Hon. Coke Stevenson, Jr.       Opinion No. c-312
Administrator,Texas Liquor
   Control Board               Re: Requisites concerning
State Office Building          issuance of liquor permits
Austin, Texaa                  to corporations.
Bear Mr. Stevenson:
Your request for an opinion reads as follows:
              "Is a corporationqualified to receive a
         permit or license from the Texas Liquor Control
         Board If less than 51% of its authorized capital
         stock but 5156or more of Its Issued capital stock
         Is owned by persons who have been United States
         citizens and residents of Texas for a period of
         three years and possess the qualificationsrequired
         of,other applicants for permits and licenses?"
You state that this question has arisen in connectionwith
the following statutes:
Article 666-18, Vernon's Penal Code, provides as follows:
               Its * e No permit shall be issued to a corpo-
          ration unless the same be incorporatedunder the
          laws of the,State and unless at least fifty-one
          (512) percent of the stock of the corporationIs
          owned at all times by citizens who have resided
          within the State for a period of three years and
          who possess the,qualiflcatlonsrequired of other
          applicants for permits; . . en
Article 667-5, 2, (h), Vernon's Penal Code provides as follows:
                      The County Judge shall refuse to ap-
          prove the applicationfor such license if he has
          reasonable grounds to believe and finds any of the
          following to be true:




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Hon. Coke Stevenson,Jr., Page 2 (C-312)

               "2. If a Distributoror retailer:
              ihj *.     that at least fifty-one percent
         (512) of the-stock of such corporationIs not owned
         'atall times by citizens who have resided within
         this State for a period of three (3)'yearsand who
         possess the qualificationsrequired of other appli-
         cants for licenses; . , ."
The sole question then, is to determine whether "stock", as
used in the above statutes, refers to "authorized"stock or
"Issued" stock.
Thompson on Corporations,8 3406 quotes and states:
               11 1
                      Stock can be created only by contract,
                      .   .   e

         whether It be in the simple form of a subscription
         or in any other mode. There must be an agreement
         to take the stock, and nothing short of this can
         create It. This Imparts to the stock the quality
         of property which before it did not assess.
         Stur es v. Stetson, 1 Bias. (U.S.) 296, 23 Bed.Cas:
         13568. This principle is further illustratedin a
         case where it appeared that the statute used the
         expression, 'the whole capital stock,' and It was
         held that in the connection in which the words were
         used It meant the capital stock actually subscribed
         for and issued, and not the amount named in the ar-
         ticles of association."
In a New York Supreme Court case, a by-law of a corporation,
requiring directors to call a special meeting of stockholders
whenever so requested In writing by stockholdersrepresenting
not less than 51 percent of capital stock" of the corpora-
tion was held to mean 51 percent of the stock issued and out-
standing In hands of stockholdersrather than 51 percent of
the stock authorized In the certificateof.the corporation
though not issued. Weisblum v. Li Falco Mfg. Co., Inc., 84
N.Y.S.2d 162 (1947).
When the two statutes in question were passed in 1935 and
1953 respectively,the Issuance of stock by a corporationwas
controlledby Article 1308, Vernon's Civil Statutes, since re-
pealed. That law made it mandatory that a prospective corpo-
ration have all of its par-value stock in good faith subscribed,
and 50% thereof paid in. With the enactment of the Texas Dusi-
CorporationAct in 1955, however, the Legislaturerequired that
a corporationneed only have issued and paid In $l,OOO.OO in
stock or 10s of its total capitalization,whichever Is greater.
Article 3.05, T.B.C.A., V.C.S.


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_   ..-.,




            Hon. Coke Stevenson, Jr., Page 3 (C-312)

            In light of this, we feel that the aforementioned51% statutory
            requirementrefers only to stock already issued, and not to the
            entire authorized stock. To hold otherwisewould be to require
            that at least 5146of a corporation'sauthorized stock be Issued.
            This would be an unreasonableburden and contrary to the spirit,
            letter, and intent of the Texas Business CorporationAct.

                                       SUNMARY
                          A corporation is qualified to receive a
                     permit OP license from the Texas Liquor Control
                     Board If 51% of its issued capital stock Is
                     owned by persona who have been United States
                     citizens and residents of Texas for a period of
                     three years and possess the qualificationsre-
                     quired of other applicants for permits and li-
                     censes.
                                          Respectfullysubmitted,
                                          WAGGONER CARR
                                          Attorney General of Texas




            BSC/lh
            APPROVED:
            OPIRIOR coMMITTEE
            W. V. Ceppert, Chairman
            Paul Phy
            LOMY Zwiener
            Cecil Rotsch
            Pat Bailey
            APPROVED FOR TRE ATTORNEY GEWERAL
            BY: Roger Tyler




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