Did a publicly traded company have to send its Public Information Report to a director paid for board service?

Plain-English summary

The company did not have to send the report to a director who was paid for board service.

Section 171.203 required a corporation to send the Public Information Report to a named officer or director who was not currently employed by the corporation or a related corporation.

The letter explained that the amendment aimed to alert people who might still be listed after ending their relationship with a company. A director paid for services already knew of the relationship, and a publicly traded company also disclosed its board in SEC filings.

The Comptroller therefore concluded that this company need not send the compensated director a separate copy.

What this means for you

Corporations reviewing historical notice duties

The letter treated compensation for board service as satisfying the notice purpose for the specific publicly traded company.

Tax professionals

Do not extend the answer to unpaid or former directors without checking the statute and facts.

Common questions

Q: Was a separate copy required for the paid director?
A: No.

Q: What problem was the statute intended to prevent?
A: Companies continuing to list people as officers or directors after their relationship ended.

Q: Did the letter waive all director notices?
A: No. It addressed a compensated director of the requesting publicly traded company.

Citations and references

• Texas Tax Code Sec. 171.203

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=FIT
• Opinion: https://star.comptroller.texas.gov/view/9705263L

Original ruling text

May 9, 1997

Dear **:

Thank you for your recent letter requesting that the requirement of sending the
Public Information Report to members of the board of directors be waived.

In the 1995 Legislative Session, Sec. 171.203, Tax Code was amended to require
a corporation to send a copy of the Public Information Report to each officer
and director named in the report who is not currently employed by the
corporation or a related corporation. As you pointed out, the purpose behind
the new subsection was to make sure that individuals listed as officers or
directors were made aware that the company was listing them as such. This was
brought about by several unfortunate cases where individuals had ended their
association with the company but continued to be listed as an officer or
director by the company.

The primary concern was that individuals were being listed as officers and
directors of companies with which they no longer had a relationship.
Certainly, when a director is being paid for services, the director is aware of
that relationship. Publicly traded companies, like The May Department Stores
Company, give public notice of their boards of directors in their SEC filings.
The intent of the legislation is met whether the director is paid as an
employee or simply for services rendered. Therefore, The May Department Stores
Company need not send a director who is paid for their services a copy of the
Public Information Report.

I hope this satisfactorily answers your concern. Should you have any further
questions, please write Teresa Comer of my Tax Policy Division at Post Office
Box 13528, Austin, Texas 78711, or call her at 1-800-531-5441, extension
3-3958.

Sincerely,

Glen D. Hunt
Director, Research and Policy Development

cc: Teresa Comer