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AGO 1957 No. 30 - March 12, 1957
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John J. O'Connell | 1957-1968 | Attorney General of Washington

SECURITIES ‑- QUALIFICATION OF FOREIGN CORPORATIONS

A Nevada corporation seeking permission to sell its stock in this state and which intends to engage in the insurance field is within the jurisdiction of the insurance commissioner for acts provided in RCW 21.04.060.

The above‑mentioned corporation is not required to qualify as a foreign corporation within the State of Washington in order to sell securities.

                                                                   - - - - - - - - - - - - -

                                                                  March 12, 1957

Honorable William A. Sullivan
Insurance Commissioner
Insurance Building
Olympia, Washington                                                                                                                Cite as:  AGO 57-58 No. 30


Dear Sir:

            You requested the opinion of this office on certain questions which we paraphrase as follows:

            (1) Is a Nevada corporation, seeking permission to sell its stock in this state and which intends to engage in the insurance field, within the jurisdiction of the insurance commissioner by virtue of the provisions of RCW 21.04.060?

            (2) Is the corporation mentioned in the first question required to qualify as a foreign corporation within the State of Washington in order to sell securities?

            We answer the first question in the affirmative as qualified.  We answer the second question in the negative.

                                                                     ANALYSIS

            In order to prevent unduly lengthening this opinion, and also so that these questions herein presented might be dealt with directly, we assume that the Nevada corporation herein referred to is subject to all provisions of chapter 21.04 RCW hereafter referred to.

            RCW 21.04.030 requires that a company which desires to sell securities of its own issue in Washington must first secure a permit.  RCW 21.04.040 sets out the contents of the permit application.  RCW 21.04.050 requires a foreign corporation to file with its application evidence of its authority to transact business in the state in which it was organized.  RCW 21.04.060 provides:

             [[Orig. Op. Page 2]]

            "The director shall examine the application and documents filed therewith, and if he finds that the proposed plan of business of the applicant is fair, just, and equitable, and that the securities which it proposes to issue and the methods to be used by it in issuing and disposing of them are not such as will work a fraud upon the purchaser, he shall issue to the applicant a permit authorizing it to issue and dispose of the securities:  Provided, That no permit shall be issued to a corporation organized to establish or control an insurance company, unless it has prepared detailed plans regarding the subsequent organization or control of the insurance company and has presented the plans to the insurance commissioner and has obtained his approval thereof, which approval shall not constitute a recommendation or endorsement of the securities permitted to be issued.  Should the director find that the proposed plan of business of the applicant is unfair, unjust, or inequitable he shall deny the application and notify the applicant of his decision.

            "The permit shall recite in bold type that the issuance thereof is permissive only, and does not constitute a recommendation or endorsement of the securities permitted to be issued."  (Emphasis supplied.)

            The aforementioned statutes outline the necessary steps to be taken by a company, foreign or domestic, seeking a permit to sell securities in this state.  The proviso in RCW 21.04.060, heretofore emphasized, constitutes an additional requirement for corporations organized to establish or control an insurance company such as the Nevada corporation in question.  RCW 21.04.060 as originally enacted in 1923 did not contain this proviso.  The provision was added by amendment in 1943.

            The plain language of the proviso requires that any corporation organized to establish or control an insurance company and which seeks a permit under chapter 21.04 RCW must present for approval by the insurance commissioner, detailed plans regarding the subsequent organization or control of the insurance company.  The sole function of the commissioner in this regard is to approve or disapprove these plans.  The permit, if issued, is issued by the license department.  The only question of jurisdiction of the insurance commissioner involved is whether he possesses the power to approve the plans referred to in RCW 21.04.060.  It is the established rule in this state that even though a power may not be expressly given in a statute, if its existence is reasonably necessary in order to effectuate the purposes intended, such power must be implied.  State ex rel. Hunter v. Superior Court, 34 Wn (2d) 214.

             [[Orig. Op. Page 3]]

            Therefore, in answer to the first question, we conclude that RCW 21.04.060 imposes upon the insurance commissioner the duty to approve or disapprove plans regarding the subsequent organization or control of an insurance company when presented by a corporation organized to establish or control an insurance company, whether said company be foreign or domestic.

            The second question was treated by our court in State ex rel. Aleutian L. Co. v. Hinkle, 130 Wash. 144.  In this case the plaintiff, a foreign corporation, sought a permit from the secretary of state (permit now issued by director of licenses) to sell its capital stock pursuant to chapter 69, Laws of 1923.  The secretary of state refused to issue the permit until the plaintiff paid a filing fee for filing its articles of incorporation in accordance with § 1, chapter 144, Laws of 1923, and also paid an annual license fee required by § 4, chapter 144.

            Chapter 144, Laws of 1923, has since been superseded by chapter 70, Laws of 1937 (RCW 23.52.020), [[23A.32.050]]but the principle involved remains the same.  The court stated:

            "We are convinced that the legislature had no intent to require an applicant, when a foreign corporation, to comply with the general laws relating to the qualifications of foreign corporations to do business in this state, as the sale of its securities has no necessary relation to the conducting of the business for which it is organized, therefore the fees for filing articles of incorporation, as provided by § 1, ch. 144, Laws of 1923, p. 462, supra, are not collectible when application is made for a permit to sell securities only.  Nor does the issuance of such a permit authorize the corporation to transact business generally. . . ."  (Emphasis supplied.)

            In light of this case, we must answer the second question in the negative.

            We trust this opinion will be of assistance to you.

Very truly yours,

JOHN J. O'CONNELL
Attorney General


DOUGLAS HARTWICH
Assistant Attorney General

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