2009 Texas Code
BUSINESS ORGANIZATIONS CODE
TITLE 1. GENERAL PROVISIONS
CHAPTER 11. WINDING UP AND TERMINATION OF DOMESTIC ENTITY
BUSINESS ORGANIZATIONS CODE
TITLE 1. GENERAL PROVISIONS
CHAPTER 11. WINDING UP AND TERMINATION OF DOMESTIC ENTITY
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 11.001. DEFINITIONS. In this chapter:
(1) "Claim" means a right to payment, damages, or property,
whether liquidated or unliquidated, accrued or contingent,
matured or unmatured.
(2) "Event requiring a winding up" or "event requiring winding
up" means an event specified by Section 11.051.
(3) "Existing claim" with respect to an entity means:
(A) a claim against the entity that existed before the entity's
termination and is not barred by limitations; or
(B) a contractual obligation incurred after termination.
(4) "Terminated entity" means a domestic entity the existence of
which has been:
(A) terminated in a manner authorized or required by this code,
unless the entity has been reinstated in the manner provided by
this code; or
(B) forfeited pursuant to the Tax Code, unless the forfeiture
has been set aside.
(5) "Terminated filing entity" means a terminated entity that is
a filing entity.
(6) "Voluntary decision to wind up" means the determination to
wind up a domestic entity made by the domestic entity or the
owners, members, or governing authority of the domestic entity in
the manner specified by:
(A) the title of this code governing the domestic entity; or
(B) if applicable to the domestic entity, Section 11.057(a) or
(b) or 11.058(a).
(7) "Voluntary winding up" means winding up as a result of a
voluntary decision to wind up.
(8) "Winding up" means the process of winding up the business
and affairs of a domestic entity as a result of the occurrence of
an event requiring winding up.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
688, Sec. 60, eff. September 1, 2007.
SUBCHAPTER B. WINDING UP OF DOMESTIC ENTITY
Sec. 11.051. EVENT REQUIRING WINDING UP OF DOMESTIC ENTITY.
Winding up of a domestic entity is required on:
(1) the expiration of any period of duration specified in the
domestic entity's governing documents;
(2) a voluntary decision to wind up the domestic entity;
(3) an event specified in the governing documents of the
domestic entity requiring the winding up, dissolution, or
termination of the domestic entity, other than an event specified
in another subdivision of this section;
(4) an event specified in other sections of this code requiring
the winding up or termination of the domestic entity, other than
an event specified in another subdivision of this section; or
(5) a decree by a court requiring the winding up, dissolution,
or termination of the domestic entity, rendered under this code
or other law.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
688, Sec. 61, eff. September 1, 2007.
Sec. 11.052. WINDING UP PROCEDURES. (a) Except as provided by
the title of this code governing the domestic entity, on the
occurrence of an event requiring winding up of a domestic entity,
unless the event requiring winding up is revoked under Section
11.151 or canceled under Section 11.152, the owners, members,
managerial officials, or other persons specified in the title of
this code governing the domestic entity shall, as soon as
reasonably practicable, wind up the business and affairs of the
domestic entity. The domestic entity shall:
(1) cease to carry on its business, except to the extent
necessary to wind up its business;
(2) if the domestic entity is not a partnership, send a written
notice of the winding up to each known claimant against the
domestic entity;
(3) collect and sell its property to the extent the property is
not to be distributed in kind to the domestic entity's owners or
members; and
(4) perform any other act required to wind up its business and
affairs.
(b) During the winding up process, the domestic entity may
prosecute or defend a civil, criminal, or administrative action.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 11.053. PROPERTY APPLIED TO DISCHARGE LIABILITIES AND
OBLIGATIONS. (a) Except as provided by Subsection (b) and the
title of this code governing the domestic entity, a domestic
entity in the process of winding up shall apply and distribute
its property to discharge, or make adequate provision for the
discharge of, all of the domestic entity's liabilities and
obligations.
(b) Except as provided by the title of this code governing the
domestic entity, if the property of a domestic entity is not
sufficient to discharge all of the domestic entity's liabilities
and obligations, the domestic entity shall:
(1) apply its property, to the extent possible, to the just and
equitable discharge of its liabilities and obligations, including
liabilities and obligations owed to owners or members, other than
for distributions; or
(2) make adequate provision for the application of the property
described by Subdivision (1).
(c) Except as provided by the title of this code governing the
domestic entity, after a domestic entity has discharged, or made
adequate provision for the discharge of, all of its liabilities
and obligations, the domestic entity shall distribute the
remainder of its property, in cash or in kind, to the domestic
entity's owners according to their respective rights and
interests.
(d) A domestic entity may continue its business wholly or
partly, including delaying the disposition of property of the
domestic entity, for the limited period necessary to avoid
unreasonable loss of the entity's property or business.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 11.054. COURT SUPERVISION OF WINDING UP PROCESS. Subject
to the other provisions of this code, on application of a
domestic entity or an owner or member of a domestic entity, a
court may:
(1) supervise the winding up of the domestic entity;
(2) appoint a person to carry out the winding up of the domestic
entity; and
(3) make any other order, direction, or inquiry that the
circumstances may require.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 11.055. COURT ACTION OR PROCEEDING DURING WINDING UP.
During the winding up process, a domestic entity may continue
prosecuting or defending a court action or proceeding by or
against the domestic entity.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 11.056. SUPPLEMENTAL PROVISIONS FOR LIMITED LIABILITY
COMPANY. (a) The termination of the continued membership of the
last remaining member of a domestic limited liability company is
an event requiring winding up under Section 11.051(4) unless, not
later than the 90th day after the date of the termination, the
legal representative or successor of the last remaining member
agrees:
(1) to continue the company; and
(2) to become a member of the company effective as of the date
of the termination or to designate another person who agrees to
become a member of the company effective as of the date of the
termination.
(b) The event requiring winding up specified in Subsection (a)
may be canceled in accordance with Sections 11.152(a) and
101.552(c).
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
688, Sec. 62, eff. September 1, 2007.
Sec. 11.057. SUPPLEMENTAL PROVISIONS FOR DOMESTIC GENERAL
PARTNERSHIP. (a) Unless otherwise provided by the partnership
agreement, a voluntary decision to wind up a domestic general
partnership, other than a partnership described by Subsection
(b), requires the express will of a majority-in-interest of the
partners who have not assigned their interests. A voluntary
decision to wind up a partnership under this subsection may be
revoked in accordance with Sections 11.151 and 152.709(e).
(b) Unless otherwise provided by the partnership agreement, a
voluntary decision to wind up a domestic general partnership that
has a period of duration or is for a particular undertaking, or
in which the partnership agreement provides for the winding up of
the partnership on occurrence of a specified event, requires the
express will of all of the partners. A voluntary decision to
wind up a partnership under this subsection may be revoked in
accordance with Sections 11.151 and 152.709(d).
(c) An event requiring the winding up of a domestic general
partnership under Section 11.051(4) includes the following:
(1) in a general partnership for a particular undertaking, the
completion of the undertaking, unless otherwise provided by the
partnership agreement;
(2) an event that makes it illegal for all or substantially all
of the partnership business to be continued, but a cure of
illegality before the 91st day after the date of notice to the
general partnership of the event is effective retroactively to
the date of the event for purposes of this subsection; and
(3) the sale of all or substantially all of the property of the
general partnership outside the ordinary course of business,
unless otherwise provided by the partnership agreement.
(d) In addition to the events specified by Subsection (c),
unless otherwise provided by the partnership agreement, if a
domestic general partnership does not have a period of duration,
is not for a particular undertaking, and is not required under
its partnership agreement to wind up the partnership on
occurrence of a specified event, an event requiring winding up of
the partnership under Section 11.051(4) occurs on the 60th day
after the date on which the partnership receives notice of a
request for winding up the partnership from a partner, other than
a partner who has agreed not to withdraw, or a later date as
specified by the request, unless a majority-in-interest of the
partners deny the request for winding up or agree to continue the
partnership. The continuation of the business by the other
partners or by those who habitually acted in the business before
the request, other than the partner making the request, without
any settlement or liquidation of the partnership business, is
prima facie evidence of an agreement to continue the partnership
under this subsection.
(e) An event requiring winding up specified in Subsection
(c)(1), (c)(3), or (d) may be canceled in accordance with
Sections 11.152 and 152.709.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
688, Sec. 63, eff. September 1, 2007.
Sec. 11.058. SUPPLEMENTAL PROVISION FOR LIMITED PARTNERSHIP.
(a) A voluntary decision to wind up a domestic limited
partnership requires the written consent of all partners in the
limited partnership unless otherwise provided by the partnership
agreement. The voluntary decision to wind up may be revoked in
accordance with Sections 11.151 and 153.501(d).
(b) An event of withdrawal of a general partner of a domestic
limited partnership is an event requiring winding up under
Section 11.051(4) unless otherwise provided by the partnership
agreement. The event requiring winding up specified in this
subsection may be canceled in accordance with Sections 11.152(a)
and 153.501(b).
(c) An event requiring winding up of a limited partnership under
Section 11.051(4) includes when there are no limited partners in
the limited partnership. The event requiring winding up
specified in this subsection may be canceled in accordance with
Sections 11.152(a) and 153.501(e).
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
688, Sec. 64, eff. September 1, 2007.
Sec. 11.059. SUPPLEMENTAL PROVISIONS FOR CORPORATIONS. For
purposes of Section 11.051(3), the event requiring the winding
up, dissolution, or termination of a domestic corporation must be
specified in:
(1) the certificate of formation of the corporation; or
(2) a bylaw of the corporation adopted by the owners or members
of the corporation in the same manner as an amendment to the
certificate of formation 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. 65, eff. September 1, 2007.
SUBCHAPTER C. TERMINATION OF DOMESTIC ENTITY
Sec. 11.101. CERTIFICATE OF TERMINATION FOR FILING ENTITY. (a)
On completion of the winding up process under Subchapter B, a
filing entity must file a certificate of termination in
accordance with Chapter 4.
(b) A certificate from the comptroller that all taxes
administered by the comptroller under Title 2, Tax Code, have
been paid must be filed with the certificate of termination if
the filing entity is a taxable entity under Chapter 171, Tax
Code, other than a nonprofit corporation.
(c) The certificate of termination must contain:
(1) the name of the filing entity;
(2) the name and address of each of the filing entity's
governing persons;
(3) the entity's file number assigned by the secretary of state,
unless the entity is a real estate investment trust;
(4) the nature of the event requiring winding up;
(5) a statement that the filing entity has complied with the
provisions of this code governing its winding up; and
(6) any other information required by this code to be included
in the certificate of termination for the filing entity.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Amended by:
Acts 2009, 81st Leg., R.S., Ch.
84, Sec. 22, eff. September 1, 2009.
Sec. 11.102. EFFECTIVENESS OF TERMINATION OF FILING ENTITY.
Except as otherwise provided by this chapter, the existence of a
filing entity terminates on the filing of a certificate of
termination with the filing officer.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 11.103. EFFECTIVENESS OF TERMINATION OF NONFILING ENTITY.
Except as otherwise provided by this chapter, the existence of a
nonfiling entity terminates on the completion of the winding up
of its business and affairs. Notice of the termination must be
provided by the nonfiling entity in the manner provided in the
governing documents of the nonfiling entity if notice of
termination is required under the governing documents.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 11.104. ACTION BY SECRETARY OF STATE. The secretary of
state shall remove from its active records a domestic filing
entity whose period of duration specified in its certificate of
formation has expired when the secretary of state determines
that:
(1) the entity has failed to file a certificate of termination
in accordance with Section 11.101; and
(2) the entity has failed to file an amendment to extend its
period of duration in accordance with Section 11.152.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
688, Sec. 66, eff. September 1, 2007.
Sec. 11.105. SUPPLEMENTAL INFORMATION REQUIRED BY CERTIFICATE OF
TERMINATION OF NONPROFIT CORPORATION. (a) In addition to the
information required by Section 11.101, the certificate of
termination filed by a nonprofit corporation that has completed
its winding up process must contain a statement that:
(1) any property of the nonprofit corporation has been
transferred, conveyed, applied, or distributed in accordance with
this chapter and Chapter 22; and
(2) there is no suit pending against the nonprofit corporation
or adequate provision has been made for the satisfaction of any
judgment, order, or decree that may be entered against the
nonprofit corporation in a pending suit.
(b) In addition to the statements required by Subsection (a), if
the nonprofit corporation received and held property permitted to
be used only for charitable, religious, eleemosynary, benevolent,
educational, or similar purposes, but the nonprofit corporation
did not hold the property on a condition requiring return,
transfer, or conveyance because of the winding up and
termination, the certificate of termination must include a
statement that distribution of that property has been effected in
accordance with a plan of distribution adopted in compliance with
this code for the distribution of that property.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
SUBCHAPTER D. REVOCATION AND CONTINUATION
Sec. 11.151. REVOCATION OF VOLUNTARY WINDING UP. (a) Before
the termination of the existence of a domestic entity takes
effect, the domestic entity may revoke a voluntary decision to
wind up the entity by approval of the revocation in the manner
specified in the title of this code governing the entity.
(b) A domestic entity may continue its business following the
revocation of a voluntary decision to wind up under Subsection
(a).
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 11.152. CONTINUATION OF BUSINESS WITHOUT WINDING UP. (a)
Subject to Subsections (c) and (d), a domestic entity to which an
event requiring the winding up of the entity occurs as specified
by Section 11.051(3) or (4) may cancel the event requiring
winding up in the manner specified in the title of this code
governing the domestic entity not later than the first
anniversary of the date of the event requiring winding up or an
earlier period prescribed by the title of this code governing the
domestic entity.
(b) A domestic entity whose specified period of duration has
expired may cancel that event requiring winding up by amending
its governing documents in the manner provided by this code, not
later than the third anniversary of the date the period expired
or an earlier date prescribed by the title of this code governing
the domestic entity, to extend its period of duration. The
expiration of its period of duration does not by itself create a
vested right on the part of an owner, member, or creditor of the
entity to prevent the extension of that period. An act
undertaken or a contract entered into by the domestic entity
during a period in which the entity could have extended its
period of duration as provided by this subsection is not
invalidated by the expiration of that period, regardless of
whether the entity has taken any action to extend its period of
duration.
(c) A domestic entity may not cancel an event requiring winding
up specified in Section 11.051(3) and continue its business if
the action is prohibited by the entity's governing documents or
the title of this code governing the entity.
(d) A domestic entity may cancel an event requiring winding up
specified in Section 11.051(4) and continue its business only if
the action:
(1) is not prohibited by the entity's governing documents; and
(2) is expressly authorized by the title of this code governing
the entity.
(e) On cancellation of an event requiring winding up under this
section, the domestic entity may continue its business.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
688, Sec. 67, eff. September 1, 2007.
Sec. 11.153. COURT REVOCATION OF FRAUDULENT TERMINATION.
Notwithstanding any provision of this code to the contrary, a
court may order the revocation of termination of an entity's
existence that was terminated as a result of actual or
constructive fraud. In an action under this section, any
limitation period provided by law is tolled in accordance with
the discovery rule. The secretary of state shall take any action
necessary to implement an order under this section.
Added by Acts 2005, 79th Leg., Ch.
64, Sec. 40, eff. January 1, 2006.
SUBCHAPTER E. REINSTATEMENT OF TERMINATED ENTITY
Sec. 11.201. CONDITIONS FOR REINSTATEMENT. (a) A terminated
entity may be reinstated under this subchapter if:
(1) the termination was by mistake or inadvertent;
(2) the termination occurred without the approval of the
entity's governing persons when their approval is required by the
title of this code governing the terminated entity;
(3) the process of winding up before termination had not been
completed by the entity; or
(4) the legal existence of the entity is necessary to:
(A) convey or assign property;
(B) settle or release a claim or liability;
(C) take an action; or
(D) sign an instrument or agreement.
(b) A terminated entity may not be reinstated under this section
if the termination occurred as a result of:
(1) an order of a court or the secretary of state;
(2) an event requiring winding up that is specified in the title
of this code governing the terminated entity, if that title
prohibits reinstatement; or
(3) forfeiture under the Tax Code.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 11.202. PROCEDURES FOR REINSTATEMENT. (a) To the extent
applicable, a terminated entity, to be reinstated, must complete
the requirements of this section not later than the third
anniversary of the date the termination of the terminated
entity's existence took effect.
(b) The owners, members, governing persons, or other persons
must approve the reinstatement of the domestic entity in the
manner provided by the title of this code governing the domestic
entity.
(c) After approval of the reinstatement of a filing entity that
was terminated, and not later than the third anniversary of the
date of the filing of the entity's certificate of termination,
the filing entity shall file a certificate of reinstatement in
accordance with Chapter 4.
(d) A certificate of reinstatement filed under Subsection (c)
must contain:
(1) the name of the filing entity;
(2) the filing number the filing officer assigned to the entity;
(3) the effective date of the entity's termination;
(4) a statement that the reinstatement of the filing entity has
been approved in the manner required by this code; and
(5) the name of the entity's registered agent and the address of
the entity's registered office.
(e) A tax clearance letter from the comptroller stating that the
filing entity has satisfied all franchise tax liabilities and may
be reinstated must be filed with the certificate of reinstatement
if the filing entity is a taxable entity under Chapter 171, Tax
Code, other than a nonprofit corporation.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Amended by:
Acts 2009, 81st Leg., R.S., Ch.
84, Sec. 23, eff. September 1, 2009.
Sec. 11.203. USE OF NAME SIMILAR TO PREVIOUSLY REGISTERED NAME.
If the secretary of state determines that a filing entity's name
contained in a certificate of reinstatement filed under Section
11.202 is the same as, deceptively similar to, or similar to a
name of a filing entity or foreign entity on file as provided by
or reserved or registered under this code, the secretary of state
may not accept for filing the certificate of reinstatement unless
the filing entity contemporaneously amends its certificate of
formation to change its name or obtains consent for the use of
the similar name.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 11.204. EFFECTIVENESS OF REINSTATEMENT OF NONFILING ENTITY.
The reinstatement of a terminated nonfiling entity takes effect
on the approval required by Section 11.202(b).
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 11.205. EFFECTIVENESS OF REINSTATEMENT OF FILING ENTITY.
The reinstatement of a terminated filing entity that previously
filed a certificate of termination takes effect on the filing of
the entity's certificate of reinstatement.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 11.206. EFFECT OF REINSTATEMENT. When the reinstatement of
a terminated entity takes effect:
(1) the existence of the terminated entity is considered to have
continued without interruption from the date of termination; and
(2) the terminated entity may carry on its business as if the
termination of its existence had not occurred.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
SUBCHAPTER F. INVOLUNTARY TERMINATION OF FILING ENTITY BY
SECRETARY OF STATE
Sec. 11.251. TERMINATION OF FILING ENTITY BY SECRETARY OF STATE.
(a) If it appears to the secretary of state that, with respect
to a filing entity, a circumstance described by Subsection (b)
exists, the secretary of state may notify the entity of the
circumstance by regular or certified mail addressed to the entity
at the entity's registered office or principal place of business
as shown on the records of the secretary of state.
(b) The secretary of state may terminate a filing entity's
existence if the secretary finds that:
(1) the entity has failed to, and, before the 91st day after the
date notice was mailed has not corrected the entity's failure to:
(A) file a report within the period required by law or pay a fee
or penalty prescribed by law when due and payable; or
(B) maintain a registered agent or registered office in this
state as required by law; or
(2) the entity has failed to, and, before the 16th day after the
date notice was mailed has not corrected the entity's failure to,
pay a fee required in connection with the filing of its
certificate of formation, or payment of the fee was dishonored
when presented by the state for payment.
(c) This subchapter shall not apply to real estate investment
trusts.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
688, Sec. 68, eff. September 1, 2007.
Sec. 11.252. CERTIFICATE OF TERMINATION. (a) If termination of
a filing entity's existence is required, the secretary of state
shall:
(1) issue a certificate of termination; and
(2) deliver a certificate of termination by regular or certified
mail to the filing entity at its registered office or principal
place of business.
(b) The certificate of termination must state:
(1) that the filing entity has been involuntarily terminated;
and
(2) the date and cause of the termination.
(c) Except as otherwise provided by this chapter, the existence
of the filing entity is terminated on the issuance of the
certificate of termination by the secretary of state.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 11.253. REINSTATEMENT BY SECRETARY OF STATE AFTER
INVOLUNTARY TERMINATION. (a) The secretary of state shall
reinstate a filing entity that has been involuntarily terminated
under this subchapter if the entity files a certificate of
reinstatement in accordance with Chapter 4 and:
(1) the entity has corrected the circumstances that led to the
involuntary termination and any other circumstances that may
exist of the types described by Section 11.251(b), including the
payment of fees, interest, or penalties; or
(2) the secretary of state finds that the circumstances that led
to the involuntary termination did not exist at the time of
termination.
(b) A certificate of reinstatement filed under Subsection (a)
must contain:
(1) the name of the filing entity;
(2) the filing number assigned by the filing officer to the
entity;
(3) the effective date of the involuntary termination;
(4) a statement that the circumstances giving rise to the
involuntary termination have been corrected; and
(5) the name of the entity's registered agent and the address of
the entity's registered office.
(c) A certificate of reinstatement must be accompanied by:
(1) each amendment to the entity's certificate of formation that
is required by intervening events, including circumstances
requiring an amendment to the filing entity's name as described
in Section 11.203; and
(2) a tax clearance letter from the comptroller stating that the
filing entity has satisfied all franchise tax liabilities and may
be reinstated, if the filing entity is a taxable entity under
Chapter 171, Tax Code, other than a nonprofit corporation.
(d) If a filing entity is reinstated before the third
anniversary of the date of its involuntary termination, the
entity is considered to have continued in existence without
interruption from the date of termination. The reinstatement
shall have no effect on any issue of personal liability of the
governing persons, officers, or agents of the filing entity
during the period between termination and reinstatement.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Amended by:
Acts 2009, 81st Leg., R.S., Ch.
84, Sec. 24, eff. September 1, 2009.
Sec. 11.254. REINSTATEMENT OF CERTIFICATE OF FORMATION FOLLOWING
TAX FORFEITURE. A filing entity whose certificate of formation
has been forfeited under the provisions of the Tax Code must
follow the procedures in the Tax Code to reinstate its
certificate of formation.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
SUBCHAPTER G. JUDICIAL WINDING UP AND TERMINATION
Sec. 11.301. INVOLUNTARY WINDING UP AND TERMINATION OF FILING
ENTITY BY COURT ACTION. (a) A court may enter a decree
requiring winding up of a filing entity's business and
termination of the filing entity's existence if, as the result of
an action brought under Section 11.303, the court finds that one
or more of the following problems exist:
(1) the filing entity or its organizers did not comply with a
condition precedent to its formation;
(2) the certificate of formation of the filing entity or any
amendment to the certificate of formation was fraudulently filed;
(3) a misrepresentation of a material matter has been made in an
application, report, affidavit, or other document submitted by
the filing entity under this code;
(4) the filing entity has continued to transact business beyond
the scope of the purpose of the filing entity as expressed in its
certificate of formation; or
(5) public interest requires winding up and termination of the
filing entity because:
(A) the filing entity has been convicted of a felony or a high
managerial agent of the filing entity has been convicted of a
felony committed in the conduct of the filing entity's affairs;
(B) the filing entity or high managerial agent has engaged in a
persistent course of felonious conduct; and
(C) termination is necessary to prevent future felonious conduct
of the same character.
(b) Sections 11.302-11.307 do not apply to Subsection (a)(5).
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 11.302. NOTIFICATION OF CAUSE BY SECRETARY OF STATE. (a)
The secretary of state shall provide to the attorney general:
(1) the name of a filing entity that has given cause under
Section 11.301 for involuntary winding up of the entity's
business and termination of the entity's existence; and
(2) the facts relating to the cause for the winding up and
termination.
(b) When notice is provided under Subsection (a), the secretary
of state shall notify the filing entity of the circumstances by
writing sent to the entity at its registered office in this
state. The notice must state that the secretary of state has
given notice under Subsection (a) and the grounds for the
notification. The secretary of state must record the date a
notice required by this subsection is sent.
(c) A court shall accept a certificate issued by the secretary
of state as to the facts relating to the cause for the winding up
and termination and the sending of a notice under Subsection (b)
as prima facie evidence of the facts stated in the certificate
and the sending of the notice.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 11.303. FILING OF ACTION BY ATTORNEY GENERAL. The attorney
general shall file an action against a filing entity in the name
of the state seeking termination of the entity's existence if:
(1) the filing entity has not cured the problems for which
winding up and termination is sought before the 31st day after
the date the notice under Section 11.302(b) is mailed; and
(2) the attorney general determines that cause exists for the
involuntary winding up of a filing entity's business and
termination of the entity's existence under Section 11.301.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 11.304. CURE BEFORE FINAL JUDGMENT. An action filed by the
attorney general under Section 11.303 shall be abated if, before
a district court renders judgment on the action, the filing
entity:
(1) cures the problems for which winding up and termination is
sought; and
(2) pays the costs of the action.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 11.305. JUDGMENT REQUIRING WINDING UP AND TERMINATION. If
a district court finds in an action brought under this subchapter
that proper grounds exist under Section 11.301(a) for a winding
up of a filing entity's business and termination of the filing
entity's existence, the court shall:
(1) make findings to that effect; and
(2) subject to Section 11.306, enter a judgment not earlier than
the fifth day after the date the court makes its findings.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 11.306. STAY OF JUDGMENT. (a) If, in an action brought
under this subchapter, a filing entity has proved by a
preponderance of the evidence and obtained a finding that the
problems for which the filing entity has been found guilty were
not wilful or the result of a failure to take reasonable
precautions, the entity may make a sworn application to the court
for a stay of entry of the judgment to allow the filing entity a
reasonable opportunity to cure the problems for which it has been
found guilty. An application made under this subsection must be
made not later than the fifth day after the date the court makes
its findings under Section 11.305.
(b) After a filing entity has made an application under
Subsection (a), a court shall stay the entry of the judgment if
the court is reasonably satisfied after considering the
application and evidence offered with respect to the application
that the filing entity:
(1) is able and intends in good faith to cure the problems for
which it has been found guilty; and
(2) has not applied for the stay without just cause.
(c) A court shall stay an entry of judgment under Subsection (b)
for the period the court determines is reasonably necessary to
afford the filing entity the opportunity to cure its problems if
the entity acts with reasonable diligence. The court may not stay
the entry of the judgment for longer than 60 days after the date
the court's findings are made.
(d) The court shall dismiss an action against a filing entity
that, during the period the action is stayed by the court under
this section, cures the problems for which winding up and
termination is sought and pays all costs accrued in the action.
(e) If a court finds that a filing entity has not cured the
problems for which winding up and termination is sought within
the period prescribed by Subsection (c), the court shall enter
final judgment requiring a winding up of the filing entity's
business.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 11.307. OPPORTUNITY FOR CURE AFTER AFFIRMATION OF FINDINGS
BY APPEALS COURT. (a) An appellate court that affirms a trial
court's findings against a filing entity under this subchapter
shall remand the case to the trial court with instructions to
grant the filing entity an opportunity to cure the problems for
which the entity has been found guilty if:
(1) the filing entity did not make an application to the trial
court for stay of the entry of the judgment;
(2) the appellate court is satisfied that the appeal was taken
in good faith and not for purpose of delay or with no sufficient
cause;
(3) the appellate court finds that the problems for which the
filing entity has been found guilty are capable of being cured;
and
(4) the filing entity has prayed for the opportunity to cure its
problems in the appeal.
(b) The appellate court shall determine the period, which may
not be longer than 60 days after the date the case is remanded to
the trial court, to be afforded to a filing entity to enable the
filing entity to cure its problems under Subsection (a).
(c) The trial court to which an action against a filing entity
has been remanded under this section shall dismiss the action if,
during the period prescribed by the appellate court for that
conduct, the filing entity cures the problems for which winding
up and termination is sought and pays all costs accrued in the
action.
(d) If a filing entity has not cured the problems for which
winding up and termination is sought within the period prescribed
by the appellate court under Subsection (b), the judgment
requiring winding up and termination shall become final.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 11.308. JURISDICTION AND VENUE. (a) The attorney general
shall bring an action for the involuntary winding up and
termination of a filing entity under this subchapter in:
(1) a district court of the county in which the registered
office or principal place of business of the filing entity in
this state is located; or
(2) a district court of Travis County.
(b) A district court described by Subsection (a) has
jurisdiction of the action for involuntary winding up and
termination.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 11.309. PROCESS IN STATE ACTION. Citation in an action for
the involuntary winding up and termination of a filing entity
under this subchapter shall be issued and served as provided by
law.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 11.310. PUBLICATION OF NOTICE. (a) If process in an
action under this subchapter is returned not found, the attorney
general shall publish notice in a newspaper in the county in
which the registered office of the filing entity in this state is
located. The notice must contain:
(1) a statement of the pendency of the action;
(2) the title of the court;
(3) the title of the action; and
(4) the earliest date on which default judgment may be entered
by the court.
(b) Notice under this section must be published at least once a
week for two consecutive weeks beginning at any time after the
citation has been returned.
(c) The attorney general may include in one published notice the
name of each filing entity against which an action for
involuntary winding up and termination is pending in the same
court.
(d) Not later than the 10th day after the date notice under this
section is first published, the attorney general shall send a
copy of the notice to the filing entity at the filing entity's
registered office in this state. A certificate from the attorney
general regarding the sending of the notice is prima facie
evidence that notice was sent under this section.
(e) Unless a filing entity has been served with citation, a
default judgment may not be taken against the entity before the
31st day after the date the notice is first published.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 11.311. ACTION ALLOWED AFTER EXPIRATION OF FILING ENTITY'S
DURATION. The expiration of a filing entity's period of duration
does not, by itself, create a vested right on the part of an
owner or creditor of the filing entity to prevent an action by
the attorney general for the involuntary winding up of the filing
entity's business and termination of the filing entity's
existence.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 11.312. COMPLIANCE BY TERMINATED ENTITY. On the decree of
a court requiring winding up of a filing entity's business, the
filing entity shall comply with:
(1) the requirements of the decree concerning the winding up
process; and
(2) Subchapter B to the extent it does not conflict with the
decree.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 11.313. TIMING OF TERMINATION. A court may enter a decree
under Section 11.301 terminating the existence of a filing
entity:
(1) when the court considers it necessary or advisable; or
(2) on completion of the winding up process.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 11.314. INVOLUNTARY WINDING UP AND TERMINATION OF
PARTNERSHIP OR LIMITED LIABILITY COMPANY. A district court in
the county in which the registered office or principal place of
business in this state of a domestic partnership or limited
liability company is located has jurisdiction to order the
winding up and termination of the domestic partnership or limited
liability company on application by:
(1) a partner in the partnership if the court determines that:
(A) the economic purpose of the partnership is likely to be
unreasonably frustrated; or
(B) another partner has engaged in conduct relating to the
partnership's business that makes it not reasonably practicable
to carry on the business in partnership with that partner; or
(2) an owner of the partnership or limited liability company if
the court determines that it is not reasonably practicable to
carry on the entity's business in conformity with its governing
documents.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Amended by:
Acts 2009, 81st Leg., R.S., Ch.
84, Sec. 25, eff. September 1, 2009.
Sec. 11.315. FILING OF DECREE OF TERMINATION AGAINST FILING
ENTITY. (a) The clerk of a court that enters a decree
terminating the existence of a filing entity shall file a
certified copy of the decree in accordance with Chapter 4.
(b) A fee may not be charged for the filing of a decree under
this section.
(c) Subject to Section 11.356, the existence of the filing
entity ceases when the certified copy of the decree is filed in
accordance with Chapter 4.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Amended by:
Acts 2005, 79th Leg., Ch.
64, Sec. 41, eff. January 1, 2006.
SUBCHAPTER H. CLAIMS RESOLUTION ON TERMINATION
Sec. 11.351. LIABILITY OF TERMINATED FILING ENTITY. A
terminated filing entity is liable only for an existing claim.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 11.352. DEPOSIT WITH COMPTROLLER OF AMOUNT DUE OWNERS AND
CREDITORS WHO ARE UNKNOWN OR CANNOT BE LOCATED. (a) On the
voluntary or involuntary termination of a domestic filing entity,
the portion of the entity's assets distributable to creditors or
owners who are unknown or cannot be found after the exercise of
reasonable diligence by a person responsible for the distribution
in liquidation of the domestic filing entity's assets must be
reduced to cash and deposited as provided by Subsection (b).
(b) Money from assets liquidated under Subsection (a) shall be
deposited with the comptroller in a special account to be
maintained by the comptroller. The money must be accompanied by a
statement to the comptroller containing:
(1) the name and last known address of each person who is known
to be entitled to all or part of the account;
(2) the amount of each entitled person's distributive portion of
the money; and
(3) other information about each person who is entitled to all
or part of the money as the comptroller may reasonably require.
(c) The comptroller shall issue a receipt for money received
under this section.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 11.353. DISCHARGE OF LIABILITY OF PERSON RESPONSIBLE FOR
LIQUIDATION. A person responsible for the distribution in
liquidation of a filing entity's assets will be released and
discharged from further liability with respect to money received
from the liquidation when the person deposits the money with the
comptroller under Section 11.352.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 11.354. PAYMENT FROM ACCOUNT BY COMPTROLLER. (a) To claim
money deposited in an account under Section 11.352, a person must
submit to the comptroller satisfactory written proof of the
person's right to the money not later than the seventh
anniversary of the date the money was deposited with the
comptroller.
(b) The comptroller shall issue a warrant drawn on the account
created under Section 11.352 in favor of a person who meets the
requirements for making a claim under Subsection (a) and in the
amount to which the person is entitled.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 11.355. NOTICE OF ESCHEAT; ESCHEAT. (a) If no claimant
has made satisfactory proof of a right to the money within the
period prescribed by Section 11.354(a), the comptroller shall
publish in one issue of a newspaper of general circulation in
Travis County a notice of the proposed escheat of the money.
(b) A notice published under Subsection (a) must contain:
(1) the name and last known address of any known creditor or
owner entitled to the money;
(2) the amount of money deposited with the comptroller; and
(3) the name of the terminated filing entity from whose assets
the money was derived.
(c) If no claimant makes satisfactory proof to the comptroller
of a right to the money before the 61st day after the date notice
under this section is published, the money automatically escheats
to and becomes the property of the state and shall be deposited
in the general revenue fund.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 11.356. LIMITED SURVIVAL AFTER TERMINATION. (a)
Notwithstanding the termination of a domestic filing entity under
this chapter, the terminated filing entity continues in existence
until the third anniversary of the effective date of the entity's
termination only for purposes of:
(1) prosecuting or defending in the terminated filing entity's
name an action or proceeding brought by or against the terminated
entity;
(2) permitting the survival of an existing claim by or against
the terminated filing entity;
(3) holding title to and liquidating property that remained with
the terminated filing entity at the time of termination or
property that is collected by the terminated filing entity after
termination;
(4) applying or distributing property, or its proceeds, as
provided by Section 11.053; and
(5) settling affairs not completed before termination.
(b) A terminated filing entity may not continue its existence
for the purpose of continuing the business or affairs for which
the terminated filing entity was formed unless the terminated
filing entity is reinstated under Subchapter E.
(c) If an action on an existing claim by or against a terminated
filing entity has been brought before the expiration of the
three-year period after the date of the entity's termination and
the claim was not extinguished under Section 11.359, the
terminated filing entity continues to survive for purposes of:
(1) the action until all judgments, orders, and decrees have
been fully executed; and
(2) the application or distribution of any property of the
terminated filing entity as provided by Section 11.053 until the
property has been applied or distributed.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 11.357. GOVERNING PERSONS OF ENTITY DURING LIMITED
SURVIVAL. (a) Subject to the provisions of the title governing
the terminated filing entity, during the three-year period that a
terminated filing entity's existence is continued under Section
11.356, the governing persons of the terminated filing entity
serving at the time of termination shall continue to manage the
affairs of the terminated filing entity for the limited purposes
specified by Section 11.356 and have the powers necessary to
accomplish those purposes. The number of governing persons:
(1) may be reduced because of the death of a governing person;
and
(2) may include successors to governing persons chosen by the
other governing persons.
(b) In exercising powers prescribed under Subsection (a), a
governing person:
(1) has the same duties to the terminated filing entity that the
person had immediately before the termination; and
(2) is liable to the terminated filing entity for the person's
actions taken after the entity's termination to the same extent
that the person would have been liable had the person taken those
actions before the termination.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 11.358. ACCELERATED PROCEDURE FOR EXISTING CLAIM
RESOLUTION. (a) A terminated filing entity may shorten the
period for resolving a person's existing claim against the entity
by giving notice by registered or certified mail, return receipt
requested, to the claimant at the claimant's last known address
that the claim must be resolved under this section.
(b) The notice required under Subsection (a) must:
(1) state the requirements of Subsections (c) and (d) for
presenting a claim;
(2) provide the mailing address to which the person's claim
against the terminated filing entity must be sent;
(3) state that the claim will be extinguished if written
presentation of the claim is not received at the address given on
or before the date specified in the notice, which may not be
earlier than the 120th day after the date the notice is mailed to
the person by the terminated filing entity; and
(4) be accompanied by a copy of this section.
(c) To assert a claim, a person who is notified by a terminated
filing entity that the person's claim must be resolved under this
section must present the claim in writing to the terminated
filing entity at the address given by the entity in the notice.
(d) A claim presented under Subsection (c) must:
(1) contain the:
(A) identity of the claimant; and
(B) nature and amount of the claim; and
(2) be received by the terminated filing entity not later than
the date specified in the notice under Subsection (b)(3).
(e) If a person presents a claim that meets the requirements of
this section, the terminated filing entity to whom the claim is
presented may give written notice to the person that the claim is
rejected by the terminated entity.
(f) Notice under Subsection (e) must:
(1) be sent by registered or certified mail, return receipt
requested, and addressed to the last known address of the person
presenting the claim;
(2) state that the claim has been rejected by the terminated
entity;
(3) state that the claim will be extinguished unless an action
on the claim is brought:
(A) not later than the 180th day after the date the notice of
rejection of the claim was mailed to the person; and
(B) not later than the third anniversary of the effective date
of the entity's termination; and
(4) state the date on which notice of the claim's rejection was
mailed and the effective date of the entity's termination.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 11.359. EXTINGUISHMENT OF EXISTING CLAIM. (a) Except as
provided by Subsection (b), an existing claim by or against a
terminated filing entity is extinguished unless an action or
proceeding is brought on the claim not later than the third
anniversary of the date of termination of the entity.
(b) A person's claim against a terminated filing entity may be
extinguished before the period prescribed by Subsection (a) if
the person is notified under Section 11.358(a) that the claim
will be resolved under Section 11.358 and the person:
(1) fails to properly present the claim in writing under
Sections 11.358(c) and (d); or
(2) fails to bring an action on a claim rejected under Section
11.358(e) before:
(A) the 180th day after the date the notice rejecting the claim
was mailed to the person; and
(B) the third anniversary of the effective date of the entity's
termination.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
SUBCHAPTER I. RECEIVERSHIP
Sec. 11.401. CODE GOVERNS. A receiver may be appointed for a
domestic entity or for a domestic entity's property or business
only as provided for and on the conditions set forth in this
code.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 11.402. JURISDICTION TO APPOINT RECEIVER. (a) A court
that has subject matter jurisdiction over specific property of a
domestic or foreign entity that is located in this state and is
involved in litigation has jurisdiction to appoint a receiver for
that property.
(b) A district court in the county in which the registered
office or principal place of business of a domestic entity is
located has jurisdiction to:
(1) appoint a receiver for the property and business of a
domestic entity for the purpose of rehabilitating the entity; or
(2) order the liquidation of the property and business of a
domestic entity and appoint a receiver to effect that
liquidation.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 11.403. APPOINTMENT OF RECEIVER FOR SPECIFIC PROPERTY. (a)
Subject to Subsection (b), and on the application of a person
whose right to or interest in any property or fund or the
proceeds from the property or fund is probable, a court that has
jurisdiction over specific property of a domestic or foreign
entity may appoint a receiver in an action:
(1) by a vendor to vacate a fraudulent purchase of the property;
(2) by a creditor to subject the property or fund to the
creditor's claim;
(3) between partners or others jointly owning or interested in
the property or fund;
(4) by a mortgagee of the property for the foreclosure of the
mortgage and sale of the property, when:
(A) it appears that the mortgaged property is in danger of being
lost, removed, or materially injured; or
(B) it appears that the mortgage is in default and that the
property is probably insufficient to discharge the mortgage debt;
or
(5) in which receivers for specific property have been
previously appointed by courts of equity.
(b) A court may appoint a receiver for the property or fund
under Subsection (a) only if:
(1) with respect to an action brought under Subsection (a)(1),
(2), or (3), it is shown that the property or fund is in danger
of being lost, removed, or materially injured;
(2) circumstances exist that are considered by the court to
necessitate the appointment of a receiver to conserve the
property or fund and avoid damage to interested parties;
(3) all other requirements of law are complied with; and
(4) the court determines that other available legal and
equitable remedies are inadequate.
(c) The court appointing a receiver under this section has and
shall retain exclusive jurisdiction over the specific property
placed in receivership. The court shall determine the rights of
the parties in the property or its proceeds.
(d) If the condition necessitating the appointment of a receiver
under this section is remedied, the receivership shall be
terminated immediately, and the receiver shall redeliver to the
domestic entity all of the property remaining in receivership.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 11.404. APPOINTMENT OF RECEIVER TO REHABILITATE DOMESTIC
ENTITY. (a) Subject to Subsection (b), a court that has
jurisdiction over the property and business of a domestic entity
under Section 11.402(b) may appoint a receiver for the entity's
property and business if:
(1) in an action by an owner or member of the domestic entity,
it is established that:
(A) the entity is insolvent or in imminent danger of insolvency;
(B) the governing persons of the entity are deadlocked in the
management of the entity's affairs, the owners or members of the
entity are unable to break the deadlock, and irreparable injury
to the entity is being suffered or is threatened because of the
deadlock;
(C) the actions of the governing persons of the entity are
illegal, oppressive, or fraudulent;
(D) the property of the entity is being misapplied or wasted; or
(E) with respect to a for-profit corporation, the shareholders
of the entity are deadlocked in voting power and have failed, for
a period of at least two years, to elect successors to the
governing persons of the entity whose terms have expired or would
have expired on the election and qualification of their
successors;
(2) in an action by a creditor of the domestic entity, it is
established that:
(A) the entity is insolvent, the claim of the creditor has been
reduced to judgment, and an execution on the judgment was
returned unsatisfied; or
(B) the entity is insolvent and has admitted in writing that the
claim of the creditor is due and owing; or
(3) in an action other than an action described by Subdivision
(1) or (2), courts of equity have traditionally appointed a
receiver.
(b) A court may appoint a receiver under Subsection (a) only if:
(1) circumstances exist that are considered by the court to
necessitate the appointment of a receiver to conserve the
property and business of the domestic entity and avoid damage to
interested parties;
(2) all other requirements of law are complied with; and
(3) the court determines that all other available legal and
equitable remedies, including the appointment of a receiver for
specific property of the domestic entity under Section 11.402,
are inadequate.
(c) If the condition necessitating the appointment of a receiver
under this section is remedied, the receivership shall be
terminated immediately, the management of the domestic entity
shall be restored to its managerial officials, and the receiver
shall redeliver to the domestic entity all of its property
remaining in receivership.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 11.405. APPOINTMENT OF RECEIVER TO LIQUIDATE DOMESTIC
ENTITY; LIQUIDATION. (a) Subject to Subsection (b), a court
that has jurisdiction over the property and business of a
domestic entity under Section 11.402(b) may order the liquidation
of the property and business of the domestic entity and may
appoint a receiver to effect the liquidation:
(1) when an action has been filed by the attorney general under
this chapter to terminate the existence of the entity and it is
established that liquidation of the entity's business and affairs
should precede the entry of a decree of termination;
(2) on application of the entity to have its liquidation
continued under the supervision of the court;
(3) if the entity is in receivership and the court does not find
that any plan presented before the first anniversary of the date
the receiver was appointed is feasible for remedying the
condition requiring appointment of the receiver;
(4) on application of a creditor of the entity if it is
established that irreparable damage will ensue to the unsecured
creditors of the domestic entity as a class, generally, unless
there is an immediate liquidation of the property of the domestic
entity; or
(5) on application of a member or director of a nonprofit
corporation or cooperative association and it appears the entity
is unable to carry out its purposes.
(b) A court may order a liquidation and appoint a receiver under
Subsection (a) only if:
(1) the circumstances demand liquidation to avoid damage to
interested persons;
(2) all other requirements of law are complied with; and
(3) the court determines that all other available legal and
equitable remedies, including the appointment of a receiver for
specific property of the domestic entity and appointment of a
receiver to rehabilitate the domestic entity, are inadequate.
(c) If the condition necessitating the appointment of a receiver
under this section is remedied, the receivership shall be
terminated immediately, the management of the domestic entity
shall be restored to its managerial officials, and the receiver
shall redeliver to the domestic entity all of its property
remaining in receivership.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 11.406. RECEIVERS: QUALIFICATIONS, POWERS, AND DUTIES. (a)
A receiver appointed under this chapter:
(1) must be an individual citizen of the United States or an
entity authorized to act as receiver;
(2) shall give a bond in the amount required by the court and
with any sureties as may be required by the court;
(3) may sue and be sued in the receiver's name in any court;
(4) has the powers and duties provided by other laws applicable
to receivers; and
(5) has the powers and duties that are stated in the order
appointing the receiver or that the appointing court:
(A) considers appropriate to accomplish the objectives for which
the receiver was appointed; and
(B) may increase or diminish at any time during the proceedings.
(b) To be appointed a receiver under this chapter, a foreign
entity must be registered to transact business in this state.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 11.407. COURT-ORDERED FILING OF CLAIMS. (a) In a
proceeding involving a receivership of the property or business
of a domestic entity, the court may require all claimants of the
domestic entity to file with the clerk of the court or the
receiver, in the form provided by the court, proof of their
respective claims under oath.
(b) A court that orders the filing of claims under Subsection
(a) shall:
(1) set a date, which may not be earlier than four months after
the date of the order, as the last day for the filing of those
claims; and
(2) prescribe the notice that shall be given to claimants of the
date set under Subdivision (1).
(c) Before the expiration of the period under Subsection (b) for
the filing of claims, a court may extend the period for the
filing of claims to a later date.
(d) A court may bar a claimant who fails to file a proof of
claim during the period authorized by the court from
participating in the distribution of the property of the domestic
entity unless the claimant presents to the court a justifiable
excuse for its delay in filing. A court may not order or effect a
discharge of a claim of the claimant described by this
subsection.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 11.408. SUPERVISING COURT; JURISDICTION; AUTHORITY. (a) A
court supervising a receivership under this subchapter may, from
time to time:
(1) make allowances to a receiver or attorney in the proceeding;
and
(2) direct the payment of a receiver or attorney from the
property of the domestic entity that is within the scope of the
receivership or the proceeds of any sale or disposition of that
property.
(b) A court that appoints a receiver under this subchapter for
the property or business of a domestic entity has exclusive
jurisdiction over the domestic entity and all of its property,
regardless of where the property is located.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 11.409. ANCILLARY RECEIVERSHIPS OF FOREIGN ENTITIES. (a)
Notwithstanding any provision of this code to the contrary, a
district court in the county in which the registered office of a
foreign entity doing business in this state is located has
jurisdiction to appoint an ancillary receiver for the property
and business of that entity when the court determines that
circumstances exist to require the appointment of an ancillary
receiver.
(b) A receiver appointed under Subsection (a) serves ancillary
to a receiver acting under orders of an out-of-state court that
has jurisdiction to appoint a receiver for the entity.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 11.410. RECEIVERSHIP FOR ALL PROPERTY AND BUSINESS OF
FOREIGN ENTITY. (a) A district court may appoint a receiver for
all of the property, in and outside this state, of a foreign
entity doing business in this state and its business if the court
determines, in accordance with the ordinary usages of equity,
that circumstances exist that necessitate the appointment of a
receiver even if a receiver has not been appointed by another
court.
(b) The appointing court shall convert a receivership created
under Subsection (a) into an ancillary receivership if the
appointing court determines an ancillary receivership is
appropriate because a court in another state has ordered a
receivership of all property and business of the entity.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 11.411. GOVERNING PERSONS AND OWNERS NOT NECESSARY PARTIES
DEFENDANT. Governing persons and owners or members of a domestic
entity are not necessary parties to an action for a receivership
or liquidation of the property and business of a domestic entity
unless relief is sought against those persons individually.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 11.412. DECREE OF INVOLUNTARY TERMINATION. In an action in
which the court has ordered the liquidation of the property and
business of a domestic entity in accordance with other provisions
of this code, the court shall enter a decree terminating the
existence of the entity:
(1) when the costs and expenses of the action and all
obligations and liabilities of the domestic entity have been paid
and discharged or adequately provided for and all of the entity's
remaining property has been distributed to its owners and
members; or
(2) if the entity's property is not sufficient to discharge the
costs and other expenses of the action and all obligations and
liabilities of the entity, when all the property of the entity
has been applied toward their payment.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
688, Sec. 69, eff. September 1, 2007.
Sec. 11.413. SUPPLEMENTAL PROVISIONS FOR APPLICATION OF PROCEEDS
FROM LIQUIDATION OF NONPROFIT CORPORATION. (a) In proceedings
under Section 11.405, the property of a nonprofit corporation or
the proceeds resulting from a sale, conveyance, or other
disposition of its property shall be applied to:
(1) pay, satisfy, and discharge all costs and expenses of the
court proceedings and all liabilities and obligations of the
nonprofit corporation; or
(2) make adequate provision for the payment, satisfaction, and
discharge of the costs, expenses, liabilities, or obligations
described by Subdivision (1).
(b) Any property remaining after application is made under this
section must be applied and distributed in the manner provided by
Section 22.304.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 11.414. FILING OF DECREE OF INVOLUNTARY TERMINATION AGAINST
FILING ENTITY. (a) The clerk of a court that enters a decree
terminating the existence of a filing entity under this
subchapter shall file a certified copy of the decree in
accordance with Chapter 4.
(b) A fee may not be charged for the filing of a decree under
this section.
(c) Subject to Section 11.356, the existence of the filing
entity ceases when the certified copy of the decree is filed in
accordance with Chapter 4.
Added by Acts 2005, 79th Leg., Ch.
64, Sec. 42, eff. January 1, 2006.
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