CHAPTER 3. FORMATION AND GOVERNANCE

Statutes > Texas Statutes > BUSINESS ORGANIZATIONS CODE > TITLE 1. GENERAL PROVISIONS > CHAPTER 3. FORMATION AND GOVERNANCE

BUSINESS ORGANIZATIONS CODE

TITLE 1. GENERAL PROVISIONS

SUBCHAPTER A. FORMATION, EXISTENCE, AND CERTIFICATE OF FORMATION

Sec. 3.001. FORMATION AND EXISTENCE OF FILING ENTITIES. (a)

Subject to the other provisions of this code, to form a filing

entity, a certificate of formation complying with Sections 3.003,

3.004, and 3.005 must be filed in accordance with Chapter 4.

(b) The filing of a certificate of formation described by

Subsection (a) may be included in a filing under Chapter 10.

of the certificate of formation takes effect as provided by

Chapter 4.

(d) Except in a proceeding by the state to terminate the

existence of a filing entity, an acknowledgment of the filing of

a certificate of formation issued by the filing officer is

conclusive evidence of:

(1) the formation and existence of the filing entity;

(2) the satisfaction of all conditions precedent to the

formation of the filing entity; and

(3) the authority of the filing entity to transact business in

this state.

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

Sec. 3.002. FORMATION AND EXISTENCE OF NONFILING ENTITIES. The

requirements for the formation of and the determination of the

existence of a nonfiling entity are governed by the title of this

code that applies to that entity.

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

Sec. 3.003. DURATION. A domestic entity exists perpetually

unless otherwise provided in the governing documents of the

entity. A domestic entity may be terminated in accordance with

this code or the Tax Code.

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

Sec. 3.004. ORGANIZERS. (a) Any person having the capacity to

contract for the person or for another may be an organizer of a

filing entity.

(b) Each organizer of a filing entity must sign the certificate

of formation of the filing entity, except that:

(1) each general partner must sign the certificate of formation

of a domestic limited partnership; and

(2) each trust manager must sign and acknowledge before an

officer who is authorized by law to take acknowledgment of a deed

the certificate of formation of a domestic real estate investment

trust.

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

Sec. 3.005. CERTIFICATE OF FORMATION. (a) The certificate of

formation must state:

(1) the name of the filing entity being formed;

(2) the type of filing entity being formed;

(3) for filing entities other than limited partnerships, the

purpose or purposes for which the filing entity is formed, which

may be stated to be or include any lawful purpose for that type

of entity;

(4) for filing entities other than limited partnerships, the

period of duration, if the entity is not formed to exist

perpetually and is intended to have a specific period of

duration;

(5) the street address of the initial registered office of the

filing entity and the name of the initial registered agent of the

filing entity at the office;

(6) the name and address of each:

(A) organizer for the filing entity, unless the entity is formed

under a plan of conversion or merger;

(B) general partner, if the filing entity is a limited

partnership; or

investment trust;

(7) if the filing entity is formed under a plan of conversion or

merger, a statement to that effect and, if formed under a plan of

conversion, the name, address, date of formation, prior form of

organization, and jurisdiction of formation of the converting

entity; and

(8) any other information required by this code to be included

in the certificate of formation for the filing entity.

(b) The certificate of formation may contain other provisions

not inconsistent with law relating to the organization,

ownership, governance, business, or affairs of the filing entity.

signing and filing of a certificate of formation for a domestic

entity.

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

Amended by:

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

688, Sec. 9, eff. September 1, 2007.

Sec. 3.006. FILINGS IN CASE OF MERGER OR CONVERSION. (a) If a

new domestic filing entity is formed under a plan of conversion

or merger, the certificate of formation of the entity must be

filed with the certificate of conversion or merger under Section

10.155(a) or 10.153(a). The certificate of formation is not

required to be filed separately under Section 3.001.

(b) The formation and existence of a domestic filing entity that

is a converted entity in a conversion or that is to be created

under a plan of merger takes effect and commences on the

effectiveness of the conversion or merger, as appropriate.

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

Sec. 3.007. SUPPLEMENTAL PROVISIONS REQUIRED IN CERTIFICATE OF

FORMATION OF FOR-PROFIT OR PROFESSIONAL CORPORATION. (a) In

addition to the information required by Section 3.005, the

certificate of formation of a for-profit or professional

corporation must state:

(1) the aggregate number of shares the corporation is authorized

to issue;

(2) if the shares the corporation is authorized to issue consist

of one class of shares only, the par value of each share or a

statement that each share is without par value;

(3) if the corporation is to be managed by a board of directors,

the number of directors constituting the initial board of

directors and the name and address of each person who will serve

as director until the first annual meeting of shareholders and

until a successor is elected and qualified; and

(4) if the corporation is to be managed pursuant to a

shareholders' agreement in a manner other than by a board of

directors, the name and address of each person who will perform

the functions required by this code to be performed by the

initial board of directors.

(b) If the shares a for-profit or professional corporation is

authorized to issue consist of more than one class of shares, the

certificate of formation of the corporation must, with respect to

each class, state:

(1) the designation of the class;

(2) the aggregate number of shares in the class;

(3) the par value of each share or a statement that each share

is without par value;

(4) the preferences, limitations, and relative rights of the

shares; and

(5) if the shares in a class the corporation is authorized to

issue consist of more than one series, the following with respect

to each series:

(A) the designation of the series;

(B) the aggregate number of shares in the series;

shares to the extent provided in the certificate of formation;

and

(D) any authority vested in the board of directors to establish

the series and set and determine the preferences, limitations,

and relative rights of the series.

corporation are to have a preemptive right or cumulative voting

right, the certificate of formation of the corporation must

comply with Section 21.203 or 21.360, as appropriate.

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

Amended by:

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

688, Sec. 10, eff. September 1, 2007.

Sec. 3.008. SUPPLEMENTAL PROVISIONS REQUIRED IN CERTIFICATE OF

FORMATION OF CLOSE CORPORATION. (a) In addition to a provision

required or permitted to be stated in the certificate of

formation of a for-profit or professional corporation under

Section 3.007, the certificate of formation of a close

corporation, whether original, amended, or restated, must include

the sentence, "This corporation is a close corporation."

(b) The certificate of formation of the close corporation may

contain:

(1) a provision contained or permitted to be contained in a

shareholders' agreement conforming to Subchapter O, Chapter 21,

that the organizers elect to include in the certificate of

formation; or

(2) a copy of a shareholders' agreement that conforms to

Subchapter O, Chapter 21, and that may be filed in the manner

provided by Section 21.212.

Subsection (b) must be preceded by a statement that the provision

is subject to the corporation remaining a close corporation.

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

Amended by:

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

688, Sec. 11, eff. September 1, 2007.

Sec. 3.009. SUPPLEMENTAL PROVISIONS REQUIRED IN CERTIFICATE OF

FORMATION OF NONPROFIT CORPORATION. In addition to the

information required by Section 3.005, the certificate of

formation of a nonprofit corporation must include:

(1) if the nonprofit corporation is to have no members, a

statement to that effect;

(2) if management of the nonprofit corporation's affairs is to

be vested in the nonprofit corporation's members, a statement to

that effect;

(3) the number of directors constituting the initial board of

directors and the names and addresses of those directors or, if

the management of the nonprofit corporation is vested solely in

the nonprofit corporation's members, a statement to that effect;

and

(4) if the nonprofit corporation is to be authorized on its

winding up to distribute the nonprofit corporation's assets in a

manner other than as provided by Section 22.304, a statement

describing the manner of distribution.

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

Sec. 3.010. SUPPLEMENTAL PROVISIONS REQUIRED IN CERTIFICATE OF

FORMATION OF LIMITED LIABILITY COMPANY. In addition to the

information required by Section 3.005, the certificate of

formation of a limited liability company must state:

(1) whether the limited liability company will or will not have

managers;

(2) if the limited liability company will have managers, the

name and address of each initial manager of the limited liability

company; and

(3) if the limited liability company will not have managers, the

name and address of each initial member of the limited liability

company.

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

Sec. 3.011. SUPPLEMENTAL PROVISIONS REGARDING CERTIFICATE OF

FORMATION OF LIMITED PARTNERSHIP. (a) To form a limited

partnership, the partners must enter into a partnership agreement

and file a certificate of formation.

(b) The partners of a limited partnership formed under Section

10.001 or 10.101 may include the partnership agreement required

under Subsection (a) in the plan of merger or conversion.

include the address of the principal office of the partnership in

the United States where records are to be kept or made available

under Section 153.551.

(d) The fact that a certificate of formation is on file with the

secretary of state is notice that the partnership is a limited

partnership and of all other facts contained in the certificate

as required by Section 3.005.

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

Sec. 3.012. SUPPLEMENTAL PROVISIONS REQUIRED IN CERTIFICATE OF

FORMATION OF REAL ESTATE INVESTMENT TRUST. In addition to the

information required by Section 3.005, the certificate of

formation of a real estate investment trust must state:

(1) that an assumed name certificate stating the name of the

real estate investment trust has been filed in the manner

provided by law;

(2) that the purpose of the real estate investment trust is to:

(A) purchase, hold, lease, manage, sell, exchange, develop,

subdivide, and improve real property and interests in real

property, other than severed mineral, oil, or gas royalty

interests, and carry on any other business and perform any other

action in connection with a purpose described by this paragraph;

(B) exercise powers conferred by the laws of this state on a

real estate investment trust; and

the same extent as an individual;

(3) the post office address of the initial principal office and

place of business of the real estate investment trust;

(4) the aggregate number of shares of beneficial interest the

real estate investment trust is authorized to issue and the par

value to be received by the real estate investment trust for the

issuance of each share;

(5) if shares described by Subdivision (4) are divided into

classes as authorized by Section 200.102 or 200.103, a

description of each class of shares, including any preferences,

conversion and other rights, voting powers, restrictions,

limitations as to dividends, qualifications, and terms and

conditions of redemption; and

(6) that the trust managers shall manage the money or property

received for the issuance of shares for the benefit of the

shareholders of the real estate investment trust.

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

Sec. 3.013. SUPPLEMENTAL PROVISIONS REQUIRED IN CERTIFICATE OF

FORMATION OF COOPERATIVE ASSOCIATION. In addition to the

information required by Section 3.005, the certificate of

formation of a cooperative association must state:

(1) whether the cooperative association is organized with or

without shares;

(2) the number of shares or memberships subscribed for the

cooperative association;

(3) if the cooperative association is organized with shares:

(A) the amount of authorized capital;

(B) the number and type of shares;

(D) the rights, preferences, and restrictions of each type of

share;

(4) the method of distribution on winding up and termination of

any surplus of the cooperative association in accordance with

Section 251.403; and

(5) the names and street addresses of the directors who will

manage the affairs of the cooperative association for the initial

year, unless sooner changed by the members.

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

Sec. 3.014. SUPPLEMENTAL PROVISIONS REQUIRED IN CERTIFICATE OF

FORMATION OF PROFESSIONAL ENTITY. In addition to the information

required by Section 3.005, the certificate of formation of a

professional entity must state:

(1) the type of professional service to be provided by the

professional entity as the purpose of the entity; and

(2) that the professional entity is a:

(A) professional association;

(B) professional corporation; or

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

Sec. 3.015. SUPPLEMENTAL PROVISIONS REQUIRED IN CERTIFICATE OF

FORMATION OF PROFESSIONAL ASSOCIATION. (a) In addition to

containing the information required under Sections 3.005 and

3.014, the certificate of formation of a professional association

must:

(1) be signed by each member of the association; and

(2) state:

(A) the name and address of each original member of the

association;

(B) whether the association is to be governed by a board of

directors or by an executive committee; and

member of the board of directors or executive committee of the

association.

(b) The certificate of formation of a professional association

may contain:

(1) provisions regarding shares or units of ownership in the

association;

(2) provisions governing the winding up and termination of the

association's business; and

(3) any other provision consistent with state law regulating the

internal affairs of a professional association.

association contains provisions regarding shares in the

association, the certificate of formation must also comply with

Section 3.007.

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

Amended by:

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

688, Sec. 12, eff. September 1, 2007.

SUBCHAPTER B. AMENDMENTS AND RESTATEMENTS OF CERTIFICATE OF

FORMATION

Sec. 3.051. RIGHT TO AMEND CERTIFICATE OF FORMATION. (a) A

filing entity may amend its certificate of formation.

(b) An amended certificate of formation may contain only

provisions that:

(1) would be permitted at the time of the amendment if the

amended certificate of formation were a newly filed original

certificate of formation; or

(2) effect a change, exchange, reclassification, subdivision,

combination, or cancellation in the membership or ownership

interests or the rights of owners or members of the filing

entity.

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

Amended by:

Acts 2005, 79th Leg., Ch.

64, Sec. 6, eff. January 1, 2006.

Sec. 3.052. PROCEDURES TO AMEND CERTIFICATE OF FORMATION. (a)

The procedure to adopt an amendment to the certificate of

formation is as provided by the title of this code that applies

to the entity.

(b) A filing entity that amends its certificate of formation

shall sign and file, in the manner required by Chapter 4, a

certificate of amendment complying with Section 3.053 or a

restated certificate of formation complying with Section 3.059.

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

Sec. 3.053. CERTIFICATE OF AMENDMENT. A certificate of

amendment for a filing entity must state:

(1) the name of the filing entity;

(2) the type of the filing entity;

(3) for each provision of the certificate of formation that is

added, altered, or deleted, an identification by reference or

description of the added, altered, or deleted provision and, if

the provision is added or altered, a statement of the text of the

amended or added provision;

(4) that the amendment or amendments have been approved in the

manner required by this code and the governing documents of the

entity; and

(5) any other matter required by the provisions of this code

applicable to the filing entity to be in the certificate of

amendment.

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

Sec. 3.054. EXECUTION OF CERTIFICATE OF AMENDMENT OF FOR-PROFIT

CORPORATION. An officer shall sign the certificate of amendment

on behalf of the for-profit corporation. If shares of the

for-profit corporation have not been issued and the certificate

of amendment is adopted by the board of directors, a majority of

the directors may sign the certificate of amendment on behalf of

the for-profit corporation.

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

Amended by:

Acts 2005, 79th Leg., Ch.

64, Sec. 7, eff. January 1, 2006.

Sec. 3.055. SUPPLEMENTAL PROVISIONS FOR CERTIFICATE OF AMENDMENT

OF REAL ESTATE INVESTMENT TRUST. (a) In addition to the

statements required by Section 3.053, a certificate of amendment

for a real estate investment trust must state:

(1) if the amendment provides for an exchange, reclassification,

or cancellation of issued shares, the manner in which the

exchange, reclassification, or cancellation of the issued shares

will be effected if the manner is not specified in the amendment;

and

(2) if the amendment effects a change in the amount of stated

capital, the manner in which the change in the amount of stated

capital is effected and the amount of stated capital expressed in

dollar terms as changed by the amendment.

(b) If shares of the real estate investment trust have not been

issued and the certificate of amendment is adopted by the trust

managers, a majority of the trust managers may execute the

certificate of amendment on behalf of the real estate investment

trust.

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

Sec. 3.056. EFFECT OF FILING OF CERTIFICATE OF AMENDMENT. (a)

An amendment to a certificate of formation takes effect when the

filing of the certificate of amendment takes effect as provided

by Chapter 4.

(b) An amendment to a certificate of formation does not affect:

(1) an existing cause of action in favor of or against the

entity for which the certificate of amendment is sought;

(2) a pending suit to which the entity is a party; or

(3) an existing right of a person other than an existing owner.

brought by or against the entity in the former name of the entity

does not abate because of the name change.

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

Sec. 3.057. RIGHT TO RESTATE CERTIFICATE OF FORMATION. (a) A

filing entity may restate its certificate of formation.

(b) An amendment effected by a restated certificate of formation

must comply with Section 3.051(b).

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

Sec. 3.058. PROCEDURES TO RESTATE CERTIFICATE OF FORMATION. (a)

The procedure to adopt a restated certificate of formation is

governed by the title of this code that applies to the entity.

(b) A filing entity that restates its certificate of formation

shall sign and file, in the manner required by Chapter 4, a

restated certificate of formation and accompanying statements

complying with Section 3.059.

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

Sec. 3.059. RESTATED CERTIFICATE OF FORMATION. (a) A restated

certificate of formation must accurately state the text of the

previous certificate of formation, regardless of whether the

certificate of formation is an original, corrected, or restated

certificate, and include:

(1) each previous amendment to the certificate being restated

that is carried forward; and

(2) each new amendment to the certificate being restated.

(b) A restated certificate of formation may omit:

(1) the name and address of each organizer other than the name

and address of each general partner of a limited partnership or

trust manager of a real estate investment trust; and

(2) any other information that may be omitted under the

provisions of this code applicable to the filing entity.

amendments to the certificate of formation being restated must be

accompanied by:

(1) a statement that the restated certificate of formation

accurately states the text of the certificate of formation being

restated, as amended, restated, and corrected, except for

information omitted under Subsection (b); and

(2) any other information required by other provisions of this

code applicable to the filing entity.

(d) A restated certificate of formation that makes new

amendments to the certificate of formation being restated must:

(1) be accompanied by a statement that each new amendment has

been made in accordance with this code;

(2) identify by reference or description each added, altered, or

deleted provision;

(3) be accompanied by a statement that each amendment has been

approved in the manner required by this code and the governing

documents of the entity;

(4) be accompanied by a statement that the restated certificate

of formation:

(A) accurately states the text of the certificate of formation

being restated and each amendment to the certificate of formation

being restated that is in effect, as further amended by the

restated certificate of formation; and

(B) does not contain any other change in the certificate of

formation being restated except for information omitted under

Subsection (b); and

(5) include any other information required by the title of this

code applicable to the entity.

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

Sec. 3.060. SUPPLEMENTAL PROVISIONS FOR RESTATED CERTIFICATE OF

FORMATION FOR FOR-PROFIT CORPORATION OR PROFESSIONAL CORPORATION.

(a) In addition to the provisions authorized or required by

Section 3.059, a restated certificate of formation for a

for-profit corporation or professional corporation may update the

current number of directors and the names and addresses of the

persons serving as directors.

(b) An officer shall sign the restated certificate of formation

on behalf of the corporation. If shares of the corporation have

not been issued and the restated certificate of formation is

adopted by the board of directors, the majority of the directors

may sign the restated certificate of formation on behalf of the

corporation.

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

Amended by:

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

688, Sec. 13, eff. September 1, 2007.

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

688, Sec. 14, eff. September 1, 2007.

Sec. 3.061. SUPPLEMENTAL PROVISIONS FOR RESTATED CERTIFICATE OF

FORMATION FOR NONPROFIT CORPORATION. (a) In addition to the

provisions authorized or required by Section 3.059, a restated

certificate of formation for a nonprofit corporation may update

the current number of directors and the names and addresses of

the persons serving as directors.

(b) If the nonprofit corporation is a church in which management

is vested in the church's members under Section 22.202, and the

original certificate of formation is not required to contain a

statement to that effect, any restated certificate of formation

for the church must contain a statement to that effect in

addition to the information required by Section 3.059.

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

Sec. 3.0611. SUPPLEMENTAL PROVISIONS FOR RESTATED CERTIFICATE OF

FORMATION FOR LIMITED LIABILITY COMPANY. In addition to the

provisions authorized or required by Section 3.059, a restated

certificate of formation for a limited liability company may:

(1) if the company's certificate of formation states that the

company will have one or more managers, update the names and

addresses of the persons serving as managers; or

(2) if the certificate of formation states that the company will

not have managers, update the names and addresses of the members

of the company.

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

688, Sec. 15, eff. September 1, 2007.

Sec. 3.062. SUPPLEMENTAL PROVISIONS FOR RESTATED CERTIFICATE OF

FORMATION FOR REAL ESTATE INVESTMENT TRUST. In addition to the

provisions authorized or required by Section 3.059, a restated

certificate of formation for a real estate investment trust may

update the current number of trust managers and the names and

addresses of the persons serving as trust managers.

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

Sec. 3.063. EFFECT OF FILING OF RESTATED CERTIFICATE OF

FORMATION. (a) A restated certificate of formation takes effect

when the filing of the restated certificate of formation takes

effect as provided by Chapter 4.

(b) On the date the restated certificate of formation takes

effect, the original certificate of formation and each prior

amendment or restatement of the certificate of formation is

superseded and the restated certificate of formation is the

effective certificate of formation.

a restated certificate of formation.

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

SUBCHAPTER C. GOVERNING PERSONS AND OFFICERS

Sec. 3.101. GOVERNING AUTHORITY. Subject to the title of this

code that governs the domestic entity and the governing documents

of the domestic entity, the governing authority of a domestic

entity manages and directs the business and affairs of the

domestic entity.

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

Sec. 3.102. RIGHTS OF GOVERNING PERSONS IN CERTAIN CASES. (a)

In discharging a duty or exercising a power, a governing person,

including a governing person who is a member of a committee, may,

in good faith and with ordinary care, rely on information,

opinions, reports, or statements, including financial statements

and other financial data, concerning a domestic entity or another

person and prepared or presented by:

(1) an officer or employee of the entity;

(2) legal counsel;

(3) a certified public accountant;

(4) an investment banker;

(5) a person who the governing person reasonably believes

possesses professional expertise in the matter; or

(6) a committee of the governing authority of which the

governing person is not a member.

(b) A governing person may not in good faith rely on the

information described by Subsection (a) if the governing person

has knowledge of a matter that makes the reliance unwarranted.

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

Sec. 3.103. OFFICERS. (a) Officers of a domestic entity may be

elected or appointed in accordance with the governing documents

of the entity or by the governing authority of the entity unless

prohibited by the governing documents.

(b) An officer of an entity shall perform the duties in the

management of the entity and has the authority as provided by the

governing documents of the entity or the governing authority that

elects or appoints the officer.

an entity unless prohibited by this code or the governing

documents of the entity.

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

Sec. 3.104. REMOVAL OF OFFICERS. (a) Unless otherwise provided

by the governing documents of a domestic entity, an officer may

be removed for or without cause by the governing authority or as

provided by the governing documents of the entity. The removal of

an officer does not prejudice any contract rights of the person

removed.

(b) Election or appointment of an officer does not by itself

create contract rights.

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

Sec. 3.105. RIGHTS OF OFFICERS IN CERTAIN CASES. (a) In

discharging a duty or exercising a power, an officer of a

domestic entity may, in good faith and ordinary care, rely on

information, opinions, reports, or statements, including

financial statements and other financial data, concerning the

entity or another person and prepared or presented by:

(1) another officer or an employee of the entity;

(2) legal counsel;

(3) a certified public accountant;

(4) an investment banker; or

(5) a person who the officer reasonably believes possesses

professional expertise in the matter.

(b) An officer may not in good faith rely on the information

described by Subsection (a) if the officer has knowledge of a

matter that makes the reliance unwarranted.

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

SUBCHAPTER D. RECORDKEEPING OF FILING ENTITIES

Sec. 3.151. BOOKS AND RECORDS FOR ALL FILING ENTITIES. (a)

Each filing entity shall keep:

(1) books and records of accounts;

(2) minutes of the proceedings of the owners or members or

governing authority of the filing entity and committees of the

owners or members or governing authority of the filing entity;

(3) at its registered office or principal place of business, or

at the office of its transfer agent or registrar, a current

record of the name and mailing address of each owner or member of

the filing entity; and

(4) other books and records as required by the title of this

code governing the entity.

(b) The books, records, minutes, and ownership or membership

records of any filing entity, including those described in

Subsection (a)(4), may be in written paper form or another form

capable of being converted into written paper form within a

reasonable time.

maintained by a limited partnership or a limited liability

company except to the extent required by its governing documents.

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

Amended by:

Acts 2005, 79th Leg., Ch.

64, Sec. 8, eff. January 1, 2006.

Sec. 3.152. GOVERNING PERSON'S RIGHT OF INSPECTION. (a) A

governing person of a filing entity may examine the entity's

books and records maintained under Section 3.151 and other books

and records of the entity for a purpose reasonably related to the

governing person's service as a governing person.

(b) A court may require a filing entity to open the books and

records of the filing entity, including the books and records

maintained under Section 3.151, to permit a governing person to

inspect, make copies of, or take extracts from the books and

records on a showing by the governing person that:

(1) the person is a governing person of the entity;

(2) the person demanded to inspect the entity's books and

records;

(3) the person's purpose for inspecting the entity's books and

records is reasonably related to the person's service as a

governing person; and

(4) the entity refused the person's good faith demand to inspect

the books and records.

other proper relief in a suit to require a filing entity to open

its books and records under Subsection (b).

(d) This section does not apply to limited partnerships. Section

153.552 applies to limited partnerships.

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

Sec. 3.153. RIGHT OF EXAMINATION BY OWNER OR MEMBER. Each owner

or member of a filing entity may examine the books and records of

the filing entity maintained under Section 3.151 and other books

and records of the filing entity to the extent provided by the

governing documents of the entity and the title of this code

governing the filing entity.

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

SUBCHAPTER E. CERTIFICATES REPRESENTING OWNERSHIP INTEREST

Sec. 3.201. CERTIFICATED OR UNCERTIFICATED OWNERSHIP INTEREST;

APPLICABILITY. (a) Ownership interests in a domestic entity may

be certificated or uncertificated.

(b) The ownership interests in a for-profit corporation, real

estate investment trust, or professional corporation must be

certificated unless the governing documents of the entity or a

resolution adopted by the governing authority of the entity

states that the ownership interests are uncertificated. If a

domestic entity changes the form of its ownership interests from

certificated to uncertificated, a certificated ownership interest

subject to the change becomes an uncertificated ownership

interest only after the certificate is surrendered to the

domestic entity.

domestic entity described by Subsection (b), are uncertificated

unless this code or the governing documents of the domestic

entity state that the interests are certificated.

(d) Sections 3.202-3.205 do not apply to a partnership or a

limited liability company except to the extent that the governing

documents of the partnership or limited liability company

specify.

(e) The governing documents of a partnership or a limited

liability company may:

(1) provide that an owner's ownership interest may be evidenced

by a certificate of ownership interest issued by the entity;

(2) provide for the assignment or transfer of ownership

interests represented by certificates; and

(3) make other provisions with respect to the certificate.

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

Sec. 3.202. FORM AND VALIDITY OF CERTIFICATES; ENFORCEMENT OF

ENTITY'S RIGHTS. (a) A certificate representing the ownership

interest in a domestic entity may contain an impression of the

seal of the entity, if any. A facsimile of the entity's seal may

be printed or lithographed on the certificate.

(b) If a domestic entity is authorized to issue ownership

interests of more than one class or series, each certificate

representing ownership interests that is issued by the entity

must conspicuously state on the front or back of the certificate:

(1) the designations, preferences, limitations, and relative

rights of the ownership interests of each class or series to the

extent they have been determined and the authority of the

governing authority to make those determinations as to subsequent

series; or

(2) that the information required by Subdivision (1) is stated

in the domestic entity's governing documents and that the

domestic entity, on written request to the entity's principal

place of business or registered office, will provide a free copy

of that information to the record holder of the certificate.

the front of the certificate:

(1) that the domestic entity is organized under the laws of this

state;

(2) the name of the person to whom the certificate is issued;

(3) the number and class of ownership interests and the

designation of the series, if any, represented by the

certificate; and

(4) if the ownership interests are shares, the par value of each

share represented by the certificate, or a statement that the

shares are without par value.

(d) A certificate representing ownership interests that is

subject to a restriction, placed by or agreed to by the domestic

entity under this code, or otherwise contained in its governing

documents, on the transfer or registration of the transfer of the

ownership interests must:

(1) conspicuously state or provide a summary of the restriction

on the front of the certificate;

(2) state the restriction on the back of the certificate and

conspicuously refer to that statement on the front of the

certificate; or

(3) conspicuously state on the front or back of the certificate

that a restriction exists pursuant to a specified document and:

(A) that the domestic entity, on written request to the entity's

principal place of business, will provide a free copy of the

document to the certificate record holder; or

(B) if the document has been filed in accordance with this code,

that the document:

(i) is on file with the secretary of state or, in the case of a

real estate investment trust, with the county clerk of the county

in which the real estate investment trust's principal place of

business is located; and

(ii) contains a complete statement of the restriction.

(e) A domestic entity that fails to provide to the record holder

of a certificate within a reasonable time a document as required

by Subsection (d)(3)(A) may not enforce the entity's rights under

the restriction imposed on the certificated ownership interests.

(f) A certificate representing ownership interests may not be

issued in bearer form.

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

Amended by:

Acts 2009, 81st Leg., R.S., Ch.

84, Sec. 3, eff. September 1, 2009.

Sec. 3.203. SIGNATURE REQUIREMENT. (a) The managerial official

or officials of a domestic entity authorized by the governing

documents of the entity to sign certificated ownership interests

of the entity must sign any certificate representing an ownership

interest in the entity.

(b) A certificated ownership interest that contains the manual

or facsimile signature of a person who is no longer a managerial

official of a domestic entity when the certificate is issued may

be issued by the entity in the same manner and with the same

effect as if the person had remained a managerial official.

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

Sec. 3.204. DELIVERY REQUIREMENT. A domestic entity shall

deliver a certificate representing a certificated ownership

interest to which the owner is entitled.

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

Sec. 3.205. NOTICE FOR UNCERTIFICATED OWNERSHIP INTEREST. (a)

Except as provided by Subsection (c) and in accordance with

Chapter 8, Business & Commerce Code, after issuing or

transferring an uncertificated ownership interest, a domestic

entity shall notify the owner of the ownership interest in

writing of any information required under this subchapter to be

stated on a certificate representing the ownership interest.

(b) Except as otherwise expressly provided by law, the rights

and obligations of the owner of an uncertificated ownership

interest are the same as the rights and obligations of the owner

of a certificated ownership interest of the same class and

series.

Subsection (a) if:

(1) the required information is included in the governing

documents of the entity; and

(2) the owner of the uncertificated ownership interest is

provided with a copy of the governing documents.

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

SUBCHAPTER F. EMERGENCY GOVERNANCE

Sec. 3.251. EMERGENCY DEFINED. For purposes of this subchapter,

an emergency exists if a majority of a domestic entity's

governing persons cannot readily participate in a meeting because

of the occurrence of a catastrophic event.

Added by Acts 2009, 81st Leg., R.S., Ch.

84, Sec. 4, eff. September 1, 2009.

Sec. 3.252. PROVISIONS IN GOVERNING DOCUMENTS. (a) Except as

otherwise provided by the entity's governing documents, the

governing persons, owners, or members of a domestic entity may

adopt provisions in the entity's governing documents regarding

the management of the entity during an emergency, including

provisions:

(1) prescribing procedures for calling a meeting of the

governing persons;

(2) establishing minimum requirements for participation at the

meeting of the governing persons; and

(3) designating additional or substitute governing persons.

(b) The emergency provisions must be adopted in accordance with:

(1) the requirements of the governing documents; and

(2) the applicable provisions of this code.

Added by Acts 2009, 81st Leg., R.S., Ch.

84, Sec. 4, eff. September 1, 2009.

Sec. 3.253. EFFECT OF EMERGENCY PROVISIONS. The emergency

provisions adopted under Section 3.252 take effect only in the

event of an emergency. The emergency provisions will no longer

be effective after the emergency ends.

Added by Acts 2009, 81st Leg., R.S., Ch.

84, Sec. 4, eff. September 1, 2009.

Sec. 3.254. EFFECT OF OTHER PROVISIONS IN GOVERNING DOCUMENTS

DURING EMERGENCY. A provision of an entity's governing documents

that is consistent with the emergency provisions adopted under

Section 3.252 remains in effect during an emergency.

Added by Acts 2009, 81st Leg., R.S., Ch.

84, Sec. 4, eff. September 1, 2009.

Sec. 3.255. EFFECT OF ACTION TAKEN. An action of a domestic

entity taken in good faith in accordance with the emergency

provisions:

(1) is binding on the entity; and

(2) may not be used to impose liability on a managerial

official, employee, or agent of the entity.

Added by Acts 2009, 81st Leg., R.S., Ch.

84, Sec. 4, eff. September 1, 2009.

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Texas Codes and Statutes

CHAPTER 3. FORMATION AND GOVERNANCE