                             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&$&as follows:
                 4,m4. provided, however, that if any of said excepted
        domiaatic curporations were heretofore or are hereafter
        orSaniead under speciar?%tutes        which contain no pr~viui~ns
        in regard to some of the matters provided for in this Act,
        or any such excepted foreign corporations were heretofore
        or hereafter granted authority to transact business withrn
        TliEgq e under any special statute which contains dQ pro-
         < tin ih re ar
        vim                                                       or an
        mi3;75ct in respect of foreign corporations,      or rf such special
        ~a*luteS specfflcally provide that the general laws for incitr-
        poratiunror for the granting of a certificate of auth
        transact blr$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



                                         3   Riahard A, Wells
                          *                ,Asalrhnt   Attorl~ry Chnrrpl
RAW/p

APPROVED:

OPINION COMMITTEE:

C. K. Richards, Chairman                                                      ,
Miltbn Richards on
S‘ohnReeves
Houghton Br ownlee                   L
Chas$es Cabaniss

R~EVIEWED FOR THE ATTORNEY bEN%RRL
BY:
        Leonard Passtiore
