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ATTORNEY     GENEW.bE
                                    July 5, 1960

       Honorable Zollie  Steakley                Opinion No. WW-871
       Secretary of State
       State Capitol                             Res   Authority of the
       Austin, Texae                                   Secretary of State to
                                                       accept and file    the
                                                       application   for Certl-
                                                       ficate   of Authority of
                                                       Panhandle Telephone Co-
                                                       Operative,   Inc., a
                                                       foreign corporation,
                                                       which propoeee to fur-
                                                       nieh rural telephone
                                                       service and related
                                                       queationa.
      Dear Mr, Steakley:
                   You have requeeted our opinion on three queetlons.~
      The.first    concerns the authority of your office     to accept and
      file an application     for a Certlfloate   of Authority   submitted
      by Panhandle Telephone Co-Operative,       Inc., a non-profit     corpora-
      tion chartered In Oklahoma purauant to the proviafone           of 18 Okla.
      Stat. 43.81, et seq.       The purpose for which the company proposes
      to transact business in Texas Is “to furnleh telephone eervice
      in rurdl areas to the widest praotloable        number of were of such
      service;   provided there shall be no duplleation      of eervlae where
      reasonable and adequate telephone’service        IB available.”      Should
      we conclude that your office      ha8 no authority   to file such ap-
      plication,    you then Inquire aa to whether or not the corporation
      oan lariully    engage in buelnees in Texabaswithout a Certificate
      of Authority.      Your third queetion is whether or not the corpora-
      tion will be required to file a return and pay the franchlse
      taxee required under Chapter 12 of Title 122A (H-B. 11, Act6 56th
      Legielatum,     Third Called Seseion 1959)~,regardleae of whether or
      not it may be required to obtain Certlfioate        of Authority.
                   Article  15280, V,C.S.T,   (Acts 1950 - 51st Lagiela-
       ture-First    Called Seuelon9 page 33# Chapter 4) authorlrea     the
       incorporation    of “ad-operative,   non-profit   corporations. O .
       for the purpome of furnlqhing ‘telephone eerviae in rural areas
       to the widest, prsatical    number of were of euch eervlee;     pro-
       vided there ohall be no~dupllcatldn       In service where reasonable,
       adequate telephone rervlce la available.”         Consequently, the
                                                                .   .




Honorable Zollie Steakley, page 2 (WW-871)

business of furnishing rural telephone service, being 8,law-
ful purpose for which corporationscould be organized prior
to the passage of either the Business CorporationAct or the
Non-Profit CdrporationAct, is a lawful purpose today unless
either of these Acts prohibits the d”ormatlonof such oompanles.
The Business CorporationAct, Art. 2.01, Sec. A, provides that
corporations “for the purpose of operating non-profit inet%-
tutions” may not adopt or be organized under the Act. More-
over, Sub-paragraph (4)(g) of Section B of Article 2.01 pro-
vides that co-operativesor limited co-operativeassociations
may not be organized under the Act or obtain authority to trans’-
act business in this State under same.
          An even more pointed prohibitionis found In Para-
graph B, Article 2,Ol of the Non-Profit CorporationAct 6Act.e
1959-56th Legislature,Chapter 162) which provides that this
Act shall not apply to any corporationnor may any corporation
be organized under this Act or obtain authority to conduct Its
affairs In this state under this Act, 0 0 (3)       if any one
or more of its purposes for the conduct of its’ai’fiirsIn this
state Is to organize telephone co-operativecorporations.” In
the face of this specific language we conclude that your office
has no authority to accept and file the applfeationin question
under the Non-Profit CorporationAot, However3 any doubts as to
whether or not Art. 1528~ was repealed by the passage of the
Non-Profit CorporationAct are removed by Article 10.05, Para-
graph B of the Act which provides:
         “Exceptas provided in Artfoie 10.06 of this
    Act, any limitations,obligations,liabflitlesand
    powers applicable to a particularkind of oorpora-
    tion, for which special provfsion is made by the
    laws of this state8 shall continue to be applicable
    to any such corporationand this Act fs not intended
    to repeal and does not repeal the statutory provi-’
    sione providing for these speolal llmftatfons,ob-
    lfgatlons, liabflltfesand powers.sr
          If, then, the Panhandle Telephone Co-Operative,Inc.
cannot obtain a Certificateof Authority to transact business
.inthis state by virtue of either the Rasiness CorporationAct
or the Texas Non-Profit CorporationAct, the question arises
as to whether or not there is an authority under which your
                              + Isate, PrSor to the passage
office might Issue such a certi
bf the Texas Business CorporationAct and t,heNon-Profit Cor-
poration Act, Chapter 19 of Title 32 (Art, 1529, VOC.S,) of
the laws of the State of Texas provided the method and manner
in which foreign corporationscould qualify to do business in
Texas. Article 1529 thereof elfmlnatesforeign non-profit
corporationsfrom the purview of Chapter 19 by providing that
-   ,




        Honorable Zollie Steakley, page 3 (~~-871)

        "any corporationfor pecuniary profit,. e *shall file 'with
        the Secretary of State a duly certified copy of its Articles
        of Incorporation;landthereupon such official shall issue to
        such $orporationa permitto transact business in this state
                Consequently,prlor'to the passage of the Texas~Busl-
        ness*CorporatlonAct and the Non-Profit CorporationAot, there
        were no provisionswhereby a foreign corporationnot for peoun-
        iary profit could obtain a permit to do business inthis state
        (see City of San Antonio v. Salvation Army, 127 S.W. 860) and
        such corporationscould carry on their activities in this state
        without obtaining such a permit. Vol. 1 Prentice Hall Corpora-
        tion Law Guide, page 3300. This, of course, 1s no longer true
        for foreign non-profit corporationscovered by the Non-Profit
        CorporationAct. For those which are not it remains the law,
        primarily by virtue of the principle of comity.
                  As stated in Attorney General Opinion V-746 by Hon-
        orable Price Daniel, "it is a well settled rule of law that
        under the doctrine of comity and in the absence of any pro-
        hibitory law or rule of public policy, foreign corporationsare
        entitled to enter a state and make anv contracts or transact
        any business therein falling within the scope of their lawful
        corporate powers which are permitted to domestic corporations
        of like kind and character. In accordance, with this rule, if
        the laws of a state prohibit the formation of domestic corpora-
        tions of a specific character, or for certain purposes, Its
        policy is controlling;and a foreign corporationof that charaa-
        ter or created for such purposes would not be allowed to enter
        the st,ateand transaot business therein. However, an intention
        to exclude foreign corporationsfrom,the state Is not to be
        deduoed from circumstancesthat the laws of the state have.made
        no provisions for domestic corporationsof like oharaoter. And
        in the absence of expressed constitutionalor statutory  Inhi=
        tlon, foreign corporationsmay enter a state and engage In busl-
        ness therein under the rule of comity notwithstandingthey are
        organized in accordancewith methods which do not obtain in
        such state." Opinion V-746 dealt with a situation in which a
        foreign corporationorganized for pecuniary profit, but without
        capital stock, deslred.to obtain a oertificateto do buslneas
        in Texas. Article 1530 of the then applicable statutes required
        that before a Certlfleateof Authority be issued the corpora-
        tion must show to the.satisfactionof the Secretary of State
        that at least $100,000 in cash of its authorized capital stock
        had been paid In or that fifty per cent (50%) of its authorized
        capital stock had been subscribed, In accordanoewith the quoted
        language above, Opinion V-746 coneluded that the foreign corpora-
        tion could obtain a oertiflcateof authority to do business in
        Texas despite its inability to meet the requirementsof Article
        1530.  In the instant situation,we find no constitutionalor
        statutory prohibitionagainst corporationsof the type In question.
  Y
                                                                 <




Honorable Zollle Steakley, page 4 (W-871)

Rather, there exists a special act, Article 15280, which au-
thorizes the formation of domestic corporationsof the identi-
cal type. Although making no specific provisions for the ob-
taining of a certificateof authority by foreign corporations
of this type, Article 1528~ assumes that foreign corporations
will transact business in this state under its authority. For
example, Section 6a(l) provides “the words ‘telephoneco-
operative’ shall not be used In the corporate name of corpora-
tions organized under the laws of this state, or authorized
to do business herein, other than those organized pursuant to
provisions of this Act*” Section 23, sub-paragraph(b) pro-
vides that “a corporationmay not otherwise sell 0 0 . a sub-
stantial portion of its property unless such sale a D D Is au-
thorized by an affirmativevote of not less than two-thirds
(2/3) of all the members of the corporation;provided, how-
ever 0 e 0 the Board of Directors may a D L1sell, lease or
otherwise dispose of all or a substantialportion of its ptip-
erty to another corporationor a forelRn corporationdoing
business In this state pursuant to this act. D Q” Similar
language may be found in Section 23.
          On the basis of the foregoing, in an8wer to your
questions 1 and 2, we hold that the Secretary of State has no
authority to accept and file the applicationof the Panhandle
Telephone Co-Operative,Inc. for a Certificateof Authority to
engage in business In this state for the above state purpose.
We also hold that the corporationmay lawfully engage In busi-
ness In Texas without a certificateof authority.
          In answer to your third queetion, it is the opinion
of this office that the corporationmust file a return and pay
the franchise taxes required 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 domes-
tic and foreign corporationheretofore of 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
Secretary of State a franchise tax for the year following which
shall be based on whichever of the following shall yield the
greater tax. D D” Obviously, the Legislaturecontemplated
that there would be ,sltuatlonsin which a corporationmay not
have been charteredunder the laws of this state, or have se-
cured 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 applicationof the Panhandle
Honorable Zollie Steakley, page 5 (~~-871)

    Telephone Co-Operative,Inc., for a Certificate
    of Authority to engage In business In this state
    for the stated purpose. The corporationmay law-
    fully engage In the business which it proposes In
    Texas without a Certificateof Authority,but must
    file a return and pay the franchise taxes required.
                                    Very truly yours,
                                    WILL WILSON
                                    Attorney General of Texas




RVL:lmc:bh
APPROVED:
OPINION COMMITTEE
W. V. Ceppert, Chairman
Morgan Nesbltt   ~-
Fred B. Werkenthin
Wallace P. Finfrock
REVIEWED FOR THE ATTORNEY QENERAL
BY:
         Leonard Passmore
