                      THE     L%~OKNEY                GENEML
                                   OF?t%XAS
                                   AUSTIN   m.lgxAn
  WI&      WILSON
A-RN-         G!,CN~-X..           January 27, 1960



        The Honorable Zollie Steakley           Opinion No. WW-789
        Secretary of State
        State Capitol                           Re:    Authority of the Secretary
        Austin, Texas                                  of State to accept 2nd file the
                                                       application for Certificate of
                                                       Authority of Panhandle Tele-
                                                       phone Co-Operative, Inc., a
                                                       foreign corporation, which pro-
                                                       poses to furnish rural tele-
                                                       phone service and related
        Dear Mr. Steakley:                             questions.

                 You have requested our opinion on three questions.   The first
        concerns the authority of your office to accept and file an app:.icatlon
        for a Certificate of Authority submitted by Panhandle Telephane Co-
        Operative. Inc., a non-profit corporation chartered in Oklahoma pur-
        suant to the provisions of 18 Okla. Stat. 43.81 et seq.. The pmrpose for
        which the company proposes to transact business in Texas is “to furnish
        telephone service in rural areas to the widest practicable number of
        users  ofsuch service; provided there shall be no duplication of service
        where reasonable and adequate telephone service is available,”      Should
        we conclude that your office has no authority to file such application,
        you then inquire as to whether or not the corporation can lawfully en-
        gage in business in Texas without a Certificate of Authority. Your
        third question is whether or not the corporation will be required to file
        a return and pay the franchise taxes required under Chapter 12 of Title
        12ZA (H.B. 11, Acts 56th Legislature, Third Called Session 1959) regard-
        less of whether or not it may be required to obtain Certificats of Authority.

                 Article 1528~ V.C.S.T. (Acts 1950, 51st Legislature, First Called
        Session, page 33, chapter 4) authorizes the incorporation of “co-operative,
        non-profit corporations. . .for the purpose of furnishing telephone ser-
        vice in rural areas to the widest practical number of users of such ser-
        vice; provided there shall be no duplication in service where reasonable,
        adequate telephone service is available.”    Consequently, the business
        of furnishing rural telephone service, being a lawful purpose for which
        corporations could be organized prior to the passage of either the Busi-
        ness Corporation Act or the Non-Profit Corporation Act, is u lawful
        purpose today unless either of these Acts prohibit the formation of such
        companies.     The Business Corporation Act, Art.   2.01, Sec. A, provides
        that corporations “for the purpose of operating non-profit institutions”
        may not adopt or be organized under the Act. Moreover, Sull-paragraph
        (4)(g) of Section B of Article 2.01 provides that co-operative:;  or limited
c   .




    The Hon. Zollie Steakley, page 2     (WW-789)



    co-operative associations may not be organized under the Act or obtain
    authority to transact business in this State under same.

             An even more pointed prohibition is found in Paragralzh B, Arti-
    cle 2.01 of the Non-Profit Corporation Act (Acts 1959, 56th Legislature,
    Chapter 162) which provides that “this Act shall not apply to imy corpor-
    ation nor may any corporation be organized under this Act or obtain
    authority to conduct its affairs in this state under this Act. ,(F.if
    any one or more of its purposes for the conduct of lts affairs in this
    state is to organize telephone co-operative corporations.”      In the face
    of this specific laneuaee we conclude that your office has no outhorihr
    to accepi and file tge application in question under the Non-Profit Cdr-
    poration Act. However, any doubts as to whether or not Art. 1528~ was
    repealed by the passage of the Non-Profit Corporation Act ars removed
    by Article 10.05, Paragraph B of the Act which provides:

                   “Except as provided in Article 10.06 of this Acf:,
            any limitations, obligations, liabilities and powers ap’-
            plicable to a particular kind of corporation, for which
            special provision is made by the laws of this state, s1.all
            continue to be applicable to any such corporation and
            this Act is not intended to repeal and doss not repeal
            the statutory provisions providing for these special
            limitations, obligations, liabilities and powers .‘*

              If. then, the Panhandle Telephone Co-Operative, Inc. cannot obtain
    a Certificate of Authority to transact business in this state by virtue of
    either the Business Corporation Act or the Texas Non-Profit Act, the ques-
    tion arises as to whether or not there is any authority under which your
    office might issue such a certificate.    Prmto    the passage al: the Texas
    Business Corporation Act and the Non-Profit Corporation Act. Chapter 19,
    of Title 32 (Art. 1529-V.C5.)    of the laws of the State of Texas provided
    the method and manner in which foreign corporations could qualify to do
    business in Texas. Article 1529 thereof eliminates foreign non-profit
    corporations from the purview of Chapter 19 by providing thz.t “any corpor-
    ation for pecuniary profit,. . .shall file with the Secretary of State a duIy
    certlffied copy of its Articles of Incorporatlou; and thereupon such official
    shall issue to such corporation a permit to transact business in this State
    . . **’ Consequently, prior to the passage of the Texas Business Corpor-
    ation Act and the Non-Profit Corporation Act, there were no provisions
    whereby a foreign corporation not for pecuniary profit could obtain a per-
    mit to do business in this state-e      City of San Antonio v. Salvation Arm
    127 S.W. 860) and such corporations could carry on their acf&
    state without obtaining such a permit. Vol. 1 Prentice Hall Corporation
    Law Guide, page 3300. This, of course,      is no longer true ior, foreign
    non-profit corporations covered by the Non-Broflt Corporation Act. For
    those which are not it remains the law, primarily by virtue of the principle
    of comity.
1




The Hon. Zollie   Steakley, page 3   (WW-789)



          As stated in Attorney General Optnion V-746 by Hon. :Price
 Daniel, “it is a well settled rule of law that under the doctrine of comity
  and in the absence of any prohibitory law or rule of public policy, foreign
 corporations are entitled to enter    a state and make any contrcmor
 transact any business therein falllng within the scope of their lawful
 corporate powers which are permitted to domestic corporaticns of like
 kind and character.    In accordance with this rule, if the laws of a state
 prohibit the formation of domestic corporations of a specific character,
 or for certain purposes, its policy is controlling; and a foreis;n corpora-
 tion of that character or created for such purposes would not be allowed
 to enter the state and transact business therein. However, an intention
 to exclude foreign corporations from the state is not to be deduced from
 circumstances that the laws of the state have made no provisions for
 domestic corporations of like character. And in the absence of expressed
 constitutional or statutory inhibition, foreign corporations may enter a
 state and engage in business therein under the rule of comity notwlth-
 standing they are organized in accordance with methods which.do not ob-
 tain in such state.”   Opinion V-746 dealt with a situation~ln which a
 tbreign  corporation organized for pecuniary profit, but without capital
 stock; desired to obtain a certificate to do.&slness     in Texas. Article
  1530 of the then applicable statutes required that before such a Certifi-
 cate of Authority be issued the corporation must show to the satisfac-
 tion of the Secretary of State that at least $100,000 in cash o,f its author-
 ized capital stock had been paid in or that fifty per c~ent(50%) of its auth-
 orized capital stock had been subscribed.      In accordance with the quoted
 language above, Opinion V-746 concluded that the foreign coz,poration
 could obtain a certlficats of authority to do business fn Texas despite
 its lnabllity to meet the requirements of Article 1530. In the instant sit-
 uation, we find no constitutional or statutory prohibition against corporations
.of the typs in question. Rather, there exists a special act, Article 1528c,
 which authorizes the formation of domestic corporations of ihe identical
 type. Although making no specific provision for the obtaining of a certifi-
 cate of authority by foreign corporations of this typo, Article 1528~ assumes
 that foreign corporations will transact business in this state under its
 authority. For example, Section ba-( 1) provides “the words ‘telephone
 co-operative’ shall not be used In the corporate name of corporations
 organized under the laws of this state, or authorized to do business herein,
 other than those organized pursuant to provisions of this AC,:.” Section 23,
 sub-paragraph (b) provides that “a corporation may hot otherwise sell. . .
 a substantial portion of its property unless such sale. . .is a,uthorised by
 an affirmative vote of not less than two-thirds (2/3) of all the members
 of the corporation; provided however. . .the Board of Directors may. . .
 sell, lease or otherwise dispose of all or a substantial portion of its
 property to another corporatton or a foreign corporation
 in this state pursuant to this act..;“mIIar        language may
 Section 25.
-   .




    The Hon. Zollie Steakley, page 4     (WW-789)



             On the basis of the foregoing, in answer to your questions 1 and
    2, we hold that the Secretary of State has no authority to~accept and file
    the application of the Panhandle Telephone Co-Operative,    Inc. for a
    Certificate of Authority to engage in business in this state for the above
    stated purpose. We also hold that the corporation may lawfully engage
    in business in Texas without a certificate of authority.

             In answer to your third question. it is the opinion of this office
    that the corporation must file a return and pay the franchise tiutes re-
    quired under the provisions of Chapter 12 of Title 122a. H.B. 11, Acts
    56th Legislature, Third Called Session, 1959, if it does business in this
    state. Article 12.01(l) provides that “except as herein provided, every
    domestic and foreign corporation heretofore or hereafter chartered or
    authorized to do business in Texas or doing business in Texas, shall, on
    or before May   1st of each year, pay in advance to the Secretal     of State
    a franchise tax for the year following which shall be based on whichever
    of the following shall yield the greatest tax. . .” Obviously, the legisla-
    ture contemplated that there would be situations in which a corporation
    may not have been chartered under the laws of this state, or have secured
    a permit to do business under the laws of this state, but yet might be
    doing business here for purposes of paying a franchise tax.

                                    SUMMARY

                  The Secretary    of State has no authority to
                  accept and file the application of the Pan-
                  handle Telephone Co-Operative, Inc., for a
                  Certificate of Authority to engage in business
                  in’lhis state for the stated purpose. The cor-
                  poration may lawfully engage in the business
                  which it proposes in Texas without a certlfi-
                  cate of authority, but must file a return and
                  pay the franchise taxes required.

                                                 Very truly yours.

                                                 WILL WILSON
                                                 Attorney Genaral of Texas



                                                 BY



    RVL:lmc
The Hon. Zollie Steakley. page 5   (WW-789)



APPROVED:

OPINION COMMITTEE:

W. V. Geppert. Chairman
John B. Webster
Jay Howell
Bob Walls
L. P. Lollar

REVIEWED FOR THE ATTORNEY          GENERAL
BY: Leonard Passmore.
