Bulletin: TX000078

Date:
October 20, 2005
To:
All Texas Agents
RE:
REVISED - Texas Business Organizations and Title Insurance Requirements

Dear Associates:

Below is a chart that outlines the necessary underwriting requirements concerning to Texas or foreign business entities doing business in Texas and the documents required to determine the authority of anyone acting on its behalf.  This chart has been revised in accordance with the new Texas Business Organizations Code effective January 1, 2006.

Chart of Texas and Foreign Business Entities and Texas Underwriting Requirements

TYPE OF ENTITY

FORMATION REQUIREMENTS

AUTHORZATION DOCUMENTS OF ENTITY

CORPORATION

Corporations are formed by filing a certificate of formation signed by an officer of the corporation with the Secretary of State.  After the filing of a certificate of formation takes effect, an organization meeting shall be held at the call of the majority of the initial board of directors or the persons named in the certificate of formation for the purpose of adopting bylaws, electing officers, and transacting other business.

When dealing with a transaction involving a Texas corporation, agents must determine that the corporation exists and is in good standing with the Secretary of State.  Agents must determine the authority of the person signing on behalf of the corporation by obtaining certified copies of the certificate of formation, bylaws and corporate resolution executed by the board of directors.

PROFESSIONAL CORPORATION

 

Professional corporations are formed by filing a certificate of formation signed by an officer of the corporation with the Secretary of State.  A professional corporation is made up of directors, officers and shareholders.  A professional corporation can be formed by other professional corporations.

When dealing with a transaction involving a professional corporation, agents must determine that the corporation exists and is in good standing with the Secretary of State.  Agents must determine the authority of the person signing on behalf of the corporation by obtaining certified copies of the certificate of formation, bylaws and corporate resolution executed by the board of directors.

NON-PROFIT CORPORATION

A religious society, a charitable, benevolent, literary, or social association, or a church may incorporate as a corporation with the consent of a majority of its members. Those members shall authorize the organizers to execute the certificate of formation. After the certificate of formation is filed, the board of directors named in the certificate of formation of a corporation shall hold an organization meeting of the board.

When dealing with a transaction involving a non-profit corporation, agents must determine that the corporation exists and in good standing with the Secretary of State.  In addition, agents must determine the authority of the person signing on behalf of the corporation by obtaining certified copies of the certificate of formation, bylaws and corporate resolution executed by the board of directors.

FOREIGN CORPORATION

A foreign corporation is formed according to the state laws in which it is incorporated.  

Agents must determine that the foreign corporation exists and in good standing with the state or territory where it is incorporated. Agents must also determine the authority of the person signing on behalf of the foreign corporation by obtaining certified copies of the articles of incorporation, bylaws and corporate resolution executed by the board of directors.

COOPERATIVE ASSOCIATION

 

After a cooperative association's certificate of formation is filed, the cooperative association shall hold an organization meeting.

Agents must determine the authority of the person signing on behalf of the corporation by obtaining certified copies of the certificate of formation, bylaws and corporate resolution executed by the board of directors.

UNINCORPORATED NON-PROFIT ASSOCIATION

 

An unincorporated non-profit association does not have to file any documents with the Secretary of State or pay any fees.

We will require copies of all organization documents to determine the person who has authority to act on behalf of the association.  If you are dealing with a church or other religious group, please call a Texas Underwriting Counsel.

FOREIGN ASSOCIATION

A foreign association is formed according to the state laws in which it is associated. 

We will require certified copies of the articles of association or bylaws to determine the authority of the person signing on behalf of a professional association.

PROFESSIONAL ASSOCIATION

 

Any one or more persons licensed to practice a profession under Texas law may form a professional association by associating themselves with the purpose of performing professional services and dividing the gains as stated in the articles of association or bylaws.  The certificate of formation must be filed with the Secretary of State. 

We will require certified copies of the certificate of formation & any organizational documents.

LIMITED LIABILITY COMPANY

 

 A limited liability company must file a certificate of formation signed by its organizers with the Secretary of State. The company agreement governs the activities of a limited liability company.

When dealing with a transaction involving a limited liability company, agents must determine that the company exists and is in good standing with the state Secretary of State. We will require certified copies of the certificate of formation and company agreement.

FOREIGN LIMITED LIABILITY COMPANY

A foreign limited liability company is formed according to the state laws in which it is organized. 

We will require certified copies of the articles of organization or operating agreement to determine the authority of the person signing on behalf of a limited liability company.

LIMITED PARTNERSHIP

 

A partnership, to become a limited liability partnership, must file an application with the secretary of state.  Each general partner must sign the certificate of formation of a domestic limited partnership and file it with the Secretary of State.

We will require a certified copy of the certificate of formation.  All limited partners should join in the execution of any real estate instrument, unless  there is authority for less than all of them to act . This authority to be set forth in the partnership agreement.

 

 

 

 

GENERAL PARTNERSHIP

 

To form a partnership, one or more people may enter into a partnership agreement.  A partnership agreement governs the relations of the partners and between the partners and the partnership. To the extent that the partnership agreement does not otherwise provide, this chapter 152 of the Texas Business Organizations Code and the other partnership provisions govern the relationship of the partners and between the partners and the partnership.

The question of the required signatories is dependent upon the partnership agreement.  All general partners should join in the execution of instruments affecting the partnership property unless the recorded statement or certificate of partnership, signed by all the partners, delegates the authority to so execute to less than all or certain of the general partners.

FOREIGN PARTNERSHIPS, LIMITED PARTNERSHIPS AND LIMITED LIABILITY PARTNERSHIPS

The laws of a state under which a foreign partnership is formed govern its organization and affairs and the liability of the partners for obligations of the partnership.

We will require a formal legal opinion from the attorney for the foreign partnership to determine if the partnership complies with its state statutes.

JOINT VENTURE

See General Partnerships Section of this Bulletin.

See General Partnerships Section of this Bulletin.

SOLE PROPRIETERSHIP

 

A sole proprietorship consists of a single person acting as a business in his/her own name. This is not a separate legal entity in Texas.

Check the homestead status of the property in the transaction.  In addition, do not show an Assumed Name Certificate as an exception in Schedule B of the policy.

REAL ESTATE INVESTMENT TRUST

 

A filing instrument relating to a domestic real estate investment trust must be filed with the county clerk of the county in which the domestic real estate investment trust's principal place of business is located. The certificate of formation of a real estate investment trust is a declaration of trust. The certificate of formation may be titled "declaration of trust" or "certificate of formation."

We will require a copy of the certificate of formation & trust agreement.

THIS BULLETIN IS FURNISHED TO INFORM YOU OF CURRENT DEVELOPMENTS. AS A REMINDER, YOU ARE CHARGED WITH KNOWLEDGE OF THE CONTENT ON VIRTUAL UNDERWRITER  AS IT EXISTS FROM TIME TO TIME AS IT APPLIES TO YOU, AS WELL AS ANY OTHER INSTRUCTIONS. OUR UNDERWRITING AGREEMENTS DO NOT AUTHORIZE OUR ISSUING AGENTS TO ENGAGE IN SETTLEMENTS OR CLOSINGS ON BEHALF OF STEWART TITLE GUARANTY COMPANY. THIS BULLETIN IS NOT INTENDED TO DIRECT YOUR ESCROW OR SETTLEMENT PRACTICES OR TO CHANGE PROVISIONS OF APPLICABLE UNDERWRITING AGREEMENTS. CONFIDENTIAL, PROPRIETARY, OR NONPUBLIC PERSONAL INFORMATION SHOULD NEVER BE SHARED OR DISSEMINATED EXCEPT AS ALLOWED BY LAW. IF APPLICABLE STATE LAW OR REGULATION IMPOSES ADDITIONAL REQUIREMENTS, YOU SHOULD CONTINUE TO COMPLY WITH THOSE REQUIREMENTS.

References

Bulletins Replaced:
TX000068 This Bulletin has been replaced by TX000078.
Related Bulletins:
TX000032 1995 Texas Legislation
 
TX000036 1997 Legislation
 
TX000076 2005 Texas Legislation
Underwriting Manual:
TX 3.68 Corporations
 
TX 15.16 Partnerships
Exceptions Manual:
None
Forms:
None