Texas Business Organizations Code 21.168 – Stock Rights, Options, and Convertible Indebtedness
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(a) Except as provided by the corporation‘s certificate of formation and regardless of whether done in connection with the issuance and sale of any other share or security of the corporation, a corporation may create and issue:
(1) rights or options that entitle the holders to purchase or receive from the corporation shares of any class or series or other securities; and
(2) indebtedness convertible into shares of any class or series of the corporation or other securities of the corporation.
(b) A right, option, or indebtedness described by this section shall be evidenced in the manner approved by the board of directors.
Terms Used In Texas Business Organizations Code 21.168
- Certificate of formation: means :
(A) the document required to be filed with the filing officer under Chapter 3 to form a filing entity; and
(B) if appropriate, a restated certificate of formation and all amendments of an original or restated certificate of formation. See Texas Business Organizations Code 1.002 - Conversion: means :
(A) the continuance of a domestic entity as a non-code organization of any type;
(B) the continuance of a non-code organization as a domestic entity of any type;
(C) the continuance of a domestic entity of one type as a domestic entity of another type;
(D) the continuance of a domestic entity of one type as a foreign entity of the same type that may be treated as a domestication, continuance, or transfer transaction under the laws of the jurisdiction of formation of the foreign entity; or
(E) the continuance of a foreign entity of one type as a domestic entity of the same type that may be treated as a domestication, continuance, or transfer transaction under the laws of the jurisdiction of formation of the foreign entity. See Texas Business Organizations Code 1.002 - Corporation: A legal entity owned by the holders of shares of stock that have been issued, and that can own, receive, and transfer property, and carry on business in its own name.
- Corporation: means an entity governed as a corporation under Title 2 or 7. See Texas Business Organizations Code 1.002
- Dependent: A person dependent for support upon another.
- Person: means an individual or a corporation, partnership, limited liability company, business trust, trust, association, or other organization, estate, government or governmental subdivision or agency, or other legal entity, or a protected series or registered series of a domestic limited liability company or foreign entity. See Texas Business Organizations Code 1.002
- Share: means a unit into which the ownership interest in a for-profit corporation, professional corporation, real estate investment trust, or professional association is divided, regardless of whether the share is certificated or uncertificated. See Texas Business Organizations Code 1.002
(c) Subject to the certificate of formation, a right or option described by this section must state the terms and conditions on which, the time within which, and any consideration, including a formula by which the consideration may be determined, for which the shares may be purchased or received from the corporation on the exercise of the right or option.
(d) Subject to the certificate of formation, convertible indebtedness described by this section must state the terms and conditions on which, the time within which, and the conversion ratio, which may be stated as a formula by which the conversion ratio may be determined, at which the indebtedness may be converted into shares. The formula may include or be made dependent on facts ascertainable outside the formula, if the manner in which those facts operate on the formula is clearly or expressly provided by the formula or in the authorization approving the formula.
(e) An authorization of the board of directors may delegate to a person or persons, in addition to the board of directors, the authority to enter into one or more transactions to issue rights or options. For a transaction entered into by a person or persons to whom authority was delegated under this subsection, the rights or options may be issued in the number, at the time, and for the consideration as the person or persons may determine if that authorization of the board of directors:
(1) states:
(A) the maximum number of rights or options, and the maximum number of shares issuable on exercise of those rights or options, that may be issued under the authorization;
(B) the period of time during which the rights or options, and the shares issuable on exercise of those rights or options, may be issued; and
(C) the minimum amount of consideration:
(i) if any, for which the rights or options may be issued; and
(ii) for the shares issuable on exercise of the rights or options; and
(2) does not permit the person or persons to whom authority was delegated to issue rights, options, or shares to that person or those persons.
(f) A provision of a right or option or an authorization of a right or option under this section may depend on a fact ascertainable outside of the right, option, or authorization, if the manner in which the fact operates on the right, option, or authorization is clearly and expressly set forth in the right, option, or authorization. In this subsection, “fact” includes the occurrence of any event, including a determination or action by any person or persons.
(g) If the authorization of the board of directors delegates to a person or persons the authority to enter into a transaction to issue rights or options under Subsection (e), the provisions of the authorization under Subsection (e)(1) may not depend on a determination or action by the person or persons to whom authority was delegated.
(h) In this section and notwithstanding § 1.002, “person” includes a committee of the board of directors.