CHAPTER 10. MERGERS, INTEREST EXCHANGES, CONVERSIONS, AND SALES OF ASSETS
BUSINESS ORGANIZATIONS CODE
TITLE 1. GENERAL PROVISIONS
CHAPTER 10. MERGERS, INTEREST EXCHANGES, CONVERSIONS, AND SALES
OF ASSETS
SUBCHAPTER A. MERGERS
Sec. 10.001. ADOPTION OF PLAN OF MERGER. (a) A domestic entity
may effect a merger by complying with the applicable provisions
of this code. A merger must be set forth in a plan of merger.
(b) To effect a merger, each domestic entity that is a party to
the merger must act on and approve the plan of merger in the
manner prescribed by this code for the approval of mergers by the
domestic entity.
(c) A domestic entity subject to dissenters' rights must provide
the notice required by Section 10.355.
(d) If one or more non-code organizations is a party to the
merger or is to be created by the plan of merger:
(1) to effect the merger each non-code organization must take
all action required by this code and its governing documents;
(2) the merger must be permitted by:
(A) the law of the state or country under whose law each
non-code organization is incorporated or organized; or
(B) the governing documents of each non-code organization if the
documents are not inconsistent with the law under which the
non-code organization is incorporated or organized; and
(3) in effecting the merger each non-code organization that is a
party to the merger must comply with:
(A) the applicable laws under which it is incorporated or
organized; and
(B) the governing documents of the non-code organization.
(e) A domestic entity may not merge under this subchapter if an
owner or member of that entity that is a party to the merger
will, as a result of the merger, become personally liable,
without that owner's or member's consent, for a liability or
other obligation of any other person.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 10.002. PLAN OF MERGER: REQUIRED PROVISIONS. (a) A plan
of merger must include:
(1) the name of each organization that is a party to the merger;
(2) the name of each organization that will survive the merger;
(3) the name of each new organization that is to be created by
the plan of merger;
(4) a description of the organizational form of each
organization that is a party to the merger or that is to be
created by the plan of merger and its jurisdiction of formation;
(5) the manner and basis of converting any of the ownership or
membership interests of each organization that is a party to the
merger into:
(A) ownership interests, membership interests, obligations,
rights to purchase securities, or other securities of one or more
of the surviving or new organizations;
(B) cash;
(C) other property, including ownership interests, membership
interests, obligations, rights to purchase securities, or other
securities of any other person or entity; or
(D) any combination of the items described by Paragraphs
(A)-(C);
(6) the certificate of formation of each new domestic filing
entity to be created by the plan of merger;
(7) the governing documents of each new domestic nonfiling
entity to be created by the plan of merger; and
(8) the governing documents of each non-code organization that:
(A) is to survive the merger or to be created by the plan of
merger; and
(B) is an entity that is not:
(i) organized under the laws of any state or the United States;
or
(ii) required to file its certificate of formation or similar
document under which the entity is organized with the appropriate
governmental authority.
(b) An item required by Subsections (a)(6)-(8) may be included
in the plan of merger by an attachment or exhibit to the plan.
(c) If the plan of merger provides for a manner and basis of
converting an ownership or membership interest that may be
converted in a manner or basis different than any other ownership
or membership interest of the same class or series of the
ownership or membership interest, the manner and basis of
conversion must be included in the plan of merger in the same
manner as provided by Subsection (a)(5).
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 10.003. CONTENTS OF PLAN OF MERGER: MORE THAN ONE
SUCCESSOR. If more than one organization is to survive or to be
created by the plan of merger, the plan of merger must include:
(1) the manner and basis of allocating and vesting the property
of each organization that is a party to the merger among one or
more of the surviving or new organizations;
(2) the name of each surviving or new organization that is
primarily obligated for the payment of the fair value of an
ownership or membership interest of an owner or member of a
domestic entity subject to dissenters' rights that is a party to
the merger and who complies with the requirements for dissent and
appraisal under this code applicable to the domestic entity; and
(3) the manner and basis of allocating each liability and
obligation of each organization that is a party to the merger, or
adequate provisions for the payment and discharge of each
liability and obligation, among one or more of the surviving or
new organizations.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 10.004. PLAN OF MERGER: PERMISSIVE PROVISIONS. A plan of
merger may include:
(1) amendments to the governing documents of any surviving
organization;
(2) provisions relating to an interest exchange, including a
plan of exchange; and
(3) any other provisions relating to the merger that are not
required by this chapter.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 10.005. CREATION OF HOLDING COMPANY BY MERGER. (a) In
this section:
(1) "Direct or indirect wholly owned subsidiary" means, with
respect to a domestic entity, another domestic entity, all of the
outstanding voting ownership or membership interests of which are
owned by the domestic entity or by one or more other domestic
entities or non-code organizations, all of the outstanding voting
ownership or membership interests of which are owned by the
domestic entity or one or more other wholly owned domestic
entities or non-code organizations.
(2) "Holding company" means a domestic entity that, from its
organization until a merger takes effect, was at all times a
direct or indirect wholly owned subsidiary of the merging
domestic entity and the ownership or membership interests of
which are issued to the members or owners of the merging domestic
entity in the merger.
(3) "Merging domestic entity" means the original domestic entity
that is a party to a merger that is intended to create a holding
company structure under a plan of merger that satisfies the
requirements of this section and whose members or owners are not
required to approve the plan of merger under Subsection (b).
(4) "Surviving entity subsidiary" means the surviving entity in
a merger of a merging domestic entity and a direct or indirect
wholly owned subsidiary of the merging domestic entity, which
immediately following the merger is a direct or indirect wholly
owned subsidiary of the holding company.
(b) A domestic entity may, without owner or member approval and
pursuant to a plan of merger, restructure the ownership or
membership structure of that entity to create a holding company
structure under this chapter and the provisions of this code
under which the entity was formed. The approval of the owners or
members of a merging domestic entity that is a party to a merger
under a plan of merger that creates a holding company is not
required if:
(1) the holding company is a domestic entity of the same
organizational form as the merging domestic entity;
(2) approval is not otherwise required by the governing
documents of the merging domestic entity;
(3) the merging domestic entity merges with a direct or indirect
wholly owned subsidiary;
(4) after the merger the merging domestic entity or its
successor is a direct or indirect wholly owned subsidiary of a
holding company;
(5) the merging domestic entity and the direct or indirect
wholly owned subsidiary are the only parties to the merger;
(6) each ownership or membership interest of the merging
domestic entity that is outstanding preceding the merger is
converted in the merger into an ownership or membership interest
of the holding company having the same designations, preferences,
limitations, and relative rights and corresponding obligations in
respect of the ownership or membership interest as the ownership
or membership interest held by the owner or member in the merging
domestic entity;
(7) except as provided by Subsection (c), the governing
documents of the holding company immediately following the merger
contain provisions substantively identical to the governing
documents of the merging domestic entity immediately preceding
the merger;
(8) except as provided by Subsections (c) and (d), the governing
documents of the surviving entity subsidiary immediately
following the merger contain provisions substantively identical
to the governing documents of the merging domestic entity
immediately preceding the merger;
(9) the governing persons of the merging domestic entity become
or remain the governing persons of the holding company when the
merger takes effect;
(10) the owners or members of the merging domestic entity will
not recognize gain or loss for United States federal income tax
purposes, the United States federal tax classification of the
holding company will be the same as that of the merging domestic
entity, and the merger will not result in the loss of any tax
benefit or attribute of the merging domestic entity, each as
determined by the governing authority of the merging domestic
entity; and
(11) the governing authority of the merging domestic entity
adopts a resolution approving the plan of merger.
(c) Subsections (b)(7) and (8) do not require identical
provisions regarding the organizer or organizers, the entity
name, the registered office and agent, the initial governing
persons, and the initial subscribers of ownership or membership
interests and provisions contained in any amendment to the
governing documents as were necessary to effect a change,
exchange, reclassification, or cancellation of ownership or
membership interests, if the change, exchange, reclassification,
or cancellation was in effect preceding the merger.
(d) Notwithstanding Subsection (b)(8):
(1) the governing documents of the surviving entity subsidiary
must require that an act or transaction by or involving the
surviving entity subsidiary, other than the election or removal
of the governing persons of the surviving entity subsidiary, that
requires for its approval under this code or the governing
documents of the surviving entity subsidiary the approval of the
owners or members of the surviving entity subsidiary must, by
specific reference to this section, require the approval of the
owners or members of the holding company, or any successor by
merger, by the same vote as is required by this code and the
governing documents of the surviving entity subsidiary;
(2) if the surviving entity subsidiary is not of the same
organizational form as the merging domestic entity, the governing
documents of the surviving entity subsidiary may differ from the
governing documents of the merging domestic entity to the minimum
extent necessary to make a change that takes into account the
differences between the types of entities, including a change in
reference to the types of owners, members, ownership interests,
membership interests, governing persons, or governing authority,
each as determined by the governing authority of the merging
domestic entity;
(3) if the surviving entity subsidiary is not of the same
organizational form as the merging domestic entity, the governing
documents of the surviving entity subsidiary must require that:
(A) the surviving entity subsidiary obtain the approval of the
owners or members of the holding company for any act or
transaction by or involving the surviving entity subsidiary,
other than the election or removal of the governing persons of
the surviving entity subsidiary, that would require the approval
of the owners or members of the surviving entity subsidiary if
the surviving entity subsidiary were of the same organizational
form as the merging domestic entity;
(B) any amendment to the governing documents of the surviving
entity subsidiary that would, if adopted by an entity of the same
organizational form as the merging domestic entity, be required
to be included in the certificate of formation of the entity also
require, by specific reference to this section, the approval of
the owners or members of the holding company, or any successor by
merger, by the same vote as is required by this code or by the
governing documents of the surviving entity subsidiary; and
(C) the business affairs of the surviving entity subsidiary be
managed by or under the direction of governing persons who are:
(i) subject to the same fiduciary duties applicable to the
governing persons of an entity of the same organizational form as
the merging domestic entity subject to this code; and
(ii) liable for the breach of any duties to the same extent as
governing persons of that form of entity;
(4) the governing documents of the surviving entity subsidiary
may change the classes and series of ownership or membership
interests and the number of ownership or membership interests
that the surviving entity subsidiary is authorized to issue; and
(5) this subsection or a provision of a surviving entity
subsidiary's governing documents required by this subsection may
not be construed as requiring the approval of the owners or
members of the holding company to elect or remove governing
persons of the surviving entity subsidiary.
(e) To the extent the provisions contained in Section 21.606
apply to a merging domestic entity and its owners or members when
a merger takes effect under this section, those provisions
continue to apply to the holding company and its owners or
members immediately after the merger takes effect as though the
holding company were the merging domestic entity. All ownership
or membership interests of the holding company acquired in the
merger, for purposes of Section 21.606, are considered to have
been acquired at the time the ownership or membership interest of
the merging domestic entity converted in the merger was acquired.
Any owner or member who, preceding the merger, was not an
affiliated owner or member as described by Section 21.606 does
not solely by reason of the merger become an affiliated owner or
member of the holding company.
(f) If the name of a holding company immediately following the
effectiveness of a merger under this section is the same as the
name of the merging domestic entity preceding the merger, the
ownership or membership interests of the holding company into
which the ownership or membership interests of the merging
domestic entity are converted pursuant to the merger will be
represented by the certificates, if any, that previously
represented the ownership or membership interests in the merging
domestic entity.
(g) This section shall not apply to a merger of a partnership
with or into a domestic entity without the approval of the owners
or members of the partnership and domestic entity as provided by
this code.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Amended by:
Acts 2005, 79th Leg., Ch.
64, Sec. 33, eff. January 1, 2006.
Acts 2007, 80th Leg., R.S., Ch.
688, Sec. 49, eff. September 1, 2007.
Sec. 10.006. SHORT FORM MERGER. (a) A parent organization that
owns at least 90 percent of the outstanding ownership or
membership interests of each class and series of each of one or
more subsidiary organizations may merge with one or more of the
subsidiary organizations as provided by this section if:
(1) at least one of the parties to the merger is a domestic
entity and each other party is a domestic entity or another
non-code organization organized under the laws of a jurisdiction
that permits a merger of the type authorized by this chapter; and
(2) the resulting organization or organizations are the parent
organization, one or more existing subsidiary organizations, or
one or more new organizations.
(b) No action by any subsidiary organization that is a domestic
entity is required to approve the merger.
(c) If the parent organization will not survive the merger, a
plan of merger must be adopted by action of the parent
organization in the same manner as a plan of merger not governed
by this section or Section 10.005.
(d) If the parent organization will survive the merger, the
merger is required to be approved only by a resolution adopted by
the governing authority of the parent organization.
(e) Sections 10.001(c)-(e), 10.002(c), 10.003, and 10.007-10.010
apply to a merger approved under Subsection (d), except that the
resolution approving the merger should be considered the plan of
merger for purposes of those sections.
(f) The resolution approving the merger under Subsection (d)
must describe:
(1) the basic terms of the merger;
(2) the organizations that are party to the merger; and
(3) the organizations that survive the merger.
(g) If the parent organization does not own all of the
outstanding ownership or membership interests of each class or
series of ownership or membership interests of each subsidiary
organization that is a party to the merger, the resolution of the
parent organization required by Subsection (d) must describe the
terms of the merger, including the cash or other property,
including ownership or membership interests, obligations, rights
to purchase securities, or other securities of any person or
organization or any combination of the ownership or membership
interests, obligations, rights, or other securities, to be used,
paid, or delivered by the parent organization on surrender of
each ownership or membership interest of the subsidiary
organizations not owned by the parent organization.
(h) An entity is not disqualified from effecting a merger under
any other provision of this chapter because it qualifies for a
merger under this section.
(i) This section shall not apply if a subsidiary organization
that is a party to the merger is:
(1) a partnership; or
(2) a domestic entity that has in its governing documents the
provision required by Section 10.005(d)(1) and of which there are
outstanding ownership or membership interests that would be
entitled to vote on the merger absent this section.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Amended by:
Acts 2005, 79th Leg., Ch.
64, Sec. 34, eff. January 1, 2006.
Sec. 10.007. EFFECTIVENESS OF MERGER. Except as otherwise
provided by Subchapter B, Chapter 4, a merger takes effect at the
time provided by the plan of merger, except that a merger that
requires a filing under Subchapter D takes effect on the
acceptance of the filing of the certificate of merger by the
secretary of state or county clerk, as appropriate.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 10.008. EFFECT OF MERGER. (a) When a merger takes effect:
(1) the separate existence of each domestic entity that is a
party to the merger, other than a surviving or new domestic
entity, ceases;
(2) all rights, title, and interests to all real estate and
other property owned by each organization that is a party to the
merger is allocated to and vested, subject to any existing liens
or other encumbrances on the property, in one or more of the
surviving or new organizations as provided in the plan of merger
without:
(A) reversion or impairment;
(B) any further act or deed; or
(C) any transfer or assignment having occurred;
(3) all liabilities and obligations of each organization that is
a party to the merger are allocated to one or more of the
surviving or new organizations in the manner provided by the plan
of merger;
(4) each surviving or new domestic organization to which a
liability or obligation is allocated under the plan of merger is
the primary obligor for the liability or obligation, and, except
as otherwise provided by the plan of merger or by law or
contract, no other party to the merger, other than a surviving
domestic entity or non-code organization liable or otherwise
obligated at the time of the merger, and no other new domestic
entity or non-code organization created under the plan of merger
is liable for the debt or other obligation;
(5) any proceeding pending by or against any domestic entity or
by or against any non-code organization that is a party to the
merger may be continued as if the merger did not occur, or the
surviving or new domestic entity or entities or the surviving or
new non-code organization or non-code organizations to which the
liability, obligation, asset, or right associated with that
proceeding is allocated to and vested in under the plan of merger
may be substituted in the proceeding;
(6) the governing documents of each surviving domestic entity
are amended to the extent provided by the plan of merger;
(7) each new filing entity whose certificate of formation is
included in the plan of merger under this chapter, on meeting any
additional requirements, if any, of this code for its formation,
is formed as a domestic entity under this code as provided by the
plan of merger;
(8) the ownership or membership interests of each organization
that is a party to the merger and that are to be converted or
exchanged, in whole or part, into ownership or membership
interests, obligations, rights to purchase securities, or other
securities of one or more of the surviving or new organizations,
into cash or other property, including ownership or membership
interests, obligations, rights to purchase securities, or other
securities of any organization, or into any combination of these
are converted and exchanged and the former owners or members who
held ownership or membership interests of each domestic entity
that is a party to the merger are entitled only to the rights
provided by the plan of merger or, if applicable, any rights to
receive the fair value for the ownership interests provided under
Subchapter H; and
(9) notwithstanding Subdivision (4), the surviving or new
organization named in the plan of merger as primarily obligated
to pay the fair value of an ownership or membership interest
under Section 10.003(2) is the primary obligor for that payment
and all other surviving or new organizations are secondarily
liable for that payment.
(b) If the plan of merger does not provide for the allocation
and vesting of the right, title, and interest in any particular
real estate or other property or for the allocation of any
liability or obligation of any party to the merger, the
unallocated property is owned in undivided interest by, or the
liability or obligation is the joint and several liability and
obligation of, each of the surviving and new organizations, pro
rata to the total number of surviving and new organizations
resulting from the merger.
(c) If a surviving organization in a merger is not a domestic
entity, the surviving organization is considered to have:
(1) appointed the secretary of state in this state as the
organization's agent for service of process in a proceeding to
enforce any obligation of a domestic entity that is a party to
the merger; and
(2) agreed to promptly pay to the dissenting owners or members
of each domestic entity that is a party to the merger who have
the right of dissent and appraisal under this code the amount, if
any, to which they are entitled under this code.
(d) If the surviving organization in a merger is not a domestic
entity, the organization shall register to transact business in
this state if the entity is required to register for that purpose
by another provision of this code.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Amended by:
Acts 2005, 79th Leg., Ch.
64, Sec. 35, eff. January 1, 2006.
Acts 2007, 80th Leg., R.S., Ch.
688, Sec. 50, eff. September 1, 2007.
Sec. 10.009. SPECIAL PROVISIONS APPLYING TO PARTNERSHIP MERGERS.
(a) A partner of a domestic partnership that is a party to a
merger does not become liable as a result of the merger for the
liability or obligation of another person that is a party to the
merger unless the partner consents to becoming personally liable
by action taken in connection with the specific plan of merger
approved by the partner.
(b) A partner of a domestic partnership that is a party to a
merger who remains in or enters a partnership is treated as an
incoming partner in the partnership when the merger takes effect
for purposes of determining the partner's liability for a debt or
obligation of the partnership or partnerships that are parties to
the merger or to be created in the merger and in which the
partner was not a partner.
(c) If a partnership merges with an organization and, because of
the merger, no longer exists, a former partner who becomes an
owner or member of the surviving organization may, until the
first anniversary of the effective date of the merger, bind the
surviving organization to a transaction for which the owner or
member no longer has authority to bind the organization if the
transaction is one in which the actions by the owner or member as
a partner would have bound the partnership before the effective
date of the merger, and the other party to the transaction:
(1) does not have actual or constructive notice of the merger;
(2) had done business with the terminated partnership within one
year preceding the effective date of the merger; and
(3) reasonably believes that the partner who was previously an
owner or member of the partnership that was merged into the
surviving organization and is now an owner or member of the
surviving organization has the authority to bind the surviving
organization to the transaction at the time of the transaction.
(d) If a partnership is formed under a plan of merger, the
existence of the partnership as a partnership begins when the
merger takes effect, and the persons to be partners become
partners at that time.
(e) A partner in a domestic partnership that is a party to the
merger but does not survive shall be treated as a partner who
withdrew from the nonsurviving domestic partnership as of the
effective date of the merger.
(f) The partnership agreement of each domestic partnership that
is a party to the merger must contain provisions that authorize
the merger provided for in the plan of merger adopted by the
partnership.
(g) Each domestic partnership that is a party to the merger must
approve the plan of merger in the manner prescribed in its
partnership agreement.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 10.010. SPECIAL PROVISIONS APPLYING TO NONPROFIT
CORPORATION MERGERS. (a) A domestic nonprofit corporation may
not merge into another entity if the domestic nonprofit
corporation would, because of the merger, lose or impair its
charitable status.
(b) One or more domestic or foreign for-profit entities or
non-code organizations may merge into one or more domestic
nonprofit corporations that continue as the surviving entity or
entities.
(c) A domestic nonprofit corporation may not merge with a
foreign for-profit entity if the domestic nonprofit corporation
does not continue as the surviving entity.
(d) One or more domestic nonprofit corporations and non-code
organizations may merge into one or more foreign nonprofit
entities that continue as the surviving entity or entities.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
SUBCHAPTER B. EXCHANGES OF INTERESTS
Sec. 10.051. INTEREST EXCHANGES. (a) For the purpose of
acquiring all of the outstanding ownership or membership
interests of one or more classes or series of one or more
domestic entities, one or more domestic entities or non-code
organizations may adopt a plan of exchange.
(b) To make an interest exchange under this section:
(1) the governing authority of each domestic entity the
ownership or membership interests of which are to be acquired in
the interest exchange must act on a plan of exchange and, if
otherwise required by this code, the owners or members of the
domestic entity must approve the plan of exchange in the manner
provided by this code; and
(2) each acquiring domestic entity must take all action that may
otherwise be required by this code and its governing documents to
effect the exchange.
(c) A domestic entity subject to dissenters' rights must provide
the notice required by Section 10.355.
(d) If a non-code organization is to acquire ownership or
membership interests in the exchange, each non-code organization
must take all action that is required under the laws of the
organization's jurisdiction of formation and the organization's
governing documents to effect the exchange.
(e) If one or more non-code organizations as part of the plan of
exchange are to issue ownership or membership interests, the
issuance of the ownership or membership interests must be
permitted by the laws under which the non-code organizations are
incorporated or organized or not inconsistent with those laws.
(f) A plan of exchange may not be effected if any owner or
member of a domestic entity that is a party to the interest
exchange will, as a result of the interest exchange, become
personally liable, without the consent of the owner or member,
for the liabilities or obligations of any other person or
organization.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 10.052. PLAN OF EXCHANGE: REQUIRED PROVISIONS. (a) A plan
of exchange must include:
(1) the name of each domestic entity the ownership or membership
interests of which are to be acquired;
(2) the name of each acquiring organization;
(3) if there is more than one acquiring organization, the
ownership or membership interests to be acquired by each
organization;
(4) the terms and conditions of the exchange; and
(5) the manner and basis of exchanging the ownership or
membership interests to be acquired for:
(A) ownership or membership interests, obligations, rights to
purchase securities, or other securities of one or more of the
acquiring organizations that is a party to the plan of exchange;
(B) cash;
(C) other property, including ownership or membership interests,
obligations, rights to purchase securities, or other securities
of any other person or entity; or
(D) any combination of those items.
(b) The manner and basis of exchanging an ownership or
membership interest of an owner or member that is exchanged in a
manner or basis different from any other owner or member having
ownership or membership interests of the same class or series
must be included in the plan of exchange in the same manner as
provided by Subsection (a)(5).
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 10.053. PLAN OF EXCHANGE: PERMISSIVE PROVISIONS. A plan of
exchange may include any other provisions not required by Section
10.052 relating to the interest exchange.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 10.054. EFFECTIVENESS OF EXCHANGE. Except as otherwise
provided by Subchapter B, Chapter 4, an interest exchange takes
effect at the time provided in the plan of exchange or otherwise
agreed to by the parties, except that an interest exchange that
requires a filing under Subchapter D takes effect on the
acceptance of the filing of the certificate of exchange by the
secretary of state or county clerk, as appropriate.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 10.055. GENERAL EFFECT OF INTEREST EXCHANGE. When an
interest exchange takes effect:
(1) the ownership or membership interest of each acquired
organization is exchanged as provided in the plan of exchange,
and the former owners or members whose interests are exchanged
under the plan of exchange are entitled only to the rights
provided in the plan of exchange or, if applicable, a right to
receive the fair value for the ownership interests provided under
Subchapter H; and
(2) the acquiring organization has all rights, title, and
interests with respect to the ownership or membership interest to
be acquired by it subject to the provisions of the plan of
exchange.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
688, Sec. 51, eff. September 1, 2007.
Sec. 10.056. SPECIAL PROVISIONS APPLYING TO PARTNERSHIPS. To
effect an interest exchange:
(1) the partnership agreement of each domestic partnership whose
partnership interests are to be acquired pursuant to the plan of
exchange must authorize the partnership interest exchange adopted
by the partnership;
(2) each domestic partnership whose partnership interests are to
be acquired under the plan of exchange must approve the plan of
exchange in the manner prescribed by its partnership agreement;
and
(3) each acquiring domestic partnership must take all actions
that may be required by its partnership agreement in order to
effect the exchange.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
SUBCHAPTER C. CONVERSIONS
Sec. 10.101. CONVERSION OF DOMESTIC ENTITIES. (a) A domestic
entity may convert into a different type of domestic entity or a
non-code organization by adopting a plan of conversion.
(b) To effect a conversion, the converting entity must act on
and the owners or members of the domestic entity must approve a
plan of conversion in the manner prescribed by this code for the
approval of conversions by the domestic entity or, if not
prescribed by this code, in the same manner as prescribed by this
code for the adoption and approval of a plan of merger by the
domestic entity when the domestic entity does not survive the
merger.
(c) A domestic entity subject to dissenters' rights must provide
the notice required by Section 10.355.
(d) A conversion may not take effect if the conversion is
prohibited by or inconsistent with the laws of the converted
entity's jurisdiction of formation, and the formation,
incorporation, or organization of the converted entity under the
plan of conversion must be effected in compliance with those laws
pursuant to the plan of conversion.
(e) At the time a conversion takes effect, each owner or member
of the converting entity, other than those who receive payment of
their ownership or membership interest under any applicable
provisions of this code relating to dissent and appraisal, has,
unless otherwise agreed to by that owner or member, an ownership
or membership interest in, and is the owner or member of, the
converted entity.
(f) A domestic entity may not convert under this section if an
owner or member of the domestic entity, as a result of the
conversion, becomes personally liable, without the consent of the
owner or member, for a liability or other obligation of the
converted entity.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
688, Sec. 52, eff. September 1, 2007.
Sec. 10.102. CONVERSION OF NON-CODE ORGANIZATIONS. (a) A
non-code organization may convert into a domestic entity by
adopting a plan of conversion as provided by this section.
(b) To effect a conversion, the non-code organization must take
any action that may be required for a conversion under the laws
of the organization's jurisdiction of formation and the
organization's governing documents.
(c) The conversion must be permitted by the laws under which the
non-code organization is incorporated or organized or by its
governing documents, which may not be inconsistent with the laws
of the jurisdiction in which the non-code organization is
incorporated or organized.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 10.1025. CONVERSION AND CONTINUANCE. (a) A converting
entity may elect to continue its existence in its current
organizational form and jurisdiction of formation in connection
with the entity's:
(1) conversion under Section 10.101 as a domestic entity of one
organizational form into a non-United States entity of the same
organizational form; or
(2) conversion under Section 10.102 as a non-United States
entity of one organizational form into a domestic entity of the
same organizational form.
(b) The election permitted by Subsection (a) for the converting
entity to continue its existence in its current organizational
form and jurisdiction of formation must be:
(1) adopted and approved as part of the plan of conversion for
the converting entity as required by Section 10.101(b) or
10.102(b), as applicable; and
(2) permitted by, or not prohibited by and inconsistent with,
the laws of the applicable non-United States jurisdiction.
(c) Section 10.156(2) does not apply in connection with the
filing of the certificate of conversion if the converting entity
is a domestic filing entity that elects to continue its existence
in accordance with this section.
(d) Chapter 9 does not apply to a non-United States entity that
also exists as a domestic filing entity because of a conversion
and election to continue its existence in accordance with this
section.
Added by Acts 2009, 81st Leg., R.S., Ch.
84, Sec. 15, eff. September 1, 2009.
Sec. 10.103. PLAN OF CONVERSION: REQUIRED PROVISIONS. (a) A
plan of conversion must include:
(1) the name of the converting entity;
(2) the name of the converted entity;
(3) a statement that the converting entity is continuing its
existence in the organizational form of the converted entity;
(4) a statement of the type of entity that the converted entity
is to be and the converted entity's jurisdiction of formation;
(5) if Sections 10.1025 and 10.109 do not apply, the manner and
basis of converting the ownership or membership interests of the
converting entity into ownership or membership interests of the
converted entity;
(6) any certificate of formation required to be filed under this
code if the converted entity is a filing entity;
(7) the certificate of formation or similar organizational
document of the converted entity if the converted entity is not a
filing entity; and
(8) if Sections 10.1025 and 10.109 apply, a statement that the
converting entity is electing to continue its existence in its
current organizational form and jurisdiction of formation after
the conversion takes effect.
(b) An item required by Subsection (a)(6) or (7) may be included
in the plan of conversion by an attachment or exhibit to the
plan.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Amended by:
Acts 2009, 81st Leg., R.S., Ch.
84, Sec. 16, eff. September 1, 2009.
Sec. 10.104. PLAN OF CONVERSION: PERMISSIVE PROVISIONS. A plan
of conversion may include other provisions relating to the
conversion that are not inconsistent with law.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 10.105. EFFECTIVENESS OF CONVERSION. Except as otherwise
provided by Subchapter B, Chapter 4, a conversion takes effect at
the time provided by the plan of conversion, except that a
conversion that requires a filing under Subchapter D takes effect
on the acceptance of the filing of the certificate of conversion
by the filing officer.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 10.106. GENERAL EFFECT OF CONVERSION. When a conversion
takes effect:
(1) the converting entity continues to exist without
interruption in the organizational form of the converted entity
rather than in the organizational form of the converting entity;
(2) all rights, title, and interests to all property owned by
the converting entity continues to be owned, subject to any
existing liens or other encumbrances on the property, by the
converted entity in the new organizational form without:
(A) reversion or impairment;
(B) further act or deed; or
(C) any transfer or assignment having occurred;
(3) all liabilities and obligations of the converting entity
continue to be liabilities and obligations of the converted
entity in the new organizational form without impairment or
diminution because of the conversion;
(4) the rights of creditors or other parties with respect to or
against the previous owners or members of the converting entity
in their capacities as owners or members in existence when the
conversion takes effect continue to exist as to those liabilities
and obligations and may be enforced by the creditors and obligees
as if a conversion had not occurred;
(5) a proceeding pending by or against the converting entity or
by or against any of the converting entity's owners or members in
their capacities as owners or members may be continued by or
against the converted entity in the new organizational form and
by or against the previous owners or members without a need for
substituting a party;
(6) the ownership or membership interests of the converting
entity that are to be converted into ownership or membership
interests of the converted entity as provided in the plan of
conversion are converted as provided by the plan, and if the
converting entity is a domestic entity, the former owners or
members of the domestic entity are entitled only to the rights
provided in the plan of conversion or a right of dissent and
appraisal under this code;
(7) if, after the conversion takes effect, an owner or member of
the converted entity as an owner or member is liable for the
liabilities or obligations of the converted entity, the owner or
member is liable for the liabilities and obligations of the
converting entity that existed before the conversion took effect
only to the extent that the owner or member:
(A) agrees in writing to be liable for the liabilities or
obligations;
(B) was liable, before the conversion took effect, for the
liabilities or obligations; or
(C) by becoming an owner or member of the converted entity,
becomes liable under other applicable law for the existing
liabilities and obligations of the converted entity; and
(8) if the converted entity is a non-code organization, the
converted entity is considered to have:
(A) appointed the secretary of state in this state as its agent
for service of process in a proceeding to enforce any obligation
or the rights of dissenting owners or members of the converting
domestic entity; and
(B) agreed that the converted entity will promptly pay the
dissenting owners or members of the converting domestic entity
the amount, if any, to which they are entitled under this code.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 10.107. SPECIAL PROVISIONS APPLYING TO PARTNERSHIP
CONVERSIONS. (a) If a partnership is formed under a plan of
conversion under this code, the existence of the partnership as a
partnership begins when the conversion takes effect, and the
owners or members designated to become the partners under the
plan of conversion become the partners at that time.
(b) The partnership agreement of a domestic partnership that is
converting must contain provisions that authorize the conversion
provided for in the plan of conversion adopted by the
partnership.
(c) A domestic partnership that is converting must approve the
plan of conversion in the manner provided in its partnership
agreement.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Amended by:
Acts 2005, 79th Leg., Ch.
64, Sec. 36, eff. January 1, 2006.
Sec. 10.108. SPECIAL PROVISIONS APPLYING TO NONPROFIT
CORPORATION CONVERSIONS. A domestic nonprofit corporation may
not convert into a for-profit entity.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 10.109. SPECIAL PROVISIONS APPLYING TO CONVERSION AND
CONTINUANCE. (a) This section applies only to a converting
entity that elects to continue its existence in accordance with
Section 10.1025.
(b) When the conversion of a converting entity to which this
section applies takes effect:
(1) notwithstanding Section 10.106(1), the converting entity
continues to exist both in its current organizational form and
jurisdiction of formation and, as the converted entity, in the
same organizational form in the new jurisdiction of formation;
(2) the converting entity and the converted entity, for purposes
of the laws of this state, constitute a single entity formed,
incorporated, created, or otherwise having come into being, as
applicable, and existing under the laws of this state and the
laws of the applicable non-United States jurisdiction, so long as
the entity continues to exist as a domestic entity under the laws
of this state following the conversion;
(3) if the converting entity is a domestic entity, this code and
the other laws of this state apply to the converted entity to the
same extent as the laws applied to the entity before the
conversion;
(4) if the converting entity is a non-United States entity, the
laws of the applicable non-United States jurisdiction apply to
the converted entity to the same extent as the laws applied to
the entity before the conversion;
(5) notwithstanding Section 10.106(2), all rights, title, and
interests in all property owned by the converting entity continue
to be owned by the converted entity, subject to any existing
liens or other encumbrances on the property, in both the
organizational form of the converting entity and the
organizational form of the converted entity without:
(A) reversion or impairment;
(B) further act or deed; or
(C) the occurrence of a transfer or assignment; and
(6) notwithstanding Section 10.106(3), all liabilities and
obligations of the converting entity remain the liabilities and
obligations of the converted entity in both the organizational
form of the converting entity and the organizational form of the
converted entity without impairment or diminution because of the
conversion.
Added by Acts 2009, 81st Leg., R.S., Ch.
84, Sec. 17, eff. September 1, 2009.
SUBCHAPTER D. CERTIFICATE OF MERGER, EXCHANGE, OR CONVERSION
Sec. 10.151. CERTIFICATE OF MERGER AND EXCHANGE. (a) After
approval of a plan of merger or a plan of exchange as provided by
this code, a certificate of merger, which may also include an
exchange, or a certificate of exchange, as applicable, must be
filed for a merger or interest exchange to become effective if:
(1) for a merger:
(A) any domestic entity that is a party to the merger is a
filing entity; or
(B) any domestic entity to be created under the plan of merger
is a filing entity; or
(2) for an exchange, an ownership or membership interest in any
filing entity is to be acquired in the interest exchange.
(b) If a certificate of merger or exchange is required to be
filed in connection with an interest exchange or a merger, other
than a merger under Section 10.006, the certificate must be
signed on behalf of each domestic entity and non-code
organization that is a party to the merger or exchange by an
officer or other authorized representative and must include:
(1) the plan of merger or exchange or a statement certifying:
(A) the name and organizational form of each domestic entity or
non-code organization that is a party to the merger or exchange;
(B) for a merger, the name and organizational form of each
domestic entity or non-code organization that is to be created by
the plan of merger;
(C) the name of the jurisdiction in which each domestic entity
or non-code organization named under Paragraph (A) or (B) is
incorporated or organized;
(D) for a merger, the amendments or changes to the certificate
of formation of each filing entity that is a party to the merger,
or if no amendments are desired to be effected by the merger, a
statement to that effect;
(E) for a merger, that the certificate of formation of each new
filing entity to be created under the plan of merger is being
filed with the certificate of merger;
(F) that a signed plan of merger or exchange is on file at the
principal place of business of each surviving, acquiring, or new
domestic entity or non-code organization, and the address of each
principal place of business; and
(G) that a copy of the plan of merger or exchange will be on
written request furnished without cost by each surviving,
acquiring, or new domestic entity or non-code organization to any
owner or member of any domestic entity that is a party to or
created by the plan of merger or exchange and, for a merger with
multiple surviving domestic entities or non-code organizations,
to any creditor or obligee of the parties to the merger at the
time of the merger if a liability or obligation is then
outstanding;
(2) if approval of the owners or members of any domestic entity
that was a party to the plan of merger or exchange is not
required by this code, a statement to that effect; and
(3) a statement that the plan of merger or exchange has been
approved as required by the laws of the jurisdiction of formation
of each organization that is a party to the merger or exchange
and by the governing documents of those organizations.
(c) A certificate of merger may also constitute a certificate of
exchange if it contains the information required for a
certificate of exchange.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
688, Sec. 53, eff. September 1, 2007.
Sec. 10.152. CERTIFICATE OF MERGER: SHORT FORM MERGER. (a) The
certificate of merger for a merger under Section 10.006 is
required to be signed only by an officer or other authorized
representative of the parent organization described by that
section.
(b) Except as provided by Subsection (c), the certificate of
merger must include:
(1) the name of the parent organization, the name of each
subsidiary organization that is a party to the merger, and the
jurisdiction of formation of each named organization;
(2) the number of outstanding ownership interests of each class
or series of each subsidiary organization and the number and
percentage of ownership interests of each class or series owned
by the parent organization;
(3) a copy of the resolution of merger adopted by the governing
authority of the parent organization authorizing the merger and
the date of the adoption of the resolution;
(4) a statement that the resolution has been approved as
required by the laws of the jurisdiction of formation of the
parent organization and by its governing documents; and
(5) if any surviving organization is not a domestic entity, the
address, including street number, if any, of its registered or
principal office in the organization's jurisdiction of formation.
(c) If a plan of merger is required to be adopted by action of
the parent organization under Section 10.006(c), the certificate
of merger must include the information required by Section
10.151(b).
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 10.153. FILING OF CERTIFICATE OF MERGER OR EXCHANGE. (a)
If a certificate of merger or exchange is required to be filed,
the certificate of merger or exchange must be filed in accordance
with Chapter 4. The certificate of formation of each filing
entity that is to be formed under a plan of merger must also be
filed with the certificate of merger in accordance with Chapter
4. Except as provided by this section, the certificate must be
filed with the secretary of state.
(b) If a domestic real estate investment trust is a party to the
merger or if an ownership interest in a domestic real estate
investment trust is to be acquired in the interest exchange, the
certificate of merger or exchange must be filed in accordance
with Chapter 4 with the county clerk of the county in which the
domestic real estate investment trust's principal place of
business in this state is located.
(c) If a domestic real estate investment trust is to be created
under the plan of merger, the certificate of formation of the
domestic real estate investment trust must also be filed with the
certificate of merger in accordance with Chapter 4 with the
county clerk of the county in which the domestic real estate
investment trust's principal place of business in this state is
located.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 10.154. CERTIFICATE OF CONVERSION. (a) After approval of
a plan of conversion as provided by this code, a certificate of
conversion must be filed for the conversion to become effective
if:
(1) any domestic entity that is a party to the conversion is a
filing entity; or
(2) any domestic entity to be created under the plan of
conversion is a filing entity.
(b) If a certificate of conversion is required to be filed in
connection with a conversion, the certificate must be signed on
behalf of the converting entity and must include:
(1) the plan of conversion or a statement certifying the
following:
(A) the name, organizational form, and jurisdiction of formation
of the converting entity;
(B) the name, organizational form, and jurisdiction of formation
of the converted entity;
(C) that a signed plan of conversion is on file at the principal
place of business of the converting entity, and the address of
the principal place of business;
(D) that a signed plan of conversion will be on file after the
conversion at the principal place of business of the converted
entity, and the address of the principal place of business; and
(E) that a copy of the plan of conversion will be on written
request furnished without cost by the converting entity before
the conversion or by the converted entity after the conversion to
any owner or member of the converting entity or the converted
entity; and
(2) a statement that the plan of conversion has been approved as
required by the laws of the jurisdiction of formation and the
governing documents of the converting entity.
(c) In addition to complying with the requirements of
Subsections (a) and (b), if Sections 10.1025 and 10.109 apply to
the conversion, the certificate of conversion required by this
section must:
(1) be titled "Certificate of Conversion and Continuance"; and
(2) include a statement certifying that the converting entity is
electing to continue its existence in its current organizational
form and jurisdiction of formation.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
688, Sec. 54, eff. September 1, 2007.
Acts 2009, 81st Leg., R.S., Ch.
84, Sec. 18, eff. September 1, 2009.
Sec. 10.155. FILING OF CERTIFICATE OF CONVERSION. (a) If a
certificate of conversion is required to be filed, the
certificate of conversion must be filed in accordance with
Chapter 4. If the converted entity is a filing entity, the
certificate of formation of the filing entity must also be filed
with the certificate of conversion in accordance with Chapter 4.
Except as provided by this section, the certificate must be filed
with the secretary of state.
(b) If the converting entity is a domestic real estate
investment trust, the certificate of conversion must be filed in
accordance with Chapter 4 with the county clerk of the county in
which the converting entity's principal place of business in this
state is located.
(c) If the converted entity is a domestic real estate investment
trust, the certificate of formation of the converted entity must
also be filed with the certificate of conversion in accordance
with Chapter 4 with the county clerk of the county in which the
converted entity's principal place of business in this state is
located.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 10.156. ACCEPTANCE OF CERTIFICATE FOR FILING. The filing
officer may not accept a certificate of merger, exchange, or
conversion for filing if:
(1) the filing officer finds that the certificate of merger,
exchange, or conversion does not conform to law; or
(2) the required franchise taxes have not been paid or the
certificate of merger, exchange, or conversion does not provide
that one or more of the surviving, new, or acquiring
organizations or the converted entity is liable for the payment
of the required franchise taxes.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
SUBCHAPTER E. ABANDONMENT OF MERGER, EXCHANGE, OR CONVERSION
Sec. 10.201. ABANDONMENT OF PLAN OF MERGER, EXCHANGE, OR
CONVERSION. After a merger, interest exchange, or conversion is
approved as provided by this code, and at any time before the
merger, interest exchange, or conversion takes effect, the plan
of merger, interest exchange, or conversion may be abandoned,
subject to any contractual rights, by any of the domestic
entities that are a party to the merger, interest exchange, or
conversion, without action by the owners or members, under the
procedures provided by the plan of merger, exchange, or
conversion or, if no abandonment procedures are provided, in the
manner determined by the governing authority.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 10.202. ABANDONMENT AFTER FILING. If a certificate of
merger, exchange, or conversion has been filed, the merger,
interest exchange, or conversion may be abandoned before its
effectiveness in accordance with Sections 4.057 and 10.201.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Amended by:
Acts 2005, 79th Leg., Ch.
64, Sec. 37, eff. January 1, 2006.
Sec. 10.203. ABANDONMENT IF NO FILING REQUIRED. (a) If no
filing is required by this chapter for the abandonment of a
merger, interest exchange, or conversion, the merger, interest
exchange, or conversion is abandoned:
(1) as provided by the procedures in the plan of merger,
exchange, or conversion; or
(2) if no abandonment procedures are provided by the plan, in
the manner determined by the governing authority of the
abandoning entity.
(b) A filing of a certificate of abandonment under Section 4.057
is not required for the abandonment of a merger, interest
exchange, or conversion if no filing is required under Subchapter
D to make the merger, interest exchange, or conversion effective.
Added by Acts 2005, 79th Leg., Ch.
64, Sec. 38, eff. January 1, 2006.
SUBCHAPTER F. PROPERTY TRANSFERS AND DISPOSITIONS
Sec. 10.251. GENERAL POWER OF DOMESTIC ENTITY TO SELL, LEASE, OR
CONVEY PROPERTY. (a) Subject to any approval required by this
code or the governing documents of the domestic entity, a
domestic entity may transfer and convey by sale, lease,
assignment, or another method an interest in property of the
entity, including real property. The transfer and conveyance may:
(1) be made with or without the goodwill of the entity;
(2) be made on any terms and conditions and for any
consideration, which may consist wholly or partly of money or
other property, including an ownership interest in a domestic
entity or non-code organization; and
(3) be evidenced by a deed, assignment, or other instrument of
transfer or conveyance, with or without the seal of the entity.
(b) Subject to any approval required by this code or the
governing documents of the domestic entity, a domestic entity may
grant a pledge, mortgage, deed of trust, or trust indenture with
respect to an interest in property of the entity, including real
property, with or without the seal of the entity.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 10.252. NO APPROVAL REQ