Texas Business Organizations Code 21.170 – Consideration for Rights, Options, and Convertible Indebtedness
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(a) In the absence of fraud in the transaction, the judgment of the board of directors of a corporation as to the adequacy of the consideration received for rights, options, or convertible indebtedness is conclusive.
(b) A corporation may issue rights or options to its shareholders, officers, consultants, independent contractors, employees, or directors without consideration if, in the judgment of the board of directors, the issuance of the rights or options is in the interests of the corporation.
Terms Used In Texas Business Organizations Code 21.170
- 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
- Fraud: Intentional deception resulting in injury to another.
(c) The consideration for shares having a par value, other than treasury shares, and issued on the exercise of the rights or options may not be less than the par value of the shares.
(d) A privilege of conversion may not be conferred on, or altered with respect to, any indebtedness that would result in the corporation receiving less than the minimum consideration required to be received on issuance of the shares.
(e) The consideration for shares issued on the exercise of rights, options, or convertible indebtedness shall be determined as provided by § 21.161.