Texas Business & Commerce Code

§ 8.202 — ISSUER'S RESPONSIBILITY AND DEFENSES; NOTICE OF DEFECT OR DEFENSE

BC § 8.202Title 1. UNIFORM COMMERCIAL CODE · Ch. 8. INVESTMENT SECURITIES · Art. B. ISSUE AND ISSUER

Statute text

(a)Even against a purchaser for value and without notice, the terms of a certificated security include terms stated on the certificate and terms made part of the security by reference on the certificate to another instrument, indenture, or document or to a constitution, statute, ordinance, rule, regulation, order, or the like to the extent the terms referred to do not conflict with terms stated on the certificate. A reference under this subsection does not of itself charge a purchaser for value with notice of a defect going to the validity of the security, even if the certificate expressly states that a person accepting it admits notice. The terms of an uncertificated security include those stated in any instrument, indenture, or document or in a constitution, statute, ordinance, rule, regulation, order, or the like pursuant to which the security is issued.

(b)The following rules apply if an issuer asserts that a security is not valid:

(1)A security other than one issued by a government or governmental subdivision, agency, or instrumentality, even though issued with a defect going to its validity, is valid in the hands of a purchaser for value and without notice of the particular defect unless the defect involves a violation of a constitutional provision. In that case, the security is valid in the hands of a purchaser for value and without notice of the defect, other than a purchaser who takes by original issue.

(2)Subdivision (1) applies to an issuer that is a government or governmental subdivision, agency, or instrumentality only if:

(A)there has been substantial compliance with the legal requirements governing the issue; or

(B)the issuer has received a substantial consideration for the issue as a whole or for the particular security and a stated purpose of the issue is one for which the issuer has power to borrow money or issue the security.

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Legislative history

Amended by Acts 1995, 74th Leg., ch. 962, Sec. 1, eff. Sept. 1, 1995.