the Secretary of State.

(3) It shall not contain the word "lottery."                                  

Acts 1959, 56th Leg., p. 286, ch. 162, art. 2.04.  Amended by Acts 
1991, 72nd Leg., 1st C.S., ch. 6, Sec. 11A(b).




Art. 1396-2.04A. Reserved Name                                                

A. The exclusive right to the use of a corporate name may be 
reserved by:   

(1) a person intending to organize a corporation under this Act;              

(2) a domestic corporation intending to change its name;                      

(3) a foreign corporation intending to apply for a certificate of 
authority to conduct affairs in this State;

(4) a foreign corporation authorized to conduct affairs in this 
State and intending to change its name;  or

(5) a person intending to organize a foreign corporation and 
intending to have that corporation apply for a certificate of 
authority to conduct affairs in this State.

B. An application for name reservation or transfer of the exclusive 
use of a specified corporate name is subject to the procedures and 
period prescribed by Article 2.06, Texas Business Corporation Act.

Added by Acts 1993, 73rd Leg., ch. 733, Sec. 2, eff. Jan. 1, 1994.            




Art. 1396-2.05. Registered Office and Registered Agent                        

Each corporation shall have and continuously maintain in this 
State:        

(1) A registered office which may be, but need not be, the same as 
its principal office.

(2) A registered agent, which agent may be an individual resident in 
this State whose business office is identical with such registered 
office, or a domestic corporation, whether for profit or not for 
profit, or a foreign corporation, whether for profit or not for 
profit, authorized to transact business or to conduct its affairs 
in this State which has a business office identical with such 
registered office.

Acts 1959, 56th Leg., p. 286, ch. 162, art. 2.05.  Amended by Acts 
1979, 66th Leg., p. 213, ch. 120, Sec. 1, eff. May 9, 1979;  Acts 
1993, 73rd Leg., ch. 733, Sec. 3, eff. Jan. 1, 1994.




Art. 1396-2.06. Change of Registered Office or Agent                          

A. A corporation may change its registered office or change its 
registered agent, or both, upon filing in the office of the 
Secretary of State a statement setting forth:

(1) The name of the corporation.                                              

(2) The post-office address of its then registered office.                    

(3) If the post-office address of its registered office is to be 
changed, the post-office address to which the registered office is 
to be changed.

(4) The name of its then registered agent.                                    

(5) If its registered agent is to be changed, the name of its 
successor registered agent.

(6) That the post-office address of its registered office and the 
post-office address of the business office of its registered agent, 
as changed, will be identical.

(7) That such change was authorized by its Board of Directors or by 
an officer of the corporation so authorized by the Board of 
Directors, or if the management of the corporation is vested in its 
members pursuant to Article 2.14C of this Act, by the members.

B. The statement required by this Article shall be signed by the 
corporation by an officer.  The original and a copy of the statement 
shall be delivered to the Secretary of State.  If the Secretary of 
State finds that such statement conforms to the provisions of this 
Act, he shall, when all fees have been paid as prescribed by law:

(1) Endorse on the original and the copy the word "Filed" and the 
month, day, and year of the filing thereof.

(2) File the original in his office.                                          

(3) Return the copy to the corporation or its representative.                 

C. Upon such filing, the change of address of the registered office, 
or the appointment of a new registered agent, or both, as the case 
may be, shall become effective.

D. Any registered agent of a corporation may resign                           

(1) by giving written notice to the corporation at its last known 
address   

(2) and by giving written notice, in triplicate (the original and 
two copies of the notice), to the Secretary of State within ten days 
after mailing or delivery of said notice to the corporation.  Such 
notice shall include the last known address of the corporation and 
shall include the statement that written notice of resignation has 
been given to the corporation and the date thereof.  Upon compliance 
with the requirements as to written notice, the appointment of such 
agent shall terminate upon the expiration of thirty (30) days after 
receipt of such notice by the Secretary of State.

If the Secretary of State finds that such written notice conforms to 
the provisions of this Act, he shall:

(1) Endorse on the original and both copies the word "filed" and the 
month, day and year of the filing thereof.

(2) File the original in his office.                                          

(3) Return one copy to such resigning registered agent.                       

(4) Return one copy to the corporation at the last known address of 
the corporation as shown in such written notice.

Acts 1959, 56th Leg., p. 286, ch. 162, art. 2.06.  Amended by Acts 
1969, 61st Leg., p. 2477, ch. 834, Sec. 1, 2;  Acts 1979, 66th Leg., 
p. 213, ch. 120, Sec. 2, eff. May 9, 1979;  Acts 1987, 70th Leg., ch. 
93, Sec. 36, eff. Aug. 31, 1987.




Art. 1396-2.06A. Change of Address of Registered Agent                        

A. The location of the registered office in this State for a 
corporation may be changed from one address to another by filing in 
the office of the Secretary of State a statement setting forth:

(1) the name of the corporation represented by the registered 
agent;        

(2) the street address at which the registered agent has maintained 
the registered office for that corporation;

(3) the new street address at which the registered agent will 
maintain the registered office for that corporation;  and

(4) a statement that notice of the change has been given to the 
corporation in writing at least ten (10) days before the date of the 
filing.

B. The statement required by this article shall be signed by the 
registered agent or, if the agent is a corporation, by an officer of 
the corporate agent on its behalf.  If the registered agent is 
simultaneously filing statements for more than one corporation, 
each statement may contain facsimile signatures in the execution.  
The original and one copy of the statement shall be delivered to the 
Secretary of State.  If the Secretary of State finds that the 
statement conforms to this Act, the Secretary of State shall:

(1) endorse on the original and the copy the word "Filed," and the 
month, day, and year of the filing;

(2) file the original in the Secretary of State's office;  and                

(3) return the copy to the registered agent.                                  

C. The registered office of the corporation named in the statement 
shall be changed to the new street address of the registered agent 
on the filing of the statement by the Secretary of State.

Added by Acts 1993, 73rd Leg., ch. 733, Sec. 4, eff. Jan. 1, 1994.            




Art. 1396-2.07. Service of Process on Corporation                             

A. The president and all vice-presidents of the corporation and the 
registered agent of the corporation shall be agents of such 
corporation upon whom any process, notice, or demand required or 
permitted by law to be served upon the corporation may be served.  
Where the chief executive function of a corporation is authorized 
to be performed by a committee, service on any member of such 
committee shall be deemed to be service on the president.

B. Whenever a corporation shall fail to appoint or maintain a 
registered agent in this State, or whenever its registered agent 
cannot with reasonable diligence be found at the registered office, 
then the Secretary of State shall be an agent of such corporation 
upon whom any such process, notice, or demand may be served.  
Service on the Secretary of State of any process, notice, or demand 
shall be made by delivering to and leaving with him, or with the 
Assistant Secretary of State, or with any clerk having charge of the 
corporation department of his office, duplicate copies of such 
process, notice, or demand.  In the event any such process, notice, 
or demand is served on the Secretary of State, he shall immediately 
cause one of the copies thereof to be forwarded by registered mail, 
addressed to the corporation at its registered office.  Any service 
so had on the Secretary of State shall be returnable in not less 
than thirty (30) days.

C. The Secretary of State shall keep a record of all processes, 
notices, and demands served upon him under this Article, and shall 
record therein the time of such service and his action with 
reference thereto.

D. Service of process, notice, or demand required or permitted by 
law to be served by a political subdivision of this state or by a 
person, including another political subdivision or an attorney, 
acting on behalf of a political subdivision in connection with the 
collection of a delinquent ad valorem tax may be served on a 
corporation whose corporate privileges are forfeited under Section 
171.251, Tax Code, or is involuntarily dissolved under Article 7.01 
of this Act by delivering the process, notice, or demand to any 
officer or director of the corporation, as listed in the most recent 
records of the secretary of state.  If the officers or directors of 
the corporation are unknown or cannot be found, service on the 
corporation may be made in the same manner as service is made on 
unknown shareholders under law.  Notwithstanding any disability or 
reinstatement of a corporation, service of process under this 
section is sufficient for a judgment against the corporation or a 
judgment in rem against any property to which the corporation holds 
title.

Acts 1959, 56th Leg., p. 286, ch. 162, art. 2.07.  Amended by Acts 
1999, 76th Leg., ch. 1481, Sec. 39, eff. Sept. 1, 1999.




Art. 1396-2.08. Members                                                       

A. A corporation may have one or more classes of members or may have 
no members.

B. If the corporation has one or more classes of members, the 
designation of such class or classes, the manner of election or 
appointment, and the qualifications and rights of the members of 
each class shall be set forth in the articles of incorporation or 
by-laws.

C. If the corporation is to have no members, that fact shall be set 
forth in the articles of incorporation.

D. A corporation may issue certificates, or cards, or other 
instruments evidencing membership rights, voting rights or 
ownership rights as may be authorized in the articles of 
incorporation or in the by-laws.

E. The members of a non-profit corporation shall not be personally 
liable for the debts, liabilities, or obligations of the 
corporation.

Acts 1959, 56th Leg., p. 286, ch. 162, art. 2.08.  Amended by Acts 
1961, 57th Leg., p. 653, ch. 302, Sec. 1.




Art. 1396-2.09. By-Laws                                                       

A. The initial by-laws of a corporation shall be adopted by its 
board of directors or, if the management of the corporation is 
vested in its members, by the members.  The by-laws may contain any 
provisions for the regulation and management of the affairs of the 
corporation not inconsistent with law or the articles of 
incorporation.

B. A corporation's board of directors may amend or repeal the 
corporation's by-laws, or adopt new by-laws, unless:

(1) the articles of incorporation or this Act reserves the power 
exclusively to the members in whole or in part;

(2) the management of the corporation is vested in its members;  or           

(3) the members in amending, repealing, or adopting a particular 
by-law expressly provide that the board of directors may not amend 
or repeal that by-law.

Acts 1959, 56th Leg., p. 286, ch. 162, art. 2.09.  Amended by Acts 
1993, 73rd Leg., ch. 733, Sec. 5, eff. Jan. 1, 1994.




Art. 1396-2.10. Meetings of Members                                           

A. If a corporation has members:                                              

(1) Meetings of members shall be held at such place, either within 
or without this State, as may be provided in the by-laws.  In the 
absence of any such provision, all meetings shall be held at the 
registered office of the corporation in this State.

(2) An annual meeting of the members shall be held at such times as 
may be provided in the by-laws, except that where the by-laws of a 
corporation provide for more than one regular meeting of members 
each year, an annual meeting shall not be required, and directors 
may be elected at such meetings as the by-laws may provide.  Failure 
to hold the annual meeting at the designated time shall not work a 
dissolution of the corporation.  In the event the board of directors 
fails to call the annual meeting at the designated time, any member 
may make demand that such meeting be held within a reasonable time, 
such demand to be made in writing by registered mail directed to any 
officer of the corporation.  If the annual meeting of members is not 
called within sixty (60) days following such demand, any member may 
compel the holding of such annual meeting by legal action directed 
against said board, and all of the extraordinary writs of common law 
and of courts of equity shall be available to such member to compel 
the holding of such annual meeting.  Each and every member is hereby 
declared to have a justiciable interest sufficient to enable him to 
institute and prosecute such legal proceedings.

(3) Special meetings of the members may be called by the president, 
the board of directors, by members having not less than one-tenth 
(1/10) of the votes entitled to be cast at such meeting, or such 
other officers or persons as may be provided in the articles of 
incorporation or by-laws.

Acts 1959, 56th Leg., p. 286, ch. 162, art. 2.10.                             




Art. 1396-2.11. Notice of Members' Meetings                                   

A. In the case of a corporation other than a church, written or 
printed notice stating the place, day, and hour of the meeting and, 
in case of a special meeting, the purpose or purposes for which the 
meeting is called, shall be delivered not less than ten (10) nor 
more than sixty (60) days before the date of the meeting, either 
personally, by facsimile transmission, or by mail, by or at the 
direction of the president, or the secretary, or the officers or 
persons calling the meeting, to each member entitled to vote at such 
meeting.  If mailed, such notice shall be deemed to be delivered 
when deposited in the United States mail addressed to the member at 
his address as it appears on the records of the corporation, with 
postage thereon paid.  If transmitted by facsimile, notice is 
deemed to be delivered on successful transmission of the facsimile.

B. In the case of a corporation which is a church, notice of 
meetings of members will be deemed sufficient if made by oral 
announcement at a regularly scheduled worship service prior to such 
meeting, or as otherwise provided in its articles of incorporation 
or its by-laws.

C. The by-laws may provide that no notice of annual or regular 
meetings shall be required.

D. If its by-laws so provide, a corporation having more than one 
thousand (1,000) members at the time a meeting is scheduled or 
called may give notice of such meeting by publication in any 
newspaper of general circulation in the community in which the 
principal office of such corporation is located.

Acts 1959, 56th Leg., p. 286, ch. 162, art. 2.11.  Amended by Acts 
1993, 73rd Leg., ch. 733, Sec. 6, eff. Jan. 1, 1994.




Art. 1396-2.11A. Record Date for Determining Members Entitled to 
Notice and Vote

A. The by-laws of a corporation may fix or provide the manner of 
fixing a date as the record date for determining the members 
entitled to notice of a members' meeting.  If the by-laws do not fix 
and do not provide for fixing the record date, the board of 
directors may fix a future date as the record date.  If a record date 
is not fixed, members at the close of business on the business day 
preceding the date on which notice is given, or if notice is waived, 
at the close of business on the business day preceding the date of 
the meeting, are entitled to notice of the meeting.

B. The by-laws of a corporation may fix or provide the manner of 
fixing a date as the record date for determining the members 
entitled to vote at a members' meeting.  If the by-laws do not fix 
and do not provide for fixing a record date, the board may fix a 
future date as the record date.  If a record date is not fixed, 
members on the date of the meeting who are otherwise eligible to 
vote are entitled to vote at the meeting.

C. The by-laws may fix or provide the manner for fixing a date as the 
record date for the purpose of determining the members entitled to 
exercise any rights regarding any other lawful action.  If the 
by-laws do not fix and do not provide for fixing a record date, the 
board of directors may fix in advance a record date.  If a record 
date is not fixed, members at the close of business on the date on 
which the board of directors adopts the resolution relating to the 
record date, or the 60th day before the date of the other action, 
whichever is later, are entitled to exercise those rights.

D. A record date fixed under this section may not be more than sixty 
(60) days before the date of the meeting or action that requires the 
determination of the members.

E. A determination of members entitled to notice of or to vote at a 
members' meeting is effective for any adjournment of the meeting 
unless the board fixes a new date for determining the right to 
notice or the right to vote.  The board must fix a new date for 
determining the right to notice or the right to vote if the meeting 
is adjourned to a date more than ninety (90) days after the record 
date for determining members entitled to notice of the original 
meeting.

Added by Acts 1993, 73rd Leg., ch. 733, Sec. 7, eff. Jan. 1, 1994.            




Art. 1396-2.11B. Voting Members' List for Meeting                             

A. After fixing a record date for the notice of a meeting, a 
corporation shall prepare an alphabetical list of the names of all 
its voting members who are entitled to notice of the meeting.  The 
list must show the address and number of votes each voting member is 
entitled to cast at the meeting.  The corporation shall maintain, 
through the time of the members' meeting, a list of members who are 
entitled to vote at the meeting but are not entitled to notice of 
the meeting.  This list shall be prepared on the same basis and be 
part of the list of voting members.

B. Not later than two (2) business days after the date notice is 
given of a meeting for which a list was prepared, as provided by 
Section A of this article, and continuing through the meeting, the 
list of voting members must be available for inspection by any 
member entitled to vote at the meeting for the purpose of 
communication with other members concerning the meeting at the 
corporation's principal office or at a reasonable place identified 
in the meeting notice in the city where the meeting will be held.  A 
voting member or voting member's agent or attorney is entitled on 
written demand to inspect and, subject to the limitations of 
Section B, Article 2.23, of this Act to copy the list at a 
reasonable time and at the member's expense during the period it is 
available for inspection.

C. The corporation shall make the list of voting members available 
at the meeting, and any voting member or voting member's agent or 
attorney is entitled to inspect the list at any time during the 
meeting or any adjournment.

Added by Acts 1993, 73rd Leg., ch. 733, Sec. 7, eff. Jan. 1, 1994.            




Art. 1396-2.12. Quorum of Members                                             

A. Unless otherwise provided in the articles of incorporation or in 
the by-laws, members holding one-tenth of the votes entitled to be 
cast, represented in person or by proxy, shall constitute a quorum.  
The vote of the majority of the votes entitled to be cast by the 
members present, or represented by proxy at a meeting at which a 
quorum is present, shall be the act of the members meeting, unless 
the vote of a greater number is required by law, the articles of 
incorporation, or the by-laws.

B. In the absence of an express provision to the contrary in the 
articles of incorporation or the by-laws, a church incorporated 
prior to the effective date of this Act shall be deemed to have 
provided in its articles of incorporation or its by-laws that 
members present at a meeting, notice for which shall have been duly 
given, shall constitute a quorum.

Acts 1959, 56th Leg., p. 286, ch. 162, art. 2.12.                             




Art. 1396-2.13. Voting of Members                                             

A. Each member, regardless of class, shall be entitled to one (1) 
vote on each matter submitted to a vote of the members, except to 
the extent that the voting rights of members of any class or classes 
are limited, enlarged, or denied by the articles of incorporation 
or the by-laws.

B. A member may vote in person or, unless the articles of 
incorporation or the by-laws otherwise provide, may vote by proxy 
executed in writing by the member or by his duly authorized 
attorney-in-fact.  No proxy shall be valid after eleven (11) months 
from the date of its execution, unless otherwise provided in the 
proxy. Each proxy shall be revocable unless expressly provided 
therein to be irrevocable, and in no event shall it remain 
irrevocable for more than eleven (11) months.  Where directors or 
officers are to be elected by members, the by-laws may provide that 
such elections may be conducted by mail, by facsimile transmission, 
or by any combination of the two.

C. At each election for directors every member entitled to vote at 
such election shall have the right to vote, in person or by proxy, 
for as many persons as there are directors to be elected and for 
whose election he has a right to vote, or, if expressly authorized 
by the articles of incorporation, to cumulate his vote by giving one 
candidate as many votes as the number of such directors multiplied 
by his vote shall equal, or by distributing such votes on the same 
principle among any number of such candidates.  Any member who 
intends to cumulate his votes as herein authorized shall give 
written notice of such intention to the secretary of the 
corporation on or before the day preceding the election at which 
such member intends to cumulate his votes.

Acts 1959, 56th Leg., p. 286, ch. 162, art. 2.13.  Amended by Acts 
1993, 73rd Leg., ch. 733, Sec. 8, eff. Jan. 1, 1994.




Art. 1396-2.14. Board of Directors                                            

A. The affairs of a corporation shall be managed by a board of 
directors.  Directors need not be residents of this State or members 
of the corporation unless the articles of incorporation or the 
by-laws so require.  The articles of incorporation or the by-laws 
may prescribe other qualifications for directors.

B. Boards of directors of religious, charitable, educational, or 
eleemosynary institutions may be affiliated with, elected and 
controlled by a convention, conference or association organized 
under the laws of this State or another state, whether incorporated 
or unincorporated, whose membership is composed of 
representatives, delegates, or messengers from any church or other 
religious association.

C. The articles of incorporation of a corporation may vest the 
management of the affairs of the corporation in its members.  If the 
corporation has a board of directors, it may limit the authority of 
the board of directors to whatever extent as may be set forth in the 
articles of incorporation or by-laws.  Except for a church 
organized and operating under a congregational system, was 
incorporated before January 1, 1994, and has the management of its 
affairs vested in its members, a corporation shall be deemed to have 
vested the management of the affairs of the corporation in its board 
of directors in the absence of an express provision to the contrary 
in the articles of incorporation or the by-laws.

D. The board of directors may be designated by any name appropriate 
to the customs, usages, or tenets of the corporation.

E. The board of directors of a corporation may be elected (in whole 
or in part) by one or more associations or corporations, organized 
under the laws of this State or another state if (1) the articles of 
incorporation or the by-laws of the former corporation so provide, 
and (2) the former corporation has no members with voting rights.

F. The articles of incorporation or the by-laws may provide that any 
one or more persons may be ex-officio members of the board of 
directors.  A person designated as an ex-officio member of the board 
of directors is entitled to notice of and to attend meetings of the 
board of directors.  The ex-officio member is not entitled to vote 
unless otherwise provided in the articles of incorporation or the 
by-laws.  An ex-officio member of the board of directors who is not 
entitled to vote does not have the duties or liabilities of a 
director as provided in this Act.

Acts 1959, 56th Leg., p. 286, ch. 162, art. 2.14.  Amended by Acts 
1967, 60th Leg., p. 1716, ch. 656, Sec. 1, eff. June 17, 1967;  Acts 
1993, 73rd Leg., ch. 733, Sec. 9, eff. Jan. 1, 1994.




Art. 1396-2.15. Number, Election, Classification, and Removal of 
Directors  

A. The number of directors of a corporation shall be not less than 
three (3).  Subject to such limitation, the number of directors 
shall be fixed by, or in the manner provided in, the articles of 
incorporation or the by-laws, except as to the number constituting 
the initial board of directors, which number shall be fixed by the 
articles of incorporation.  The number of directors may be 
increased or decreased from time to time by amendment to, or in the 
manner provided in, the articles of incorporation or the by-laws, 
but no decrease shall have the effect of shortening the term of any 
incumbent director.  The number of directors may not be decreased to 
fewer than three (3).  In the absence of a by-law or a provision of 
the articles of incorporation fixing the number of directors or 
providing for the manner in which the number of directors shall be 
fixed, the number of directors shall be the same as the number 
constituting the initial board of directors as fixed by the 
articles of incorporation.

B. The directors constituting the initial board of directors shall 
be named in the articles of incorporation and shall hold office 
until the first annual election of directors or for such other 
period as may be specified in the articles of incorporation or the 
by-laws.  Thereafter, directors shall be elected, appointed, or 
designated in the manner and for the terms provided in the articles 
of incorporation or the by-laws.  If the method of election, 
designation, or appointment is not provided in the articles of 
incorporation or by-laws, the directors, other than the initial 
directors, shall be elected by the board of directors.  In the 
absence of a provision in the articles of incorporation or the 
by-laws fixing the term of office, a director shall hold office 
until the next annual election of directors and until his successor 
shall have been elected, appointed, or designated and qualified.

C. Directors may be divided into classes and the terms of office of 
the several classes need not be uniform.  Unless removed in 
accordance with the provisions of the articles of incorporation or 
the by-laws, each director shall hold office for the term for which 
he is elected, appointed, or designated and until his successor 
shall have been elected, appointed, or designated and qualified.

D. A director may be removed from office pursuant to any procedure 
therefor provided in the articles of incorporation or by-laws.  In 
the absence of a provision providing for removal, a director may be 
removed from office, with or without cause, by the persons entitled 
to elect, designate, or appoint the director.  If the director was 
elected to office, removal requires an affirmative vote equal to 
the vote necessary to elect the director.

Acts 1959, 56th Leg., p. 286, ch. 162, art. 2.15.  Amended by Acts 
1989, 71st Leg., ch. 801, Sec. 45, eff. Aug. 28, 1989;  Acts 1993, 
73rd Leg., ch. 733, Sec. 10, eff. Jan. 1, 1994.




Art. 1396-2.16. Vacancies                                                     

A. Unless otherwise provided in the articles of incorporation or 
the by-laws, any vacancy occurring in the board of directors shall 
be filled by the affirmative vote of a majority of the remaining 
directors though less than a quorum of the board of directors.  A 
director elected to fill a vacancy shall be elected for the 
unexpired term of his predecessor in office.

B. Any directorship to be filled by reason of an increase in the 
number of directors shall be filled by election at an annual meeting 
or at a special meeting of members called for that purpose.  If a 
corporation has no members, or no members having the right to vote 
thereon, such directorship shall be filled as provided in the 
articles of incorporation or the by-laws.

Acts 1959, 56th Leg., p. 286, ch. 162, art. 2.16.                             




Art. 1396-2.17. Quorum and Voting Directors                                   

A. A quorum for the transaction of business by the board of 
directors shall be whichever is less:

(1) A majority of the number of directors fixed by the bylaws, or in 
the absence of a bylaw fixing the number of directors, a majority of 
the number of directors stated in the articles of incorporation, or

(2) Any number, not less than three, fixed as a quorum by the 
articles of incorporation or the bylaws.

B. Directors present by proxy may not be counted toward a quorum.             

C. The act of the majority of the directors present in person or by 
proxy at a meeting at which a quorum is present shall be the act of 
the board of directors, unless the act of a greater number is 
required by the articles of incorporation or the bylaws.

D. A director may vote in person or (if the articles of 
incorporation or the bylaws so provide) by proxy executed in 
writing by the director.  No proxy shall be valid after three months 
from the date of its execution.  Each proxy shall be revocable 
unless expressly provided therein to be irrevocable, and unless 
otherwise made irrevocable by law.

Acts 1959, 56th Leg., p. 286, ch. 162, art. 2.17.  Amended by Acts 
1967, 60th Leg., p. 1716, ch. 656, Sec. 2, eff. June 17, 1967.




Art. 1396-2.18. Committees                                                    

A. If the articles of incorporation or the bylaws so provide, the 
board of directors, by resolution adopted by a majority of the 
directors in office, may designate one or more committees, which, 
to the extent provided in such resolution, in the articles of 
incorporation, or in the bylaws, shall have and exercise the 
authority of the board of directors in the management of the 
corporation.  Each such committee shall consist of two or more 
persons, a majority of whom are directors;  the remainder, if the 
articles of incorporation or the bylaws so provide, need not be 
directors.  The designation of such committees and the delegation 
thereto of authority shall not operate to relieve the board of 
directors, or any individual director, of any responsibility 
imposed upon it or him by law.  Any non-director who becomes a 
member of any such committee shall have the same responsibility 
with respect to such committee as a director who is a member 
thereof.

B. Other committees not having and exercising the authority of the 
board of directors in the management of the corporation may be 
designated and appointed by a resolution adopted by a majority of 
the directors at a meeting at which a quorum is present, or by the 
president thereunto authorized by a like resolution of the board of 
directors or by the articles of incorporation or by the by-laws.  
Membership on such committees may, but need not be, limited to 
directors.

Acts 1959, 56th Leg., p. 286, ch. 162, art. 2.18.  Amended by Acts 
1967, 60th Leg., p. 1716, ch. 656, Sec. 3, eff. June 17, 1967.




Art. 1396-2.19. Place and Notice of Directors' Meetings                       

A. Meetings of the board of directors, regular or special, may be 
held either within or without this State.

B. Regular meetings of the board of directors may be held with or 
without notice as prescribed in the by-laws.  Special meetings of 
the board of directors shall be held upon such notice as is 
prescribed in the by-laws.  Attendance of a director at a meeting 
shall constitute a waiver of notice of such meeting, except where a 
director attends a meeting for the express purpose of objecting to 
the transaction of any business on the ground that the meeting is 
not lawfully called or convened.  Neither the business to be 
transacted at, nor the purpose of, any regular or special meeting of 
the board of directors need be specified in the notice or waiver of 
notice of such meeting, unless required by the by-laws.

Acts 1959, 56th Leg., p. 286, ch. 162, art. 2.19.                             




Art. 1396-2.20. Officers                                                      

A. The officers of a corporation shall consist of a president and a 
secretary and may also consist of one or more vice-presidents, a 
treasurer, and such other officers and assistant officers as may be 
deemed necessary, each of whom shall be elected or appointed at such 
time and in such manner and for such terms not exceeding three (3) 
years as may be prescribed in the articles of incorporation or the 
by-laws.  In the absence of any such provisions, all officers shall 
be elected or appointed annually by the board of directors, or, if 
the management of the corporation is vested in its members, by the 
members.  Any two or more offices may be held by the same person, 
except the offices of president and secretary.  A committee duly 
designated may perform the functions of any officer and the 
functions of any two or more officers may be performed by a single 
committee, including the functions of both president and secretary.

B. The officers of a corporation may be designated by such other or 
additional titles as may be provided in the articles of 
incorporation or the by-laws.

C. In the case of a corporation which is a church, it shall not be 
necessary that there be officers as provided herein, but such 
duties and responsibilities may be vested in the board of directors 
or other designated body in any manner provided for in the articles 
of incorporation or the by-laws.

D. In the discharge of a duty imposed or power conferred on an 
officer of a corporation, the officer may in good faith and with 
ordinary care rely on information, opinions, reports, or 
statements, including financial statements and other financial 
data, concerning the corporation or another person, that were 
prepared or presented by:

(1) one or more other officers or employees of the corporation, 
including members of the board of directors;

(2) legal counsel, public accountants, or other persons as to 
matters the officer reasonably believes are within the person's 
professional or expert competence;  or

(3) in the case of religious corporations, religious authorities 
and ministers, priests, rabbis, or other persons whose position or 
duties in the religious organization the officer believes justify 
reliance and confidence and whom the officer believes to be 
reliable and competent in the matters presented.

E. An officer is not relying in good faith as required by Section D 
of this article if the officer has knowledge concerning the matter 
in question that makes reliance otherwise permitted by Section D of 
this article unwarranted.

Acts 1959, 56th Leg., p. 286, ch. 162, art. 2.20.  Amended by Acts 
1993, 73rd Leg., ch. 733, Sec. 11, eff. Jan. 1, 1994.




Art. 1396-2.21. Removal of Officers                                           

A. Any officer elected or appointed may be removed by the persons 
authorized to elect or appoint such officer whenever in their 
judgment the best interests of the corporation will be served 
thereby.  The removal of an officer shall be without prejudice to 
the contract rights, if any, of the officer so removed.  Election or 
appointment of an officer or agent shall not of itself create 
contract rights.

Acts 1959, 56th Leg., p. 286, ch. 162, art. 2.21.                             




Art. 1396-2.22. Officer Liability                                             

(a) An officer is not liable to the corporation or any other person 
for an action taken or omission made by the officer in the person's 
capacity as an officer unless the officer's conduct was not 
exercised:

(1) in good faith;                                                            

(2) with ordinary care;  and                                                  

(3) in a manner the officer reasonably believes to be in the best 
interest of the corporation.

(b) This article shall not affect the liability of the corporation 
for an act or omission of the officer.

Added by Acts 2001, 77th Leg., ch. 727, Sec. 1, eff. Sept. 1, 2001.           




Art. 1396-2.22A. Power to Indemnify and to Purchase Indemnity 
Insurance;  Duty to Indemnify

A. In this article:                                                           

(1) "Corporation" includes any domestic or foreign predecessor 
entity of the corporation in a merger, consolidation, or other 
transaction in which the liabilities of the predecessor are 
transferred to the corporation by operation of law and in any other 
transaction in which the corporation assumes the liabilities of the 
predecessor but does not specifically exclude liabilities that are 
the subject matter of this article.

(2) "Director" means any person who is or was a director of the 
corporation and any person who, while a director of the 
corporation, is or was serving at the request of the corporation as 
a director, officer, partner, venturer, proprietor, trustee, 
employee, agent, or similar functionary of another foreign or 
domestic corporation, partnership, joint venture, sole 
proprietorship, trust, employee benefit plan, or other enterprise.

(3) "Expenses" includes court costs and attorneys' fees.                      

(4) "Official capacity" means:                                                

(a) when used with respect to a director, the office of director in 
the corporation;  and

(b) when used with respect to a person other than a director, the 
elective or appointive office in the corporation held by the 
officer or the employment or agency relationship undertaken by the 
employee or agent in behalf of the corporation;  but

(c) in both Paragraphs (a) and (b) does not include service for any 
other foreign or domestic corporation or any partnership, joint 
venture, sole proprietorship, trust, employee benefit plan, or 
other enterprise.

(5) "Proceeding" means any threatened, pending, or completed 
action, suit, or proceeding, whether civil, criminal, 
administrative, arbitrative, or investigative, any appeal in such 
an action, suit, or proceeding, and any inquiry or investigation 
that could lead to such an action, suit, or proceeding.

B. A corporation may indemnify a person who was, is, or is 
threatened to be made a named defendant or respondent in a 
proceeding because the person is or was a director only if it is 
determined in accordance with Section F of this article that the 
person:

(1) conducted himself in good faith;                                          

(2) reasonably believed:                                                      

(a) in the case of conduct in his official capacity as a director of 
the corporation, that his conduct was in the corporation's best 
interests;  and

(b) in all other cases, that his conduct was at least not opposed to 
the corporation's best interests;  and

(3) in the case of any criminal proceeding, had no reasonable cause 
to believe his conduct was unlawful.

C. Except to the extent permitted by Section E of this article, a 
director may not be indemnified under Section B of this article in 
respect of a proceeding:

(1) in which the person is found liable on the basis that personal 
benefit was improperly received by him, whether or not the benefit 
resulted from an action taken in the person's official capacity;  or

(2) in which the person is found liable to the corporation.                   

D. The termination of a proceeding by judgment, order, settlement, 
or conviction or on a plea of nolo contendere or its equivalent is 
not of itself determinative that the person did not meet the 
requirements set forth in Section B of this article.  A person shall 
be deemed to have been found liable in respect of any claim, issue 
or matter only after the person shall have been so adjudged by a 
court of competent jurisdiction after exhaustion of all appeals 
therefrom.

E. A person may be indemnified under Section B of this article 
against judgments, penalties (including excise and similar taxes), 
fines, settlements, and reasonable expenses actually incurred by 
the person in connection with the proceeding;  but if the person is 
found liable to the corporation or is found liable on the basis that 
personal benefit was improperly received by the person, the 
indemnification (1) is limited to reasonable expenses actually 
incurred by the person in connection with the proceeding, and (2) 
shall not be made in respect of any proceeding in which the person 
shall have been found liable for willful or intentional misconduct 
in the performance of his duty to the corporation.

F. A determination of indemnification under Section B of this 
article must be made:

(1) by a majority vote of a quorum consisting of directors who at 
the time of the vote are not named defendants or respondents in the 
proceeding;

(2) if such a quorum cannot be obtained, by a majority vote of a 
committee of the board of directors, designated to act in the matter 
by a majority vote of all directors, consisting solely of two or 
more directors who at the time of the vote are not named defendants 
or respondents in the proceeding;

(3) by special legal counsel selected by the board of directors or a 
committee of the board by vote as set forth in Subsection (1) or (2) 
of this section, or, if such a quorum cannot be obtained and such a 
committee cannot be established, by a majority vote of all 
directors;  or

(4) by the members in a vote that excludes the vote of directors who 
are named defendants or respondents in the proceeding.

G. Authorization of indemnification and determination as to 
reasonableness of expenses must be made in the same manner as the 
determination that indemnification is permissible, except that if 
the determination that indemnification is permissible is made by 
special legal counsel, authorization of indemnification and 
determination as to reasonableness of expenses must be made in the 
manner specified by Subsection (3) of Section F of this article for 
the selection of special legal counsel.  A provision contained in 
the articles of incorporation, the bylaws, a resolution of members 
or directors, or an agreement that makes mandatory the 
indemnification permitted under Section B of this article shall be 
deemed to constitute authorization of indemnification in the manner 
required by this section even though such provision may not have 
been adopted or authorized in the same manner as the determination 
that indemnification is permissible.

H. A corporation shall indemnify a director against reasonable 
expenses incurred by him in connection with a proceeding in which he 
is a named defendant or respondent because he is or was a director 
if he has been wholly successful, on the merits or otherwise, in the 
defense of the proceeding.

I. If, in a suit for the indemnification required by Section H of 
this article, a court of competent jurisdiction determines that the 
director is entitled to indemnification under that section, the 
court shall order indemnification and shall award to the director 
the expenses incurred in securing the indemnification.

J. If, upon application of a director, a court of competent 
jurisdiction determines, after giving any notice the court 
considers necessary, that the director is fairly and reasonably 
entitled to indemnification in view of all the relevant 
circumstances, whether or not he has met the requirements set forth 
in Section B of this article or has been found liable in the 
circumstances described by Section C of this article, the court may 
order the indemnification that the court determines is proper and 
equitable;  but if the person is found liable to the corporation or 
is found liable on the basis that personal benefit was improperly 
received by the person, the indemnification shall be limited to 
reasonable expenses actually incurred by the person in connection 
with the proceeding.

K. Reasonable expenses incurred by a director who was, is, or is 
threatened to be made a named defendant or respondent in a 
proceeding may be paid or reimbursed by the corporation, in advance 
of the final disposition of the proceeding and without the 
determination specified in Section F of this article or the 
authorization or determination specified in Section G of this 
article, after the corporation receives a written affirmation by 
the director of his good faith belief that he has met the standard 
of conduct necessary for indemnification under this article and a 
written undertaking by or on behalf of the director to repay the 
amount paid or reimbursed if it is ultimately determined that he has 
not met that standard or if it is ultimately determined that 
indemnification of the director against expenses incurred by him in 
connection with that proceeding is prohibited by Section E of this 
article.  A provision contained in the articles of incorporation, 
the bylaws, a resolution of members or directors, or an agreement 
that makes mandatory the payment or reimbursement permitted under 
this section shall be deemed to constitute authorization of that 
payment or reimbursement.

L. The written undertaking required by Section K of this article 
must be an unlimited general obligation of the director but need not 
be secured.  It may be accepted without reference to financial 
ability to make repayment.

M. A provision for a corporation to indemnify or to advance expenses 
to a director who was, is, or is threatened to be made a named 
defendant or respondent in a proceeding, whether contained in the 
articles of incorporation, the bylaws, a resolution of members or 
directors, an agreement, or otherwise, except in accordance with 
Section R of this article, is valid only to the extent it is 
consistent with this article as limited by the articles of 
incorporation, if such a limitation exists.

N. Notwithstanding any other provision of this article, a 
corporation may pay or reimburse expenses incurred by a director in 
connection with his appearance as a witness or other participation 
in a proceeding at a time when he is not a named defendant or 
respondent in the proceeding.

O. An officer of the corporation shall be indemnified as, and to the 
same extent, provided by Sections H, I, and J of this article for a 
director and is entitled to seek indemnification under those 
sections to the same extent as a director.  A corporation may 
indemnify and advance expenses to an officer, employee, or agent of 
the corporation to the same extent that it may indemnify and advance 
expenses to directors under this article.

P. A corporation may indemnify and advance expenses to a person who 
is not or was not an officer, employee, or agent of the corporation 
but who is or was serving at the request of the corporation as a 
director, officer, partner, venturer, proprietor, trustee, 
employee, agent, or similar functionary of another foreign or 
domestic corporation, partnership, joint venture, sole 
proprietorship, trust, employee benefit plan, or other enterprise 
to the same extent that it may indemnify and advance expenses to 
directors under this article.

Q. A corporation may indemnify and advance expenses to an officer, 
employee, agent, or person identified in Section P of this article 
and who is not a director to such further extent, consistent with 
law, as may be provided by its articles of incorporation, bylaws, 
general or specific action of its board of directors, or contract or 
as permitted or required by common law.

R. (1) A corporation may purchase and maintain insurance on behalf 
of any person who is or was a director, officer, employee, or agent 
of the corporation or who is or was serving at the request of the 
corporation as a director, officer, partner, venturer, proprietor, 
trustee, employee, agent, or similar functionary of another foreign 
or domestic corporation, partnership, joint venture, sole 
proprietorship, trust, employee benefit plan, or other enterprise 
against any liability asserted against him and incurred by him in 
such a capacity or arising out of his status as such a person, 
whether or not the corporation would have the power to indemnify him 
against that liability under this article.

(2)(a) In addition to the powers described in Subsection (1), a 
corporation may purchase, maintain, or enter into other 
arrangements on behalf of any person who is or was a director, 
officer, or trustee of the corporation against any liability 
asserted against him and incurred by him in such capacity or arising 
out of his status as such a person, whether or not the corporation 
would have the power to indemnify him against that liability under 
this article.

(b) If the other arrangement is with a person or entity that is not 
regularly engaged in the business of providing insurance coverage, 
the arrangement may provide for payment of a liability with respect 
to which the corporation would not have the power to indemnify a 
person only if coverage for that liability has been approved by the 
corporation's members, if the corporation has members.

(c) Without limiting the power of the corporation to procure or 
maintain any kind of other arrangement, a corporation, for the 
benefit of persons described in Subsection (2)(a) may:

(i) create a trust fund;                                                      

(ii) establish any form of self-insurance;                                    

(iii) secure its indemnity obligation by grant of a security 
interest or other lien on the assets of the corporation;  or

(iv) establish a letter of credit, guaranty, or surety arrangement.           

(d) For the limited purposes of Subsection (2) of this section only, 
any liability indemnification arrangement, other than coverage 
through an insurance carrier, is not considered to be the business 
of insurance under the Insurance Code, including the Texas Property 
and Casualty Insurance Guaranty Act (Article 21.28-C, Vernon's 
Texas Civil Statutes), or any other law of this state.

(3) The insurance may be procured or maintained with an insurer, or 
the other arrangement may be procured, maintained, or established 
within the corporation or with any insurer or other person 
considered appropriate by the board of directors, regardless of 
whether all or part of the stock or other securities of the insurer 
or other person are owned in whole or part by the corporation.  In 
the absence of fraud, the judgment of the board of directors as to 
the terms and conditions of the insurance or other arrangement and 
the identity of the insurer or other person participating in an 
arrangement is conclusive, and the insurance or arrangement is not 
voidable and does not subject the directors approving the insurance 
or arrangement to liability, on any ground, regardless of whether 
directors participating in the approval are beneficiaries of the 
insurance or arrangement.

S. Any indemnification of or advance of expenses to a director in 
accordance with this article shall be reported in writing to the 
members of the corporation with or before the notice or waiver of 
notice of the next meeting of members or with or before the next 
submission to members of a consent to action without a meeting 
pursuant to Section A, Article 1396-9.10 of this Act and, in any 
case, within the 12-month period immediately following the date of 
the indemnification or advance.

T. For purposes of this article, the corporation is deemed to have 
requested a director to serve an employee benefit plan whenever the 
performance by him of his duties to the corporation also imposes 
duties on or otherwise involves services by him to the plan or 
participants or beneficiaries of the plan.  Excise taxes assessed 
on a director with respect to an employee benefit plan pursuant to 
applicable law are deemed fines.  Action taken or omitted by him 
with respect to an employee benefit plan in the performance of his 
duties for a purpose reasonably believed by him to be in the 
interest of the participants and beneficiaries of the plan is 
deemed to be for a purpose which is not opposed to the best 
interests of the corporation.

U. The articles of incorporation of a corporation may restrict the 
circumstances under which the corporation is required or permitted 
to indemnify a person under Section H, I, J, O, P, or Q of this 
article.

Added by Acts 1985, 69th Leg., ch. 128, Sec. 30, eff. May 20, 1985.  
Amended by Acts 1989, 71st Leg., ch. 801, Sec. 46, eff. Aug. 28, 
1989;  Acts 1989, 71st Leg., ch. 1199, Sec. 2, eff. Aug. 28, 1989.




Art. 1396-2.23. Books and Records                                             

A. Each corporation shall keep correct and complete books and 
records of account and shall keep minutes of the proceedings of its 
members, board of directors, and committees having any authority of 
the board of directors and shall keep at its registered office or 
principal office in this State a record of the names and addresses 
of its members entitled to vote.

B. A member of a corporation, on written demand stating the purpose 
of the demand, has the right to examine and copy, in person or by 
agent, accountant, or attorney, at any reasonable time, for any 
proper purpose, the books and records of the corporation relevant 
to that purpose, at the expense of the member.

Acts 1959, 56th Leg., p. 286, ch. 162, art. 2.23.  Amended by Acts 
1993, 73rd Leg., ch. 733, Sec. 12, eff. Jan. 1, 1994.




Art. 1396-2.23A. Financial Records and Annual Reports                         

A. A corporation shall maintain current true and accurate financial 
records with full and correct entries made with respect to all 
financial transactions of the corporation, including all income and 
expenditures, in accordance with generally accepted accounting 
practices.

B. Based on these records, the board of directors shall annually 
prepare or approve a report of the financial activity of the 
corporation for the preceding year.  The report must conform to 
accounting standards as promulgated by the American Institute of 
Certified Public Accountants and must include a statement of 
support, revenue, and expenses and changes in fund balances, a 
statement of functional expenses, and balance sheets for all funds.

C. All records, books, and annual reports of the financial activity 
of the corporation shall be kept at the registered office or 
principal office of the corporation in this state for at least three 
years after the closing of each fiscal year and shall be available 
to the public for inspection and copying there during normal 
business hours.  The corporation may charge for the reasonable 
expense of preparing a copy of a record or report.

D. A corporation that fails to maintain financial records, prepare 
an annual report, or make a financial record or annual report 
available to the public in the manner prescribed by this article is 
guilty of a Class B misdemeanor.

E. This article does not apply to:                                            

(1) a corporation that solicits funds only from its members;                  

(2) a corporation which does not intend to solicit and receive and 
does not actually raise or receive contributions from sources other 
than its own membership in excess of $10,000 during a fiscal year;

(3) a career school or college that has received a certificate of 
approval from the Texas Workforce Commission, a public institution 
of higher education and foundations chartered for the benefit of 
such institutions or any component part thereof, a private or 
independent institution of higher education as defined by Section 
61.003, Education Code, a postsecondary educational institution 
with a certificate of authority to grant a degree issued by the 
Texas Higher Education Coordinating Board, or an elementary or 
secondary school;

(4) religious institutions which shall be limited to churches, 
ecclesiastical or denominational organizations, or other 
established physical places for worship at which religious services 
are the primary activity and such activities are regularly 
conducted;

(5) a trade association or professional society whose income is 
principally derived from membership dues and assessments, sales, or 
services;

(6) any insurer licensed and regulated by the Texas Department of 
Insurance;

(7) an alumni association of a public or private institution of 
higher education in this state, provided that such association is 
recognized and acknowledged by the institution as its official 
alumni association.

Added by Acts 1977, 65th Leg., p. 1947, ch. 773, Sec. 1, eff. Jan. 1, 
1978.  Amended by Acts 1993, 73rd Leg., ch. 733, Sec. 13, eff. Jan. 
1, 1994.

Sec. E amended by Acts 2003, 78th Leg., ch. 238, Sec. 42, eff. Sept. 
1, 2003;  Acts 2003, 78th Leg., ch. 364, Sec. 2.31, eff. Sept. 1, 
2003;  Acts 2003, 78th Leg., ch. 817, Sec. 8.45, eff. Sept. 1, 2003.




Art. 1396-2.23B. Corporations Assisting State Agencies                        

A. In this Article state agency means:                                        

(1) a board, commission, department, office, or other entity that 
is in the executive branch of state government and that was created 
by the constitution or a statute of the State, including an 
institution of higher education as defined by Section 61.003, Texas 
Education Code, as amended;

(2) the legislature or a legislative agency;  or                              

(3) the Supreme Court, the Court of Criminal Appeals, a court of 
appeals, or the State Bar of Texas or another state judicial agency.

B. The books and records of a corporation except a bona fide alumni 
association are subject to audit at the discretion of the State 
Auditor if both of the following obtain:

(1) the corporation's charter specifically dedicates the 
corporation's activities to the benefit of a particular agency of 
state government;  and

(2) a board member, officer, or employee of the same agency of state 
government sits on the board of directors of the corporation in 
other than an ex officio, nonvoting, advisory capacity.

C. If the corporation's charter specifically dedicates the 
corporation's activities to the benefit of a particular agency of 
state government but the conditions in Section B of this Article do 
not obtain, before the 90th day after the last day of the 
corporation's fiscal year, the corporation shall file with the 
Secretary of State a report for the preceding fiscal year 
consisting of a copy of a report as described by Section B of 
Article 2.23A of this Act (Article 1396-2.23A, Vernon's Texas Civil 
Statutes).

Added by Acts 1983, 68th Leg., p. 4600, ch. 779, Sec. 1, eff. Aug. 
29, 1983.




Art. 1396-2.24. Dividends Prohibited                                          

A. No dividend shall be paid and no part of the income of a 
corporation shall be distributed to its members, directors, or 
officers.  A corporation may pay compensation in a reasonable 
amount to its members, directors, or officers for services 
rendered, may confer benefits upon its members in conformity with 
its purposes, and upon dissolution or final liquidation may make 
distributions to its members, but only as permitted by this Act.

Acts 1959, 56th Leg., p. 286, ch. 162, art. 2.24.                             




Art. 1396-2.25. Loans to Directors Prohibited                                 

A. No loans shall be made by a corporation to its directors.                  

B. The directors of a corporation who vote for or assent to the 
making of a loan to a director of the corporation, and any officer 
or officers participating in the making of such loan, shall be 
jointly and severally liable to the corporation for the amount of 
such loan until repayment thereof.

Acts 1959, 56th Leg., p. 286, ch. 162, art. 2.25.  Amended by Acts 
1989, 71st Leg., ch. 1199, Sec. 3, eff. Aug. 28, 1989.




Art. 1396-2.26. Liability of Directors in Certain Cases                       

A. In addition to any other liabilities imposed by law upon 
directors of a corporation, the directors who vote for or assent to 
any distribution of assets other than in payment of its debts, when 
the corporation is insolvent or when such distribution would render 
the corporation insolvent, or during the liquidation of the 
corporation without the payment and discharge of or making adequate 
provisions for all known debts, obligations and liabilities of the 
corporation, shall be jointly and severally liable to the 
corporation for the value of such assets which are thus 
distributed, to the extent that such debts, obligations and 
liabilities of the corporation are not thereafter paid and 
discharged.

B. A director of a corporation who is present at a meeting of its 
board of directors at which action was taken on such corporate 
matter shall be presumed to have assented to such action unless his 
dissent shall be entered in the minutes of the meeting or unless he 
shall file his written dissent to such action with the person acting 
as the secretary of the meeting before the adjournment thereof or 
shall forward such dissent by registered mail to the secretary of 
the corporation immediately after the adjournment of the meeting.  
Such right to dissent shall not apply to a director who voted in 
favor of the action.

C. A director shall not be liable under Section A of this Article 
if, in voting for or assenting to a distribution, the director:

(1) relied in good faith and with ordinary care on information, 
opinions, reports, or statements, including financial statements 
and other financial data, concerning the corporation or another 
person that were prepared or presented by:

(a) one or more officers or employees of the corporation;                     

(b) legal counsel, public accountants, or other persons as to 
matters the director reasonably believes are within the person's 
professional or expert competence;  or

(c) a committee of the board of directors of which the director is 
not a member;

(2) acting in good faith and with ordinary care, considered the 
assets of the corporation to be at least that of their book value;  
or

(3) in determining whether the corporation made adequate provision 
for payment, satisfaction, or discharge of all of its liabilities 
and obligations as provided in Article 6.03 of this Act, relied in 
good faith and with ordinary care on financial statements of, or 
other information concerning, a person who was or became 
contractually obligated to pay, satisfy, or discharge some or all 
of those liabilities or obligations.

D. A director shall not be liable under this Article if, in the 
exercise of ordinary care, he acted in good faith and in reliance 
upon the written opinion of an attorney for the corporation.

E. A director against whom a claim shall be asserted under this 
Article and who shall be held liable thereon shall be entitled to 
contribution from persons who accepted or received such 
distribution knowing such distribution to have been made in 
violation of this Article, in proportion to the amounts received by 
them respectively.

Acts 1959, 56th Leg., p. 286, ch. 162, art. 2.26.  Amended by Acts 
1993, 73rd Leg., ch. 733, Sec. 14, eff. Jan. 1, 1994.




Art. 1396-2.27. Charitable Corporations                                       

A. Notwithstanding any provision in this Act or in the articles of 
incorporation to the contrary (except as provided in Section B), 
the articles of incorporation of each corporation which is a 
private foundation described in Section 509 of the Internal Revenue 
Code of 1986  shall be deemed to contain the following provisions:  
"The corporation shall make distributions at such time and in such 
manner as not to subject it to tax under Section 4942 of the 
Internal Revenue Code of 1986;   the corporation shall not engage in 
any act of self-dealing which would be subject to tax under Section 
4941 of the Code;   the corporation shall not retain any excess 
business holdings which would subject it to tax under Section 4943 
of the Code;   the corporation shall not make any investments which 
would subject it to tax under Section 4944 of the Code;   and the 
corporation shall not make any taxable expenditures which would 
subject it to tax under Section 4945 of the Code."   With respect to 
any such corporation organized prior to January 1, 1970, this 
Section A shall apply only for its taxable years beginning on or 
after January 1, 1972.

B. The articles of incorporation of any corporation described in 
Section A may be amended to expressly exclude the application of 
Section A, and in the event of such amendment, Section A shall not 
apply to such corporation.

C. All references in this Article to "the Code" are to the Internal 
Revenue Code of 1986, and all references in this Article to specific 
sections of the Code include corresponding provisions of any 
subsequent Federal tax laws.

Added by Acts 1971, 62nd Leg., p. 889, ch. 119, Sec. 1, eff. May 10, 
1971.  Amended by Acts 1993, 73rd Leg., ch. 733, Sec. 15, eff. Jan. 
1, 1994.




Art. 1396-2.28. General Standards for Directors                               

A. A director shall discharge the director's duties, including the 
director's duties as a member of a committee, in good faith, with 
ordinary care, and in a manner the director reasonably believes to 
be in the best interest of the corporation.

B. In the discharge of any duty imposed or power conferred on a 
director, including as a member of a committee, the director may in 
good faith rely on information, opinions, reports, or statements, 
including financial statements and other financial data, 
concerning the corporation or another person that were prepared or 
presented by:

(1) one or more officers or employees of the corporation;                     

(2) legal counsel, public accountants, or other persons as to 
matters the director reasonably believes are within the person's 
professional or expert competence;

(3) a committee of the board of directors of which the director is 
not a member;  or

(4) in the case of religious corporations, religious authorities 
and ministers, priests, rabbis, or other persons whose position or 
duties in the religious organization the director believes justify 
reliance and confidence and whom the director believes to be 
reliable and competent in the matters presented.

C. A director is not relying in good faith, within the meaning of 
this article, if the director has knowledge concerning a matter in 
question that makes reliance otherwise permitted by this article 
unwarranted.

D. A director is not liable to the corporation, any member, or any 
other person for any action taken or not taken as a director if the 
director acted in compliance with this article.  A person seeking to 
establish liability of a director must prove that the director has 
not acted:

(1) in good faith;                                                            

(2) with ordinary care;  and                                                  

(3) in a manner the director reasonably believes to be in the best 
interest of the corporation.

E. A director is not deemed to have the duties of a trustee of a 
trust with respect to the corporation or with respect to any 
property held or administered by the corporation, including 
property that may be subject to restrictions imposed by the donor or 
transferor of the property.

Added by Acts 1993, 73rd Leg., ch. 733, Sec. 16, eff. Jan. 1, 1994.           




Art. 1396-2.29. Delegation of Investment Authority                            

A. The board of directors of a corporation may:                               

(1) from time to time contract with investment counsel, trust 
companies, banks, investment advisors, or investment managers;  and

(2) confer on those advisors full power and authority to:                     

(a) purchase or otherwise acquire stocks, bonds, securities, and 
other investments on behalf of the corporation;  and

(b) sell, transfer, or otherwise dispose of any of the 
corporation's assets and properties at a time and for a 
consideration that the advisor deems appropriate.

B. The board of directors also may:                                           

(1) confer on an advisor described by Section A of this article 
other powers regarding the corporation's investments as the board 
of directors deems appropriate;  and

(2) authorize the advisor to hold title to any of the corporation's 
assets and properties in its own name for the benefit of the 
corporation or in the name of a nominee for the benefit of the 
corporation.

C. The board of directors has no liability regarding any action 
taken or omitted by an advisor engaged under this article if the 
board of directors acted in good faith and with ordinary care in 
selecting the advisor.  The board of directors may remove or replace 
the advisor, with or without cause, if they deem that action 
appropriate or necessary.

Added by Acts 1993, 73rd Leg., ch. 733, Sec. 16, eff. Jan. 1, 1994.           




Art. 1396-2.30. Interested Directors                                          

A. A contract or transaction between a corporation and one or more 
of its directors, officers, or members, or between a corporation 
and any other corporation, partnership, association, or other 
organization in which one or more of its directors, officers, or 
members are directors, officers, or members, or have a financial 
interest, is not void or voidable solely for that reason, solely 
because the director, officer, or member is present at or 
participates in the meeting of the board or committee of the board 
or of the members that authorizes the contract or transaction, or 
solely because the director's, officer's, or member's votes are 
counted for that purpose, if:

(1) the material facts as to the relationship or interest and as to 
the contract or transaction are disclosed or are known to the board 
of directors, the committee, or the members, and the board, 
committee, or members in good faith and with ordinary care 
authorizes the contract or transaction by the affirmative vote of a 
majority of the disinterested directors or members, even though the 
disinterested directors or members are less than a quorum;

(2) the material facts as to the relationship or interest and as to 
the contract or transaction are disclosed or are known to the 
members entitled to vote on the contract or transaction, and the 
contract or transaction is specifically approved in good faith and 
with ordinary care by vote of the disinterested members;  or

(3) the contract or transaction is fair to the corporation when it 
is authorized, approved, or ratified by the board of directors, a 
committee of the board, or the members.

B. Common or interested directors or members may be counted in 
determining the presence of a quorum at a meeting of the board of 
directors, of a committee, or of the members that authorizes the 
contract or transaction.

Added by Acts 1993, 73rd Leg., ch. 733, Sec. 16, eff. Jan. 1, 1994.           




Art. 1396-2.31. Power to Serve as Trustee                                     

A. A corporation that is described by Section 501(c)(3) or 170(c), 
Internal Revenue Code of 1986, or a corresponding provision of a 
subsequent federal tax law, or a corporation listed by the Internal 
Revenue Service in the Cumulative List of Organizations Described 
in Section 170(c) of the Internal Revenue Code of 1986, I.R.S. 
Publication 78, may serve as the trustee of a trust:

(1) of which the corporation is a beneficiary;  or                            

(2) benefiting another organization described by one of those 
sections of the Internal Revenue Code of 1986, or a corresponding 
provision of a subsequent federal tax law, or listed by the Internal 
Revenue Service in the Cumulative List of Organizations Described 
in Section 170(c) of the Internal Revenue Code of 1986, I.R.S. 
Publication 78.

B. Any corporation (or person or entity assisting such corporation) 
described in this article shall have immunity from suit (including 
both a defense to liability and the right not to bear the cost, 
burden, and risk of discovery and trial) as to any claim alleging 
that the corporation's role as trustee of a trust described in this 
article constitutes engaging in the trust business in a manner 
requiring a state charter as defined in Section 181.002(a)(9), 
Finance Code. An interlocutory appeal may be taken if a court denies 
or otherwise fails to grant a motion for summary judgment that is 
based on an assertion of the immunity provided in this subsection.

Added by Acts 1995, 74th Leg., ch. 914, Sec. 21, eff. June 16, 1995.  
Amended by Acts 1997, 75th Leg., ch. 769, Sec. 9, eff. June 17, 
1997;  Acts 1999, 76th Leg., ch. 344, Sec. 8.001, eff. May 29, 1999;  
Acts 1999, 76th Leg., ch. 1073, Sec. 1, eff. June 18, 1999;  Acts 
2001, 77th Leg., ch. 1420, Sec. 6.030, eff. Sept. 1, 2001.




Art. 1396-3.01. Incorporators                                                 

A. Any natural person of the age of eighteen (18) years or more 
without regard to the person's place of residence or domicile may 
act as an incorporator of a corporation by signing the articles of 
incorporation for such corporation and delivering the original and 
a copy of the articles of incorporation to the Secretary of State.

B. Any religious society, charitable, benevolent, literary, or 
social association, or church may incorporate under this Act with 
the consent of a majority of its members, who shall authorize the 
incorporators to execute the articles of incorporation.

Acts 1959, 56th Leg., p. 286, ch. 162, art. 3.01.  Amended by Acts 
1979, 66th Leg., p. 214, ch. 120, Sec. 3, eff. May 9, 1979;  Acts 
1987, 70th Leg., ch. 93, Sec. 37, eff. Aug. 31, 1987.




Art. 1396-3.02. Articles of Incorporation                                     

A. The articles of incorporation shall set forth:                             

(1) The name of the corporation.                                              

(2) A statement that the corporation is a non-profit corporation.             

(3) The period of duration, which may be perpetual.                           

(4) The purpose or purposes for which the corporation is organized.           

(5) If the corporation is to have no members, a statement to that 
effect.   

(6) If management of the affairs of the corporation is to be vested 
in its members, a statement to that effect.

(7) Any provision, not inconsistent with law, including any 
provision which under this Act is required or permitted to be set 
forth in the by-laws, which the incorporators elect to set forth in 
the articles of incorporation for the regulation of the internal 
affairs of the corporation.

(8) The street address of its initial registered office and the name 
of its initial registered agent at such street address.

(9) The number of directors constituting the initial board of 
directors, and the names and addresses of the persons who are to 
serve as the initial directors unless the management of the 
corporation is vested in its members, in which event a statement to 
that effect shall be set forth.

(10) The name and street or post office address of each 
incorporator.       

(11) If the corporation is to be authorized on its dissolution to 
distribute its assets in a manner other than as provided by Article 
6.02(3) of this Act, a statement describing the manner of 
distribution of the corporation's assets.

B. Provided that charters or articles of incorporation of 
corporations existing on the effective date of this Act which do not 
contain one or more of the requirements listed in the foregoing 
Section need not be amended for the purpose of meeting such 
requirements.  Any subsequent amendment or restatement of the 
articles of incorporation of such corporation shall include such 
requirements, except that it shall not be necessary, in such 
amended or restated articles, to include the information required 
in Subsections (8), (9), and (10) of Section A.

C. It shall not be necessary to set forth in the articles of 
incorporation any of the corporate powers enumerated in this Act.

D. Unless the articles of incorporation provide that a change in the 
number of directors shall be made only by amendment to the articles 
of incorporation, a change in the number of directors made by 
amendment to the by-laws shall be controlling.  In all other cases, 
whenever a provision of the articles of incorporation is 
inconsistent with a by-law, the provision of the articles of 
incorporation shall be controlling.

Acts 1959, 56th Leg., p. 286, ch. 162, art. 3.02.  Amended by Acts 
1965, 59th Leg., p. 1294, ch. 597, Sec. 1, eff. Aug. 30, 1965;  Acts 
1993, 73rd Leg., ch. 733, Sec. 17, eff. Jan. 1, 1994.




Art. 1396-3.03. Filing of Articles of Incorporation                           

A. The original and a copy of the articles of incorporation shall be 
delivered to the Secretary of State.  If the Secretary of State 
finds that the articles of incorporation conform to law, he shall, 
when all fees have been paid as required by law:

(1) Endorse on the original and the copy the word "Filed", and the 
month, day, and year of the filing thereof.

(2) File the original in his office.                                          

(3) Issue a certificate of incorporation to which he shall affix the 
copy.  

B. The certificate of incorporation, together with the copy of the 
articles of incorporation affixed thereto by the Secretary of State 
shall be delivered to the incorporators or their representatives.

Acts 1959, 56th Leg., p. 286, ch. 162, art. 3.03.  Amended by Acts 
1979, 66th Leg., p. 214, ch. 120, Sec. 4, eff. May 9, 1979.




Art. 1396-3.04. Effect of Issuance of Certificate of Incorporation            

A. Upon the issuance of the certificate of incorporation, the 
corporate existence shall begin, and such certificate of 
incorporation shall be conclusive evidence that all conditions 
precedent required to be performed by the incorporators have been 
complied with, and that the corporation has been incorporated under 
this Act, except as against the State in a proceeding for 
involuntary dissolution.

Acts 1959, 56th Leg., p. 286, ch. 162, art. 3.04.                             




Art. 1396-3.05. Organization Meeting                                          

A. After the issuance of the certificate of incorporation, an 
organization meeting of the board of directors named in the 
articles of incorporation shall be held, either within or without 
this State, at the call of the incorporators or the call of a 
majority of the directors named in the articles of incorporation, 
for the purpose of adopting by-laws, electing officers, and for 
such other purposes as may come before the meeting.  The 
incorporators or directors calling the meeting shall give at least 
three (3) days' notice thereof by mail to each director named in the 
articles of incorporation, which notice shall state the time and 
place of the meeting.

B. A first meeting of the members may be held at the call of the 
directors, or a majority of them, upon at least three (3) days' 
notice, for such purposes as shall be stated in the notice of the 
meeting.

C. If the management of a corporation is vested in its members, the 
organization meeting shall be held by the members upon the call of 
any of the incorporators.  The incorporators calling the meeting 
shall (a) give at least three (3) days' notice by mail to each 
member stating the time and place of the meeting, or shall (b) make 
an oral announcement of the time and place of meeting at a regularly 
scheduled worship service prior to such meeting if the corporation 
is a church, or shall (c) give such notice of the meeting as may be 
provided for in the articles of incorporation.

Acts 1959, 56th Leg., p. 286, ch. 162, art. 3.05.  Amended by Acts 
1993, 73rd Leg., ch. 733, Sec. 18, eff. Jan. 1, 1994.




Art. 1396-4.01. Right to Amend Articles of Incorporation                      

A. A corporation may amend its articles of incorporation from time 
to time, in any and as many respects as may be desired, so long as 
its articles of incorporation as amended contain only such 
provisions as are lawful under this Act.

Acts 1959, 56th Leg., p. 286, ch. 162, art. 4.01.                             




Art. 1396-4.02. Procedure to Amend Articles of Incorporation                  

A. Amendments to the articles of incorporation may be made in the 
following manner:

(1) Except as provided in Section A(4) of this article, where there 
are members having voting rights, the board of directors shall 
adopt a resolution setting forth the proposed amendment and 
directing that it be submitted to a vote at a meeting of members 
having voting rights, which may be either an annual or a special 
meeting.  Written or printed notice setting forth the proposed 
amendment or a summary of the changes to be effected thereby shall 
be given to each member entitled to vote at such meeting within the 
time and in the manner provided in this Act for the giving of notice 
of meetings of members.  The proposed amendment shall be adopted 
upon receiving at least two-thirds of the votes which members 
present at such meeting in person or by proxy are entitled to cast, 
unless any class of members is entitled to vote as a class thereon 
by the terms of the articles of incorporation or of the by-laws, in 
which event the proposed amendment shall not be adopted unless it 
also receives at least two-thirds of the votes which the members of 
each such class who are present at such meeting in person or by 
proxy are entitled to cast.

(2) Where there are no members, no members having voting rights, or 
in the case of an amendment under Section A(4) of this article, an 
amendment shall be adopted at a meeting of the board of directors 
upon receiving the vote of a majority of the directors in office.

(3) Where the management of the affairs of the corporation is vested 
in the members pursuant to Article 2.14C of this Act, the proposed 
amendment shall be submitted to a vote at a meeting of members which 
may be an annual, a regular, or a special meeting.  Except as 
otherwise provided in the articles of incorporation or the by-laws, 
notice setting forth the proposed amendment or a summary of the 
changes to be effected thereby shall be given to the members within 
the time and in the manner provided in this Act for the giving of 
notice of meetings of members.  The proposed amendment shall be 
adopted upon receiving at least two-thirds of the votes of members 
present at such meeting.

(4) Unless the articles of incorporation provide otherwise, the 
board of directors of a corporation with members having voting 
rights may adopt one or more of the following amendments to the 
articles of incorporation without member approval:

(a) extend the duration of the corporation if it was incorporated 
when limited duration was required by law;

(b) delete the names and addresses of the initial directors;                  

(c) delete the name and address of the initial registered agent or 
registered office, if a statement of change is on file with the 
Secretary of State;  or

(d) change the corporate name by substituting the word 
"corporation," "incorporated," "company," "limited," or the 
abbreviation "corp.," "inc.," "co.," "ltd.," for a similar word or 
abbreviation in the name, or by adding, deleting, or changing a 
geographical attribution to the name.

B. Any number of amendments may be submitted and voted upon at any 
one meeting.

Acts 1959, 56th Leg., p. 286, ch. 162, art. 4.02.  Amended by Acts 
1993, 73rd Leg., ch. 733, Sec. 19, eff. Jan. 1, 1994.




Art. 1396-4.03. Articles of Amendment                                         

A. The articles of amendment shall be signed on behalf of the 
corporation by an officer and shall set forth:

(1) The name of the corporation.                                              

(2) If the amendment alters any provision of the original or amended 
articles of incorporation, an identification by reference or 
description of the altered provision and a statement of its text as 
it is amended to read.  If the amendment is an addition to the 
original or amended articles of incorporation, a statement of that 
fact and the full text of each provision added.

(3) Where there are members having voting rights, (1) a statement 
setting forth the date of the meeting of members at which the 
amendment was adopted, that a quorum was present at such meeting, 
and that such amendment received at least two-thirds of the votes 
which members present at such meeting in person or by proxy were 
entitled to cast, as well as, in the case of any class entitled to 
vote as a class thereon by the terms of the articles of 
incorporation or of the by-laws, at least two-thirds of the votes 
which members of any such class who were present at such meeting in 
person or by proxy were entitled to cast, or (2) a statement that 
such amendment was adopted by a consent in writing signed by all 
members entitled to vote with respect thereto.

(4) Where there are no members, or no members having voting rights, 
a statement of such fact, the date of the meeting of the board of 
directors at which the amendment was adopted, and a statement of the 
fact that such amendment received the vote of a majority of the 
directors in office.

Acts 1959, 56th Leg., p. 286, ch. 162, art. 4.03.  Amended by Acts 
1979, 66th Leg., p. 214, ch. 120, Sec. 5, eff. May 9, 1979;  Acts 
1987, 70th Leg., ch. 93, Sec. 38, eff. Aug. 31, 1987.




Art. 1396-4.04. Filing of Articles of Amendment                               

A. The original and a copy of the articles of amendment shall be 
delivered to the Secretary of State.  If the Secretary of State 
finds that the articles of amendment conform to law, he shall, when 
all fees have been paid as in this Act prescribed:

(1) Endorse on the original and the copy the word "Filed", and the 
month, day, and year of the filing thereof.

(2) File the original in his office.                                          

(3) Issue a certificate of amendment to which he shall affix the 
copy.      

B. The certificate of amendment, together with the copy of the 
articles of amendment affixed thereto by the Secretary of State, 
shall be delivered to the corporation or its representative.

Acts 1959, 56th Leg., p. 286, ch. 162, art. 4.04.  Amended by Acts 
1979, 66th Leg., p. 215, ch. 120, Sec. 6, eff. May 9, 1979.




Art. 1396-4.05. Effect of Certificate of Amendment                            

A. Upon the issuance of the certificate of amendment by the 
Secretary of State, the amendment shall become effective and the 
articles of incorporation shall be deemed to be amended 
accordingly.

B. No amendment shall affect any existing cause of action in favor 
of or against such corporation, or any pending suit to which such 
corporation shall be a party, or the existing rights of persons 
other than members;  and, in the event the corporate name shall be 
changed by amendment, no suit brought by or against such 
corporation under its former name shall abate for that reason.

Acts 1959, 56th Leg., p. 286, ch. 162, art. 4.05.                             




Art. 1396-4.06. Restated Articles of Incorporation                            

A. A corporation may, by following the procedure to amend the 
articles of incorporation provided by this Act, authorize, execute 
and file restated articles of incorporation, except that member 
approval, if the corporation has members with voting rights, is not 
required if no amendments are made.  The restated articles of 
incorporation may restate either:

(1) The entire text of the articles of incorporation as amended or 
supplemented by all certificates of amendment previously issued by 
the Secretary of State;  or

(2) The entire text of the articles of incorporation as amended or 
supplemented by all certificates of amendment previously issued by 
the Secretary of State, and as further amended by such restated 
articles of incorporation.

B. If the restated articles of incorporation restate the entire 
articles of incorporation as amended and supplemented by all 
certificates of amendment previously issued by the Secretary of 
State, without making any further amendment thereof, the 
introductory paragraph shall contain a statement that the 
instrument accurately copies the articles of incorporation and all 
amendments thereto that are in effect to date and that the 
instrument contains no change in the provisions thereof, provided 
that the number of directors then constituting the board of 
directors and the names and addresses of the persons then serving as 
directors may be inserted in lieu of similar information concerning 
the initial board of directors, and the name and address of each 
incorporator may be omitted;  and provided further that, if the 
management of a church is vested in its members pursuant to Article 
2.14C of this Act and if, under that Article, original articles of 
incorporation are not required to contain a statement to that 
effect, any restatement of the articles of incorporation shall 
contain a statement to that effect.

C. If the restated articles of incorporation restate the entire 
articles of incorporation as amended and supplemented by all 
certificates of amendment previously issued by the Secretary of 
State, and as further amended by such restated articles of 
incorporation, the instrument containing such articles shall:

(1) Set forth, for any amendment made by such restated articles of 
incorporation, a statement that each such amendment has been 
effected in conformity with the provisions of this Act, and shall 
further set forth the statements required by this act to be 
contained in articles of amendment, provided that the full text of 
such amendments need not be set forth except in the restated 
articles of incorporation as so amended.

(2) Contain a statement that the instrument accurately copies the 
articles of incorporation and all amendments thereto that are in 
effect to date and as further amended by such restated articles of 
incorporation and that the instrument contains no other change in 
any provision thereof;  provided that the number of directors then 
constituting the board of directors and the names and addresses of 
the persons then serving as directors may be inserted in lieu of 
similar information concerning the initial board of directors, and 
the names and addresses of each incorporator may be omitted;  and 
provided further that, if the management of a church is vested in 
its members pursuant to Article 2.14C of this Act, and if, under 
that Article, original articles of incorporation are not required 
to contain a statement to that effect, any restatement of the 
articles of incorporation shall contain a statement to that effect.

(3) Restate the text of the entire articles of incorporation as 
amended and supplemented by all certificates of amendment 
previously issued by the Secretary of State and as further amended 
by the restated articles of incorporation.

D. Such restated articles of incorporation shall be signed on 
behalf of the corporation by an officer.  The original and a copy of 
the restated articles of incorporation shall be delivered to the 
Secretary of State.  If the Secretary of State finds that the 
restated articles of incorporation conform to law, he shall, when 
the appropriate filing fee is paid as required by law:

(1) Endorse on the original and the copy the word "Filed", and the 
month, day, and year of the filing thereof.

(2) File the original in his office.                                          

(3) Issue a restated certificate of incorporation to which he shall 
affix the copy.

E. The restated certificate of incorporation, together with the 
copy of the restated articles of incorporation affixed thereto by 
the Secretary of State, shall be delivered to the corporation or its 
representative.

F. Upon the issuance of the restated certificate of incorporation 
by the Secretary of State, the original articles of incorporation 
and all amendments thereto shall be superseded and the restated 
articles of incorporation shall be deemed to be articles of 
incorporation of the corporation.

Acts 1959, 56th Leg., p. 286, ch. 162, art. 4.06.  Amended by Acts 
1979, 66th Leg., p. 215, ch. 120, Sec. 7, eff. May 9, 1979;  Acts 
1981, 67th Leg., p. 832, ch. 297, Sec. 2, eff. Aug. 31, 1981;  Acts 
1987, 70th Leg., ch. 93, Sec. 39, eff. Aug. 31, 1987;  Acts 1993, 
73rd Leg., ch. 733, Sec. 20, eff. Jan. 1, 1994.




Art. 1396-5.01. Procedure for Merger of Domestic Corporations                 

A. Any two or more domestic corporations may merge into one of such 
corporations pursuant to a plan of merger approved in the manner 
provided in this Act.

B. Each corporation shall adopt a plan of merger setting forth:               

(1) The name of the corporation proposing to merge.                           

(2) The name of the corporation into which they propose to merge, 
which is hereinafter designated as the surviving corporation.

(3) The terms and conditions of the proposed merger.                          

(4) A statement of any changes in the articles of incorporation of 
the surviving corporation to be affected by such merger.

(5) Such other provisions with respect to the proposed merger as are 
deemed necessary or desirable.

Acts 1959, 56th Leg., p. 286, ch. 162, art. 5.01.                             




Art. 1396-5.02. Procedure for Consolidation of Domestic 
Corporations        

A. Any two or more domestic corporations may consolidate into a new 
corporation pursuant to a plan of consolidation approved in the 
manner provided in this Act.

B. Each corporation shall adopt a plan of consolidation setting 
forth:      

(1) The names of the corporations proposing to consolidate.                   

(2) The name of the new corporation into which they propose to 
consolidate, which is hereinafter designated as the new 
corporation.

(3) The terms and conditions of the proposed consolidation.                   

(4) With respect to the new corporation, all of the statements 
required to be set forth in articles of incorporation for 
corporations organized under this Act.

(5) Such other provisions with respect to the proposed 
consolidation as are deemed necessary or desirable.

Acts 1959, 56th Leg., p. 286, ch. 162, art. 5.02.                             




Art. 1396-5.03. Approval of Merger or Consolidation of Domestic 
Corporations

A. A plan of merger or consolidation of domestic corporations shall 
be adopted in the following manner:

(1) Where the members of any merging or consolidating corporation 
have voting rights, the board of directors of such corporations 
shall adopt a resolution approving the proposed plan and directing 
that it be submitted to a vote at the meeting of members having 
voting rights, which may be either an annual or a special meeting.  
Written or printed notice setting forth the proposed plan or a 
summary thereof shall be given to each member entitled to vote at 
such meeting within the time and in the manner provided in this Act 
for the giving of notice of meetings of members.  The proposed plan 
shall be adopted upon receiving at least two-thirds of the votes 
which members present at such meeting in person or by proxy are 
entitled to cast, unless any class of members is entitled to vote as 
a class thereon by the terms of the articles of incorporation or of 
the by-laws, in which event as to such corporations the proposed 
plan shall not be adopted unless it also receives at least 
two-thirds of the votes which members of each such class who are 
present at such meeting in person or by proxy are entitled to cast.

(2) Where any merging or consolidating corporation has no members, 
or no members having voting rights, a plan of merger or 
consolidation shall be adopted at a meeting of the board of 
directors of such corporation upon receiving the vote of a majority 
of the directors in office.

(3) Where the management of the affairs of any merging or 
consolidating corporation is vested in its members pursuant to 
Article 2.14C of this Act, the proposed plan shall be submitted to a 
vote at a meeting of the members, which may be an annual, a regular, 
or a special meeting.  Except as otherwise provided in the articles 
of incorporation or the by-laws, notice setting forth the proposed 
plan or a summary thereof shall be given to the members within the 
time and in the manner provided in this Act for the giving of notice 
of meetings of members.  The proposed plan shall be adopted upon 
receiving at least two-thirds of the votes of the members present at 
such meeting.

B. After such approval, and at any time prior to the filing of the 
articles of merger or consolidation, the merger or consolidation 
may be abandoned pursuant to provisions therefor, if any, set forth 
in the plan of merger or consolidation.

Acts 1959, 56th Leg., p. 286, ch. 162, art. 5.03.                             




Art. 1396-5.04. Articles of Merger or Consolidation of Domestic 
Corporations

A. Upon such approval, articles of merger or articles of 
consolidation shall be signed on behalf of each corporation by one 
of its officers and shall set forth:

(1) The plan of merger or the plan of consolidation.                          

(2) Where the members of any merging or consolidating corporation 
have voting rights, then as to each corporation (a) a statement 
setting forth the date of the meeting of members at which the plan 
was adopted, that a quorum was present at such meeting, and that 
such plan received at least two-thirds of the votes which members 
present at such meeting in person or by proxy were entitled to cast, 
as well as, in the case of any class entitled to vote as a class 
thereon by the terms of the articles of incorporation or of the 
by-laws, at least two-thirds of the votes which members of any such 
class who were present at such meeting in person or by proxy were 
entitled to cast, or (b) a statement that such amendment was adopted 
by a consent in writing signed by all members entitled to vote with 
respect thereto.

(3) Where any merging or consolidating corporation has no members, 
or no members having voting rights, then as to each such corporation 
a statement of such fact, the date of the meeting of the board of 
directors at which the plan was adopted and a statement of the fact 
that such plan received the vote of a majority of the directors in 
office.

B. The original and a copy of the articles of merger or articles of 
consolidation shall be delivered to the Secretary of State.  If the 
Secretary of State finds that such articles conform to law, he 
shall, when all fees have been paid as in this Act prescribed:

(1) Endorse on the original and the copy the word "Filed," and the 
month, day and year of the filing thereof.

(2) File the original in his office.                                          

(3) Issue a certificate of merger or a certificate of consolidation 
to which he shall affix the copy.

C. The certificate of merger or certificate of consolidation, 
together with the copy of the articles of merger or articles of 
consolidation affixed thereto by the Secretary of State, shall be 
returned to the surviving or new corporation, as the case may be, or 
its representative.

Acts 1959, 56th Leg., p. 286, ch. 162, art. 5.04.  Amended by Acts 
1979, 66th Leg., p. 216, ch. 120, Sec. 8, eff. May 9, 1979;  Acts 
1987, 70th Leg., ch. 93, Sec. 40, eff. Aug. 31, 1987.




Art. 1396-5.05. Effective Date of Merger or Consolidation of 
Domestic Corporations

A. Except as provided by Article 10.07 of this Act, on the issuance 
of the certificate of merger or the certificate of consolidation by 
the Secretary of State, the merger or consolidation of domestic 
corporations shall be effected.

Acts 1959, 56th Leg., p. 286, ch. 162, art. 5.05.  Amended by Acts 
1993, 73rd Leg., ch. 733, Sec. 21, eff. Jan. 1, 1994.




Art. 1396-5.06. Effect of Merger or Consolidation of Domestic 
Corporations  

A. When such merger or consolidation of domestic corporations has 
been effected:

(1) The several corporations parties to the plan of merger or 
consolidation shall be a single corporation, which, in the case of a 
merger, shall be that corporation designated in the plan of merger 
as the surviving corporation, and, in the case of consolidation, 
shall be the new corporation provided for in the plan of 
consolidation.

(2) The separate existence of all corporations parties to the plan 
of merger or consolidation, except the surviving or new 
corporation, shall cease.

(3) Such surviving or new corporation shall have all the rights, 
privileges, immunities and powers and shall be subject to all the 
duties and liabilities of a corporation organized under this Act.

(4) Such surviving or new corporation shall thereupon and 
thereafter possess all the rights, privileges, immunities and 
franchises, as well of a public as of a private nature, of each of 
the merging or consolidating corporations;  and all property, real, 
personal and mixed, and all debts due on whatever account, and all 
other choses in action, and all and every other interest, of or 
belonging to or due to each of the corporations so merged or 
consolidated, shall be taken and deemed to be transferred to and 
vested in such single corporation without further act or deed.

(5) Such surviving or new corporation shall thenceforth be 
responsible and liable for all the liabilities and obligations of 
each of the corporations so merged or consolidated;  and any claim 
existing or action or proceeding pending by or against any of such 
corporations may be prosecuted as if such merger or consolidation 
had not taken place, or such surviving or new corporation may be 
substituted in its place.  Neither the rights of creditors nor any 
liens upon the property of any such corporations shall be impaired 
by such merger or consolidation.

(6) In the case of a merger, the articles of incorporation of the 
surviving corporation shall be deemed to be amended to the extent, 
if any, that changes in its articles of incorporation are stated in 
the plan of merger;  and, in the case of a consolidation, the 
statements set forth in the articles of consolidation and which are 
required or are permitted to be set forth in the articles of 
incorporation of corporations organized under this Act shall be 
deemed to be the articles of incorporation of the new corporation.

Acts 1959, 56th Leg., p. 286, ch. 162, art. 5.06.                             




Art. 1396-5.07. Merger or Consolidation of Domestic and Foreign 
Corporations

A. One or more foreign corporations and one or more domestic 
corporations may be merged or consolidated, if such merger or 
consolidation is permitted by the laws of the State under which each 
such foreign corporation is organized.  In the case of merger, the 
surviving corporation may be any one of the constituent 
corporations and shall be deemed to continue to exist under the laws 
of the state of its incorporation.  In the case of consolidation, 
the new corporation may be a corporation organized under the laws of 
any state under which any of the constituent corporations was 
organized.

B. Such merger or consolidation shall be carried out in the 
following manner:

(1) Each domestic corporation shall comply with the provisions of 
this Act with respect to merger or consolidation, as the case may 
be, of domestic corporations, except that if the surviving or new 
corporation is to be a foreign corporation, the plan of merger or 
consolidation shall specify the state under whose laws such 
surviving or new corporation is to be governed and the post office 
address of the registered or principal office of such surviving or 
new corporation in the state under whose laws it is to be governed;  
provided, however, that no domestic corporation shall be merged or 
consolidated with a foreign corporation unless and until a 
resolution authorizing such merger or consolidation shall receive, 
at a meeting of members of the domestic corporation, called and 
conducted in the same manner as provided by Article 5.03 of this 
Act, at least two-thirds (2/3) of the votes which members present at 
such meeting in person or by proxy are entitled to cast, and 
provided further that if any class of members is entitled to vote as 
a class thereon by the terms of the articles of incorporation or of 
the by-laws, as to such corporation the resolution shall not be 
adopted unless it shall also receive at least two-thirds of the 
votes which members of each such class who are present at such 
meeting in person or by proxy are entitled to cast, and provided 
further that if such a domestic corporation has no members, or no 
members having voting rights, the plan of merger or consolidation 
shall be adopted at a meeting of the board of directors of such 
corporation upon receiving the vote of a majority of the directors 
in office.

(2) If the surviving or new corporation, as the case may be, is a 
foreign corporation, it shall comply with the provisions of this 
Act with respect to foreign corporations if it is to transact 
business in this State, and in every case it shall file with the 
Secretary of State of this State:

(a) An agreement that it may be served with process in this State in 
any proceeding for the enforcement of any obligation of any 
domestic corporation which was a party to such merger or 
consolidation.

(b) An irrevocable appointment of the Secretary of State of this 
State as its agent to accept service of process in any such 
proceeding.

(3) Upon compliance by each domestic and foreign corporation which 
is a party to the merger or consolidation with the provisions of 
this Act with respect to merger or consolidation, and upon issuance 
by the Secretary of State of this State of the certificate of merger 
or the certificate of consolidation provided for in this Act, the 
merger or consolidation shall be effected