Secretary of State               Opinion lo. O-1613
Austin, Texas                    Re: zd;;,the last paragraph
                                             7 of the Texas
Attention: C.~P.,Sandera,            Securikea Act would 20$
           Securities Analyst        of the capital which is
                                     actually employed in the
                                     business b8 equivalent to
                                     16-Z/3$ of the selling
Dear Sir:                            price to the public?

          We 'are in receipt of your request for an opinion
on the following situation:

          "I wish to request an opinion from your de-
     partment involving the last paragraph of Sec. 7
     of the Texas Securities Act% 9 %:

          '99%    . It is'my interpretation that the
     amount of oapital sought to be employed in a
     company is not the total selling price of the
     securities but the selling price less the aom-
     missions paid in disposing of the securities.

          "I aomputed the percentage oommission tote
     paid in the following manner:

          Let X equal capital to be employed in the
          butiinesa
          .20X equal amount of commission which may
         ,be oharged
     How a88UJ88 selling price of ~100.00 per Share
     on an issue, therefore:
           100.00 minus .20X equals X
           100.00 equals X plus .20X or $100.00 equals
        :,!f
           1.2x
          X equals.#83.33 which I interpret as the
     amount of capital sought to be 8mplOy8d in the
     bUSiIl888.
                                     -   .




S8Cr8tSYy Of State, page 2, O-1613



         "The commi88ion, thereforej is $16.66 or
    16 2/3$ of the selling price of the stools. In
    all cases 20$ of th8 capital which is actually
    employed in the bUSine88 is equivalent to 16 Z/3$
    of the selling price to the publio.

          "1 trust that 1 have made myself Sufficiently
     clear on this pointand  I shall appreciate an early
     opinion from your department."

          The last paragraph of Section 7 of Article 600a,
Vernon's Annotated Civil Statutes, i.e., Texas Securities
Act read8 as f0110ws.o

          "The total 8Xp8n388 5noluding'OrganisatiOn

    ~r~$~?c~~~~~~%              ~~~~i.?d~?%~
    shall not 8XC88d twenty per cent of the total
    amount of capital sought to be employed inch
    proposed company." (Underscoring OUra).

          The ~questim before us is what did the T8Xa8 L8g-
islature mean by "the total amount of capital sought to be
employed in such company".

          The term wcapitalw is ordinarily used to deSignat8
the aSSetS Of the COrpOratiOn, regardless of their source,
Utilized for the conduot of the corporate business and for
the purposes of deriving gains and profits.

     10 TEX. JDR. 670:
     WACO IiATIaBAL BARK v. ROGERS, 51 T8Xa8 606, 608;
     RARRIS0R v. VIKES, 46 Texas 15, 21;
     TURNER v. CATTLEMEN'S TRUST CO., 215 S.W. 831, 832;
     OPINIONSOF ATTORNEY GENERAL, Bienniel Report,
          1924-1926, p. 235e

           "Broadly speaking, the capbtaI~-of a corpora-
     tion is the fund U88d by it in the oonduct of~ifs
     business and from which it profit8 in a great
     measure at least9 are expected tobe raised. Thi8
     fund,ia raised by the issue and sale of it8 au-
     orized capit 1 stook." (UnderSOoring Ours).
     SOBLAND V. B&R    58 A.L.R. 693 141 Atl.  2’77.
Secretary of State, page 3, O-1613



           wCapitaln is money oontributed for corporate
purpo~ses and may be expended for any proper Corporate use.

     COMMONWEALTH v. SCHWAR!ZS CHILD & XILZPRRGER CO.
      OF AMERICA,
            -     102 Atlantic 412, 413, 259 Pa. 130.

          The ncapitals of a stock company or a bUSine38
has a well defined meaning.  It is the fund intended to
be 8Ubj8ot t0 the risks Of the bUSi.n8SS, the Pund con-
tributed to meet the obligation8 of the bUSineS8, and
to be repaid to the contributors only after all of the
other obligations should have been satisfied.

     In re DE3NOYER.S SHOE CO., 224 F. 372,377.
          As r8Sp8otS property Of COrpOratiOn "Capital" ap-
plies only to property or amounts contributed by stock-
holders a8 the fund or basis of the enterprise for whiah
corporation was formed.

     MALLEX V.   OLD COLONY TRUST CO. 229 F.   523, 528.

           "The oapital of a oorpcration is the money fur-
   nished by SUbscriberS or promoter8 to be used by
   the oorporation in it8 business, or Undertaking,
   irhile th?, 'oapital stock' is the authorized amount
   of the capital to be subscribed by the StOOkhOld8rS
   and to be contributed for the oorporation*s purposes;
   th8~Ucapital~ being the amount contributed, while the
   stock represents the oapital, and 8teIId8 as a guaranty
   to the publio of the corporation*8 ability to meet its
   obligations, and is not subject to disposal at the
   whim Of the promoter8 or directors. &IIeriCan Life
   Ins. Co. v. F8rgUSOn,   134 P. 1029, 66 Or. 417."

     w8 advance the various standard definition8 of Capital,
becaUS,e it is our opinion that the L8giahtUIYa used the
word capital in its ordinary meaning in the phrase "the
total amount of capital SOtIght to be 8mploy8d". As suoh the
true intent of the Legislature was that the total expenses of
incorporation shall.not 8XC88d 2@ of the total amOUnt or
value contributed by 'stockholders sought as the basis of
enterprise for which the corporation was formed. The seotion
quoted specifically provides that the commissions paid, to
salesmen are a portLon of the total expenses which are not to
Secretary of State, page 4, O-1613



exoeed 20% of the total oapital. Th8 8 tatUt8    does not
provide for the deduction of commissions from the sell-
ing prioe before estimating total expenses. The plain
langauge indicates the exact opposite effect. The com-
putation of the expense allowable on the basis of the
88llillg  pFiC8  Of the S8CUriti8S carried Out the legiS-
latiV8   intent.
            A statute that is plafir and unambiguous if con-
strued at all, will be interpreted lIterally, according
to the maximum ita tix SCripta est.
                                 .~.
     WINIll   VS. KIND, 297 S.W. 689, aff. 1 S.W. (2d)

     TRIM&    VS. CARLTCW, 264 S.W.   253, aff. 296.
         S.W. '070.

             Section 6 of Article 12, of the Texas Constitution
provides:
          "No corporation shall issue stock 9 9 9 ex-
     cept for money paid, labor done or property aa-
     tually received 8 * 0"

          *The total amXAnt   of aapital sought to b8 employ-
ed", in the legislative mind, was the total.value of the
money paid, labor done, SItid property aCtUallg r8C8iV8d
in return for the S8OUriti8S. As has b88n said before,
commissions paid Ln disposing of the securities are a part
of the total expenses not to exaeed 20$ of the total value
or selling price of the securities.

          We have given careful consideration to the argu-
ment advanced for 8 different construction, but are un-
able to agree that suchwas the intention of the Legislature.

           It is our opinion that the phrase "total amount
of capital sought tombe employed" by companies within the
operation of the law under Section 7 of Article 600a,
Vernon*8 &notated Civil Statutes, i.e., Texas Securities
Act. is properly construed as the total selling price of the
securities issued, and that the total expenses including
organization and all commissions paid in disposing of the
securities shall not exceed 20% of the total selling price
Of the S8OWiti8S.
Secretary of State, page 5, O-1613




           TPUSting   that we haV8 fully aIMW8r8d your inquiry,
we are
                                Yours very   truly

                                ATTORNEY GENERAL OF TEXAS

                                 s/.Diok Stout

                                 BY
                                                 Disk Stout
                                                  Assistant


DS:ob/og

Approved Nov. 1, 1939

8/ Gerald C. Manp

ATTORNEX GENERAL OF TEXAS
