BUSINESS ORGANIZATIONS CODE
CHAPTER 10. MERGERS, INTEREST EXCHANGES, CONVERSIONS, AND SALES OF
ASSETS
SUBCHAPTER A. MERGERS
§ 10.001. ADOPTION OF PLAN OF MERGER. (a) A domestic
entity may effect a merger by complying with the applicable
provisions of this code. A merger must be set forth in a plan of
merger.
(b) To effect a merger, each domestic entity that is a party
to the merger must act on and approve the plan of merger in the
manner prescribed by this code for the approval of mergers by the
domestic entity.
(c) A domestic entity subject to dissenters' rights must
provide the notice required by Section 10.355.
(d) If one or more non-code organizations is a party to the
merger or is to be created by the plan of merger:
(1) to effect the merger each non-code organization
must take all action required by this code and its governing
documents;
(2) the merger must be permitted by:
(A) the law of the state or country under whose
law each non-code organization is incorporated or organized; or
(B) the governing documents of each non-code
organization if the documents are not inconsistent with the law
under which the non-code organization is incorporated or organized;
and
(3) in effecting the merger each non-code organization
that is a party to the merger must comply with:
(A) the applicable laws under which it is
incorporated or organized; and
(B) the governing documents of the non-code
organization.
(e) A domestic entity may not merge under this subchapter if
an owner or member of that entity that is a party to the merger will,
as a result of the merger, become personally liable, without that
owner's or member's consent, for a liability or other obligation of
any other person.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 10.002. PLAN OF MERGER: REQUIRED PROVISIONS. (a) A
plan of merger must include:
(1) the name of each organization that is a party to
the merger;
(2) the name of each organization that will survive
the merger;
(3) the name of each new organization that is to be
created by the plan of merger;
(4) a description of the organizational form of each
organization that is a party to the merger or that is to be created
by the plan of merger and its jurisdiction of formation;
(5) the manner and basis of converting any of the
ownership or membership interests of each organization that is a
party to the merger into:
(A) ownership interests, membership interests,
obligations, rights to purchase securities, or other securities of
one or more of the surviving or new organizations;
(B) cash;
(C) other property, including ownership
interests, membership interests, obligations, rights to purchase
securities, or other securities of any other person or entity; or
(D) any combination of the items described by
Paragraphs (A)-(C);
(6) the certificate of formation of each new domestic
filing entity to be created by the plan of merger;
(7) the governing documents of each new domestic
nonfiling entity to be created by the plan of merger; and
(8) the governing documents of each non-code
organization that:
(A) is to survive the merger or to be created by
the plan of merger; and
(B) is an entity that is not:
(i) organized under the laws of any state or
the United States; or
(ii) required to file its certificate of
formation or similar document under which the entity is organized
with the appropriate governmental authority.
(b) An item required by Subsections (a)(6)-(8) may be
included in the plan of merger by an attachment or exhibit to the
plan.
(c) If the plan of merger provides for a manner and basis of
converting an ownership or membership interest that may be
converted in a manner or basis different than any other ownership or
membership interest of the same class or series of the ownership or
membership interest, the manner and basis of conversion must be
included in the plan of merger in the same manner as provided by
Subsection (a)(5).
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 10.003. CONTENTS OF PLAN OF MERGER: MORE THAN ONE
SUCCESSOR. If more than one organization is to survive or to be
created by the plan of merger, the plan of merger must include:
(1) the manner and basis of allocating and vesting the
property of each organization that is a party to the merger among
one or more of the surviving or new organizations;
(2) the name of each surviving or new organization
that is primarily obligated for the payment of the fair value of an
ownership or membership interest of an owner or member of a domestic
entity subject to dissenters' rights that is a party to the merger
and who complies with the requirements for dissent and appraisal
under this code applicable to the domestic entity; and
(3) the manner and basis of allocating each liability
and obligation of each organization that is a party to the merger,
or adequate provisions for the payment and discharge of each
liability and obligation, among one or more of the surviving or new
organizations.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 10.004. PLAN OF MERGER: PERMISSIVE PROVISIONS. A
plan of merger may include:
(1) amendments to the governing documents of any
surviving organization;
(2) provisions relating to an interest exchange,
including a plan of exchange; and
(3) any other provisions relating to the merger that
are not required by this chapter.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 10.005. CREATION OF HOLDING COMPANY BY
MERGER. (a) In this section:
(1) "Direct or indirect wholly owned subsidiary"
means, with respect to a domestic entity, another domestic entity,
all of the outstanding voting ownership or membership interests of
which are owned by the domestic entity or by one or more other
domestic entities or non-code organizations, all of the outstanding
voting ownership or membership interests of which are owned by the
domestic entity or one or more other wholly owned domestic entities
or non-code organizations.
(2) "Holding company" means a domestic entity that,
from its organization until a merger takes effect, was at all times
a direct or indirect wholly owned subsidiary of the domestic entity
and the ownership or membership interests of which are issued in the
merger.
(b) A domestic entity may, without owner approval and
pursuant to a plan of merger, restructure the ownership structure
of that entity to create a holding company structure under this
chapter and the provisions of this code under which the entity was
formed. The approval of the owners or members of a domestic entity
of a plan of merger that creates a holding company is not required
if:
(1) approval is not otherwise required by the
governing documents of the domestic entity;
(2) the domestic entity merges with a direct or
indirect domestic wholly owned entity;
(3) after the merger the domestic entity or its
successor is a direct or indirect wholly owned entity of a holding
company;
(4) the domestic entity and the direct or indirect
wholly owned entity are the only parties to the merger;
(5) each ownership or membership interest of the
domestic entity that is outstanding preceding the merger is
converted in the merger into an ownership or membership interest of
the holding company having the same designations, preferences,
limitations, and relative rights as the ownership or membership
interest held by the owner or member in the domestic entity;
(6) the holding company is a domestic entity of the
same organizational form as the merging domestic entity;
(7) except as provided by Subsections (c) and (d), the
initial governing documents of the holding company contain
provisions identical to the governing documents of the domestic
entity preceding the merger;
(8) except as provided by Subsections (c) and (d), the
initial governing documents of the surviving entity contain
provisions identical to the governing documents of the domestic
entity preceding the merger;
(9) the governing persons of the domestic entity
become or remain the governing persons of the holding company when
the merger takes effect;
(10) the owners or members of the domestic entity will
not recognize gain or loss for United States federal income tax
purposes or any other tax benefit or attribute as determined by the
governing authority of the domestic entity; and
(11) the governing authority of the domestic entity
adopts a resolution approving the plan of merger.
(c) Subsections (b)(7) and (8) do not require identical
provisions regarding the incorporator or incorporators, the entity
name, the registered office and agent, the initial governing
persons, and the initial subscribers of ownership interests and
provisions contained in any amendment to the certificate as are
necessary to effect a change, exchange, reclassification, or
cancellation of ownership or membership interests, if the change,
exchange, reclassification, or cancellation was in effect
preceding the merger.
(d) Notwithstanding Subsection (b)(8):
(1) the governing documents of the surviving entity
must require that an act or transaction by or involving the
surviving entity that requires for its approval under this code the
approval of the owners or members of the merging domestic entity
must, by specific reference to this section, require the approval
of the owners or members of the holding company, or any successor by
merger, by the same vote as is required by this code and the
governing documents of the surviving entity; and
(2) the governing documents of the surviving entity
may change the classes and series of ownership or membership
interests and the number of ownership or membership interests that
the surviving entity is authorized to issue.
(e) To the extent the provisions contained in Section 21.606
apply to a domestic entity and its owners or members when a merger
takes effect under this section, those provisions continue to apply
to the holding company and its owners or members immediately after
the merger takes effect as though the holding company were the
domestic entity. All ownership or membership interests of the
holding company acquired in the merger, for purposes of Section
21.606, are considered to have been acquired at the time the
ownership or membership interest of the domestic entity converted
in the merger was acquired. Any owner or member who, preceding the
merger, was not an affiliated owner or member as described by
Section 21.606 does not solely by reason of the merger become an
affiliated owner or member of the holding company.
(f) If the name of a holding company immediately following
the effectiveness of a merger under this section is the same as the
name of the domestic entity preceding the merger, the ownership or
membership interests of the holding company into which the
ownership or membership interests of the domestic entity are merged
are represented by the certificates, if any, that previously
represented the ownership or membership interests in the domestic
entity.
(g) This section shall not apply to partnerships.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 10.006. SHORT FORM MERGER. (a) A parent
organization that owns at least 90 percent of the outstanding
ownership or membership interests of each class and series of each
of one or more subsidiary organizations may merge with one or more
of the subsidiary organizations as provided by this section if:
(1) at least one of the parties to the merger is a
domestic entity and each other party is a domestic entity or another
non-code organization organized under the laws of a jurisdiction
that permits a merger of the type authorized by this chapter; and
(2) the resulting organization or organizations are
the parent organization, one or more existing subsidiary
organizations, or one or more new organizations.
(b) No action by any subsidiary organization that is a
domestic entity is required to approve the merger.
(c) If the parent organization will not survive the merger,
a plan of merger must be adopted by action of the parent
organization in the same manner as a plan of merger not governed by
this section or Section 10.005.
(d) If the parent organization will survive the merger, the
merger is required to be approved only by a resolution adopted by
the governing authority of the parent organization.
(e) Sections 10.001(c)-(e), 10.002(c), 10.003, and
10.007-10.010 apply to a merger approved under Subsection (d),
except that the resolution approving the merger should be
considered the plan of merger for purposes of those sections.
(f) The resolution approving the merger under Subsection
(d) must describe:
(1) the basic terms of the merger;
(2) the organizations that are party to the merger;
and
(3) the organizations that survive the merger.
(g) If the parent organization does not own all of the
outstanding ownership or membership interests of each class or
series of ownership or membership interests of each subsidiary
organization that is a party to the merger, the resolution of the
parent organization required by Subsection (d) must describe the
terms of the merger, including the cash or other property,
including ownership or membership interests, obligations, rights
to purchase securities, or other securities of any person or
organization or any combination of the ownership or membership
interests, obligations, rights, or other securities, to be used,
paid, or delivered by the parent organization on surrender of each
ownership or membership interest of the subsidiary organizations
not owned by the parent organization.
(h) An entity is not disqualified from effecting a merger
under any other provision of this chapter because it qualifies for a
merger under this section.
(i) This section shall not apply if a subsidiary
organization that is a party to the merger is a partnership.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 10.007. EFFECTIVENESS OF MERGER. Except as otherwise
provided by Subchapter B, Chapter 4, a merger takes effect at the
time provided by the plan of merger, except that a merger that
requires a filing under Subchapter D takes effect on the acceptance
of the filing of the certificate of merger by the secretary of state
or county clerk, as appropriate.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 10.008. EFFECT OF MERGER. (a) When a merger takes
effect:
(1) the separate existence of each domestic entity
that is a party to the merger, other than a surviving or new
domestic entity, ceases;
(2) all rights, title, and interests to all real
estate and other property owned by each organization that is a party
to the merger is allocated to and vested, subject to any existing
liens or other encumbrances on the property, in one or more of the
surviving or new organizations as provided in the plan of merger
without:
(A) reversion or impairment;
(B) any further act or deed; or
(C) any transfer or assignment having occurred;
(3) all liabilities and obligations of each
organization that is a party to the merger are allocated to one or
more of the surviving or new organizations in the manner provided by
the plan of merger;
(4) each surviving or new domestic organization to
which a liability or obligation is allocated under the plan of
merger is the primary obligor for the liability or obligation, and,
except as otherwise provided by the plan of merger or by law or
contract, no other party to the merger, other than a surviving
domestic entity or non-code organization liable or otherwise
obligated at the time of the merger, and no other new domestic
entity or non-code organization created under the plan of merger is
liable for the debt or other obligation;
(5) any proceeding pending by or against any domestic
entity or by or against any non-code organization that is a party to
the merger may be continued as if the merger did not occur, or the
surviving or new domestic entity or entities or the surviving or new
non-code organization or non-code organizations to which the
liability, obligation, asset, or right associated with that
proceeding is allocated to and vested in under the plan of merger
may be substituted in the proceeding;
(6) the governing documents of each surviving domestic
entity are amended to the extent provided by the plan of merger;
(7) each new filing entity whose certificate of
formation is included in the plan of merger under this chapter, on
meeting any additional requirements, if any, of this code for its
formation, is formed as a domestic entity under this code as
provided by the plan of merger;
(8) the ownership or membership interests of each
organization that is a party to the merger and that are to be
converted or exchanged, in whole or part, into ownership or
membership interests, obligations, rights to purchase securities,
or other securities of one or more of the surviving or new
organizations, into cash or other property, including ownership or
membership interests, obligations, rights to purchase securities,
or other securities of any organization, or into any combination of
these are converted and exchanged and the former owners or members
who held ownership or membership interests of each domestic entity
that is a party to the merger are entitled only to the rights
provided by the certificate of merger or, if applicable, any rights
to receive the fair value for the ownership or membership interests
previously held by them provided under this code; and
(9) notwithstanding Subdivision (4), the surviving or
new organization named in the plan of merger as primarily obligated
to pay the fair value of an ownership or membership interest under
Section 10.003(2) is the primary obligor for that payment and all
other surviving or new organizations are secondarily liable for
that payment.
(b) If the plan of merger does not provide for the
allocation and vesting of the right, title, and interest in any
particular real estate or other property or for the allocation of
any liability or obligation of any party to the merger, the
unallocated property is owned in undivided interest by, or the
liability or obligation is the joint and several liability and
obligation of, each of the surviving and new organizations, pro
rata to the total number of surviving and new organizations
resulting from the merger.
(c) If a surviving organization in a merger is not a
domestic entity, the surviving organization is considered to have:
(1) appointed the secretary of state in this state as
the organization's agent for service of process in a proceeding to
enforce any obligation of a domestic entity that is a party to the
merger; and
(2) agreed to promptly pay to the dissenting owners or
members of each domestic entity that is a party to the merger who
have the right of dissent and appraisal under this code the amount,
if any, to which they are entitled under this code.
(d) If the surviving organization in a merger is not a
domestic entity, the organization shall register to transact
business in this state if the entity is required to register for
that purpose by another provision of this code.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 10.009. SPECIAL PROVISIONS APPLYING TO PARTNERSHIP
MERGERS. (a) A partner of a domestic partnership that is a party
to a merger does not become liable as a result of the merger for the
liability or obligation of another person that is a party to the
merger unless the partner consents to becoming personally liable by
action taken in connection with the specific plan of merger
approved by the partner.
(b) A partner of a domestic partnership that is a party to a
merger who remains in or enters a partnership is treated as an
incoming partner in the partnership when the merger takes effect
for purposes of determining the partner's liability for a debt or
obligation of the partnership or partnerships that are parties to
the merger or to be created in the merger and in which the partner
was not a partner.
(c) If a partnership merges with an organization and,
because of the merger, no longer exists, a former partner who
becomes an owner or member of the surviving organization may, until
the first anniversary of the effective date of the merger, bind the
surviving organization to a transaction for which the owner or
member no longer has authority to bind the organization if the
transaction is one in which the actions by the owner or member as a
partner would have bound the partnership before the effective date
of the merger, and the other party to the transaction:
(1) does not have actual or constructive notice of the
merger;
(2) had done business with the terminated partnership
within one year preceding the effective date of the merger; and
(3) reasonably believes that the partner who was
previously an owner or member of the partnership that was merged
into the surviving organization and is now an owner or member of the
surviving organization has the authority to bind the surviving
organization to the transaction at the time of the transaction.
(d) If a partnership is formed under a plan of merger, the
existence of the partnership as a partnership begins when the
merger takes effect, and the persons to be partners become partners
at that time.
(e) A partner in a domestic partnership that is a party to
the merger but does not survive shall be treated as a partner who
withdrew from the nonsurviving domestic partnership as of the
effective date of the merger.
(f) The partnership agreement of each domestic partnership
that is a party to the merger must contain provisions that authorize
the merger provided for in the plan of merger adopted by the
partnership.
(g) Each domestic partnership that is a party to the merger
must approve the plan of merger in the manner prescribed in its
partnership agreement.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 10.010. SPECIAL PROVISIONS APPLYING TO NONPROFIT
CORPORATION MERGERS. (a) A domestic nonprofit corporation may
not merge into another entity if the domestic nonprofit corporation
would, because of the merger, lose or impair its charitable status.
(b) One or more domestic or foreign for-profit entities or
non-code organizations may merge into one or more domestic
nonprofit corporations that continue as the surviving entity or
entities.
(c) A domestic nonprofit corporation may not merge with a
foreign for-profit entity if the domestic nonprofit corporation
does not continue as the surviving entity.
(d) One or more domestic nonprofit corporations and
non-code organizations may merge into one or more foreign nonprofit
entities that continue as the surviving entity or entities.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
SUBCHAPTER B. EXCHANGES OF INTERESTS
§ 10.051. INTEREST EXCHANGES. (a) For the purpose of
acquiring all of the outstanding ownership or membership interests
of one or more classes or series of one or more domestic entities,
one or more domestic entities or non-code organizations may adopt a
plan of exchange.
(b) To make an interest exchange under this section:
(1) the governing authority of each domestic entity
the ownership or membership interests of which are to be acquired in
the interest exchange must act on a plan of exchange and, if
otherwise required by this code, the owners or members of the
domestic entity must approve the plan of exchange in the manner
provided by this code; and
(2) each acquiring domestic entity must take all
action that may otherwise be required by this code and its governing
documents to effect the exchange.
(c) A domestic entity subject to dissenters' rights must
provide the notice required by Section 10.355.
(d) If a non-code organization is to acquire ownership or
membership interests in the exchange, each non-code organization
must take all action that is required under the laws of the
organization's jurisdiction of formation and the organization's
governing documents to effect the exchange.
(e) If one or more non-code organizations as part of the
plan of exchange are to issue ownership or membership interests,
the issuance of the ownership or membership interests must be
permitted by the laws under which the non-code organizations are
incorporated or organized or not inconsistent with those laws.
(f) A plan of exchange may not be effected if any owner or
member of a domestic entity that is a party to the interest exchange
will, as a result of the interest exchange, become personally
liable, without the consent of the owner or member, for the
liabilities or obligations of any other person or organization.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 10.052. PLAN OF EXCHANGE: REQUIRED
PROVISIONS. (a) A plan of exchange must include:
(1) the name of each domestic entity the ownership or
membership interests of which are to be acquired;
(2) the name of each acquiring organization;
(3) if there is more than one acquiring organization,
the ownership or membership interests to be acquired by each
organization;
(4) the terms and conditions of the exchange; and
(5) the manner and basis of exchanging the ownership
or membership interests to be acquired for:
(A) ownership or membership interests,
obligations, rights to purchase securities, or other securities of
one or more of the acquiring organizations that is a party to the
plan of exchange;
(B) cash;
(C) other property, including ownership or
membership interests, obligations, rights to purchase securities,
or other securities of any other person or entity; or
(D) any combination of those items.
(b) The manner and basis of exchanging an ownership or
membership interest of an owner or member that is exchanged in a
manner or basis different from any other owner or member having
ownership or membership interests of the same class or series must
be included in the plan of exchange in the same manner as provided
by Subsection (a)(5).
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 10.053. PLAN OF EXCHANGE: PERMISSIVE PROVISIONS. A
plan of exchange may include any other provisions not required by
Section 10.052 relating to the interest exchange.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 10.054. EFFECTIVENESS OF EXCHANGE. Except as
otherwise provided by Subchapter B, Chapter 4, an interest exchange
takes effect at the time provided in the plan of exchange or
otherwise agreed to by the parties, except that an interest
exchange that requires a filing under Subchapter D takes effect on
the acceptance of the filing of the certificate of exchange by the
secretary of state or county clerk, as appropriate.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 10.055. GENERAL EFFECT OF INTEREST EXCHANGE. When an
interest exchange takes effect:
(1) the ownership or membership interest of each
acquired organization is exchanged as provided in the plan of
exchange, and the former owners whose interests are exchanged under
the plan of exchange are entitled only to the rights provided in the
certificate of exchange or, if applicable, a right to receive the
fair value for the ownership or membership interests provided under
Subchapter H; and
(2) the acquiring organization has all rights, title,
and interests with respect to the ownership or membership interest
to be acquired by it subject to the provisions of the certificate of
exchange.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 10.056. SPECIAL PROVISIONS APPLYING TO
PARTNERSHIPS. To effect an interest exchange:
(1) the partnership agreement of each domestic
partnership whose partnership interests are to be acquired pursuant
to the plan of exchange must authorize the partnership interest
exchange adopted by the partnership;
(2) each domestic partnership whose partnership
interests are to be acquired under the plan of exchange must approve
the plan of exchange in the manner prescribed by its partnership
agreement; and
(3) each acquiring domestic partnership must take all
actions that may be required by its partnership agreement in order
to effect the exchange.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
SUBCHAPTER C. CONVERSIONS
§ 10.101. CONVERSION OF DOMESTIC ENTITIES. (a) A
domestic entity may convert into a different type of domestic
entity or a non-code organization by adopting a plan of conversion.
(b) To effect a conversion, the converting entity must act
on and the owners or members of the domestic entity must approve a
plan of conversion in the manner prescribed by this code for the
approval of conversions by the domestic entity or, if not
prescribed by this code, in the same manner as prescribed by this
code for the adoption and approval of a plan of merger by the
domestic entity when the domestic entity does not survive the
merger.
(c) A domestic entity subject to dissenters' rights must
provide the notice required by Section 10.355.
(d) A conversion may not take effect if the conversion is
prohibited by or inconsistent with the laws of the converted
entity's jurisdiction of formation, and the formation,
incorporation, or organization of the converted entity under the
plan of conversion must be effected in compliance with those laws
pursuant to the plan of conversion.
(e) At the time a conversion takes effect, each owner of the
converting entity, other than those who receive payment of their
ownership or membership interest under any applicable provisions of
this code relating to dissent and appraisal, has, unless otherwise
agreed to by that owner or member, an ownership or membership
interest in, and is the owner or member of, the converted entity.
(f) A domestic entity may not convert under this section if
an owner or member of the domestic entity, as a result of the
conversion, becomes personally liable, without the consent of the
owner or member, for a liability or other obligation of the
converted entity.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 10.102. CONVERSION OF NON-CODE ORGANIZATIONS. (a) A
non-code organization may convert into a domestic entity by
adopting a plan of conversion as provided by this section.
(b) To effect a conversion, the non-code organization must
take any action that may be required for a conversion under the laws
of the organization's jurisdiction of formation and the
organization's governing documents.
(c) The conversion must be permitted by the laws under which
the non-code organization is incorporated or organized or by its
governing documents, which may not be inconsistent with the laws of
the jurisdiction in which the non-code organization is incorporated
or organized.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 10.103. PLAN OF CONVERSION: REQUIRED
PROVISIONS. (a) A plan of conversion must include:
(1) the name of the converting entity;
(2) the name of the converted entity;
(3) a statement that the converting entity is
continuing its existence in the organizational form of the
converted entity;
(4) a statement of the type of entity that the
converted entity is to be and the converted entity's jurisdiction
of formation;
(5) the manner and basis of converting the ownership
or membership interests of the converting entity into ownership or
membership interests of the converted entity;
(6) any certificate of formation required to be filed
under this code if the converted entity is a filing entity; and
(7) the certificate of formation or similar
organizational document of the converted entity if the converted
entity is not a filing entity.
(b) An item required by Subsection (a)(6) or (7) may be
included in the plan of conversion by an attachment or exhibit to
the plan.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 10.104. PLAN OF CONVERSION: PERMISSIVE PROVISIONS. A
plan of conversion may include other provisions relating to the
conversion that are not inconsistent with law.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 10.105. EFFECTIVENESS OF CONVERSION. Except as
otherwise provided by Subchapter B, Chapter 4, a conversion takes
effect at the time provided by the plan of conversion, except that a
conversion that requires a filing under Subchapter D takes effect
on the acceptance of the filing of the certificate of conversion by
the filing officer.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 10.106. GENERAL EFFECT OF CONVERSION. When a
conversion takes effect:
(1) the converting entity continues to exist without
interruption in the organizational form of the converted entity
rather than in the organizational form of the converting entity;
(2) all rights, title, and interests to all property
owned by the converting entity continues to be owned, subject to any
existing liens or other encumbrances on the property, by the
converted entity in the new organizational form without:
(A) reversion or impairment;
(B) further act or deed; or
(C) any transfer or assignment having occurred;
(3) all liabilities and obligations of the converting
entity continue to be liabilities and obligations of the converted
entity in the new organizational form without impairment or
diminution because of the conversion;
(4) the rights of creditors or other parties with
respect to or against the previous owners or members of the
converting entity in their capacities as owners or members in
existence when the conversion takes effect continue to exist as to
those liabilities and obligations and may be enforced by the
creditors and obligees as if a conversion had not occurred;
(5) a proceeding pending by or against the converting
entity or by or against any of the converting entity's owners or
members in their capacities as owners or members may be continued by
or against the converted entity in the new organizational form and
by or against the previous owners or members without a need for
substituting a party;
(6) the ownership or membership interests of the
converting entity that are to be converted into ownership or
membership interests of the converted entity as provided in the
plan of conversion are converted as provided by the plan, and if the
converting entity is a domestic entity, the former owners or
members of the domestic entity are entitled only to the rights
provided in the plan of conversion or a right of dissent and
appraisal under this code;
(7) if, after the conversion takes effect, an owner or
member of the converted entity as an owner or member is liable for
the liabilities or obligations of the converted entity, the owner
or member is liable for the liabilities and obligations of the
converting entity that existed before the conversion took effect
only to the extent that the owner or member:
(A) agrees in writing to be liable for the
liabilities or obligations;
(B) was liable, before the conversion took
effect, for the liabilities or obligations; or
(C) by becoming an owner or member of the
converted entity, becomes liable under other applicable law for the
existing liabilities and obligations of the converted entity; and
(8) if the converted entity is a non-code
organization, the converted entity is considered to have:
(A) appointed the secretary of state in this
state as its agent for service of process in a proceeding to enforce
any obligation or the rights of dissenting owners or members of the
converting domestic entity; and
(B) agreed that the converted entity will
promptly pay the dissenting owners or members of the converting
domestic entity the amount, if any, to which they are entitled under
this code.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 10.107. SPECIAL PROVISIONS APPLYING TO PARTNERSHIP
CONVERSIONS. (a) If a partnership is formed under a plan of
conversion under this code, the existence of the partnership as a
partnership begins when the conversion takes effect, and the owners
or members designated to become the partners under the plan of
conversion become the partners at that time.
(b) The partnership agreement of a domestic partnership
that is converting must contain provisions that authorize the
conversion provided for in the plan of conversion adopted by the
partnership.
(c) A domestic partnership that is converting must approve
the plan of conversion in the merger provided in its partnership
agreement.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 10.108. SPECIAL PROVISIONS APPLYING TO NONPROFIT
CORPORATION CONVERSIONS. A domestic nonprofit corporation may not
convert into a for-profit entity.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
SUBCHAPTER D. CERTIFICATE OF MERGER, EXCHANGE, OR CONVERSION
§ 10.151. CERTIFICATE OF MERGER AND
EXCHANGE. (a) After approval of a plan of merger or a plan of
exchange as provided by this code, a certificate of merger, which
may also include an exchange, or a certificate of exchange, as
applicable, must be filed for a merger or interest exchange to
become effective if:
(1) for a merger:
(A) any domestic entity that is a party to the
merger is a filing entity; or
(B) any domestic entity to be created under the
plan of merger is a filing entity; or
(2) for an exchange, an ownership or membership
interest in any filing entity is to be acquired in the interest
exchange.
(b) If a certificate of merger or exchange is required to be
filed in connection with an interest exchange or a merger, other
than a merger under Section 10.006, the certificate must be signed
on behalf of each domestic entity and non-code organization that is
a party to the merger or exchange by an officer or other authorized
representative and must include:
(1) the plan of merger or exchange or a statement
certifying:
(A) the name of each domestic entity or non-code
organization that is a party to the merger or exchange;
(B) the name of each domestic entity or non-code
organization that is to be created by the plan of merger or
exchange;
(C) the name of the jurisdiction in which each
domestic entity or non-code organization named under Paragraph (A)
or (B) is incorporated or organized;
(D) for a merger, the amendments or changes to
the certificate of formation of each filing entity that is a party
to the merger, or if no amendments are desired to be effected by the
merger, a statement to that effect;
(E) that the certificate of formation of each new
filing entity to be created under the plan of merger or exchange is
being filed with the certificate of merger or exchange;
(F) that a signed plan of merger or exchange is on
file at the principal place of business of each surviving,
acquiring, or new domestic entity or non-code organization, and the
address of each principal place of business; and
(G) that a copy of the plan of merger or exchange
will be on written request furnished without cost by each
surviving, acquiring, or new domestic entity or non-code
organization to any owner or member of any domestic entity that is a
party to or created by the plan of merger or exchange and, for a
merger with multiple surviving domestic entities or non-code
organizations, to any creditor or obligee of the parties to the
merger at the time of the merger if a liability or obligation is
then outstanding;
(2) if approval of the owners or members of any
domestic entity that was a party to the plan of merger or exchange
is not required by this code, a statement to that effect; and
(3) a statement that the plan of merger or exchange has
been approved as required by the laws of the jurisdiction of
formation of each organization that is a party to the merger or
exchange and by the governing documents of those organizations.
(c) A certificate of merger may also constitute a
certificate of exchange if it contains the information required for
a certificate of exchange.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 10.152. CERTIFICATE OF MERGER: SHORT FORM
MERGER. (a) The certificate of merger for a merger under Section
10.006 is required to be signed only by an officer or other
authorized representative of the parent organization described by
that section.
(b) Except as provided by Subsection (c), the certificate of
merger must include:
(1) the name of the parent organization, the name of
each subsidiary organization that is a party to the merger, and the
jurisdiction of formation of each named organization;
(2) the number of outstanding ownership interests of
each class or series of each subsidiary organization and the number
and percentage of ownership interests of each class or series owned
by the parent organization;
(3) a copy of the resolution of merger adopted by the
governing authority of the parent organization authorizing the
merger and the date of the adoption of the resolution;
(4) a statement that the resolution has been approved
as required by the laws of the jurisdiction of formation of the
parent organization and by its governing documents; and
(5) if any surviving organization is not a domestic
entity, the address, including street number, if any, of its
registered or principal office in the organization's jurisdiction
of formation.
(c) If a plan of merger is required to be adopted by action
of the parent organization under Section 10.006(c), the certificate
of merger must include the information required by Section
10.151(b).
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 10.153. FILING OF CERTIFICATE OF MERGER OR
EXCHANGE. (a) If a certificate of merger or exchange is required
to be filed, the certificate of merger or exchange must be filed in
accordance with Chapter 4. The certificate of formation of each
filing entity that is to be formed under a plan of merger must also
be filed with the certificate of merger in accordance with Chapter
4. Except as provided by this section, the certificate must be
filed with the secretary of state.
(b) If a domestic real estate investment trust is a party to
the merger or if an ownership interest in a domestic real estate
investment trust is to be acquired in the interest exchange, the
certificate of merger or exchange must be filed in accordance with
Chapter 4 with the county clerk of the county in which the domestic
real estate investment trust's principal place of business in this
state is located.
(c) If a domestic real estate investment trust is to be
created under the plan of merger, the certificate of formation of
the domestic real estate investment trust must also be filed with
the certificate of merger in accordance with Chapter 4 with the
county clerk of the county in which the domestic real estate
investment trust's principal place of business in this state is
located.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 10.154. CERTIFICATE OF CONVERSION. (a) After
approval of a plan of conversion as provided by this code, a
certificate of conversion must be filed for the conversion to
become effective if:
(1) any domestic entity that is a party to the
conversion is a filing entity; or
(2) any domestic entity to be created under the plan of
conversion is a filing entity.
(b) If a certificate of conversion is required to be filed
in connection with a conversion, the certificate must be signed on
behalf of the converting entity and must include:
(1) the plan of conversion or a statement certifying
the following:
(A) the name and jurisdiction of organization of
the converting entity;
(B) the organizational form of the converting
entity;
(C) that a signed plan of conversion is on file at
the principal place of business of the converting entity, and the
address of the principal place of business;
(D) that a signed plan of conversion will be on
file after the conversion at the principal place of business of the
converted entity, and the address of the principal place of
business; and
(E) that a copy of the plan of conversion will be
on written request furnished without cost by the converting entity
before the conversion or by the converted entity after the
conversion to any owner or member of the converting entity or the
converted entity; and
(2) a statement that the plan of conversion has been
approved as required by the laws of the jurisdiction of formation
and the governing documents of the converting entity.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 10.155. FILING OF CERTIFICATE OF CONVERSION. (a) If
a certificate of conversion is required to be filed, the
certificate of conversion must be filed in accordance with Chapter
4. If the converted entity is a filing entity, the certificate of
formation of the filing entity must also be filed with the
certificate of conversion in accordance with Chapter 4. Except as
provided by this section, the certificate must be filed with the
secretary of state.
(b) If the converting entity is a domestic real estate
investment trust, the certificate of conversion must be filed in
accordance with Chapter 4 with the county clerk of the county in
which the converting entity's principal place of business in this
state is located.
(c) If the converted entity is a domestic real estate
investment trust, the certificate of formation of the converted
entity must also be filed with the certificate of conversion in
accordance with Chapter 4 with the county clerk of the county in
which the converted entity's principal place of business in this
state is located.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 10.156. ACCEPTANCE OF CERTIFICATE FOR FILING. The
filing officer may not accept a certificate of merger, exchange, or
conversion for filing if:
(1) the filing officer finds that the certificate of
merger, exchange, or conversion does not conform to law; or
(2) the required franchise taxes have not been paid or
the certificate of merger, exchange, or conversion does not provide
that one or more of the surviving, new, or acquiring organizations
or the converted entity is liable for the payment of the required
franchise taxes.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
SUBCHAPTER E. ABANDONMENT OF MERGER, EXCHANGE, OR CONVERSION
§ 10.201. ABANDONMENT OF PLAN OF MERGER, EXCHANGE, OR
CONVERSION. After a merger, interest exchange, or conversion is
approved as provided by this code, and at any time before the
merger, interest exchange, or conversion takes effect, the plan of
merger, interest exchange, or conversion may be abandoned, subject
to any contractual rights, by any of the domestic entities that are
a party to the merger, interest exchange, or conversion, without
action by the owners or members, under the procedures provided by
the plan of merger, exchange, or conversion or, if no abandonment
procedures are provided, in the manner determined by the governing
authority.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 10.202. ABANDONMENT AFTER FILING. (a) If a
certificate of merger, exchange, or conversion has been filed, the
merger, interest exchange, or conversion may be abandoned before
its effectiveness in accordance with Sections 4.057 and 10.201.
(b) A filing of a certificate of abandonment under Section
4.057 is not required for the abandonment of a merger, interest
exchange, or conversion if no filing is required under Subchapter D
to make the merger, interest exchange, or conversion effective.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
SUBCHAPTER F. PROPERTY TRANSFERS AND DISPOSITIONS
§ 10.251. GENERAL POWER OF DOMESTIC ENTITY TO SELL,
LEASE, OR CONVEY PROPERTY. (a) Subject to any approval required
by this code or the governing documents of the domestic entity, a
domestic entity may transfer and convey by sale, lease, assignment,
or another method an interest in property of the entity, including
real property. The transfer and conveyance may:
(1) be made with or without the goodwill of the entity;
(2) be made on any terms and conditions and for any
consideration, which may consist wholly or partly of money or other
property, including an ownership interest in a domestic entity or
non-code organization; and
(3) be evidenced by a deed, assignment, or other
instrument of transfer or conveyance, with or without the seal of
the entity.
(b) Subject to any approval required by this code or the
governing documents of the domestic entity, a domestic entity may
grant a pledge, mortgage, deed of trust, or trust indenture with
respect to an interest in property of the entity, including real
property, with or without the seal of the entity.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 10.252. NO APPROVAL REQUIRED FOR CERTAIN DISPOSITIONS
OF PROPERTY. Except as otherwise provided by this code, the
governing documents of the domestic entity, or specific limitations
established by the governing authority, a sale, lease, assignment,
conveyance, pledge, mortgage, deed of trust, trust indenture, or
other transfer of an interest in real property or other property
made by a domestic entity does not require the approval of the
members or owners of the entity.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 10.253. RECORDING INSTRUMENT CONVEYING REAL PROPERTY
OF DOMESTIC ENTITY. (a) A deed or other instrument executed by a
domestic entity that conveys an interest in real property may be
recorded in the same manner and with the same effect as other
similar instruments if the instrument is signed and acknowledged
by:
(1) an officer, authorized attorney-in-fact, or other
authorized person of the entity; or
(2) in the case of a partnership or limited liability
company, a governing person of the entity.
(b) A deed or other instrument executed by a domestic entity
that conveys an interest in real property and that is recorded and
signed by an officer, authorized attorney-in-fact, or other
authorized person of the entity constitutes prima facie evidence
that the sale or conveyance that is the subject of the instrument
was authorized under this code and the governing documents of the
entity.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 10.254. DISPOSITION OF PROPERTY NOT A MERGER OR
CONVERSION; LIABILITY. (a) A disposition of all or part of the
property of a domestic entity, regardless of whether the
disposition requires the approval of the entity's owners or
members, is not a merger or conversion for any purpose.
(b) Except as otherwise expressly provided by another law, a
person acquiring property described by this section may not be held
responsible or liable for a liability or obligation of the
transferring domestic entity that is not expressly assumed by the
person.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
SUBCHAPTER G. BANKRUPTCY REORGANIZATION
§ 10.301. REORGANIZATION UNDER BANKRUPTCY AND SIMILAR
LAWS. (a) A trustee appointed for a domestic entity that is being
reorganized under a federal statute, the designated officers of a
domestic entity being reorganized under a federal statute, or any
other individual designated by a court having jurisdiction of a
domestic entity being reorganized under a federal statute to act on
behalf of the domestic entity may, without action by or notice to
the domestic entity's governing authority, owners, or members, in
order to carry out a plan of reorganization ordered by a court under
the federal statute:
(1) amend or restate the domestic entity's certificate
of formation if the certificate of formation after amendment or
restatement contains only provisions required or permitted to be
contained in the certificate of formation;
(2) merge or exchange an interest with one or more
domestic entities or non-code organizations under a plan of merger
or exchange having any provision required or permitted by Sections
10.002, 10.003, 10.004, 10.005, 10.052, and 10.053;
(3) change the location of the domestic entity's
registered office, change its registered agent, and remove or
appoint any agent to receive service of process;
(4) alter, amend, or repeal the domestic entity's
governing documents other than filing instruments;
(5) constitute or reconstitute and classify or
reclassify the domestic entity's governing authority and name,
constitute, or appoint managerial officials in place of or in
addition to all or some of the managerial officials;
(6) sell, lease, exchange, or otherwise dispose of
all, or substantially all, of the domestic entity's property and
assets;
(7) authorize and fix the terms, manner, and
conditions of the issuance of bonds, debentures, or other
obligations, regardless of whether the obligation is convertible
into ownership interests of any class or bearing warrants or other
evidences of optional rights to purchase or subscribe for any
ownership interests of any class;
(8) wind up and terminate the entity's existence; or
(9) effect a conversion.
(b) An action taken under Subsection (a)(4) or (5) takes
effect on entry of the order approving the plan of reorganization or
on another effective date as may be specified, without further
action of the domestic entity, as and to the extent provided by the
plan of reorganization or the order approving the plan of
reorganization.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 10.302. SIGNING OF DOCUMENTS. A trustee appointed for
a domestic entity being reorganized under a federal statute, the
designated officers of a domestic entity being reorganized under a
federal statute, or any other individual designated by a court
having jurisdiction of a domestic entity being reorganized under a
federal statute may sign on behalf of a domestic entity that is
being reorganized:
(1) a certificate of amendment or restated certificate
of formation containing:
(A) the name of the domestic entity;
(B) each amendment or the restatement approved by
the court;
(C) the date of the court's order approving the
certificate of amendment or the restatement;
(D) the name of the court having jurisdiction,
file name, and case number of the reorganization case in which the
order was entered; and
(E) a statement that the court had jurisdiction
of the case under a federal statute;
(2) a certificate of merger or exchange containing:
(A) the name of the domestic entity;
(B) the part of the plan of reorganization that
contains the plan of merger or exchange approved by the court, which
must include the information required by Section 10.151(b) or
10.152, as applicable, but which is not required to include the
resolution of the governing authority referred to in Section
10.152;
(C) the date of the court's order approving the
plan of merger or consolidation;
(D) the name of the court having jurisdiction,
file name, and case number of the reorganization case in which the
order or decree was entered; and
(E) a statement that the court had jurisdiction
of the case under a federal statute;
(3) a certificate of termination containing:
(A) the name of the domestic entity;
(B) the information required by Sections
11.101(c)(1)-(4);
(C) the date of the court's order approving the
certificate of termination;
(D) a statement that the obligations of the
domestic entity, including debts and liabilities, have been paid or
discharged as provided by the plan of reorganization and the
remaining property and assets of the domestic entity have been
distributed as provided by the plan of reorganization;
(E) the name of the court having jurisdiction,
file name, and case number of the reorganization case in which the
order or decree was entered; and
(F) a statement that the court had jurisdiction
of the case under a federal statute;
(4) a statement of change of registered office or
registered agent, or both, containing:
(A) the name of the domestic entity;
(B) the information required by Section
5.202(b), as applicable, but not the information included in the
statement referred to in Section 5.202(b)(6);
(C) the date of the court's order approving the
statement of change of registered office or registered agent, or
both;
(D) the name of the court having jurisdiction,
file name, and case number of the reorganization case in which the
order or decree was entered; and
(E) a statement that the court had jurisdiction
of the case under a federal statute; or
(5) a certificate of conversion containing:
(A) the name of the domestic entity;
(B) the part of the plan of reorganization that
contains the plan of conversion approved by the court, which must
include the information required by Section 10.103;
(C) the date of the court's order or decree
approving the plan of conversion;
(D) the name of the court having jurisdiction,
file name, and case number of the reorganization case in which the
order was entered; and
(E) a statement that the court had jurisdiction
of the case under a federal statute.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 10.303. REORGANIZATION WITH OTHER ENTITIES. If a
domestic entity or non-code organization that is not being
reorganized under a federal statute merges or exchanges an interest
with a domestic entity that is being reorganized under a plan of
reorganization under a federal statute:
(1) Subchapters A, B, D, E, and H apply to the domestic
entity or non-code organization that is not being reorganized to
the same extent those subchapters would apply if the domestic
entity or non-code organization were merging or engaging in an
interest exchange with a domestic entity that is not being
reorganized, except as otherwise provided by the plan of
reorganization ordered by a court under the federal statute;
(2) Subchapter H applies to a subsidiary organization
that is not being reorganized to the same extent that subchapter
would apply if the subsidiary organization were merging with a
parent organization that is not being reorganized;
(3) on the receipt of all required authorization for
all action required by this code for each domestic entity that is a
party to the plan of merger or exchange that is not being
reorganized and all action by each domestic entity or non-code
organization that is a party to the plan of merger or exchange
required by the laws of the entity's or organization's jurisdiction
of formation and governing documents, a certificate of merger or
exchange shall be signed by each domestic entity or non-code
organization that is a party to the merger or exchange other than
the domestic entity that is being reorganized as provided by
Section 10.151 and on behalf of the domestic entity that is being
reorganized by the persons specified in Section 10.302;
(4) the certificate of merger or exchange must contain
the information required by Section 10.302(2);
(5) the certificate of merger or exchange must be
filed in the manner provided by Section 10.153; and
(6) on the acceptance for filing of the certificate of
merger or exchange in accordance with Subchapter D, the merger or
interest exchange, when effective, has the same effect as if it had
been adopted by unanimous action of the governing authority and
owners or members of the domestic entity being reorganized, and the
effectiveness of the merger or interest exchange is determined as
provided by Section 10.007 or 10.054.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 10.304. RIGHT OF DISSENT AND APPRAISAL EXCLUDED. An
owner or member of a domestic entity subject to dissenters' rights
being reorganized under a federal statute does not have a right to
dissent and appraisal under this code except as provided by the plan
of reorganization.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 10.305. AFTER FINAL DECREE. This subchapter does not
apply after the entry of a final decree in a reorganization case
under a federal statute even though the court that renders the
decree may retain jurisdiction of the case for limited purposes
unrelated to consummation of the plan of reorganization.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 10.306. CHAPTER CUMULATIVE OF OTHER CHANGES. This
chapter does not preclude other changes in a domestic entity or its
ownership or membership interests or securities by a plan of
reorganization ordered by a court under a federal statute.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
SUBCHAPTER H. RIGHTS OF DISSENTING OWNERS
§ 10.351. APPLICABILITY OF SUBCHAPTER. (a) This
subchapter does not apply to a fundamental business transaction of
a domestic entity if, immediately before the effective date of the
fundamental business transaction, all of the ownership interests of
the entity otherwise entitled to rights to dissent and appraisal
under this code are held by one owner or only by the owners who
approved the fundamental business transaction.
(b) This subchapter applies only to a "domestic entity
subject to dissenters' rights," as defined in Section 1.002. That
term includes a domestic for-profit corporation, professional
corporation, professional association, and real estate investment
trust. Except as provided in Subsection (c), that term does not
include a partnership or limited liability company.
(c) The governing documents of a partnership or a limited
liability company may provide that its owners are entitled to the
rights of dissent and appraisal provided by this subchapter.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 10.352. DEFINITIONS. In this subchapter:
(1) "Dissenting owner" means an owner of an ownership
interest in a domestic entity subject to dissenters' rights who:
(A) provides notice under Section 10.356; and
(B) complies with the requirements for
perfecting that owner's right to dissent under this subchapter.
(2) "Responsible organization" means:
(A) the organization responsible for:
(i) the provision of notices under this
subchapter; and
(ii) the primary obligation of paying the
fair value for an ownership interest held by a dissenting owner;
(B) with respect to a merger or conversion:
(i) for matters occurring before the merger
or conversion, the organization that is merging or converting; and
(ii) for matters occurring after the merger
or conversion, the surviving or new organization that is primarily
obligated for the payment of the fair value of the dissenting
owner's ownership interest in the merger or conversion;
(C) with respect to an interest exchange, the
organization the ownership interests of which are being acquired in
the interest exchange; and
(D) with respect to the sale of all or
substantially all of the assets of an organization, the
organization the assets of which are to be transferred by sale or in
another manner.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 10.353. FORM AND VALIDITY OF NOTICE. (a) Notice
required under this subchapter:
(1) must be in writing; and
(2) may be mailed, hand-delivered, or delivered by
courier or electronic transmission.
(b) Failure to provide notice as required by this subchapter
does not invalidate any action taken.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 10.354. RIGHTS OF DISSENT AND
APPRAISAL. (a) Subject to Subsection (b), an owner of an
ownership interest in a domestic entity subject to dissenters'
rights is entitled to:
(1) dissent from:
(A) a plan of merger to which the domestic entity
is a party if owner approval is required by this code and the owner
owns in the domestic entity an ownership interest that was entitled
to vote on the plan of merger;
(B) a sale of all or substantially all of the
assets of the domestic entity if owner approval is required by this
code and the owner owns in the domestic entity an ownership interest
that was entitled to vote on the sale;
(C) a plan of exchange in which the ownership
interest of the owner is to be acquired;
(D) a plan of conversion in which the domestic
entity is the converting entity if owner approval is required by
this code and the owner owns in the domestic entity an ownership
interest that was entitled to vote on the plan of conversion; or
(E) a merger effected under Section 10.006 in
which:
(i) the owner is entitled to vote on the
merger; or
(ii) the ownership interest of the owner is
converted or exchanged; and
(2) subject to compliance with the procedures set
forth in this subchapter, obtain the fair value of that ownership
interest through an appraisal.
(b) Notwithstanding Subsection (a), subject to Subsection
(c), an owner may not dissent from a plan of merger or conversion in
which there is a single surviving or new domestic entity or non-code
organization, or from a plan of exchange, if:
(1) the ownership interest held by the owner is part of
a class or series of ownership interests that are, on the record
date set for purposes of determining which owners are entitled to
vote on the plan of merger, conversion, or exchange, as
appropriate:
(A) listed on a national securities exchange or a
similar system;
(B) listed on the Nasdaq Stock Market or a
successor quotation system;
(C) designated as a national market security on
an interdealer quotation system by the National Association of
Securities Dealers, Inc., or a successor system; or
(D) held of record by at least 2,000 owners;
(2) the owner is not required by the terms of the plan
of merger, conversion, or exchange, as appropriate, to accept for
the owner's ownership interest any consideration that is different
from the consideration to be provided to any other holder of an
ownership interest of the same class or series as the ownership
interest held by the owner, other than cash instead of fractional
shares or interests the owner would otherwise be entitled to
receive; and
(3) the owner is not required by the terms of the plan
of merger, conversion, or exchange, as appropriate, to accept for
the owner's ownership interest any consideration other than:
(A) ownership interests of a domestic entity or
non-code organization of the same general organizational type that,
immediately after the effective date of the merger, conversion, or
exchange, as appropriate, will be part of a class or series of
ownership interests that are:
(i) listed on a national securities
exchange or authorized for listing on the exchange on official
notice of issuance;
(ii) approved for quotation as a national
market security on an interdealer quotation system by the National
Association of Securities Dealers, Inc., or a successor entity; or
(iii) held of record by at least 2,000
owners;
(B) cash instead of fractional ownership
interests the owner would otherwise be entitled to receive; or
(C) any combination of the ownership interests
and cash described by Paragraphs (A) and (B).
(c) Subsection (b) shall not apply to a domestic entity that
is a subsidiary with respect to a merger under Section 10.006.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 10.355. NOTICE OF RIGHT OF DISSENT AND
APPRAISAL. (a) A domestic entity subject to dissenters' rights
that takes or proposes to take an action regarding which an owner
has a right to dissent and obtain an appraisal under Section 10.354
shall notify each affected owner of the owner's rights under that
section if:
(1) the action or proposed action is submitted to a
vote of the owners at a meeting; or
(2) approval of the action or proposed action is
obtained by written consent of the owners instead of being
submitted to a vote of the owners.
(b) If a parent organization effects a merger under Section
10.006 and a subsidiary organization that is a party to the merger
is a domestic entity subject to dissenters' rights, the responsible
organization shall notify the owners of that subsidiary
organization who have a right to dissent to the merger under Section
10.354 of their rights under this subchapter not later than the 10th
day after the effective date of the merger. The notice must also
include a copy of the certificate of merger and a statement that the
merger has become effective.
(c) A notice required to be provided under Subsection (a) or
(b) must:
(1) be accompanied by a copy of this subchapter; and
(2) advise the owner of the location of the
responsible organization's principal executive offices to which a
notice required under Section 10.356(b)(2) may be provided.
(d) In addition to the requirements prescribed by
Subsection (c), a notice required to be provided under Subsection
(a)(1) must accompany the notice of the meeting to consider the
action, and a notice required under Subsection (a)(2) must be
provided to:
(1) each owner who consents in writing to the action
before the owner delivers the written consent; and
(2) each owner who is entitled to vote on the action
and does not consent in writing to the action before the 11th day
after the date the action takes effect.
(e) Not later than the 10th day after the date an action
described by Subsection (a)(1) takes effect, the responsible
organization shall give notice that the action has been effected to
each owner who voted against the action and sent notice under
Section 10.356(b)(2).
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 10.356. PROCEDURE FOR DISSENT BY OWNERS AS TO ACTIONS;
PERFECTION OF RIGHT OF DISSENT AND APPRAISAL. (a) An owner of an
ownership interest of a domestic entity subject to dissenters'
rights who has the right to dissent and appraisal from any of the
actions referred to in Section 10.354 may exercise that right to
dissent and appraisal only by complying with the procedures
specified in this subchapter. An owner's right of dissent and
appraisal under Section 10.354 may be exercised by an owner only
with respect to an ownership interest that is not voted in favor of
the action.
(b) To perfect the owner's rights of dissent and appraisal
under Section 10.354, an owner:
(1) with respect to the ownership interest for which
the rights of dissent and appraisal are sought:
(A) must vote against the action if the owner is
entitled to vote on the action and the action is approved at a
meeting of the owners; and
(B) may not consent to the action if the action is
approved by written consent; and
(2) must give to the responsible organization a notice
dissenting to the action that:
(A) is addressed to the president and secretary
of the responsible organization;
(B) demands payment of the fair value of the
ownership interests for which the rights of dissent and appraisal
are sought;
(C) provides to the responsible organization an
address to which a notice relating to the dissent and appraisal
procedures under this subchapter may be sent;
(D) states the number and class of the ownership
interests of the domestic entity owned by the owner and the fair
value of the ownership interests as estimated by the owner; and
(E) is delivered to the responsible organization
at its principal executive offices at the following time:
(i) before the action is considered for
approval, if the action is to be submitted to a vote of the owners at
a meeting;
(ii) not later than the 20th day after the
date the responsible organization sends to the owner a notice that
the action was approved by the requisite vote of the owners, if the
action is to be undertaken on the written consent of the owners; or
(iii) not later than the 20th day after the
date the responsible organization sends to the owner a notice that
the merger was effected, if the action is a merger effected under
Section 10.006.
(c) An owner who does not make a demand within the period
required by Subsection (b)(2)(E) is bound by the action and is not
entitled to exercise the rights of dissent and appraisal under
Section 10.354.
(d) Not later than the 20th day after the date an owner makes
a demand under this section, the owner must submit to the
responsible organization any certificates representing the
ownership interest to which the demand relates for purposes of
making a notation on the certificates that a demand for the payment
of the fair value of an ownership interest has been made under this
section. An owner's failure to submit the certificates within the
required period has the effect of terminating, at the option of the
responsible organization, the owner's rights to dissent and
appraisal under Section 10.354 unless a court, for good cause
shown, directs otherwise.
(e) If a domestic entity and responsible organization
satisfy the requirements of this subchapter relating to the rights
of owners of ownership interests in the entity to dissent to an
action and seek appraisal of those ownership interests, an owner of
an ownership interest who fails to perfect that owner's right of
dissent in accordance with this subchapter may not bring suit to
recover the value of the ownership interest or money damages
relating to the action.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 10.357. WITHDRAWAL OF DEMAND FOR FAIR VALUE OF
OWNERSHIP INTEREST. (a) An owner may withdraw a demand for the
payment of the fair value of an ownership interest made under
Section 10.356 before:
(1) payment for the ownership interest has been made
under Sections 10.358 and 10.361; or
(2) a petition has been filed under Section 10.361.
(b) Unless the responsible organization consents to the
withdrawal of the demand, an owner may not withdraw a demand for
payment under Subsection (a) after either of the events specified
in Subsections (a)(1) and (2).
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 10.358. RESPONSE BY ORGANIZATION TO NOTICE OF DISSENT
AND DEMAND FOR FAIR VALUE BY DISSENTING OWNER. (a) Not later than
the 20th day after the date a responsible organization receives a
demand for payment made by a dissenting owner in accordance with
Section 10.356, the responsible organization shall respond to the
dissenting owner in writing by:
(1) accepting the amount claimed in the demand as the
fair value of the ownership interests specified in the notice; or
(2) rejecting the demand and including in the response
the requirements prescribed by Subsection (c).
(b) If the responsible organization accepts the amount
claimed in the demand, the responsible organization shall pay the
amount not later than the 90th day after the date the action that is
the subject of the demand was effected if the owner delivers to the
responsible organization:
(1) endorsed certificates representing the ownership
interests if the ownership interests are certificated; or
(2) signed assignments of the ownership interests if
the ownership interests are uncertificated.
(c) If the responsible organization rejects the amount
claimed in the demand, the responsible organization shall provide
to the owner:
(1) an estimate by the responsible organization of the
fair value of the ownership interests; and
(2) an offer to pay the amount of the estimate provided
under Subdivision (1).
(d) An offer made under Subsection (c)(2) must remain open
for a period of at least 60 days from the date the offer is first
delivered to the dissenting owner.
(e) If a dissenting owner accepts an offer made by a
responsible organization under Subsection (c)(2) or if a dissenting
owner and a responsible organization reach an agreement on the fair
value of the ownership interests, the responsible organization
shall pay the agreed amount not later than the 60th day after the
date the offer is accepted or the agreement is reached, as
appropriate, if the dissenting owner delivers to the responsible
organization:
(1) endorsed certificates representing the ownership
interests if the ownership interests are certificated; or
(2) signed assignments of the ownership interests if
the ownership interests are uncertificated.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 10.359. RECORD OF DEMAND FOR FAIR VALUE OF OWNERSHIP
INTEREST. (a) A responsible organization shall note in the
organization's ownership interest records maintained under Section
3.151 the receipt of a demand for payment from any dissenting owner
made under Section 10.356.
(b) If an ownership interest that is the subject of a demand
for payment made under Section 10.356 is transferred, a new
certificate representing that ownership interest must contain:
(1) a reference to the demand; and
(2) the name of the original dissenting owner of the
ownership interest.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 10.360. RIGHTS OF TRANSFEREE OF CERTAIN OWNERSHIP
INTEREST. A transferee of an ownership interest that is the
subject of a demand for payment made under Section 10.356 does not
acquire additional rights with respect to the responsible
organization following the transfer. The transferee has only the
rights the original dissenting owner had with respect to the
responsible organization after making the demand.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 10.361. PROCEEDING TO DETERMINE FAIR VALUE OF
OWNERSHIP INTEREST AND OWNERS ENTITLED TO PAYMENT; APPOINTMENT OF
APPRAISERS. (a) If a responsible organization rejects the amount
demanded by a dissenting owner under Section 10.358 and the
dissenting owner and responsible organization are unable to reach
an agreement relating to the fair value of the ownership interests
within the period prescribed by Section 10.358(d), the dissenting
owner or responsible organization may file a petition requesting a
finding and determination of the fair value of the owner's
ownership interests in a court in:
(1) the county in which the organization's principal
office is located in this state; or
(2) the county in which the organization's registered
office is located in this state, if the organization does not have a
business office in this state.
(b) A petition described by Subsection (a) must be filed not
later than the 60th day after the expiration of the period required
by Section 10.358(d).
(c) On the filing of a petition by an owner under Subsection
(a), service of a copy of the petition shall be made to the
responsible organization. Not later than the 10th day after the
date a responsible organization receives service under this
subsection, the responsible organization shall file with the clerk
of the court in which the petition was filed a list containing the
names and addresses of each owner of the organization who has
demanded payment for ownership interests under Section 10.356 and
with whom agreement as to the value of the ownership interests has
not been reached with the responsible organization. If the
responsible organization files a petition under Subsection (a), the
petition must be accompanied by this list.
(d) The clerk of the court in which a petition is filed under
this section shall provide by registered mail notice of the time and
place set for the hearing to:
(1) the responsible organization; and
(2) each owner named on the list described by
Subsection (c) at the address shown for the owner on the list.
(e) The court shall:
(1) determine which owners have:
(A) perfected their rights by complying with this
subchapter; and
(B) become subsequently entitled to receive
payment for the fair value of their ownership interests; and
(2) appoint one or more qualified appraisers to
determine the fair value of the ownership interests of the owners
described by Subdivision (1).
(f) The court shall approve the form of a notice required to
be provided under this section. The judgment of the court is final
and binding on the responsible organization, any other organization
obligated to make payment under this subchapter for an ownership
interest, and each owner who is notified as required by this
section.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 10.362. COMPUTATION AND DETERMINATION OF FAIR VALUE OF
OWNERSHIP INTEREST. (a) For purposes of this subchapter, the
fair value of an ownership interest of a domestic entity subject to
dissenters' rights is the value of the ownership interest on the
date preceding the date of the action that is the subject of the
appraisal. Any appreciation or depreciation in the value of the
ownership interest occurring in anticipation of the proposed action
or as a result of the action must be specifically excluded from the
computation of the fair value of the ownership interest.
(b) In computing the fair value of an ownership interest
under this subchapter, consideration must be given to the value of
the organization as a going concern without including in the
computation of value any:
(1) payment for a control premium or minority discount
other than a discount attributable to the type of ownership
interests held by the dissenting owner; and
(2) limitation placed on the rights and preferences of
those ownership interests.
(c) The determination of the fair value of an ownership
interest made for purposes of this subchapter may not be used for
purposes of making a determination of the fair value of that
ownership interest for another purpose or of the fair value of
another ownership interest, including for purposes of determining
any minority or liquidity discount that might apply to a sale of an
ownership interest.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 10.363. POWERS AND DUTIES OF APPRAISER; APPRAISAL
PROCEDURES. (a) An appraiser appointed under Section 10.361 has
the power and authority that:
(1) is granted by the court in the order appointing the
appraiser; and
(2) may be conferred by a court to a master in chancery
as provided by Rule 171, Texas Rules of Civil Procedure.
(b) The appraiser shall:
(1) determine the fair value of an ownership interest
of an owner adjudged by the court to be entitled to payment for the
ownership interest; and
(2) file with the court a report of that
determination.
(c) The appraiser is entitled to examine the books and
records of a responsible organization and may conduct
investigations as the appraiser considers appropriate. A
dissenting owner or responsible organization may submit to an
appraiser evidence or other information relevant to the
determination of the fair value of the ownership interest required
by Subsection (b)(1).
(d) The clerk of the court appointing the appraiser shall
provide notice of the filing of the report under Subsection (b) to
each dissenting owner named in the list filed under Section 10.361
and the responsible organization.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 10.364. OBJECTION TO APPRAISAL; HEARING. (a) A
dissenting owner or responsible organization may object, based on
the law or the facts, to all or part of an appraisal report
containing the fair value of an ownership interest determined under
Section 10.363(b).
(b) If an objection to a report is raised under Subsection
(a), the court shall hold a hearing to determine the fair value of
the ownership interest that is the subject of the report. After the
hearing, the court shall require the responsible organization to
pay to the holders of the ownership interest the amount of the
determined value with interest, accruing from the 91st day after
the date the applicable action for which the owner elected to
dissent was effected until the date of the judgment.
(c) Interest under Subsection (b) accrues at the same rate
as is provided for the accrual of prejudgment interest in civil
cases.
(d) The responsible organization shall:
(1) immediately pay the amount of the judgment to a
holder of an uncertificated ownership interest; and
(2) pay the amount of the judgment to a holder of a
certificated ownership interest immediately after the certificate
holder surrenders to the responsible organization an endorsed
certificate representing the ownership interest.
(e) On payment of the judgment, the dissenting owner does
not have an interest in the:
(1) ownership interest for which the payment is made;
or
(2) responsible organization with respect to that
ownership interest.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 10.365. COURT COSTS; COMPENSATION FOR
APPRAISER. (a) An appraiser appointed under Section 10.361 is
entitled to a reasonable fee payable from court costs.
(b) All court costs shall be allocated between the
responsible organization and the dissenting owners in the manner
that the court determines to be fair and equitable.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 10.366. STATUS OF OWNERSHIP INTEREST HELD OR FORMERLY
HELD BY DISSENTING OWNER. (a) An ownership interest of an
organization acquired by a responsible organization under this
subchapter:
(1) in the case of a merger, conversion, or interest
exchange, shall be held or disposed of as provided in the plan of
merger, conversion, or interest exchange; and
(2) in any other case, may be held or disposed of by
the responsible organization in the same manner as other ownership
interests acquired by the organization or held in its treasury.
(b) An owner who has demanded payment for the owner's
ownership interest under Section 10.356 is not entitled to vote or
exercise any other rights of another owner with respect to the
ownership interest except the right to:
(1) receive payment for the ownership interest under
this subchapter; and
(2) bring an appropriate action to obtain relief on
the ground that the action to which the demand relates would be or
was fraudulent.
(c) An ownership interest for which payment has been
demanded under Section 10.356 may not be considered outstanding for
purposes of any subsequent vote or action.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 10.367. RIGHTS OF OWNERS FOLLOWING TERMINATION OF
RIGHT OF DISSENT. (a) The rights of a dissenting owner terminate
if:
(1) the owner withdraws the demand under Section
10.356;
(2) the owner's right of dissent is terminated under
Section 10.356;
(3) a petition is not filed within the period required
by Section 10.361; or
(4) after a hearing held under Section 10.361, the
court adjudges that the owner is not entitled to elect to dissent
from an action under this subchapter.
(b) On termination of the right of dissent under this
section:
(1) the dissenting owner and all persons claiming a
right under the owner are conclusively presumed to have approved
and ratified the action to which the owner dissented and are bound
by that action;
(2) the owner's right to be paid the fair value of the
owner's ownership interests ceases and the owner's status as an
owner of those ownership interests is restored without prejudice in
any interim proceeding if the owner's ownership interests were not
canceled, converted, or exchanged as a result of the action or a
subsequent fundamental business transaction; and
(3) the dissenting owner is entitled to receive
dividends or other distributions made in the interim to owners of
the same class and series of ownership interests held by the owner
as if a demand for the payment of the ownership interests had not
been made under Section 10.356, subject to any change in or
adjustment to ownership interests because of the cancellation or
exchange of the ownership interests after the date a demand under
Section 10.356 was made pursuant to a fundamental business
transaction.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 10.368. EXCLUSIVITY OF REMEDY OF DISSENT AND
APPRAISAL. In the absence of fraud in the transaction, any right
of an owner of an ownership interest to dissent from an action and
obtain the fair value of the ownership interest under this
subchapter is the exclusive remedy for recovery of:
(1) the value of the ownership interest or money
damages to the owner with respect to the ownership interest; and
(2) the owner's right in the organization with respect
to a fundamental business transaction.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
SUBCHAPTER Z. MISCELLANEOUS PROVISIONS
§ 10.901. CREDITORS; ANTITRUST. This code does not
affect, nullify, or repeal the antitrust laws or abridge any right
or rights of any creditor under existing laws.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 10.902. NONEXCLUSIVITY. This chapter does not limit
the power of a domestic entity or non-code organization to acquire
all or part of the ownership or membership interests of one or more
classes or series of a domestic entity through a voluntary exchange
or otherwise.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
