How to issue shares in Texas corporations
Texas has emerged as a significant state of incorporation, with the Texas Business Organizations Code modeled on the Model Business Corporation Act. The Texas Business Court (effective September 2024) handles complex commercial disputes and is being watched as a potential Delaware alternative.
| TBOC § 21.151 | Issuance of shares |
|---|---|
| TBOC § 21.152 | Form of consideration |
| TBOC § 21.157 | Liability for inadequate consideration |
| TBOC § 21.171 | Certificated and uncertificated shares |
| TBOC § 21.219 | Books and records |
| TSA § 7 | Texas Securities Act state filings |
- Authorized by the board under TBOC § 21.151; consideration determined by the board (§ 21.152)
- Future services permitted as consideration (different from Delaware)
- Uncertificated shares permitted by default under § 21.171
- Shareholder inspection under § 21.218 requires written demand and proper purpose
- Texas Securities Act filings under TSA § 7 for limited offerings to Texas residents
Board authorization under TBOC § 21.151
Stock issuance is authorized by the board under Texas Business Organizations Code § 21.151. The board determines the consideration under § 21.152. Texas permits a broad range of consideration including cash, property, services performed, contracts for services to be performed, and debts. The board's determination of consideration value is conclusive absent fraud (§ 21.157).
Form of consideration under § 21.152
TBOC § 21.152 lists permitted consideration: tangible or intangible property, services performed for the corporation, contracts for services to be performed, securities or debts of the corporation. Texas permits future services as consideration (unlike Delaware), but the corporation may treat the shares as not validly issued until the services are performed unless the board determines otherwise.
Uncertificated shares as the default
TBOC § 21.171 permits the corporation to issue certificated or uncertificated shares; the statute does not require certificates. Most modern Texas-incorporated corporations issue uncertificated shares with statements of holdings, especially for venture-backed startups. Certificates may be issued at the corporation's election or at the shareholder's request, subject to the bylaws.
Books and records under § 21.219
TBOC § 21.219 requires every corporation to maintain books and records of account, minutes of board and shareholder meetings, and records of shareholders. § 21.218 grants shareholders an inspection right on written demand stating a purpose reasonably related to their interest as a shareholder. The standard is similar to DGCL § 220's proper-purpose requirement.
Texas Securities Act compliance
Offerings to Texas residents are governed by the Texas Securities Act. § 7 requires registration unless exempt. Rule 109.13 (limited offering exemption) is the most common state exemption for private placements; a notice filing on Form 133.16 may be required. NSMIA pre-empts the Texas Securities Act for Rule 506 offerings but not the notice filing. Federal Form D applies separately.
Common mistakes
Common Texas-specific failure points in share issuance:
- Treating Delaware case law as controlling for Texas governance disputes (TBOC has its own framework)
- Failing to file Texas Securities Act notice for offerings to Texas residents
- Not maintaining the books and records required under TBOC § 21.219
- Inadequate consideration recitals when relying on future services
Octelligence handles TBOC specifics in the share register, certificates, board resolutions, and beneficial-ownership filings: jurisdiction-aware templates, statute citations on each record, and the right reconciliation cadence for the corporation.
See Digital Corporate RecordsCommon questions in Texas
Octelligence handles TBOC-specific share issuance: register, certificates, resolutions, and beneficial-ownership records aligned with statute.