CHAPTER 23. SPECIAL-PURPOSE CORPORATIONS - Texas Statutes

BUSINESS ORGANIZATIONS CODE

TITLE 2. CORPORATIONS

CHAPTER 23. SPECIAL-PURPOSE CORPORATIONS

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 23.001. DETERMINATION OF APPLICABLE LAW. (a) A

corporation created under this chapter or under a special statute

outside this code, to the extent not inconsistent with a special

statute regarding a particular corporation, is governed by:

(1) Title 1 and Chapter 21, if the corporation is organized for

profit; and

(2) Title 1 and Chapter 22, if the corporation is organized not

for profit.

(b) If a special statute does not contain any provision

regarding a matter provided for in Title 1 or Chapter 21 or 22,

or if the special statute specifically provides that the general

laws for corporations supplement the statute, to the extent

consistent with the special statute:

(1) Title 1 and Chapter 21 apply to a corporation organized for

profit; and

(2) Title 1 and Chapter 22 apply to a corporation organized not

for profit.

Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.

Sec. 23.002. APPLICABILITY OF FILING REQUIREMENTS. Except as

otherwise provided by the special statute, a document to be filed

with the secretary of state under a special statute shall be

executed and filed in accordance with Chapter 4.

Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.

Sec. 23.003. DOMESTIC CORPORATION ORGANIZED UNDER SPECIAL

STATUTE. A corporation organized under a special statute other

than this code is not considered a "domestic corporation" formed

under this code, although this code may apply to the corporation.

Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.

SUBCHAPTER B. BUSINESS DEVELOPMENT CORPORATIONS

Sec. 23.051. DEFINITIONS. In this subchapter:

(1) "Corporation" means a business development corporation

organized under this subchapter.

(2) "Financial institution" means a banking corporation or trust

company, savings and loan association, governmental agency,

insurance company, or related corporation, partnership,

foundation, or other institution engaged primarily in lending or

investing funds.

(3) "Loan limit" means the maximum amount permitted to be

outstanding at one time on loans made by a member to a

corporation.

(4) "Member" means a financial institution authorized to do

business in this state that undertakes to lend money to a

corporation.

Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.

Sec. 23.052. ORGANIZERS. Subject to The Securities Act (Article

581-1 et seq., Vernon's Texas Civil Statutes), 25 or more

persons, the majority of whom must be residents of this state,

may form a business development corporation to promote, develop,

and advance the prosperity and economic welfare of this state.

Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.

Sec. 23.053. PURPOSES. (a) A business development corporation

may be organized as a:

(1) for-profit corporation under Chapter 21; or

(2) nonprofit corporation under Chapter 22.

(b) In accordance with Section 3.005(a)(3), the certificate of

formation of a business development corporation must state that

the purposes of the corporation are to:

(1) promote, stimulate, develop, and advance the business

prosperity and economic welfare of this state and the residents

of this state;

(2) encourage and assist, through loans, investments, or other

business transactions, new business and industry in this state;

(3) rehabilitate and assist existing industry in this state;

(4) stimulate and assist in the expansion of business activity

that will tend to promote the business development and maintain

the economic stability of this state, provide maximum

opportunities for employment, encourage thrift, and improve the

standard of living of the residents of this state;

(5) cooperate and act in conjunction with other public or

private organizations in the promotion and advancement of

industrial, commercial, agricultural, and recreational

developments in this state; and

(6) provide financing for the promotion, development, and

conduct of business activity in this state.

Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

688, Sec. 94, eff. September 1, 2007.

Sec. 23.054. POWERS. (a) The powers of a corporation include,

in addition to the powers conferred on the corporation by

Chapters 2 and 21 or 22, as applicable, the power to:

(1) elect, appoint, and employ officers, agents, and employees;

(2) make contracts and incur liabilities for a purpose of the

corporation;

(3) borrow money on a secured or unsecured basis to carry out a

purpose of the corporation;

(4) issue for the purpose of borrowing money a bond, debenture,

note, or other evidence of indebtedness, whether secured or

unsecured;

(5) secure an evidence of indebtedness by mortgage, pledge, deed

of trust, or other lien on a property, franchise, right, or

privilege of the corporation, or any part of or interest in those

items, without securing shareholder or member approval;

(6) make a secured or unsecured loan and establish and regulate

the terms and conditions of that loan and the charges for

interest or service connected with that loan;

(7) purchase, receive, hold, lease, or otherwise acquire, and

sell, convey, transfer, lease, or otherwise dispose of, property

and exercise those rights and privileges incidental and

appurtenant to the acquisition or disposal of the property and to

the use of the property, including any property acquired by the

corporation periodically in the satisfaction of a debt or

enforcement of an obligation;

(8) acquire improved or unimproved real property to construct an

industrial plant or other business establishment on the property

or dispose of the real property for the construction of an

industrial plant or other business establishment;

(9) acquire, construct or reconstruct, alter, repair, maintain,

operate, sell, convey, transfer, lease, or otherwise dispose of

an industrial plant or business establishment;

(10) protect the corporation's position as creditor by acquiring

the goodwill, business, rights, property, including a share,

bond, debenture, note, other evidence of indebtedness, other

asset, or any part of an asset or interest in an asset, of a

person to whom the corporation loaned money and assume,

undertake, or pay an obligation, debt, or liability of the

person;

(11) mortgage, pledge, or otherwise encumber any property,

right, or thing of value, acquired under Subdivision (7), (8),

(9), or (10), as security for the payment of a part of the

purchase price;

(12) promote the establishment of local development corporations

in the various communities of this state, enter into agreements

with those local development corporations, and cooperate with,

assist, or otherwise encourage the local foundations; and

(13) participate with a properly authorized federal lending

agency in the making of loans.

(b) A corporation may approve an application for a loan under

Subsection (a)(6) only if the applicant demonstrates that:

(1) the applicant applied for the loan through ordinary banking

channels; and

(2) the loan has been refused by at least two banks or other

financial institutions.

Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.

Sec. 23.055. STATEWIDE OPERATION. A corporation organized under

this subchapter is a state development company as defined by

Section 103, Small Business Investment Act of 1958 (15 U.S.C.

Section 662), as amended, or similar federal legislation, and may

operate on a statewide basis.

Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.

Sec. 23.056. CERTIFICATE OF FORMATION. (a) The certificate of

formation of a corporation must state:

(1) the name of the corporation;

(2) the purpose or purposes for which the corporation is

organized as required by Section 23.053; and

(3) any other information required by:

(A) Chapter 4; and

(B) Chapter 21 or 22, as applicable.

(b) The name of a corporation must include the words "Business

Development Corporation."

Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.

Sec. 23.057. MANAGEMENT BY BOARD OF DIRECTORS; NUMBER OF

DIRECTORS. (a) The organization, control, and management of a

corporation are vested in a board of directors. The board must

consist of not fewer than 15 and not more than 21 directors.

(b) The board of directors may exercise any power of the

corporation not conferred on the shareholders or members by law

or by the corporation's bylaws.

Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.

Sec. 23.058. ELECTION OR APPOINTMENT OF DIRECTORS. (a) The

organizers of a corporation shall name the directors constituting

the initial board of directors of the corporation. Directors

other than the initial directors shall be elected at each annual

meeting of the corporation. If an annual meeting is not held at

the time designated by the bylaws of the corporation, the

directors shall be elected at a special meeting held in lieu of

the annual meeting.

(b) At an annual meeting or special meeting held in lieu of the

annual meeting, the members of the corporation shall elect

two-thirds of the directors, and the shareholders of the

corporation shall elect the remaining directors.

Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

688, Sec. 95, eff. September 1, 2007.

Sec. 23.059. TERM OF OFFICE; VACANCY. (a) A director of a

corporation holds office until the next annual election of

directors and until a successor is elected and qualified, unless

the director is removed at an earlier date in accordance with the

corporation's bylaws.

(b) A vacancy in the office of a director elected by the members

shall be filled by the directors elected by the members, and a

vacancy in the office of a director elected by the shareholders

shall be filled by the directors elected by the shareholders.

Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.

Sec. 23.060. OFFICERS. The board of directors of a corporation

shall appoint a president, a treasurer, and any other agent or

officer of the corporation and shall fill each vacancy other than

a vacancy on the board.

Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.

Sec. 23.061. PARTICIPATION AS OWNER. (a) An individual,

corporation, or other organization authorized to conduct business

in this state, including a public utility company, insurance and

casualty company, or foreign corporation licensed to do business

in this state, or a trust may acquire, purchase, hold, sell,

assign, transfer, mortgage, pledge, or otherwise dispose of a

bond, security, or other evidence of indebtedness created by, or

shares of, the corporation.

(b) An owner of shares of the corporation may exercise any

right, power, or privilege of that ownership, including the right

to vote.

Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.

Sec. 23.062. FINANCIAL INSTITUTION AS MEMBER OF CORPORATION.

(a) A financial institution may become a member of a corporation

and may make loans to the corporation as provided by this

chapter.

(b) A financial institution may request membership in the

corporation by applying to the corporation's board of directors

in the manner prescribed by the board. Membership in the

corporation takes effect on the board's acceptance of the

application.

(c) A financial institution that is a member of a corporation

may acquire, purchase, hold, sell, assign, transfer, mortgage,

pledge, or otherwise dispose of a bond, security, or other

evidence of indebtedness created by, or a share of, the

corporation. As owner of shares of the corporation, a financial

institution may exercise any right, power, or privilege of that

ownership, including the right to vote. A member of a corporation

may not acquire shares of the corporation in an amount greater

than 10 percent of the member's loan limit. The amount of shares

of the corporation that a member may acquire is in addition to

the amount of shares of corporations that the member may

otherwise acquire.

(d) A financial institution that is not a member of the

corporation may not acquire any shares of the corporation.

Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.

Sec. 23.063. WITHDRAWAL OF MEMBER. (a) On written notice to

the corporation's board of directors, a member may withdraw from

a corporation on the date stated in the notice. The date of a

member's withdrawal must be at least six months after the date

notice is given under this subsection.

(b) A member is not obligated to make a loan to the corporation

pursuant to a call made after the date of the member's withdrawal

from the corporation, but a member shall fulfill any obligation

that has accrued or for which a commitment has been made before

the withdrawal date.

Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.

Sec. 23.064. POWERS OF SHAREHOLDERS AND MEMBERS. The

shareholders and members of a corporation may:

(1) determine the number of directors and elect the directors as

provided by Section 23.058;

(2) make, amend, and repeal bylaws of the corporation; or

(3) exercise any other power of the corporation that is

conferred on the shareholders and members by the bylaws.

Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.

Sec. 23.065. VOTING BY SHAREHOLDER OR MEMBER. (a) Each

shareholder of a corporation has one vote, in person or by proxy,

for each share held by the shareholder.

(b) Each member of a corporation has one vote in person or by

proxy.

(c) A member with a loan limit that exceeds $1,000 has one

additional vote, in person or by proxy, for each additional

$1,000 the member may have outstanding on loans to the

corporation at any one time as determined under Section 23.068.

Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.

Sec. 23.066. LOAN TO CORPORATION. (a) When called on by a

corporation to make a loan to the corporation, a member of the

corporation shall make the loan on those terms and conditions

periodically approved by the board of directors.

(b) A loan made to the corporation by a member shall be

evidenced by a bond, debenture, note, or other evidence of

indebtedness of the corporation that:

(1) is freely transferable at any time; and

(2) accrues interest at a rate of not less than one-fourth of

one percent more than the rate of interest determined by the

board of directors to be the prime rate prevailing on the date of

issuance on unsecured commercial loans.

Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.

Sec. 23.067. PROHIBITED LOAN. (a) A member may not make a loan

to a corporation if, immediately after the loan would be made,

the total amount of the obligations of the corporation would

exceed 50 times the capital of the corporation.

(b) For purposes of this section, the capital of the corporation

includes the amount of the outstanding shares of the corporation,

whether common or preferred, and the earned or paid-in surplus of

the corporation.

Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.

Sec. 23.068. LOAN LIMITS. (a) A loan limit shall be

established at the $1,000 amount nearest to the amount computed

in accordance with this section.

(b) The total amount outstanding on loans made to a corporation

by a member at any one time, when added to the amount of the

investment in the shares of the corporation then held by the

member, may not exceed:

(1) 20 percent of the total amount then outstanding on loans to

the corporation by all members, including outstanding amounts

validly called for a loan but not yet loaned; or

(2) the following limit, to be determined as of the time the

member becomes a member of the corporation, or at any time

requested by a member on the basis of the audited balance sheet

of the member at the close of its fiscal year immediately

preceding its application for membership or, in the case of an

insurance company, its last annual statement to the Texas

Department of Insurance:

(A) an amount equal to the lesser of $750,000 or two percent of

the capital and surplus of a commercial bank or trust company;

(B) an amount equal to one percent of the total outstanding

loans made by a savings and loan association;

(C) an amount equal to one percent of the capital and unassigned

surplus of a stock insurance company other than a fire insurance

company;

(D) an amount equal to one percent of the unassigned surplus of

a mutual insurance company other than a fire insurance company;

(E) an amount equal to one-tenth of one percent of the assets of

a fire insurance company; or

(F) the limits approved by the board of directors of the

corporation for a government pension fund or other financial

institution.

(c) Subject to Subsection (b), each call made by the corporation

shall be prorated among the members of the corporation in

substantially the same proportion that the adjusted loan limit of

each member bears to the aggregate of the adjusted loan limits of

all members.

(d) For purposes of Subsection (c), the adjusted loan limit of a

member is the amount of the member's loan limit, reduced by the

balance of outstanding loans made by the member to the

corporation and the investment in shares of the corporation held

by the member at the time of the call.

Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.

Sec. 23.069. SURPLUS. (a) A corporation shall set apart as

earned surplus not less than 10 percent of the corporation's net

earnings each year until the surplus, with any unimpaired surplus

paid in, is equal to one-half of the amount paid in on the shares

then outstanding. The surplus shall be kept to secure against

losses and contingencies. If the surplus becomes impaired, the

surplus shall be reimbursed in the manner provided for its

accumulation.

(b) Net earnings and surplus shall be determined by the board of

directors after providing for the required reserves as the

directors consider advisable. A good faith determination of net

earnings and surplus by the directors under this subsection is

conclusive.

Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.

Sec. 23.070. DEPOSITORY. (a) A corporation may deposit the

corporation's funds in a banking institution that has been

designated as a depository by a vote of the majority of the

directors present at an authorized meeting of the board of

directors of the corporation, excluding a director who is an

officer or director of the designated depository.

(b) The corporation may not receive money on deposit.

Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.

Sec. 23.071. ANNUAL REPORT; PROVISION OF REQUIRED INFORMATION.

(a) A corporation shall annually make a report of its condition

to the banking commissioner and the Texas Department of

Insurance.

(b) A corporation shall provide any information that is required

by the secretary of state.

Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.

SUBCHAPTER C. GRAND LODGES

Sec. 23.101. FORMATION. (a) An institution or order, by

resolution or other consent of its members, may incorporate under

this subchapter if the institution or order is:

(1) the grand lodge of Texas, Ancient, Free and Accepted Masons;

(2) the Grand Royal Arch Chapter of Texas;

(3) the Grand Commandery of Knights Templars of Texas;

(4) the grand lodge of the Independent Order of Odd Fellows of

Texas; or

(5) another similar institution or order organized for

charitable or benevolent purposes.

(b) A corporation formed under this subchapter shall file a

certificate of formation in accordance with Chapter 4 that

complies with this subchapter.

Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.

Sec. 23.102. APPLICABILITY OF CHAPTER 22. If this subchapter

does not contain any provision regarding a matter provided for in

Chapter 22, to the extent consistent with this subchapter,

Chapter 22 applies to a corporation formed under this subchapter.

Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.

Sec. 23.103. DURATION. A grand body that incorporates under

this subchapter may provide in the grand body's certificate of

formation for the expiration of its corporate powers at the end

of a stated number of years. If the certificate of formation does

not provide for the duration of the grand body, the grand body

has perpetual existence. The grand body may by its corporate name

have perpetual succession of its officers and members.

Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.

Sec. 23.104. SUBORDINATE LODGES. (a) The incorporation of a

grand body includes each of its subordinate lodges or bodies

holding a warrant or charter under the grand body.

(b) A subordinate body has all of the rights of other

corporations under and by the name given to the grand body in the

warrant or charter issued to the grand body to which it is

attached. Those rights shall be provided for in the charter of

the grand body.

(c) A subordinate body is subject to the jurisdiction and

control of its respective grand body, and the warrant or charter

of the subordinate body may be revoked by the grand body.

Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.

Sec. 23.105. TRUSTEES AND DIRECTORS. A grand body and a

subordinate of the grand body may elect trustees and directors or

may appoint trustees or directors from among their officers.

Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.

Sec. 23.106. FRANCHISE TAXES. A corporation formed under this

subchapter is not subject to or required to pay a franchise tax,

except that a corporation is exempt from the franchise tax

imposed by Chapter 171, Tax Code, only if the corporation is

exempted by that chapter.

Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.

Sec. 23.107. GENERAL POWERS. A grand body and a subordinate of

the grand body may take action as directed or provided by law in

the case of other corporations and may make constitutions and

bylaws to govern their affairs.

Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.

Sec. 23.108. AUTHORITY REGARDING PROPERTY. (a) A grand body or

subordinate body may acquire and hold property as necessary or

convenient for a site on which to erect a building for the use

and occupancy of the body and to erect homes and schools for

members' widows or orphans or elderly, disabled, or indigent

members and may sell or mortgage the property.

(b) A conveyance must be executed by the presiding officer and

attested to by the secretary with the seal.

(c) The authority of a subordinate body to sell or to mortgage

property is subject to the conditions periodically prescribed or

established by the grand body to which the subordinate is

attached.

Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.

Sec. 23.109. AUTHORITY REGARDING LOANS. (a) A grand body

incorporated under this subchapter may:

(1) loan money held and owned by the grand body for charitable

purposes, for the endowment of any of the institutions of the

grand body, or otherwise; and

(2) secure loans by taking and receiving liens on real property

or by another method elected by the grand body.

(b) On sale of real property secured by a lien, a grand body may

become the purchaser of the real property and hold title to the

property.

Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.

Sec. 23.110. WINDING UP AND TERMINATION OF SUBORDINATE BODY.

(a) On the winding up and termination of a subordinate body

attached to a grand body, all property and rights existing in the

subordinate body pass to and vest in the grand body to which it

was attached, subject to the payment of any debt owed by the

subordinate body.

(b) Notwithstanding a grand body's liability for the debt of a

subordinate body under Subsection (a), the grand body is not

liable for an amount greater than the actual cash value of the

subordinate body's effects or authority.

Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.