Attorney General Opinion WW-0906

E NEY GENERAL EXAS Hon. William A. Harrison, Commissioner Opinion No,, WW-906 State Board of Insurance International Life Builditrg Re: Whether or not the Texas Busi- Austin, Texas ness Corporation Act is now or will become applicable to insurance companies subject to Art. 2.18 of the Texas Insur- ance Coda. in view ti H.B. 144, Dear Mr, Harrison: 56th Legislature, You have asked our opinion 0n several queetions concorning the appli- cability of the Texas Business Corporation Act (hsrefaafQr referred to as thu “Act’*) to inrurknce companies governed by,Ardcfe 2.18 of the hrurauca Coda. Thir Article provides as follows: “The 16~0 governing corporat$Qnr in general shall apply to and govern insurance companies inciarporated in this State in so far 0s the same or0 not inconoietent with any provision of th# Code. None 0f the provisions of this Chapter, 2 shall apply to insurance companies organixed or operating under tbu p~ovisioaa of Chapter 3 or Chapter 11 uf &his, CaBa, aml Ckrlptir~ fO, 12, 19, or 14 of this Cud0;” Your request is predicated on the 1959 amondmont (H.B. 144) to~9.14A of thR A& which added the underlimrd &mrtlons~ to this 0cctlon now quo&$&as follows: 4, m4. provided, however, that if any of said excepted domiaatic curporations were heretofore or are hereafter orSaniead under speciar?%tutes which contain no pr~viui~ns in regard to some of the matters provided for in this Act, or any such excepted foreign corporations were heretofore or hereafter granted authority to transact business withrn TliEgq e under any special statute which contains dQ pro- vim tin ih re ar < or an mi3;75ct in respect of foreign corporations, or rf such special ~a*luteS specfflcally provide that the general laws for incitr- poratiunror for the granting of a certificate of auth transact blr$ine$s,, Jn this F$ttite, al ,the case may b supplemen?P&e pro”v”fons of such statutes, then the Provi- sions of this Act shall apply to the extent that they are not inconsistent with the provisions of such special stautes.‘” The recent Attorney General’s Opinion WW-905 was concerned with the00 *ame questions in’regard to life insurance companies governed by Hon. William A. HarKson, page 2 (WW-906) Article 3.69 of the Insurance Code. In that Opinion we held that ‘*a literal reading of the 1959 amendment to 9.14A evidence6 a clear legislative intent to bring all insurance companies, regardless of when organized or admitted to Texas, under one set of corporate laws supplemental to the Code as of the effective date of such amendment,” and that the s@ions of 9.14 po6t- poning the effective date of the Act for existing general business corporation6 do not apply to life insurance companies, The 6ame principles apply with equal force to insurance companies in- corporated under Chapter 2 of the Insurance Code and we therefore hold that the Texas Business, Corporation Act aupplementa the provioions of the Texas Insurance Code pertaining to insurance campaaiea gaverned by 2.18 of the Code where not inconaiatent therewith, The remaining quertio~ in this request turn on the issue of whether the provision of Article 2.17B of the Act limiting the allochtion of capital funds to surplus to not more than 25% applies to those inourance companies governed by Article 2.18 of the insurance Code. As in the case of life insurance com- panies, the Insurance Coda permit6 compFnie6 incorporated under Chapter 2, issuing no-par value stock under Section 2 Of Article 2.07 to begin business with a $250,Q00.00 minimum. Article 2.02, Section 4, Set6 out the authorized minimum capital and minimum sutplu6 requirements as follows: “4. The amount of its capital stock and it6 6urplus, which shall in no case be lesa than $100,000~00 capital and $50,000.00 surplus in the event the company is incorporated to engage in the bu6inesa of fire insurance ahd its allied lines, or marine ineurance, or both, and which in no case.ehall be less than $lSO,Obd.OO capital and $75,000,00 surplus if the company ie incorporated to engage in the carualty ln6urace businrse, including fidelity, guaranty, 8urety and trust busi& . . ness, and which in 00 case shall be leas than $~OO,OOO.OO capital and $100,000.00 ourplus in the event the company is incorporatid to enSage in the burinere of fire insurance and it’f allied lines, or morfna ia6uraacer or both fire mad marine -! insurance, and the business of ca6ualty ia6uraace~*0 The application of 2,17B. of the Act to ,fbsurance compnn~es dercrtbediin 1 this Article would require a company to begin busines6 with 8 greate amount of capital than permitted in Article 2,02, Section 4, in ordcrr for the described minimum surplus amount6 to constitute not more than 25% of the proceeds from the sale ~of no-par value stock as required by 2.17B.. Since theee 6ame points are discussed in detail by Attorney General’s Gpinion WW-905, they will not be extended here, We held in Attorney General”6 Qpinioa WW-905, :(dealiug with life inwar- ante compahies issuing no-par value 6tock) that “the restriction of 2.17B simply does not take into account or even conbmplote a required minimum surplus and hence is inconsistent with the Insurance Code,‘* The Dame is , true i~r, Chrpttw 2 companies, and we, therMore, hold that the restriction on the percentage of capital funds allocable to surplus in Article 2.17B of the Texbs Business Corporation Act ie iqconoiatent with the provis,i,q of the Texas Insurance Code regulating companies governed by Article~~&lB thereof, and, therefore, is not applicable to such componier. SUMMARY The Tatxau Bueinrar Corpolutim Act suppXemants .tbr ~roviotoua of the Texas Iusur8nco Coda, deal&g with Chapter 2 eocnpanies, where not inconsistent therkwith. However, the restriction m t&r pmcentage af capftel funds allocable to surplus in Article a.178 of the! Texar Busiuess Corporation Act is inconsistent witH the sections & the &surance Code dealing with componies issuing no*par value Mock governed by 23 and, therefore, So nut rppiicebb to ruck companfe6, Very truly yours, WILL WILsOhi Attorney General of Texas * RAW/p 3 Riahard A, Wells ,Asalrhnt Attorl~ry Chnrrpl APPROVED: OPINION COMMITTEE: C. K. Richards, Chairman Miltbn Richards on S‘ohn Reeves Houghton Br ownlee L Chas$es Cabaniss R~EVIEWED FOR THE ATTORNEY bEN%RRL BY: Leonard Passtiore ,