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Texas Business Organizations Code - Section 21.211. Valid Restrictions On Transfer

Legal Research Home > Texas Laws > Business Organizations Code > Texas Business Organizations Code - Section 21.211. Valid Restrictions On Transfer

§ 21.211. VALID RESTRICTIONS ON TRANSFER.  (a) 
Notwithstanding Sections 21.210 and 21.213, a restriction placed on 
the transfer or registration of transfer of a security of a 
corporation is valid if the restriction reasonably:
		(1)  obligates the holder of the restricted security to 
offer a person, including the corporation or other holders of 
securities of the corporation, an opportunity to acquire the 
restricted security within a reasonable time before the transfer;
		(2)  obligates the corporation, to the extent provided 
by this code, or another person to purchase securities that are the 
subject of an agreement relating to the purchase and sale of the 
restricted security;
		(3)  requires the corporation or the holders of a class 
of the corporation's securities to consent to a proposed transfer 
of the restricted security or to approve the proposed transferee of 
the restricted security for the purpose of preventing a violation 
of law;
		(4)  prohibits the transfer of the restricted security 
to a designated person or group of persons and the designation is 
not manifestly unreasonable;
		(5)  maintains the status of the corporation as an 
electing small business corporation under Subchapter S of the 
Internal Revenue Code;
		(6)  maintains a tax advantage to the corporation;                            
		(7)  maintains the status of the corporation as a close 
corporation under Subchapter O;
		(8)  obligates the holder of the restricted securities 
to sell or transfer an amount of restricted securities to a person 
or group of persons, including the corporation or other holders of 
securities of the corporation;  or
		(9)  causes or results in the automatic sale or 
transfer of an amount of restricted securities to a person or group 
of persons, including the corporation or other holders of 
securities of the corporation.
	(b)  A restriction placed on the transfer or registration of 
transfer of a security of a corporation, on the amount of the 
corporation's securities, or on the amount of the corporation's 
securities that may be owned by a person or group of persons is 
conclusively presumed to be for a reasonable purpose if the 
restriction:
		(1)  maintains a local, state, federal, or foreign tax 
advantage to the corporation or its shareholders, including:
			(A)  maintaining the corporation's status as an 
electing small business corporation under Subchapter S of the 
Internal Revenue Code;
			(B)  maintaining or preserving any tax attribute, 
including net operating losses;  or
			(C)  qualifying or maintaining the qualification 
of the corporation as a real estate investment trust under the 
Internal Revenue Code or regulations adopted under the Internal 
Revenue Code;  or
		(2)  maintains a statutory or regulatory advantage or 
complies with a statutory or regulatory requirement under 
applicable local, state, federal, or foreign law.

Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.  Amended by 
Acts 2005, 79th Leg., ch. 64, § 49, eff. Jan. 1, 2006.

Last modified: August 11, 2007