Search results
20 results
Sort by:
Entity Acquisitions Under the Texas Business Organizations Code
The Texas Business Organizations Code (the TBOC or the Code) is a substantive codification of the prior Texas statutes governing non-profit and for-profit private-sector entities, which, for the most part, were repealed effective as of January 1, 2010. These statutes consisted of the Texas Business Corporation Act (TBCA), Texas Miscellaneous Corporation Laws Act (TMCLA), Texas Limited Liability Company Act (TLLCA), Texas Revised Limited Partnership Act (TRLPA), Texas Revised Partnership Act (TRPA), Texas Non-Profit Corporation Act (TNPCA), Texas Real Estate Investment Trust Act (TREITA), Texas Uniform Unincorporated Nonprofit Associations Act (TUUNAA), Texas Professional Corporation Act (TPCA), Texas Professional Associations Act (TPAA), Cooperative Associations Act (CAA) and other existing provisions of Texas statutes governing private entities.
Shareholder Agreements: Drafting and Analysis
Under the Texas Business Organizations Code (the “TBOC”), there are three kinds of shareholders agreements for a Texas for-profit corporation. First, there are shareholders agreements between the corporation and one or more of the corporation’s shareholders or agreements between two or more shareholders that are not executed by all of the shareholders of the corporation. The TBOC has no specific provisions governing this first kind of shareholders agreements other than to state that the statutory provisions governing the other two kinds of shareholders agreementsdo not prohibit or impair such agreements. Second, there are written shareholders agreements that are executed by all of the shareholders at the time of the agreement and made known to the corporation. Third, there are shareholders agreements that are contained in the certificate of formation or bylaws if approved by all of the shareholders at the time of the agreement. The latter two forms of shareholder agreements are authorized and governed by Subchapter C of Chapter 21 of the TBOC. These latter agreements may be amended only by all of the shareholders at the time of the amendment, unless the agreement provides otherwise.4 This article refers to the latter kinds of shareholders agreements as “statutory shareholders agreements”.
2023 Texas Legislative Update on Amendments to Texas Business Organizations Code
This article summarizes several bills that were passed by the Texas Legislature in its 2023 Regular Session and that amend the Texas Business Organizations Code (the “TBOC”). There are many other bills that were passed affecting business law, so this article should not be viewed as containing a listing of all business-related bills. The article contains summaries only and should not be relied on as a complete description of any bill or portion thereof.
2019 Texas Legislative Update on Amendments to Entity Laws
This article summarizes several pieces of legislation that have been passed by the Texas Legislature in its 2019 Regular Session and that amend the Texas Business Organizations Code and the Texas Business and Commerce Code. It covers changes to assumed name filings, authorized use of electronic data systems, delayed effectiveness of filings, deriviative proceedings, voting agreements, LLC provision amendments, partnership provision amendments, two-step offer merger transactions, ratification of defective acts, directors of non-profit organizations, and notice of redemptions by for profit corporations.
Derivative Actions Under the Texas Business Organizations Code
The fiduciary duties of directors or other governing persons of an entity and its officers are generally owed to the corporation, limited liability company (“LLC”) or limited partnership (“LP”) entity they serve and not to any individual owners. Thus, a cause of action against a director or other governing persons of an entity and its officers for breach of fiduciary duty would be vested in, and brought by or in the right of, the entity. Statutes in both Texas6 and Delaware authorize an action brought in the right of the entity by a stakeholder against its Board for breach of fiduciary duty.8 Such an action is called a “derivative action.” The TBOC was amended in the 2019 Legislative Session to make consistent derivative proceedings provisions governing for profit corporations with those governing LLCs and LPs by House Bill No. 3603, which became effective on September 1, 2019.
Entities and Marital Property Law: Interrelated Claims and Assets
Valuing assets is part art and part science. In a litigation context, it becomes even harder. In a divorce case, the difficulty again multiplies. Preparing a valuation with the hypothetical assumptions required by Texas case law further complicates the process. There is no simple “cookbook” approach to valuing assets. The appraiser must be intuitive in his or her approach. One challenging the appraiser, in Court or otherwise, must be prepared to not only have a complete understanding of the asset itself, but also a complete understanding of the approach chosen by the appraiser, the approaches discarded as inappropriate, and why one was deemed better than another in this case. There is no substitute for hard work, thorough attention to detail, and that spark of imagination and creativity necessary to achieve results that stand the test of time.
Forming New Non-Profits
Many attorneys use the term “nonprofit” interchangeably with the term “tax-exempt.” They are not the same. Chapter 22 of the Texas Business Organizations Code (“Code”) governs nonprofit corporations. A nonprofit corporation may be exempt from various taxes, or it may be subject to various other taxes. “Tax-exempt” means that the organization is exempt from one or more federal or state tax. Frequently, the tax exemption requires that the organization qualify as a nonprofit corporation. This paper discusses entities commonly used by non-profits, purposes that qualify non-profits for tax-exempt status and common mistakes made. The author also provides a list of tax-exempt purposes under federal and Texas law, a certificate of formation for a non-profit corporation and bylaws for a non-profit corporation.
Representing Minority Owners and Addressing Fiduciary Duties - What is Left After Ritchie v. Rupe
Over half a century ago, the Texas Supreme court recognized a cause of action by a minority shareholder against the majority shareholder for wrongful suppression of dividends. Following that decision, numerous Texas courts recognized and addressed a cause of action for minority stockholder oppression. But notwithstanding that jurisprudence, the Texas Supreme Court abruptly changed the rules in 2014. There remains a statutory claim for “oppressive” conduct under the TBOC that allows the appointment of a receiver for specific assets of the corporation. And other sections of the TBOC authorize the appointment of a receiver to liquidate the business. This paper examines some of the rights minority shareholders still have after this “seismic shift” in the law.
Practical Considerations When Onboarding New Directors
Onboarding new directors should be based on a well-conceived plan that begins before recruitment and continues to evolve as directors provide input and feedback. There are three basic best practices for onboarding new directors: (1) provide an orientation process similar to onboarding new employees; (2) provide company reading materials, reports, and financial statements so new directors can become familiar with the business, its products and services, its competitors, its market, and its financial status; and (3) schedule meetings with current directors, executive personnel, and corporate counsel to solidify a director’s overall understanding of his/her duties, the culture, expectations and policies of the company.
Shareholder Agreements: Litigation Perspectives
It has been almost five years since the Texas Supreme Court declined to recognize a common law cause of action for shareholder oppression. Ritchie v. Rupe, 443 S.W.3d 856 (Tex. 2014). Although it restricted shareholder common law rights, Ritchie did not put an end to shareholder litigation. As highlighted further below, recent cases show that shareholders continue to seek available judicial remedies, including through derivative actions and the various statutory and common law causes of action and remedies outlined by the Court in Ritchie. These cases provide insight into the types of claims practitioners should be cognizant of when advising their clients and drafting organizational documents. Through its repeated emphasis on the use of shareholder agreements, the Court in Ritchie for many situations left it to shareholders and corporations to protect their respective rights and interests and govern themselves by contract. Id. at 871. Thus, five years after Ritchie, the importance of well-drafted shareholder agreements cannot be understated. Accordingly, this article also discusses some of the potential provisions that practitioners should strongly consider including in their organizational documents, including shareholder agreements.
Shareholders Agreements: Drafting and Analysis
Under the Texas Business Organizations Code (the “TBOC”), there are three kinds of shareholders agreements for a Texas for-profit corporation. First, there are shareholders agreements between the corporation and one or more of the corporation’s shareholders or agreements between two or more shareholders that are not executed by all of the shareholders of the corporation. The TBOC has no specific provisions governing this first kind of shareholders agreements other than to state that the statutory provisions governing the other two kinds of shareholders agreements do not prohibit or impair such agreements. Second, there are written shareholders agreements that are executed by all of the shareholders at the time of the agreement and made known to the corporation. Third, there are shareholders agreements that are contained in the certificate of formation or bylaws if approved by all of the shareholders at the time of the agreement. The latter two forms of shareholder agreements are authorized and governed by Subchapter C of Chapter 21 of the TBOC. These latter agreements may be amended only by all of the shareholders at the time of the amendment, unless the agreement provides otherwise. This article refers to the latter kinds of shareholders agreements as “statutory shareholders agreements”.
Diverse Mergers: How to Divide an Entity into Two or More Entities Under a Merger Authorized by the Texas Business Organizations Code
The common conception of a merger is the combination of two entities into one surviving entity.1 However, the Texas Business Organizations Code (the “TBOC”)2 provides that through the use of the merger provisions of the code, a Texas domestic entity (an organization formed under or the internal affairs of which are governed by the TBOC3 ) may be divided into two or more new domestic entities or other organizations or into a surviving domestic entity and one or more new domestic or foreign entities or noncode organizations.4 This division through use of the merger statutes is sometimes called a divisive merger or a divisional merger.5 These provisions remain unique to Texas, although Pennsylvania provides for a statutory division but does not deal with division in its merger statutes.6 Through an illustrative, fictitious case study, this paper will consider the possibilities presented by the Texas divisional merger provisions as a tool to accomplish client goals and will provide a checklist of steps required to accomplish a divisional merger of a Texas limited liability company or limited partnership (including presenting a form plan of merger). This paper will not examine the federal income tax implications of a divisional merger.
Divisive Mergers: How to Divide an Entity into Two or More Entities Under a Merger Authorized by the Texas Business Organizations Code
The common conception of a merger is the combination of two entities into one surviving entity.1 However, the Texas Business Organizations Code (the “TBOC”) provides that through the use of the merger provisions of the code, a Texas domestic entity (an organization formed under or the internal affairs of which are governed by the TBOC) may be divided into two or more new domestic entities or other organizations or into a surviving domestic entity and one or more new domestic or foreign entities or noncode organizations.4 This division through use of the merger statutes is sometimes called a divisive merger or a divisional merger. These provisions remain unique to Texas, although Pennsylvania provides for a statutory division but does not deal with division in its merger statutes. Through an illustrative, fictitious case study, this paper will consider the possibilities presented by the Texas divisional merger provisions as a tool to accomplish client goals and will provide a checklist of steps required to accomplish a divisional merger of a Texas limited liability company or limited partnership (including presenting a form plan of merger). This paper will not examine the federal income tax implications of a divisional merger.
Changes in Texas Business Organizations Code in 2015 Session of Texas Legislature
INTRODUCTION AND BACKGROUND This article summarizes several pieces of legislation passed by the Texas Legislature in its 2015 Regular Session that amend primarily the Texas Business Organizations Code (the “Code”) .
Governing Persons in Action: Overview of Fiduciary Duties, Excupation, and Indemnification in Texas Business Organizations Code Chapter 7.1
Statutory developments beginning in the 1990s have impacted the analysis of fiduciary duties in the business organizations context. The duties of general partners are now defined by statutory provisions that delineate the duties without referring to them as “fiduciary” duties and specifically provide that partners shall not be held to the standard of a trustee. Whether limited partners in a limited partnership have fiduciary duties is not well- settled, but the Business Organizations Code (BOC) clarifies that a limited partner does not owe the duties of a general partner solely by reason of being a limited partner. While the fiduciary duties of directors are still principally defined by common law, various provisions of the corporate statutes are relevant to the application of fiduciary duty concepts in the corporate context. Because limited liability companies (LLCs) are a relatively recent phenomenon and the Texas LLC statutes do not specify duties of managers and members, there is some uncertainty with regard to the duties in this area, but the LLC statutes allude to or imply the existence of duties, and managers in a manager-managed LLC and members in a member-managed LLC should expect to be held to fiduciary duties similar to the duties of corporate directors or general partners. In each type of entity, the governing documents may vary (at least to some extent) the duties and liabilities of managerial or governing persons. The power to define duties, eliminate liability, and provide for indemnification is addressed somewhat differently in the statutes governing the various forms of business entities.
Governing Persons in Action: Overview of Fiduciary Duties, Excupation, and Indemnification in Texas Business Organizations Code Chapter 7.1
Statutory developments beginning in the 1990s have impacted the analysis of fiduciary duties in the business organizations context. The duties of general partners are now defined by statutory provisions that delineate the duties without referring to them as “fiduciary” duties and specifically provide that partners shall not be held to the standard of a trustee. Whether limited partners in a limited partnership have fiduciary duties is not well- settled, but the Business Organizations Code (BOC) clarifies that a limited partner does not owe the duties of a general partner solely by reason of being a limited partner. While the fiduciary duties of directors are still principally defined by common law, various provisions of the corporate statutes are relevant to the application of fiduciary duty concepts in the corporate context. Because limited liability companies (LLCs) are a relatively recent phenomenon and the Texas LLC statutes do not specify duties of managers and members, there is some uncertainty with regard to the duties in this area, but the LLC statutes allude to or imply the existence of duties, and managers in a manager-managed LLC and members in a member-managed LLC should expect to be held to fiduciary duties similar to the duties of corporate directors or general partners. In each type of entity, the governing documents may vary (at least to some extent) the duties and liabilities of managerial or governing persons. The power to define duties, eliminate liability, and provide for indemnification is addressed somewhat differently in the statutes governing the various forms of business entities.
Rights to Information of Owners and Governing Persons of Texas Entities Under the Texas Business Organizations Code
The Texas Business Organizations Code (the “TBOC”) contains various provisions governing the rights of owners and governing persons of Texas entities to review, “inspect” or “examine” the books and records of such entities. This paper focuses on those statutory information rights with respect to for-profit corporations, nonprofit corporations, limited liability companies, limited partnerships and general partnerships. Each Texas filing entity1 is subject to the provisions in Title 1, Chapter 3 of the TBOC granting an explicit right to the entity’s governing persons to examine its books and records for a purpose reasonably related to the governing person’s service as such. On the other hand, the rights of the owners of Texas entities are governed by the different titles of the TBOC governing each different type of entity. This paper first summarizes the provisions of the TBOC requiring the retention of books and records by each different type of entity. Then, this paper summarizes the provisions of the TBOC governing the rights of governing persons to information and the rights of owners to information with respect to the different types of entities.
Corporation, Partnership (General, Limited and LLP) and Limited Liability Company Acquisitions Under Texas Business Organizations Code, Including Special Issues
The Texas Business Organizations Code (the ―TBOC‖ or the ―Code‖) is a substantive codification of the prior Texas statutes governing non-profit and for-profit, private-sector entities, which, for the most part were repealed effective as of January 1, 2010. These statutes consisted of the Texas Business Corporation Act (―TBCA‖), Texas Miscellaneous Corporation Laws Act (―TMCLA‖), Texas Limited Liability Company Act (―TLLCA‖), Texas Revised Limited Partnership Act (―TRLPA‖), Texas Revised Partnership Act (―TRPA‖), Texas Non-Profit Corporation Act (―TNPCA‖), Texas Real Estate Investment Trust Act (―TREITA‖), Texas Uniform Unincorporated Nonprofit Associations Act (―TUUNAA‖), Texas Professional Corporation Act (―TPCA‖), Texas Professional Associations Act (―TPAA‖), Cooperative Associations Act (―CAA‖) and other existing provisions of Texas statutes governing private entities. The Code was a joint project of the Business Law Section of the State Bar of Texas and The Office of the Texas Secretary of State. The Texas Legislative Council provided drafting and editing assistance. The Code has been under development since 1995, when the Business Law Section first formed a committee to study codification of the foregoing statutes. This committee evolved into a drafting committee (the ―Committee‖) that included representatives of the Secretary of State’s Office, solo practitioners, law firm lawyers and prominent law professors from several Texas law schools. The Committee’s continuing work to improve the Code has resulted in a number of amendments to the Code, the most recent of which were included in a few bills passed by the 2011 Texas Legislature and became effective on September 1, 2011.
CSC 2019 Legislative Developments #21
Here are the most significant developments since the last update on 5/17/2019:
Chapter 10 of the Texas Business Organizations Code
Mergers, Interest Exchanges, Conversions, and Sales of Assets