2009 Legislative Update:

September 1, 2009—New and Amended Filing Provisions & Requirements

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2009 Legislative Update:

September 1, 2009—New and Amended Filing Provisions & Requirements

Senate Bill 1442, which was passed by the 81st Legislature, becomes effective September 1, 2009. SB 1442 made both technical and substantive changes to the Texas Business Organizations Code (BOC), Texas Business & Commerce Code (B&CC), Texas Professional Association Act (TPAA), and Texas Revised Limited Partnership Act (TRLPA). This update summarizes the legislative changes enacted by SB 1442 that have an impact on filings made with the Corporations Section on and after September 1, 2009.

Tax Clearances & Certificates:Amends BOC and prior law to conform to the amendments made to Chapter 171 of the Tax Code in 2007 which subjected limited partnerships, limited liability partnerships and professional associations to franchise tax. Applies same requirements to obtain tax certificates and tax clearance letters that are currently imposed on corporations and limited liability companies.

Certificate that all taxes under Title 2, Tax Code have been paid. (Comptroller Form 05-305)

Required When Filing:

  • A Dissolution of a Professional Association Governed by TPAA (SOS Form 604)
  • A Cancellation of a Limited Partnership under TRLPA (SOS Form 607)
  • A Certificate of Termination under the BOC (SOS Form 651) (Required for all entities.)
  • A Certificate of Withdrawal of a Foreign Registration (SOS Form 608) (Required for all entities, other than nonprofit corporations.)
  • A Certificate of Withdrawal of a Foreign LLP Registration (SOS Form 609)
  • A Certificate of Withdrawal of a Domestic LLP Registration (SOS Form 704)

Tax Clearance Letter from Comptroller stating that all franchise taxes have been paid.

ProvideWhen Reinstating:

  • A non-BOC corporation, limited liability company, or professional association that has been involuntarily dissolved (SOS Form 814)
  • A domestic filing entity, other than a nonprofit corporation, that has been voluntarily or involuntarily terminated under BOC (SOS Form 811)
  • A foreign filing entity, other than a nonprofit corporation, that has had its registration revoked for non-tax reasons (SOS Form 814 and Form 811).
  • A limited partnership that has been involuntarily canceled/terminated/revoked for failing to file a periodic report under the TRLPA or the BOC.

Required Amendments to Foreign LP Registration:SB 1442 amends Section 9.009 and imposes the same requirements on foreign limited partnerships that are currently imposed on domestic limited partnerships by requiring a foreign limited partnership to amend its registration to reflect:

(1)the admission of a new general partner;

(2)the withdrawal of a general partner; and

(3)a change in the name of a general partner stated in its application for registration.

SOS Form 412 has been revised; the revised form may be used to amend the registration of a foreign LP registered under the BOC orTRLPA. We also will accept amendments to the registration of a foreign LP to reflect the changes to general partnership information when submitted on Form 406, regardless of the revision date. A person submitting an amendment on behalf of a foreign LP may use the “Other Amendments to Registration” section of Form 406 to reflect the changes mandated by Section 9.009 of the BOC.

Execution Requirements for Corrections:Section 4.101(b) of the BOC was amended to permit a certificate of correction to be signed by a person authorized by the BOC to sign the filing instrument to be corrected. Current provisions required that any correction be made by an officer or other governing person. This amendment now permits the organizer of a domestic entity to execute and submit a certificate of correction to correct a drafting error found in a certificate of formation.

Conversion and Continuance:SB 1442 provides for a new type of conversion transaction when the converted or converting entity is a non-United States entity. (BOC §§ 1.002(56-a) & (56-b), 10.1025, 10.109, & 10.154)

A converting entity may elect to continue its existence in its current organizational form and jurisdiction of formation after conversion if:

(1)adopted and approved as part of the plan of conversion;

(2)permitted by or not prohibited by or inconsistent with the laws of the applicable non-United States jurisdiction; and

(3)the converted entity is a domestic entity or non-United States entity of the same organizational form.

There is no SOS form designed to cover this “dual citizenship” conversion transaction. When submitting a conversion that makes this election, the document must be identified as a “Certificate of Conversion and Continuance.”

Automatic Withdrawal of Registration on Conversion:SB 1442 amends the BOC to provide for the automatic withdrawal of the registration of a foreign filing entity or foreign LLP when the registered foreign entity files a conversion converting it to a domestic filing entity. The automatic withdrawal of the registration is effective on the effectiveness of the conversion. (New §9.012)

Reminder: A foreign entity of one type that converts to a foreign entity of the same or different type may transfer its registration to the converted entity by amending the registration to reflect the conversion. (SOS Form 422)

Domestic Series LLCs:Texas joins Delaware (and a few other jurisdictions) in authorizing the formation of a LLC that may provide in its governing documents for the establishment of a series of members, managers, membership interests, or assets that have separate rights, assets, obligations, liabilities, and different business purposes or investment objectives. The series LLC provides a means of isolating the assets of one series from the liabilities and obligations of a different series or of the LLC generally. The Texas provisions are similar to provisions found in Delaware law and are found in new Subchapter M of Chapter 101 of the BOC. Pursuant to Section 101.602(b), the benefits of a series LLC apply if:

(1)The certificate of formation of the LLC contains a specific notice of the limitations provided by Section 101.602(a);

(2)The company agreement specifically states the effect of the limitations provided by Section 101.602(a); and

(3)Separate records are maintained for the separate assets of each series.

The secretary of state will not have a separate form for formation of a Texas series LLC. A person choosing to use Form 205 to form a series LLC may add the additional required information by using the “Supplemental Provisions/Information” section of the form.

No filing action is required by the LLC on the establishment of a series. Consequently, the records of the secretary of state will not reveal whether theLLC has, in fact, established a series. However, if any established series conducts business in Texas under a name that differs from the legal name of the LLC, the LLC should file an assumed name certificate in compliance with Chapter 71 of the B&CC.

The majority of states do not authorize series LLCs. If a Texas series LLC will be transacting business outside of Texas, you should determine the applicable registration requirements in the other jurisdiction and seek legal advice regarding the treatment of a series LLC in that jurisdiction.

Foreign Series LLCs:SB 1442 amended Chapter 9 of the BOC to require an application for registration made by a LLC that is a foreign series LLC to contain supplemental information. This supplemental information is found in new Section 9.005 and provides notice that the foreign LLC is a series LLC.

A foreignseries LLC formed under the laws of another jurisdiction that is treated as a single entity in its jurisdiction of organization will be treated as a single legal entity for registration purposes. The LLC itself, rather than the individual series of the LLC, should register as the legal entity transacting business in Texas. A separate application for registration form for a foreign series LLC will be released shortly after September 1, 2009. However, if you should have a foreign series LLC needing to register before publication of this new form, use SOS Form 304 and include the additional content required under Section 9.005in the “Supplemental Provisions/Information” section of the form.

Assumed Name Certificates:SB 1442 amends Chapter 71 of the B&CC, which became effective on April 1, 2009, to authorize the secretary of state to accept assumed name filings by any foreign filing entity required to register with the secretary of state pursuant to Chapter 9 of the BOC. This change permits a foreign REIT and foreign statutory trust to file an assumed name certificate with the secretary of state in the same manner as a foreign corporation, LLC or LP. Other changes include the simplification of county filing requirements and the elimination of certain redundant information from the certificate. The changes to the assumed name certificate reduced the information/content required; consequently, the secretary of state will accept an assumed name filingsubmitted on SOS Form 503 with a revision date earlier than September of 2009.

Railroads:SB 1442 eliminates the specific prohibition against the formation of a domestic entity for the purpose of operating a railroad and the specific limitations of purposes for railways. These changes reconcile the BOC with changes made by the 80th Legislature to the prior law governing the formation of railroad companies in Texas (Title 112, Texas Civil Statues).

Evidence of Filing & Certificates of Fact:SB 1442 clarifies that the secretary of state may provide a written acknowledgment of filing by issuing a letter of acknowledgment, a certificate of filing, or both. In addition, SB 1442 clarifies that a certificate issued by the secretary of state may be relied on to determine that a domestic entity is in existence and that a foreign entity is registered with the secretary of state and authorized to transact business.

List of Revised Forms Now Posted:

  • Form 306 (Application for Registration of a Foreign Limited Partnership)
  • Form403 (Certificate of Correction)
  • Form 406 (Amendment to Foreign Registration)
  • Form 412 (Amended Registration—Foreign Limited Partnership)
  • Form 503 (Assumed Name Certificate)
  • Form 604 (TPAA—Professional Association Dissolution)
  • Form 607 (TRLPA—Cancellation of Limited Partnership)
  • Form 608 (Certificate of Withdrawal of Foreign Registration)
  • Form 609 (Withdrawal of Foreign LLP Registration)
  • Form 651 (Certificate of Termination of a Domestic Entity)
  • Form 704 (Withdrawal of Texas LLP Registration)
  • Form 811 (Certificate of Reinstatement—BOC Entity: Non-Tax Reasons)