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Background and Structure of the Texas Business Organizations Code

The Texas Business Organizations Code is a comprehensive revision program aimed at clarifying and simplifying statutes for business entities. This code encompasses various laws related to for-profit and non-profit entities and includes provisions for corporations, limited liability companies, partnerships, real estate investment trusts, and more. The code also standardizes provisions, introduces new terminology, and simplifies filing procedures.

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Background and Structure of the Texas Business Organizations Code

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  1. Background and Structureof theTexas Business Organizations Code Business and Public Filings Division

  2. Statutory Revision Program • Section 323.007 of the Texas Government Code directs that the Texas Legislative Council execute a permanent statutory revision program for the revision of the statutes on a topical or code basis. • Purpose of the program is to clarify and simplify the statutes and to make the statutes more accessible, understandable and usable. Business and Public Filings Division

  3. Statutory Revision Program • TLC may not alter the sense, meaning or effect of the statute. • Statutory revision process is nearing completion with enacted codes covering almost all areas of the Texas statutes. Business and Public Filings Division

  4. Creation of the State Bar Business Organizations Code Committee • Committee formed in 1995 by the Business Law Section of the State Bar to study codification of the statutes related to the formation of for-profit and non-profit entities. • Texas Legislative Council provided drafting assistance. Business and Public Filings Division

  5. Composition of Committee • Attorneys from large law firms as well as solo practitioners. • Business law professors from the University of Texas, Baylor University and Southern Methodist University law schools. • Representatives from the Secretary of State. Business and Public Filings Division

  6. Substantive Changes • Numbering and organization of business law statutes was changing. • BOC Committee used opportunity to harmonize the statutes and provide more uniformity among entity types. • Uses common provisions when possible. Business and Public Filings Division

  7. History of Code • Originally introduced in 1999 legislative session. • Code enacted in 2003 to be effective on January 1, 2006. • Supplemented by HB 1319 by the 2005 Texas Legislature. Business and Public Filings Division

  8. Purpose of HB 1319 • Incorporates changes to the source law made during the 2003 legislative session. • Fills gaps • Clarifies • Corrects minor errors Business and Public Filings Division

  9. What Does the Code Change? • New organization of statutes • Standardization of provisions • New terminology • Simplification of filing provisions • More uniformity of filing fees Business and Public Filings Division

  10. Texas Business Organizations Code Codifies the Following Statutes: • Texas Business Corporation Act • Texas Non-Profit Corporation Act • Texas Professional Corporation Act • Texas Professional Association Act • Texas Miscellaneous Corporation Laws Act • Texas Revised Partnership Act • Texas Revised Limited Partnership Act Business and Public Filings Division

  11. Texas Business Organizations Code Codifies the Following Statutes: • Texas Limited Liability Company Act • Texas Real Estate Investment Trust Act • Texas Cooperative Association Act • Texas Uniform Unincorporated Nonprofit Association Act • …and other stuff Business and Public Filings Division

  12. Does Not Include • Texas Business & Commerce Code Assumed Names Trademarks • Most special purpose corporations Economic development corporations Telephone cooperatives Electric cooperatives Business and Public Filings Division

  13. Code Structure Provisions common to most forms of entities are placed in a single title with provisions specific to entity type being placed in separate titles. • Title 1. General Provisions • Title 2. Corporations • Title 3. Limited Liability Companies • Title 4. Partnerships • Title 5. Real Estate Investment Trusts • Title 6. Associations • Title 7. Professional Entities • Title 8. Miscellaneous and Transition Provisions Business and Public Filings Division

  14. The Wheel Business and Public Filings Division

  15. General Provisions Title 1 “The Hub” • Provisions applicable to most entities • Contains 12 chapters pulling together similar or overlapping provisions found in prior law • Intent--to standardize, organize, and simplify Business and Public Filings Division

  16. Hub ChaptersTitle 1 • Chapter 1: Definitions (key chapter) • Chapter 2: Purposes and Powers of Texas entities (Prohibited Purposes) Business and Public Filings Division

  17. More Hub Provisions • Chapter 3: Formation and Governance • Subchapter A--Requirements for certificates of formation for all entities • Subchapter B--Amendments and restatements Business and Public Filings Division

  18. Chapter 4 • Filings • Subchapter A--General provisions applicable to signatures, liability for false filing instruments, facsimile copies • Subchapter B--When Filings Take Effect General rule: On Filing Delayed effective dates and conditions Abandonments before effectiveness Business and Public Filings Division

  19. Chapter 4 Continued • Subchapter C: Certificates of correction • Subchapter D: FILING FEES! Business and Public Filings Division All Entities 4.151 For-Profit 4.152 Nonprofit 4.153 etc.

  20. Chapter 5 • Names of Entities; Registered Agents and Registered Offices • Subchapter B: Names • May use assumed name • Unauthorized purpose in name prohibited • May not be same as or deceptively similar Business and Public Filings Division

  21. More on Names in Chapter 5 • Organizational identifiers for all names • Professional entity names must not be contrary to regulatory statute • Cannot use “Lotto” or “Lottery” • Unauthorized use of certain words in veterans organizations Business and Public Filings Division

  22. Chapter 5 • Name reservations in Subchapter C • Name registrations in Subchapter D Business and Public Filings Division

  23. Registered Agents and OfficesSubchapter E • Designation of agent and office • Changes to registered agent/office • Change by a registered agent to name or address • Resignation of registered agent Business and Public Filings Division

  24. Other Chapters • Chapter 6: Meetings and Voting • Chapter 7: Liability • Chapter 8: Indemnification and Insurance Business and Public Filings Division

  25. Chapter 9: Foreign Entities • Foreign entities required to register • Permissive registration • Registration procedures • Name changes • Withdrawal of registration Business and Public Filings Division

  26. Chapter 9 Again • Failure to register--late filing fee • Revocation of registration by SOS • Reinstatement after revocation • Activities not constituting the transaction of business Business and Public Filings Division

  27. Chapter 10: Mergers, Interest Exchanges, Conversions and Sales of Assets • Subchapter A--Mergers • Subchapter B--Exchanges of Interests • Subchapter C--Conversions • Subchapter D--Certificates filed with the SOS • Subchapter E--Abandonment of Merger, Exchange, or Conversion Business and Public Filings Division

  28. Chapter 11: Winding up and Termination • The new dissolution provisions • Includes voluntary and involuntary terminations • Also reinstatement procedures Business and Public Filings Division

  29. Chapter 12Administrative Powers of SOS and OAG • Adoption of procedural rules • Interrogatories • Appeal from SOS decisions Business and Public Filings Division

  30. The Spokes Title 2 through Title 8 Business and Public Filings Division

  31. Title 2 Corporations For-Profit Nonprofit Special-Purpose Corporations Lodges Business and Public Filings Division

  32. Title 3 Limited Liability Companies Business and Public Filings Division

  33. Title 4 Partnerships General Partnerships Limited Liability Partnerships Limited Partnerships Business and Public Filings Division

  34. Title 5 Real Estate Investment Trusts Business and Public Filings Division

  35. Title 6 Associations Cooperative Associations Unincorporated Nonprofit Associations Business and Public Filings Division

  36. Title 7 Professional Entities Professional Associations Professional Corporations Professional Limited Liability Companies Business and Public Filings Division

  37. Title 8 Miscellaneous and Transition Provisions When the Code takes effect When it applies to entities already in existence What happens to the TBCA and other existing laws Business and Public Filings Division

  38. Structure and OrganizationTexas Business Organizations Code Title 1 Common Provisions Apply to all entities Chapters 1, 4, & 5 Title 2 Corporations Title 3 Limited Liability Companies Title 4 Partnerships Title 5 REITS Title 6 Associations Title 7 Professional Entities Chap. 20 General Provisions Chap. 151 General Provisions Chap. 251 Cooperative Association Chap. 252 Unincorporated Nonprofit Associations Chap. 301 General Provisions Definitions Chap. 21 For-profit Corporation Chap. 22 Nonprofit Corporation Chap. 152 General Partnership (LLPs) Chap. 153 Limited Partnership Chap. 304 Professional Limited Liability Co. Chap. 302 Professional Association Chap. 303 Professional Corporation

  39. Navigating the BOC • Look to Title 1 for the general provision • Then look to the specific title governing the entity--The “spoke” E.g., corporations--Title 2 • If the provision of Title 1 conflicts with a provision in the specific title governing the entity, the provision in the specific title supercedes the provision in Title 1. Business and Public Filings Division

  40. Navigating the BOCProfessional Entities • Look to Title 1 for the general provision • Then look to the specific title governing the professional entity--The “spoke” E.g., Title 7 • Also look to the spoke provision for the type of professional entity-- E.g., Title 2 for a professional corporation; Title 3 for a professional limited liability company. Business and Public Filings Division

  41. Short Titles for Spoke Provisions • Texas Corporation Law Title 2 and Title 1 to the extent applicable to corporations • Texas For-Profit Corporation Law Chapters 20 and 21 and Title 1... Business and Public Filings Division

  42. Short Titles for Spoke Provisions • Texas Nonprofit Corporation Law Chapters 20 and 22 and Title 1…. • Texas Limited Liability Company Law Title 3 and Title 1…. Business and Public Filings Division

  43. Short Titles for Spoke Provisions • Texas General Partnership Law Chapters 151, 152 and 154 and Title 1… • Texas Limited Partnership Law Chapters 151, 153 and 154 and Title 1... Business and Public Filings Division

  44. Short Titles for Spoke Provisions • Texas Real Estate Investment Trust Law Title 5 and the provisions of Title 1… • Texas Cooperative Association Act Chapter 251 and the provisions of Title 1... Business and Public Filings Division

  45. Short Titles for Spoke Provisions • Texas Professional Entities Law Title 7 and the provisions of Titles 1, 2 & 3… • Uniform Unincorporated Nonprofit Association Act Chapter 252 Business and Public Filings Division

  46. Short Title for Spoke Provisions • Texas Professional Association Law Chapters 301 and 302, and Chapters 20 and 21 and Title 1… • Texas Professional Corporation Law Chapters 301 and 303, and Chapters 20 and 21 and Title 1... Business and Public Filings Division

  47. Short Titles for Spoke Provisions • Texas Professional Limited Liability Company Act Chapters 301 and 304 and the provisions of Title 1 and Title 3... Business and Public Filings Division

  48. Continuing Role of the BOC Committee • To further identify opportunities for clarification or correction • To monitor legislation to existing law to determine whether BOC should be amended • To prepare a commentary for the BOC by the mandatory application date Business and Public Filings Division Send suggestions for clarification, corrections or enhancement to corphelp@sos.state.tx.us

  49. The Business Organizations Code Effective Dates and Transition Issues Business and Public Filings Division

  50. The Business Organizations Code Effective Dates and Transition Issues • Current law (such as the TBCA, the LLC Act, etc) will govern formation filings received and accepted for filing on or before December 31, 2005. • BOC will govern formation filings and foreign registrations received on or after January 1, 2006. Business and Public Filings Division

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