Texas Attorney General Opinion: WW-564 Page: 2 of 3
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Honorable William M. King, Page 2, (W-564)
this Act shall not apply, to any sale, offer for
sale, solicitation, subscription, dealing in or
delivery of any security under any of the follow-
ing transactions or conditions:
"I. The sale by any corporation of its se-
curities or by any unincorporated association or
partnership of interest, where the total member-
ship or stockholders will not thereafter exceed
thirty-five (35), and where the sale is made
without the use of advertisements or any form of
Section I only mentions sales by corporations, unincorporated
associations and partnerships; accordingly this exemption can only apply
to a transaction where an entity of this character is the vendor.
With respect to unincorporated associations and partnerships,
the only security exempted by Section I is the sale of an interest" .
In other words, the vendee must acquire a proprietary interest in the
partnership or unincorporated association as such.. The legislative his-
tory of Section I indicates such is the proper construction. The pre-
sent exemption is really a merger of three sections found in Section 3
(exempt transactions) of the 1955 Securities Act, Acts 54th Legislature,
R.S., 1955, Chapter 67, Article 579 1 through 579-42 V.C.S. and section
3 of the Insurance Securities Act, Acts 54 Legislature, R.S. 1955,
Chapter 38:, Article 580-1 through 580-39 V.c.S. Those sections were Sec-
tions 3(j), (k) and (1). Section 3(k), which is the section applicable
to partnerships, pools or other companies not a corporation, exempted
only "the sale of an interest in a partnership, etc." Therefore, with
respect to sales in which the vendor is an unincorporated association
or partnership, in order for the sale to qualify as exempt under Section
I, the sale must be of an interest in the vendor-association or partner-
ship, as the case may be, and after the sale there must not be more than
thirty-five members in the association or partnership. (Of course, the
sale amust be made without the use of advertisement or advertisements or
any form of public solicitation.)
Concerning corporations, Section I only exempts from the Secu-
rities Act, sales made by corporations of its securities, which could re-
suit in increasing the stockholders of the corporation. The only secu-
rities that a corporation could sell that could increase the number of
stockholders would be shares of its capital stock.
The exemption contained in Section I is only applicable to
the sale of a security that would result in the vendee acquiring a pro-
prietary interest in the corporation, unincorporated association or part-
nership. The number of persons holding an interest in or under an oil,
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Texas. Attorney-General's Office. Texas Attorney General Opinion: WW-564, text, March 3, 1959; (texashistory.unt.edu/ark:/67531/metapth267176/m1/2/: accessed July 17, 2018), University of North Texas Libraries, The Portal to Texas History, texashistory.unt.edu; crediting UNT Libraries Government Documents Department.