Business Management and Ownership

The State Securities Board is frequently asked how a person sells or transfers an ownership interest in a limited liability company, corporation, or limited partnership. 

Instructions on the process of issuing or transferring securities is a matter of corporation governance not within the Agency's jurisdiction and should be directed to private legal counsel.

The Texas Business Organizations Code (BOC) applies to all Texas corporations, partnerships, limited liability companies, and other domestic filing entities, as well as all foreign filing entities registered to transact business in Texas. The Secretary of State, Corporations Section is responsible for the receipt, filing, and permanent maintenance and retention of documents that create or affect business organizations.  These documents, and the names of officers, directors, and the registered agent of a corporation, may be obtained from the Corporation Section's website.  

Depending on the type of business entity, changes in management may need to be reported to the Secretary of State and/or the Comptroller of Public Accounts.   Questions regarding these filing requirements should be directed to those agencies. 

The State Securities Board enforces the Texas Securities Act.  Generally, any offering or sale of securities in Texas must be registered with this Agency unless an exemption from registration is available.  This is true when the securities are first issued by the company (the initial offering), as well as when they are resold or transferred by investors (secondary market transfers). 

Additional restrictions may apply to secondary market sales of securities in closely held companies.  Such securities were probably originally sold pursuant to a limited offering exemption and resales are restricted.  Restricted securities must ordinarily be held for a period before they can be resold to evidence the investor purchased them with investment intent rather than with a view toward resale. 

Sales of securities by holders may also be governed by contract and business law that are not within the Agency's jurisdiction to interpret.  For example, the company’s bylaws or other contractual agreement (most likely a stock restriction agreement) may restrict resales of the securities or create a right of first refusal in the securities.  These restrictions should be set out in the entity's organizational documents and other documents received when the securities were first issued. 

In large part, the ability to resell securities is dependent on restrictions placed on the securities as a result of contract, agreement, and/or the manner in which they were first issued by the company.  The Agency cannot provide legal advice.  Therefore, questions about interpretation of those documents should be directed to private legal counsel experienced in corporation law.

More information regarding the securities registration process can be found under Regulation of Securities.  The Registration Division can answer specific questions on the registration process and requirements.

Information regarding commonly-used exemptions is also available.  Exemptions from registration requirements for initial offerings or secondary market transfers of securities can be found in Section 5 of the Act and in Chapters 109 and 139 of the Board's rules.