Honorable 0. P. Lockhart, Chairman         Overruled by 0-5933A
Board of Insurance Commissioners           in 80 far a6 it conflicts   &4~7
                                                                          d
Auet in, Texae


Dear Sir:                             Opinion No. O-5792
                                      Re: Whether a life insurance
                                            company whose stock ie
                                           without par value may re-
                                            duce ite capital to $100,000
                                            for the purpose of making
                                            good an impairment of its
                                            capital under the provisions
                                            of Article 4748 and Article
                                           4704, Vernon’s Annotated
                                           Civil Statutes; and a
                                           related   matter.

          Your letter requesting the opinion of this     department
on the question0 etated therein reads as follows:


           “A Texas life insurance company, whose share@
     of etock are without nominal or par value, wishes to
     reduce its capital to $100,000.   The Cotipany’s author.-
     ized capital ie $500,000, of which $250,000 was paid
     in in cash at incorporation.

           “The purpose of the reduction is to restore an
     impairment in its present capital etructure.    Thie
     procedure is available   to companiee with par value
     stock under Article   4748.

            “Will you please advise me whether, in view of
     Article   4704 and any other applicable statutee, a life
     insurance company whose stock ia without par value, may
     reduce its capital to $100,000 for the purpose of mak-
     ing good an impairment of its capital.
Honorable   0. P. Lockhart,   page 2 (O-5792)




           “If your anewer should be in the negative,              ,. ~~   ~.   ,,;;
     please advise me whether the no par stock may be
     converted into stock with par value 60 that the
     company may then proceed with the reduction un-
     der Article  4748.”


            Article   4704, Vernon’e   Annotated Civil Statutes,    provides,
in part:


           “Sec. 2. Upon the incorporation     or upon the
     amendment of the charter in the manner now or here-
     after provided by law, of any insurance company
     organized under the laws of thie State, provieion
     may be made for the iesuance of &ares of its stock
     without a nominal or par value.      Every euch ehare,
     shall be equal in all respects to every other such
     share; provided,    however, that the stockholders  of
     any euch company authorizing the issuance of it8
     stock without nominal or par value, shall be re-
     quired in good faith to subscribe and pay for at
     leaet fifty   (50s) per cent of the authorized share8
     to be issued without nominal or par value, before
     said corporation    shall be chartered  or have ite
     charter amended 80 a8 to authorize the ireuance of
     shares without nominal or par value; and provided
     further that in no event shall the amount 80 paid
     be less than Two Hundred Fifty Thousand ($250,000.00)
     Dollars.

            n * * *

           “Sec. 6. The privileges     and power8 conferred
     by thia Act shall be in addition to any and all
     powere and privileges   conferred by any other law
     or lawa, and not in rertriction      or limitation   of
     any of the powere now permitted to ruch companies;
     life,  health or accident inrurance companies organ-
     ized or amending their charter under thin Act shall
     be subject to and controlled     by the provinionr     of
     Chapter 3, Title 78, Revieed Civil Statute6 of Texae,
     1925, except where the provisions      of eaid Chapter
     are inconsistent   or in conflict’with     the provisions
     of this Act.”
Honorable 0. P. Lockhart,     page 3 (O-5792)




           Article  4719, Vernon'8 Annotated  Civil Statutes,
authorizes  life,  health and accident insurance companies to
amend their charter6 and also increase or reduce the amount
of their capital stock in the manner therein prescribed.

            Article   4748, Vernon's   Annotated Civil   Statutes,
provides:


             "Any insurance company transacting    business
      within this State, whose capital stock shall be-
      come impaired to the extent of thirty-three       and
      one-third per centthereof,     computing its liabili-
      ties according to the terms of this chapter, shall
      make good such impairment within sixty days, by
      reduction of its capital stock, (provided such
      capital stock shall in no case be less than one
      hundred thousand dollars),     or otherwise; and fail-
      ing to make good such impairment within said time
      shall forfeit    its right to write new business in
      this State until said impairment shall have been
      made good.    The Commissioner may apply to any
      court of competent jurisdiction     for the appoint-
      ment of a receiver to wind up the affairs      of such
      company when its capital stock shall become im-
      paired to the extent of fifty per cent thereof,
      computing ita po~licy liabilities    according to the
      American experience table of mortality and four
      and one-half per cent interest.      No company shall
      write new business in Texas when its net surplus
      to policy holders is less than one hundred thousand
      dollars."


           Article 4704, supra, authorizes   insurance companies to
issue shares of their stock without nominal or par value.     Said
statute requires companies issuing such stock to subscribe and
pay for at least fifty per cent of the authorized shares to be
issued without nominal or par value before said corporation     shall
be chartered or have their charters amended so as to authorize
the iseuance of shares without nominal or par value, and in no
event shall the amount 60 paid be less than $25O,OOO. In view
of Article  4704, it is our opinion that a life insurance company
whose shares of stock are without nominal or par value cannot
reduce its capital to $100,000.    Such statute (Article  4704) ex-
                                                                                  -   ..   _




Honorable   0. P. Lockhart,      page 4 (O-5792)



pressly provides      that   in no event shall   the amount 80 paid be less
than $250,000.

           It is our further opinion that Article 4719 authorizing
life, health and accident insurance companies to reduce their capi-
tal stock does not authorize such companies to reduce their capital
stock whose shares of stock are without nominal or par value to any
amount leS6 than $250,000.

            Article    4715, Vernon's   Annotated Civil   Statutes,   provides:

          "The laws governing corporations  in general Shall
     apply to and govern insurance companies incorporated   in
     this State in so far as the same are not inconsistent
     with any provision  of this title."

            Articles   1538a,-1538m, Vernon's Annotated Civil Statutes,
authorize corporations     generally to iSSUe stock without nominal
or par value.     These statutes authorize private corporations    for
profit,  other than corporation6     authorized to conduct a banking
or insurance business,     having authorized Share6 for par or face
value, or shares without nominal or par value, or both, to change
its shares of Stock with par or face value, or any class or classes
thereof,   into the same number or into a larger or smaller number
of shares without nominal or par value, provided that all shares
in any one class shall be changed on the same basis,       or 60 a6 to
change its shares without nominal or par value, or any ClaBB or
classes thereof,     into a larger or smaller number of Shares with-
out nominal or par value, provided that all shares in any one ClaSS
shall be changed on the same basis.        It will be noted that these
statute6 do not authorize corporations       generally to convert Share6
of stock without nominal or par value into stock with nominal or
par value.

           After a careful search of the cases of the appellate
courts, we have failed to find any case paseing upon the qUeStiOn
under consideration.    We have also failed to find any authority
or statute authorizing   a life insurance company who66 shares of
stock are without nominal or par value to convert such stock into
stock with nominal or par value.    Therefore,  it is our opinion
that a life insurance company whose shares of Stock are without
nominal or par value cannot legally    convert such stock into Stock
with nominal or par value.

                        APPROVED      Yours very truly
APPROVED JAN 28, 1944   OPINION
/s/ Grover Sellers     COMMITTEE ATTORNEY GENERAL  OF TEXAS
ATTOPJiEYGENERALOFTEXASBY /s/ GWB By /a/ Ardell William6
                         CHAIRMAN        Ardell William6
AW:RP                                          Assistant
