                                                                           260




      Oi=FICE    Ok
                      ‘rHE    ATTORNEY     GENERAL      OF   TEXAS
                                 AUSTIN




Hoooreble Cleude Iebell
secretcry of state
Auatin, Texas
itteM&m:      flofioreble
                        Xoraoe 8. .*eaione
              Lieouritleacommlablor.r
'3earsir:




                                                 rty (30) peraoIIe. The
                                                 ssouritia8  Diviuion or
                                                    ra of the proposed

                              exa6 SoouritietsAot wae availebxa,
                                th6 reglstretlon provioloue of.
                               e neoeessry .
                     ornay contend8 that, rinoe thir ID
                                   ifi whioh the aubsarlbera
                             ntarpriea
                   pertlalpeted       in aubsorlbl~ ror etook,
      the Texas tioaurities     Aot   would have no epplioa-
      tiOE.

              93inoe     to    our   knowledge     this mntter ha8 not
      been the eubjsot or httorney                 Oenersl*e oplnlon,
      and wa have no Taxes oaaea                 beering on the eubject,
,




            we                                 u5 .itiltlli
               511all rspprCcl%te::o+rfi>vorin(-          O&l-
            Ion OE the question raisd4 by the attornej'for the
            lnoorpd~ators.
                  %e atteoh Lareto CT copy or th3 popoee4   chur-
            tor an4 efrmvit,   together   with.our complete aor-
            re8pondenoe file for your l.uforn@tlonin &ivlng tha
            mott*r aon8i46retlon. ;ue ehell aypreolate Lhe
            return of tais matorial.w
            The purposo clause of the Woo4 Leke Auter Corporstion
    0s stated In the Article8 of Inoorporation ia:
                 mThe purpo8s for wnioh the oorporhtion I8
            organleod Is to rupply water to the pub110 In the
            iw0a IalE4comauuity In Trinity county, Texe8.a'
             T& amount of the 8took I8 Three Thourend Dollar8
    (,3,000.00) 4lvi4od into 8Ixtb (60) ihnrea at rlrtyDollar8
    (+SO.OO) leah, all of wtioh oepltel stook has beon in good
    fait3 sub8orIbodand the 8um of Two Thousand Two Iiundnd Dol-
    ler8 (i2,2OO.O0) pal& In as.per~arrIdavlt aooorapanylng the
    chartar. Tha rpOunt paid in by the lubearibers     wa8 paid by
    tha aalo, tran8rar   and oonveyanoe to the corporation   of th8
    property whioh we8 purohaaed~ iron an agency OS tho Units4
    stetoa  gov4mmont 46sorlbe4 In the arridevlt eooocnpanying
    the Art10108 of lnoorporatlon. Cenerelly apeakhg       the ohar-
    ter  of e priveto  ~oorporatlon oannot be file4 unle88 tha full
    amount of It8 authorized oapital stock he8 bean In go04 faith
    aubrorlbod an4 rirtg per oant (56) thoreor peI4:ln oaah, or
    it8 oquivaloentIn Other property or labor done. (Artlola
    1308, Vernon08 Annotated Civil Statutea). Thin provl8Ion re-
    refer8 in term8 to the aggregate mount of oeQlt.81stock.        S0
    longerrl!th8 con814aratI00 re00lv04 rr0m nome 8tookhol4ora
    n0ouut8 to rirty par oat    (SW$) or the total amount of the
    oa$Ital *took, thl8 yrarequirito,o1 Incorporetlon I8 00m-
    plied with. (Stringfellow v. Panhandle i:eoklngCornyany,213
    4. 3. 250.)
           SuboootIon8 (a), (b) and (0) or Seotlon 2, Article
    WOa, Varnon*8 Annot8te4 Clvll Statute8 are ~8 follow8r
                   *(a)T&o term * esourity’ or *8eaurltlo8*
            8haU  Inoludo any share, stook, troaaury  ltook,
            8took oortlrloate undar a votlng trust ag~oaant,
            oollatoral trust  oortIrlcate, aquipmsnt tru8t
                                                                    262




 06rtifioa tu , prtor,+iilzutioii   ccrtiiicoto   or receipt,
 aubeoription   or raoreonizetion o~rtlficotc, s.ota,
 bond, debefitura , mortgo~a o6rtificat.eor other avi-
denca of indebtedness, an!, form of oOiUU6rOialpap6r,
cartiriotit6in or under 6 i.rofits:iurlI&or pUti.-
clpetlon egreem6nt, certlflcata or any inetrument
reprcraontinganj-interest  in or under PfiOil, L;68
or mining 16686, fee or tltla, or any oertifloata
or inatrumant repreeentlng or 86our6d by en inter-
est in any or all or tha oapitol, property, 6aset8,
profita or oarri~a   of eny oomyeny, inVaatm6I~tCOIL-
treat, or any other inetrument oommonly known 68 a
security,  whether eMl6r   to those herein rafarred
to or not.
        *(b)    The term *oompany' ahall inolu46 a aor-
poratlon, a pbraon, joint #took             company, pertfiar-
ship, 888OOi8tiOn, OOmQeny, 8yndia6to trIl#t,in-
oorporatsd or unincorporated,             h6retofora or horoerter
fOrrpSdtSI46rthe 16~8 Of this or any other Stat.,
oountry    , 8OVOId&nty      or politioal     8UbdiviDiOn thore-
OS. An ~884 horein, the term *trust9               8haU be daowb
to inoludo e eOpIleo0       leu trust, but ah6u not inoluda
a trust      oreat      or appointed under or by virtua of
8 lO#t    will en4 tO@tW&O5t       or by 8 OOUrt Of law end
equity,
         *(a)    The tom    *dealer* anal1 inaluda   every
parson    or    company,   Other f&en a sa~68~I6n, who en-
gages In this Ytate,~eithar for all or pert 0r hi8
or Its time, directly or through en agent, in selling,
0rrOring      ror sale or 4611vrry or solioitlrq      8ubeoriy-
tiOIl8   to,   or Order8    for, or undertaking to 418po8e
of, or to bvlte OffOrD ror, or sealing in 6ny other
PBnnor In ayy aoourity         Qr seouritiar within thin
State. Auy issuer other than e reglataro4            dealer,
Of 6 seourity      or DSOUriti638 who, dlreotly or tu-ougn
any poreonor oomyany,          other than a roglstere4 dealer,
ortern     ror 8616, 60118 Or AT&~@ SuleD Of it8 Own
DOOUdty       or 8~OUdtiO8 8h811 bo dOOnL.4 a dOd#r ?Uld
Shall    bo rS~Uir04     ii0 oomply with the proVi#iO&I#
hereori provi464, howav6r. thie YeotiOU Or QrOVi8iOIi8
lh611 not 6Qply t0 8uoh i#@U~r if auoh 8eOllrityOr
saouriti68 6~ .0rf6ma           ror aale or 8014 alth6r to a
         :0J10ratll6
                  Glaude I~bcll, i;yi~;e
                                      1+




               action  3 of rrtiols 600s. Vernon*8 Annotated Civil
        Statute8 onuaeratae Oartaln oxumpt tl’tiJiBUOt~OJiU,tllld sub-
        tbOtiOn        (1)    Of     t&id   s6OtiOA    it   Ma I’OllOV~O:

                             Subeoriptions t3 OapILbi 8GOCk LluOba-
                              “(1)
                  sery to (;ualIfyfor Incorporation &en eubeoribed
                  by AOt aore than fifteen (15) lnoorporatorr In a
                  proposed Text8 oorporation."
                 Under the dafinitiOn       0i the tern   “8eoUrity”    or “8e0Uri-
        tie&P   there 18 no question       but the atook referred to Is sub-
        jsot to the yrorl~Io~a of the Seourltles Act,             unle88 exempt
        thereX=     by 80~8 prdri8ions        of the Act.   The Tex88 Security
        Aot r6gdXe8 the r6gittrttiOA Of all t6eUdti68 8016 IA Toxcr8
        unleue   8uah atouritita     oaw within a 8psoiflo exemption from
        rtgirrtrttionunder Sootions 3 and 23, and the hot al80 pro-
        vides that pawn8        makin    any orfaring and eale OS 8eourltie8
        be lioennd    a8 nourity      t ealert   unlto~ the saourltler,    ere aold
.X.~
   ,~   in exeiapttrsn8sotiont lI8ted under the sxemptioA8 proviatd
        under 8ald eeotiona      above mentioned.

                   It will be notad that under, Sib8ection          (1) , seotion    3,
        8upra, sUb8oriptiOA8         to oapital   8took neoe88ary      to qwirg
        for inoorpor&d.on        I*heA8ub8orIbed by not more then fiftOtA
        (15)    inoorporatora      in & proposed Texae oorporatlon art exmipt
        fP2m the JWOTi8iOA8 Of tht SOOllritI~8bOt. ItMy~:,~~a";;t
        the dopartawt8l         oonatruotion    or the Seorttary     0
        if   there wore 010x% 'thanfifteen        (15)  subaoribsrs     to. oapital
        stook or e propoevd Texa8 Qorporetlon tLl6prOV&DiOA8 'of the
        3ourItie8 itotwould oe applloeble, unless exempt b; nome
        provI8lon8 OS the statute. The subsoribere Lo capital                   etook
        m6 A06 moe88ariig           the iAOOrpOBStOr8. The Inaorporators            an
        the panon        obtaining     the oharter. see 2 uordt EIAQ I’hrtntn,
        1st   seriar,         1623. (tioUidty           v. Parsons et tl, 116 s. L. 907.)
                  It     18    8tated       la   HilGebrsnd18     Texas     Corporation8,   VOluait

                       'Tha Tou8 atatute8   do not dilrerentiate be-
                  tweon btookholdsrr* and ‘eubaorlberr*  to the etook
                  Of the OOrpOretiOA. For iA6t6flO0iA VerJlOA'eAAAO-
                  tattd Civil statutea, Artiole 1308, It i8 provided
                  that before the charter oun btr filed by the &ore-
                  tary or state, tha full amount ot its oayital ntook
                  &et be eubeorlbed by Its atockholdaru. IA Arti
      1313 It in thu stocnholdars t:ictxurriiehevidence
      tu the xcrottiry of state t!i6ttlielow has been
      oompliud with. fiocordiAGto krtiole 1326 th6
      by-luwe me:: b6 altered, ohaagador timendedby a
      majority vota or the StOOkhOld6ro. 4rtIole 1323
      providea that thenbooks aAd raoorda of Lb6 oor>o-
      ratiOA ehall b6 open t0 iA8peotiOJlOf any etook-
      holdar. Artiola    1336 authorizee the forreiture
      of the atook If aw atookholder n6,eleoteto pa?
      any Inat&.lment ae rsGuIred by the Board of
      DireetOrS, aAd Arti016 1345 authorizes an exeou-
      tlon againat a4y of the stockholders to 6n extent
      equal to the emount of the etook unpaid. UA the
      other hand, Artiole 1335 provldee that the Board
      Of DireotOrS mey reqUir0 'th6 SUbeorIberS* t0 the
      oepite1 8tOok to pey the emount eubearibed a6 is
      prOVided in the by-1awS. In other words, IA mO8t
      iASttflOt8,a party who hae subscribed for StOok
      in e oorporetion on ortdlt It deaiguattd es e
      atookholder even though he hoe not fully peld
      for hi8 etook. Tharefora, the atatutat    do riot
      fUrAi8h e 801UtiOA Or muoh USSittJAAOt  iA deoiding
      th8 above problfma.   . .*
      YUbaectiOA (8) Of SeOtiOA 2 of krtiole 6008, VerAon'
          CiVfiSt&Ate8 18 US rOllOWt:
.iJUIOtOted
            *The t0rmt ~8~16~ or *orrer for sala* or *tell'
      8hl.l  inolude every diSpOSItiOA, Or 6tteJnytto die-
     POM Or t 88OUdtJ for Vtbe.        The term ‘S&h*  meano
     atiP includes   oontraota and egreements whereby aoouri-
     tie8 ere 8old,~treded or orohawedfor moJJey,property
     or other thing of value, or uny transfer or agreement
     to trunrter, IA trust    or otharwise. kqy seourlty
     given or delivered with or as b bonus on eooount of,
     any pUrohe8e of eeourltleo or other thIAg ortielue,
     shell be oo~olusfvs~     prseumod to constitute a part
     Of the aubjoot    of ouoh puraheae end to htVobeen
     sold for value.     The teW 'Sell' m6eA8 eny eet by
     rhioh a salo io mado, end the term *selec or *Offer
     tOr 8810' 8hSu. inOhld@ 8 SUbSOriptIOA, eA OpttOn
     ior Sth,     a'solioitationof 8818, an attempt to ~011,
     or an ofror to 8011, diwotly or by an egent or Sa~OS-
     man, by a olroulsr, lotkr or 8dV6rti86m6nt or othar-
     WiSe,   IAOlUdiAg the deposit IA e United St6ttS  POSt
        tirflcaor ~11 box ~)rin ULA~in~m~er i;ltwit;United
        ;it,ateanails sithifithis state of a latter, clroular
        or other sdvortlaln& matter; yrovidr;d,!iowt)ver,that
        notninE harsin shell llmlt or dlmiuleh the full
        meaning or the tarma *aala,' *sell* or 'offer:for
        anle' aa used by or aooaptad ln courta of law or
        uquity. Provided, further, that ths aala of a
        aoourlty undar oondltlona whioh entitle the pur-
        ohaaer or subaaquant holder to exohangv ths,aaaa
        for, or to purohaaa noaa other eeourlty ahall not
        ba deaaad a eula or offer ror sale or suoh other
        leo ur lty;but no lxohanga for or sale of suoh
        othar aaourltg ahall aver ba made unleaa and until
        the aala tharaof ahall have basn flrat authorlzad
        in Texas under this Aot, if not exempt hereundur,
        or by other prorlaiona Of law.*
       saotlon 5 of mtiole   6000 la in part   aa rollowrr
              *No dealer, agent or aa1aam.m ahall 8011 or
       offer   for aala any aeourltlealaauad after the
       paaaage of this Aot, exoapt those which ooae within
       the oleaaaa anuaaratad in Subdlriaiono (a) to (a),
       both lnoluairo,of Saotion 3 of this Aot, or Sub-
       dlvlalona (a) to (1). both lnolualve of section 23
       of thla Aot, until the iaauar of such aeouritlea
       8hsl.l  have beon cranted a porn&t by the saoretary
       of Sate, and no auoh parmlt ahall be graptad by
       the 3eoratary of Stat8 until the laauer of auoh
       aaourltloa ahaU have filed with the Seoratary of
       State a aworn ltntaaunt verified under the oath
       of an lxooutlre offioor   of the lsauer and attaatad
       by the aaoratary tharaof, .aottlngrorth the r0ii0+
       ing inror5atlonr i . .*
           Tha Artfolua of Inoorporatlon of tba Wood J,aka‘u;ater
CorpOrutiOi dlaoloaa that than ara th~raaincorporatora who here
subaorlbod for a oartain nucnber of aharaa of atook and that thara
We a number of other parsons who have aubaoribad for oerta5.n nun-
bera of aharaa of atook and that 8UOh aubaorlptlona whlab hava
b~eanpaid, aa horalnabove ltatad, ware paid in by the tranefer
Of oertaln proparty to the oorporntion. Gonerally agesking
atookholdora are menbora of a oorporatlonihowarar, thay an not
neoaaaarlly tha lnoorporatora. After oarorully conaiderin(Jyour
(iueatlon,wa place the laaa ooaatruotion  on Subaaotion (19, Se+
tlon 3 of Artiola 600a, Veraon* Annotatad Civil Ytetutua aa tho
                                                                       266




,ecrztury or stato,~tfrstis, if there are ~uore thnr~ I‘ifteer (13)
subsoribera  to the obpltal stook,   then the provisions  of the
_.ccurity hit are applioable.    ha there nre snore than fifteen
(15) eubaorlbora to the oapltel stock or the proposed coryora-
ti0fiin .ueatlon It is our opinion Lhet the srovlaione of the
,ecurity Aot are applioeble    end that the exemptions sat forth
in the Leourity Aot are not available to the proposed oorpora-
tial.   stated differently it will be nooaaaary    zor one of the
iuOor~oratora or lponsora eotlrrg ror the incorporatora    to ap-
i,ly for and obtain a dealer*8   permit in order that the aaourl-
tiea iuayDB aold ln oomplianoe with th0 ?exne security kot. It
ie contended by the attorney for the incorporators that there
hts been no sale or will be no sale of atook.      In view or the
defifiition of the term *aslea oontalned in the 3acurltloa Aot,
ne   c.%MOt agree with the OOntOntiOA Of the attorney  for tha
izoorporatora beoauao the owners of oertaln property are trana-
Ierr&     said property to the oorporatlon ror a Oartein number
of shares of atook, the number of shuroa of stock to be rooelved
b: each eubaoribar will be detaraUod%y      the reluo of the proper-
ty of eaoh indlrlduel tranafarmd    to the car  oration for aaid
stock.   Vie believe that auoh a tranaaotlon oPearly comes within
t!le dofinitiOn  Of the tom *aela~ and, aa heretofore atotad,
none Or the oxemptiona oontslned in the Leourltlsa Aot are
a?Pllcable to the proposed oorporation unbar the raota pra-
sentod.
      Go are   raturnin&   herewith the file aoooapanying   your
rc ;&uest.
