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2021 Legislative Session Update

The following bills, which were passed during the Regular Session of the 87th Legislature, impact procedures, filings, or other duties and responsibilities of the Texas Secretary of State, Business & Commercial Filings Section.

House Bill 1493 (PDF) (effective September 1, 2021): HB 1493 amends chapter 5 of the Business Organizations Code [hereinafter BOC] to add new sections 5.064 and 5.065. Section 5.064 codifies a secretary of state administrative rule [1 TAC §79.33(a)] that prohibits an entity name that may falsely imply governmental affiliation. New Section 5.064 further provides that the submission of a filing instrument is an affirmation by the organizer or by a managerial official named in the filing instrument that the name provided as the name of the filing entity does not falsely imply an affiliation with a governmental entity.

New section 5.065 enables a governmental entity to send written notification to the secretary of state when the governmental entity believes that an entity name filed by the secretary of state is in violation of section 5.064. Section 5.065 outlines procedures to be followed by the secretary of state after receipt of the governmental entity’s written request/notification, and permits the secretary of state, after consultation with the attorney general, to notify the entity and take further action, including requiring the entity to submit a filing instrument to amend the entity’s name after a final determination by the secretary that the entity’s name falsely implies a governmental affiliation.

Section 5.065 also authorizes the attorney general to bring an action in the name of the state for injunctive relief to require compliance. The secretary of state is required to adopt rules and prescribe procedures to implement new sections 5.064 and 5.065.

Emergency rules were published in the December 10, 2021 issue of the Texas Register.

House Bill 2633 (PDF) (effective September 1, 2021): HB 2633 amends the Health and Safety Code to establish the trafficked persons program account as a General Revenue-Dedicated Account and requires the Health and Human Services Commission to administer the account. HB 2633 also amends Chapter 4 of the Government Code with respect to the secretary of state’s responsibility for establishment of the human trafficking prevention business partnership program. The secretary of state is required to inform participating corporations and other private entities of the opportunity to support the trafficked persons program account established under new Section 50.0153 of the Health and Safety Code, by making a donation to that account.

For more information on the trafficked persons program account and on making a donation to that account, please visit the Health and Human Services Commission’s website. For information on the secretary of state’s human trafficking prevention business partnership, please visit the secretary of state’s web page.

House Bill 3131 (PDF) (effective January 1, 2022): HB 3131 amends section 3.005(a) of the BOC to require a certificate of formation of a domestic filing entity to include the entity’s initial mailing address. The initial mailing address as stated in an entity’s certificate of formation will be the initial contact address used by the Comptroller of Public Accounts for purposes of sending the entity tax information and Comptroller correspondence.

Secretary of State Certificate of Formation forms (forms 201-207) have been revised to include the additional statutory requirement. Revised forms with a revision date of 12/21 are posted on the business and nonprofit forms web page.

Senate Bill 938 (PDF) (effective January 1, 2022 – December 31, 2025): SB 938 amends the BOC to provide an exemption from filing fees imposed under subchapter D of chapter 4 of the BOC and franchise taxes under Chapter 171 of the Tax Code for new veteran-owned businesses during the first five years of operation. To be eligible, a business must be formed in Texas on or after January 1, 2022. Each owner of the entity to be formed must be a natural person who was honorably discharged from a branch of the United States armed forces. An entity formed under the laws of another state does not qualify for this exemption.

To qualify for the exemption from the formation filing fee, the owner(s) must first obtain a Veteran Verification Letter of Honorable Discharge from the Texas Veterans Commission and complete a Certification of New Veteran-Owned Business form, which is obtained from the Comptroller of Public Accounts. To attain the exemption from the statutory filing fee, the submission of the certificate of formation to the secretary of state must be accompanied by the Veteran Verification Letter of Honorable Discharge and the Certification of New Veteran-Owned Business form.

For more information on forming a new veteran-owned business, please visit our Business Information for Veterans web page.

Senate Bill 1203 (PDF) (effective September 1, 2021): SB 1203 makes substantive and technical amendments to the BOC and includes amendments that impact filing requirements for certain instruments filed with the secretary of state.

SB 1203 amends section 3.010 of the BOC to require the certificate of formation of a limited liability company [LLC] to specify whether the LLC initially has or does not have managers. If the LLC initially has managers, the certificate of formation would provide the names and addresses of the initial managers. If the LLC does not initially have managers, the certificate of formation would provide the name and address of each initial member of the LLC.

Other amendments made by SB 1203 include amendments to sections 3.060(a), 3.061(a) and 3.0611(a) of the BOC which set forth the information that may be omitted from the restated certificate of formation of a for-profit corporation, a nonprofit corporation, and an LLC. Amendments made by SB 1203 will permit a corporation to omit any prior statements regarding the number and names and addresses of the directors of a corporation and will allow an LLC to omit any prior statements regarding whether the LLC has or does not have managers and the names and addresses of managers or members. The amendments made to these filing provisions will provide greater flexibility with respect to effecting changes to an LLC management structure and will facilitate the filing of restated certificates of formation for the entity types listed.

Senate Bill 1523 (PDF) (effective June 1, 2022): SB 1523 amends both the BOC as well as the Business & Commerce Code and introduces the concept of a “registered series” to Texas. SB 1523 makes substantive amendments to the BOC along the same lines as the Delaware model by amending existing provisions relating to series LLCs found in subchapter M of Chapter 101 to refer to existing series as “protected series” and adding new provisions relating to the creation of a “registered series.”

A registered series has the same characteristics as a protected series except that the LLC must file a certificate of registered series with the secretary of state to form the registered series. In addition, amendments are made to chapter 5 of the BOC to require the name of a registered series to be distinguishable in the records of the SOS from the name of any existing filing entity, the name of a foreign filing entity that is registered to transact business in Texas, the existing fictitious name of a foreign filing entity, the name of another existing registered series of a Texas LLC, and any existing name reservation or name registration. Amendments to subchapter M of Chapter 101 require the name of a registered series to contain the name of the LLC and comply with amended section 5.056(c) which requires the name of a registered series to contain the phrase “registered series” or the abbreviation “RS” or “R.S.” Amendments to Sec 5.051 clarify that a registered series may file an assumed name under chapter 71 of the Business & Commerce Code and may transact business using an assumed name.

A registered series filed with the secretary of state will be able to obtain a certificate of status issued by the secretary of state for purposes of presenting to third parties in any transaction should it be required/desired. In addition, because a registered series has a filing with the secretary of state, SB 1523 gives a registered series the ability to file other types of filing instruments with the secretary of state to reflect certain changes that may occur in connection with that series.

The bill also adds new Sec 4.162 to chapter 4 of the BOC to specify the filing fees for filings made by or for a registered series of an LLC.

Senate Bill 1580 (PDF) (effective June 18, 2021): SB 1580 amends chapter 41 of the Utilities Code to enable electric cooperatives to use securitization financing to recover extraordinary costs and expenses incurred due to Winter Storm Uri. SB 1580 requires an electric cooperative's board to adopt a financing order approving the issuance of securitized bonds and the creation of securitized charges for the recovery of qualified costs consistent with the standards prescribed by the bill. The bill requires the order to detail the amount of qualified costs to be recovered and the period over which the nonbypassable securitized charges must be recovered, which the bill caps at 30 years.

The bill requires the secretary of state to implement new section 41.159 relating to security interests, assignment, commingling, and default by establishing and maintaining a separate system of records for the filing of notices under those provisions and prescribing the rules for those filings based on article 9 of the Uniform Commercial Code, adapted to the bill and using terms defined by the bill.