Title BO, Business Organizations Code

Sec. 21.552. STANDING TO BRING PROCEEDING. (a) Subject to Subsection (b), a shareholder may not institute or maintain a derivative proceeding unless: (1) the shareholder: (A) was a shareholder of the corporation at the time of the act or omission complained of; or (B) became a sh…

Sec. 21.553. DEMAND. (a) A shareholder may not institute a derivative proceeding until the 91st day after the date a written demand is filed with the corporation stating with particularity the act, omission, or other matter that is the subject of the claim or challenge and reques…

Sec. 21.554. DETERMINATION BY DIRECTORS OR INDEPENDENT PERSONS. (a) A determination of how to proceed on allegations made in a demand or petition relating to a derivative proceeding must be made by an affirmative vote of the majority of: (1) all independent and disinterested dire…

Sec. 21.555. STAY OF PROCEEDING. (a) If the corporation that is the subject of a derivative proceeding commences an inquiry into the allegations made in a demand or petition and the person or group of persons described by Section 21.554 is conducting an active review of the alleg…

Sec. 21.556. DISCOVERY. (a) If a corporation proposes to dismiss a derivative proceeding under Section 21.558, discovery by a shareholder after the filing of the derivative proceeding in accordance with this subchapter shall be limited to: (1) facts relating to whether the person…

Sec. 21.557. TOLLING OF STATUTE OF LIMITATIONS. A written demand filed with the corporation under Section 21.553 tolls the statute of limitations on the claim on which demand is made until the later of: (1) the 31st day after the expiration of any waiting period under Section 21.…

Sec. 21.558. DISMISSAL OF DERIVATIVE PROCEEDING. (a) A court, sitting in equity as the finder of fact, shall dismiss a derivative proceeding on a motion by the corporation if the person or group of persons described by Section 21.554 determines in good faith, after conducting a r…

Sec. 21.559. ALLEGATIONS AFTER DEMAND REJECTED. If a derivative proceeding is instituted after a demand is rejected, the petition must allege with particularity facts that establish that the rejection was not made in accordance with the requirements and standards under Sections 2…

Sec. 21.560. DISCONTINUANCE OR SETTLEMENT. (a) A derivative proceeding may not be discontinued or settled without court approval. (b) The court shall direct that notice be given to the affected shareholders if the court determines that a proposed discontinuance or settlement may …

Sec. 21.561. PAYMENT OF EXPENSES. (a) In this section, "expenses" means reasonable expenses incurred by a party in a derivative proceeding, including: (1) attorney's fees; (2) costs in pursuing an investigation of the matter that was the subject of the derivative proceeding; or (…

Sec. 21.562. APPLICATION TO FOREIGN CORPORATIONS. (a) In a derivative proceeding brought in the right of a foreign corporation, the matters covered by this subchapter are governed by the laws of the jurisdiction of formation of the foreign corporation, except for Sections 21.555,…

Sec. 21.563. CLOSELY HELD CORPORATION. (a) In this section, "closely held corporation" means a corporation that has: (1) fewer than 35 shareholders; and (2) no shares listed on a national securities exchange or regularly quoted in an over-the-counter market by one or more members…

Sec. 21.601. DEFINITIONS. In this subchapter: (1) "Issuing public corporation" means a domestic corporation that has: (A) 100 or more shareholders of record as shown by the share transfer records of the corporation; (B) a class or series of the corporation's voting shares registe…

Sec. 21.602. AFFILIATED SHAREHOLDER. (a) For purposes of this subchapter, a person, other than the issuing public corporation or a wholly owned subsidiary of the issuing public corporation, is an affiliated shareholder if the person: (1) is the beneficial owner of 20 percent or m…

Sec. 21.603. BENEFICIAL OWNER OF SHARES OR OTHER SECURITIES. (a) For purposes of this subchapter, a person is a beneficial owner of shares or other securities if the person individually, or through an affiliate or associate, directly or indirectly beneficially owns the shares or …

Sec. 21.604. BUSINESS COMBINATION. A business combination is: (1) a merger, share exchange, or conversion of an issuing public corporation or a subsidiary with: (A) an affiliated shareholder; (B) a foreign or domestic corporation or other entity that is, or after the merger, shar…

Sec. 21.605. CONTROL. (a) For purposes of this subchapter, a person has control of another person if the person has possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of the other person, through the ownership of equit…

Sec. 21.606. THREE-YEAR MORATORIUM ON CERTAIN BUSINESS COMBINATIONS. An issuing public corporation may not, directly or indirectly, enter into or engage in a business combination with an affiliated shareholder, or any affiliate or associate of the affiliated shareholder, during t…

Sec. 21.607. APPLICATION OF MORATORIUM. Section 21.606 does not apply to: (1) a business combination of an issuing public corporation if: (A) the original articles of incorporation or certificate of formation, as applicable, or the original bylaws of the corporation contain a pro…

Sec. 21.608. EFFECT ON OTHER ACTIONS. (a) This subchapter does not affect, directly or indirectly, the validity of another action by the board of directors of an issuing public corporation. (b) This subchapter does not preclude the board of directors of an issuing public corporat…

Sec. 21.609. CONFLICTING PROVISIONS. If this subchapter conflicts with another provision of this code, this subchapter controls. Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.

Sec. 21.610. CHANGE IN VOTING REQUIREMENTS. The affirmative vote or concurrence of shareholders required for approval of an action that is required to be submitted to a vote of the shareholders under this subchapter may be increased but not decreased under Section 21.365. Acts 20…

Sec. 21.651. DEFINITION. In this subchapter, "investment company" means a corporation registered as an open-end company under the Investment Company Act. Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.

Sec. 21.652. ESTABLISHING CLASS OR SERIES OF SHARES; CHANGE IN NUMBER OF SHARES. (a) In addition to the actions the board may undertake under Subchapters D, E, and F, the board of directors of an investment company may: (1) establish classes of shares and series of unissued share…

Sec. 21.653. REQUIRED STATEMENT RELATING TO SHARES. (a) Before the first issuance of shares of a class or series established or increased or decreased by resolution adopted by the board of directors of an investment company under Section 21.652, and to delete from the investment …

Sec. 21.654. TERM OF OFFICE OF DIRECTORS. Unless the director resigns or is removed in accordance with the certificate of formation or bylaws of the investment company, a director of an investment company shall serve as director for the term for which the director is elected and …

Sec. 21.655. MEETINGS OF SHAREHOLDERS. (a) If provided by the certificate of formation or bylaws of an investment company, the investment company is not required to hold an annual meeting of shareholders or elect directors in a year in which an election of directors is not requir…

Sec. 21.701. DEFINITIONS. In this subchapter and Subchapter P: (1) "Close corporation" means a domestic corporation formed under this subchapter or governed by this subchapter because of Section 21.705, 21.706, or 21.707. (2) "Close corporation provision" means a provision in the…

Sec. 21.702. APPLICABILITY OF SUBCHAPTER. (a) This subchapter applies only to a close corporation. (b) This chapter applies to a close corporation to the extent not inconsistent with this subchapter. Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.

Sec. 21.703. FORMATION OF CLOSE CORPORATION. A close corporation shall be formed in accordance with Chapter 3. Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.

Sec. 21.704. BYLAWS OF CLOSE CORPORATION. (a) A close corporation does not need to adopt bylaws if provisions required by law to be contained in the bylaws are contained in the certificate of formation or a shareholders' agreement. (b) A close corporation that does not have bylaw…

Sec. 21.705. ADOPTION OF AMENDMENT FOR CLOSE CORPORATION STATUS. (a) An ordinary corporation may become a close corporation by amending its certificate of formation in accordance with Chapter 3 to conform with Section 3.008. (b) An amendment adopting close corporation status must…

Sec. 21.706. ADOPTION OF CLOSE CORPORATION STATUS THROUGH MERGER, EXCHANGE, OR CONVERSION. (a) A surviving or new corporation resulting from a merger or conversion or a corporation that acquires a corporation under an exchange under Chapter 10 may become a close corporation if, a…

Sec. 21.707. EXISTING CLOSE CORPORATION. (a) This section applies to an existing corporation that elected to become a close corporation before the mandatory application date of this code and has not terminated that status. (b) A close corporation existing before the mandatory app…

Sec. 21.708. TERMINATION OF CLOSE CORPORATION STATUS. A close corporation may terminate its status as a close corporation by: (1) filing a statement terminating close corporation status under Section 21.709; (2) amending the close corporation's certificate of formation under Chap…

Sec. 21.709. STATEMENT TERMINATING CLOSE CORPORATION STATUS; FILING; NOTICE. (a) If a close corporation provision specifies a time or event requiring the termination of close corporation status, regardless of whether the provision is identifiable by a person dealing with the clos…

Sec. 21.710. EFFECT OF TERMINATION OF CLOSE CORPORATION STATUS. (a) A close corporation that terminates its status as a close corporation and becomes an ordinary corporation is subject to this chapter as if the corporation had not elected close corporation status under this subch…

Sec. 21.711. SHAREHOLDERS' MEETING TO ELECT DIRECTORS. A shareholders' meeting required by Section 21.710(c)(2) shall be promptly called after the termination of close corporation status takes effect. If a meeting is not called before the 31st day after the date the termination t…

Sec. 21.712. TERM OF OFFICE OF DIRECTORS. A director succeeding to the management of the corporation under Section 21.710(c) shall have a term of office as set forth in Section 21.408. Until a board of directors is elected, the shareholders of the corporation shall act as the cor…

Sec. 21.713. MANAGEMENT. A close corporation shall be managed: (1) by a board of directors in the same manner an ordinary corporation would be managed under this chapter; or (2) in the manner provided by the close corporation's certificate of formation or by a shareholders' agree…

Sec. 21.714. SHAREHOLDERS' AGREEMENT. (a) The shareholders of a close corporation may enter into one or more shareholders' agreements. (b) The business and affairs of a close corporation or the relationships among the shareholders that may be regulated by a shareholders' agreemen…

Sec. 21.715. EXECUTION OF SHAREHOLDERS' AGREEMENT. A shareholders' agreement shall be executed: (1) in the case of an existing close corporation, by each shareholder at the time of execution, regardless of whether the shareholder has voting power; (2) in the case of an existing o…

Sec. 21.716. ADOPTION OF AMENDMENT OF SHAREHOLDERS' AGREEMENT. Unless otherwise provided by a shareholders' agreement, an amendment to the shareholders' agreement of a close corporation may be adopted only by the written consent of each person who would be required to execute the…

Sec. 21.717. DELIVERY OF SHAREHOLDERS' AGREEMENT. (a) The close corporation shall deliver a complete copy of a shareholders' agreement to: (1) each person who is bound by the shareholders' agreement; (2) each person who is or will become a shareholder in the close corporation as …

Sec. 21.718. STATEMENT OF OPERATION AS CLOSE CORPORATION. (a) On or after the formation of a close corporation or adoption of close corporation status, a close corporation that begins to conduct its business and affairs under a shareholders' agreement that has become effective sh…

Sec. 21.719. VALIDITY AND ENFORCEABILITY OF SHAREHOLDERS' AGREEMENT. (a) A shareholders' agreement executed in accordance with Section 21.715 is valid and enforceable notwithstanding: (1) the elimination of a board of directors; (2) any restriction imposed on the discretion or po…