§§ 13.1-1 through 13.1-200.

Repealed by Acts 1985, c. 522, effective January 1, 1986.

Cross references. - For provisions as to stock corporations, see now §§ 13.1-601 through 13.1-800. For provisions as to industrial development corporations, see now §§ 13.1-981 through 13.1-998 .

Editor's note. - Sections 13.1-3, 13.1-10.1 and 13.1-16 were also repealed by Acts 1976, c. 84, Acts 1981, c. 253 and Acts 1972, c. 580, respectively. Section 13.1-53 was also repealed by Acts 1975, c. 500.

§§ 13.1-201 through 13.1-300.

Repealed by Acts 1985, c. 522, effective January 1, 1986.

Cross references. - For provisions as to nonstock corporations, see now §§ 13.1-801 through 13.1-945 .

Editor's note. - Sections 13.1-205 and 13.1-209.1 were repealed by Acts 1975, c. 500 and Acts 1981, c. 253, respectively. Section 13.1-247 was also repealed by Acts 1975, c. 500.

§ 13.1-301. Organization of cooperative associations; purposes; name; par value stock required.

1. Any number of persons, not less than five, may, under the provisions of Article 3 (§ 13.1-618 et seq.) of Chapter 9 or Article 3 (§ 13.1-818 et seq.) of Chapter 10, associate themselves together as a cooperative association, society, company or exchange, for the purpose of (i) conducting any housing, agricultural, fishing, dairy, mercantile, merchandise, brokerage, water, sewer, manufacturing, service or mechanical business on the cooperative plan or (ii) representing or providing financing for cooperative associations, societies, companies, or exchanges organized pursuant to the laws of this Commonwealth or any other state, provided that the word "cooperative" shall be included as a part of the name. Except for a cooperative association organized to conduct business as a water or sewer company, no cooperative association organized under this article shall conduct any business in this Commonwealth as a public service company or exercise any privileges of such company.
2. The provisions of Chapter 9 (§ 13.1-601 et seq.) or 10 (§ 13.1-801 et seq.), as the case may be, shall apply to cooperative associations created under this section or subject to the provisions of this article, except so far as the same are in conflict with the following sections of this article which shall be applicable only to such cooperative associations, and except that no stock cooperative association shall issue stock without nominal or par value.
3. To the extent that the application of the provisions of this article to any worker cooperative established under Article 3 (§ 13.1-346 et seq.) conflicts with the provisions of Article 3, the provisions of Article 3 shall control. (Code 1950, § 13-238; 1952, c. 668; 1956, c. 428; 1986, c. 363; 1992, cc. 155, 653; 1994, c. 217; 2020, c. 673.)

Editor's note. - At its 1954 session the General Assembly directed the Virginia Code Commission to revise the laws of Virginia relating to corporations generally, and particularly Title 13 relating to business corporations, and in September, 1955, the Commission sent to the Governor and General Assembly its report containing the proposed revision. The report, which is entitled "Report by the Code Commission of Virginia for Revision of the Laws Relating to Corporations," was published as House Document 5 of the 1956 session, and contains revisor's notes and comments which, while valuable, are too voluminous for inclusion here. The Code Commission's draft of the revision, as amended by the General Assembly, became Chapter 428 of the Acts of 1956, which repealed Title 13 and enacted in lieu thereof Title 13.1 of the Code.

Some of the cases cited in the notes under the various sections of this title were decided under corresponding provisions of former law.

Acts 2020, c. 1289, Item 128 J, as added by Acts 2021, Sp. Sess. I, c. 552, effective for the biennium ending June 30, 2022, provides: "Notwithstanding § 2.2-1604 , Code of Virginia, any cooperative association organized pursuant to Chapter 3 ( § 13.1-301 et seq.) of Title 13.1 of the Code of Virginia as a nonstock corporation that was certified as a small business by the Department of Small Business and Supplier Diversity prior to July 1, 2017, may be recertified as a small business by the Department, provided that such cooperative association otherwise meets the requirements for certification as a small business pursuant to Article 1 ( § 2.2-1603 et seq.) of Chapter 16.1 of Title 2.2 of the Code of Virginia and any other applicable provision of the Code of Virginia."

The 2020 amendments. - The 2020 amendment by c. 673 designated the existing provisions as subsections A and B and added subsection C; in subsection A, deleted "of this title" following "Chapter 9" and "Chapter 10"; and in subsection B, substituted "or 10" for "and Chapter 10" and deleted "of this title" preceding "as the case may be."

Law review. - For survey on business and corporate law in Virginia for 1989, see 23 U. Rich. L. Rev. 491 (1989).

For annual survey article, "Corporate and Business Law," see 44 U. Rich. L. Rev. 307 (2009).

Michie's Jurisprudence. - For related discussion, see 4B M.J. Corporations, § 2; 8B M.J. Food, § 3; 12B M.J. Markets and Marketing, § 4.

§ 13.1-301.1. Amendments to articles of incorporation.

An association may amend its articles of incorporation by the affirmative vote of two-thirds of the members voting thereon at any regular meeting, or at a special meeting called for the purpose. Notice of the proposed amendment and of the time and place of holding such meetings shall be delivered to each member, or mailed to his last known address shown by the books of the association, at least ten days prior to any such meetings. No amendment affecting the priority or preferential rights of any outstanding nonvoting stock shall be adopted until the written consent of two-thirds of the holders of such outstanding nonvoting stock has been obtained. Triplicate originals of the articles of amendment duly signed and acknowledged together with the filing fee required to be paid shall be delivered to the Commission. If the Commission finds that the articles comply with the requirements of law and that all required fees have been paid, it shall by order issue a certificate of amendment, which shall be admitted to record in its office. Upon the issuance of such certificate, it shall become effective in accordance with its terms.

(1958, c. 88.)

§ 13.1-301.2. Adoption, change or repeal of bylaws; subject matter.

The board of directors or members of the association, before commencing business, shall adopt bylaws not inconsistent with law or its articles of incorporation, and they may alter, amend and revise the same from time to time. The bylaws may be adopted, amended or revised by a majority vote of the board of directors, or by the vote of two-thirds of the members voting thereon at any regular or special meeting of the members or by the written assent of two-thirds of the members voting thereon by mail ballot, provided, that written notice of the proposed bylaw or bylaw amendments or revisions shall have been delivered to each member or mailed to his last known address as shown by the books of the association, at least ten days prior to any such meeting or the date on which the mail ballots must be returned to be counted. The bylaws made by the board of directors may be repealed or changed and new bylaws made by the members, and the members may prescribe that any bylaw made by them shall not be altered, amended or repealed by the directors. The bylaws may also provide for any or all of the following matters:

1. The time, place and manner of calling and conducting meetings of the members, and the number of members (which may be less than a majority) that shall constitute a quorum;
2. The manner of voting and the conditions upon which members may vote at general and special meetings by proxy and by mail or by delegates elected by district groups or other associations;
3. Subject to any provision thereon in the articles of incorporation and in this article, the number, qualifications, compensation, duties and terms of office of directors and officers; the time of their election and the mode and manner of giving notice thereof;
4. The time, place and manner for calling and holding meetings of the directors and executive committee, and the number that shall constitute a quorum;
5. Rules consistent with law and the articles of incorporation for the management of the association, the establishment of election districts, the making of contracts, the issuance, retirement and transfer of stock, the relative rights, interests and preferences of members and stockholders, and the mode, manner and effect of the expulsion of a member;
6. Penalties for violations of the bylaws.

   (1958, c. 88.)

§ 13.1-302. Limitation of individual stockholding.

No holder of common stock in any stock cooperative association shall own shares of a greater par value than $1,000, except as hereinafter provided, or be entitled to more than one vote.

(Code 1950, § 13-239; 1956, c. 428; 1994, c. 217.)

§ 13.1-303. Investment in other stock.

At any regular meeting or any regularly called special meeting of a stock cooperative association at which at least a majority of all its stockholders shall be present or represented, any such association may by a majority vote of the stockholders present or represented subscribe for shares and invest its capital or reserve fund in the capital stock of any corporation or cooperative association; provided that it shall not so invest a total amount in excess of twenty-five percent of the amount of its capital stock.

(Code 1950, § 13-240; 1956, c. 428; 1994, c. 217.)

§ 13.1-304. Purchase of business by issue of shares of stock.

Whenever any stock cooperative association shall purchase the business of another association, person or persons, it may pay for the same in whole or in part by issuing to the selling association or person shares of its capital stock to an amount which at par value would equal the fair market value of the business so purchased, and in such case the transfer to the association of such business at such valuation shall be equivalent to payment in cash for the shares of stock so issued. In case the cash value of such purchased business exceeds $1,000 the directors of the association are authorized to hold the shares in excess of $1,000 in trust for the vendor and dispose of the same to such persons and within such time, as may be mutually satisfactory to the parties in interest, and to pay the proceeds thereof as currently received to the former owners of such business.

(Code 1950, § 13-241; 1956, c. 428; 1994, c. 217.)

§ 13.1-305. Rights of subscribers before full payment.

Certificates of stock of a stock cooperative association shall not be issued to any subscriber until fully paid, but the bylaws of the association may allow subscribers to vote as stockholders provided part of the stock subscribed for has been paid in cash.

(Code 1950, § 13-242; 1956, c. 428; 1994, c. 217.)

§ 13.1-306. Distribution of earnings.

The net earnings and profits of an association organized pursuant to § 13.1-301 shall be apportioned, distributed and applied as the association may at any general or special meeting direct. The association may in its bylaws prescribe the terms and conditions, rules and regulations under and by which the stockholders or employees, or cooperating nonstockholders may participate in the earnings of the association.

Unless and until otherwise ordered by the association at any general or special meeting the board of directors shall annually apportion the net earnings by first paying dividends on the paid-up capital stock not exceeding eight per centum per annum, and by then setting aside not less than ten per centum of the remaining net earnings for a reserve fund until an amount has accumulated in the reserve fund equal to thirty per centum of the paid-up capital stock, and five per centum of the then remaining net earnings for an educational fund to be used in teaching cooperation; and shall apportion the remainder of such net profits by uniform dividends to its stockholders upon the amount of purchases of such association from its stockholders, and sales by the association to its stockholders or for their account, and upon the wages and salaries of employees, and one-half of such uniform dividend to cooperating nonstockholders unless otherwise provided by the bylaws of such association as follows: If the association be engaged in the mercantile business, then to the extent the business is so conducted, dividends, except as hereinafter otherwise provided, shall be paid as above provided to cooperating nonstockholders only upon the amount of their purchases and not upon the purchases made by the association. If the association be engaged to any extent in the purchase and sale of products of farm or orchard or as selling agent of such products, or if the association be a productive association, such as a creamery, cannery or factory, and the like, dividends to such extent shall be paid as above provided to cooperating nonstockholders who furnish such products upon the amounts of such products so furnished and not upon sales by the association.

(Code 1950, § 13-243; 1956, c. 428.)

§ 13.1-307. Permissible limitation of stock ownership or voting rights.

Any cooperative association may, either in its charter or by bylaws, provide and require that no membership or share of its stock shall be issued to or owned by any person not a member of a nonstock corporation or nonstock corporations named or designated in such charter or bylaws, or may in like manner provide that memberships or shares of its stock may be issued to or owned by persons not members of such designated nonstock corporation or nonstock corporations, but that when so owned such stock shall have no voting power. The provisions of this section shall not apply to any worker cooperative established under Article 3 (§ 13.1-346 et seq.).

(Code 1950, § 13-244; 1956, c. 428; 1994, c. 217; 2020, c. 673.)

The 2020 amendments. - The 2020 amendment by c. 673 added the last sentence.

§ 13.1-308. Limitation of use of "cooperative" in corporate name.

1. No corporation or association organized or doing business for profit in this Commonwealth shall be entitled to use the term "cooperative" as part of its corporate or other business name or title, unless it has complied with the provisions of this article or of Article 2 (§ 13.1-312 et seq.) or 3 (§ 13.1-346 et seq.) of this chapter or of Chapter 9.1 (§ 56-231.15 et seq.) or 16 (§ 56-485 et seq.) of Title 56 or of any other statute providing for cooperative corporations or associations now existing or hereafter enacted; and any corporation or association violating the provisions of this section may be enjoined from doing business under such name at the instance of any stockholder or member of any corporation or association legally organized under any law giving it the right to use the word cooperative as a part of its corporate or business name.
2. Subsection A shall not apply to a corporation or association, domestic or foreign, whose purpose is to promote housing opportunities or to represent, coordinate and further the purposes of groups organized to construct, operate, or promote housing, and such corporation or association may use the term "cooperative" as part of its corporate or other business name or title.

   (Code 1950, § 13-245; 1950, c. 300; 1956, c. 428; 1993, c. 822; 2020, c. 673.)

The 2020 amendments. - The 2020 amendment by c. 673, in subsection A, inserted "or 3 ( § 13.1-346 et seq.)" and deleted "Chapter" preceding "16."

§ 13.1-309. Other cooperatives may come under article.

Any cooperative marketing association or corporation incorporated under Article 2 (§ 13.1-312 et seq.) of this chapter, or under the general corporation laws of this Commonwealth, may be brought under the provisions of this article, and be entitled to all the benefits thereof, and be subject to all provisions, restrictions and limitations thereof by amending its articles of association or incorporation in the same manner as set out in § 13.1-334 , in cases of such associations and corporations existing under Article 2 of this chapter, either by original incorporation or by amendment, and in cases of such associations and corporations existing under the general corporation laws by amending such articles of association or incorporation according to the provisions of Article 11 (§ 13.1-705 et seq.) of Chapter 9 of this title or Article 10 (§ 13.1-884 et seq.) of Chapter 10 of this title, as the case may be; but when such amendment is had in the case of a corporation or association existing under the provisions of Article 2 of this chapter, all special privileges under such article shall be thereby surrendered.

(Code 1950, § 13-246; 1956, c. 428; 1994, c. 217.)

§ 13.1-309.1. Foreign cooperatives.

A foreign cooperative whose purpose shall include one or more of the purposes recognized for domestic cooperatives under this title or any other title of the Code of Virginia shall be authorized to do business under the provisions of this chapter by complying with the laws relating to foreign corporations doing business in the Commonwealth. The foreign cooperative shall deliver to the Commission the documents required by § 13.1-759 if a stock cooperative, or by § 13.1-921 if a nonstock cooperative along with a copy of the cooperative's bylaws. Upon such compliance, the foreign cooperative shall have all the rights and privileges of a domestic cooperative. No foreign cooperative association authorized to do business in this Commonwealth under the provisions of this article shall conduct any business in this Commonwealth as a public service company or exercise any privileges of such company.

(1992, c. 653; 1994, c. 217.)

§ 13.1-310. Cooperative associations may give certain liens on rotating stocks.

Any cooperative association or corporation organized under the laws of this Commonwealth, or under the laws of the United States, or qualifying as a cooperative association under the laws of the United States, may give as security for any loan or loans obtained from any bank for cooperatives organized under any act of Congress a chattel mortgage or deed of trust covering stocks of goods or other things in bulk, but changing in specifics, in which case the lien of such mortgage or deed of trust shall be lost as to all articles disposed of by the mortgagor up to the time of foreclosure but shall attach to the articles purchased to supply their places; provided, however, no stock of goods shall be pledged by a cooperative association unless such stock has been fully paid for and is owned by the association without incumbrance at the time it is so pledged.

(Code 1950, § 13-247; 1956, c. 428.)

§ 13.1-311. Taxation.

Every cooperative association, society, company and exchange created under the provisions of this article and every cooperative marketing association or corporation and every general corporation that may be brought under the provisions of this article, whether such association, society, company, exchange or corporation be organized or brought under this article prior or subsequent to the date of the approval of this section and whether chartered under the laws of this Commonwealth or otherwise chartered and doing business in this Commonwealth, and conducting a mercantile, merchandise or brokerage business on the cooperative plan shall be taxable as a merchant by the Commonwealth, and by the city or town within which such business is done. Nothing in this article shall exempt any such organization from any state or local merchant's license tax.

(1950, c. 365; 1956, c. 428.)

§ 13.1-311.1. Provisions relating to dissolution of and revocation of certificates of associations.

Those provisions of the Virginia Stock Corporation Act (§ 13.1-601 et seq.) and the Virginia Nonstock Corporation Act (§ 13.1-801 et seq.) relating, respectively, to the involuntary termination of domestic corporations and to the revocation of the certificates of authority to do business in this Commonwealth of foreign corporations shall apply to every association organized or doing business in this Commonwealth pursuant to the provisions of this chapter; but the provisions of this section shall not be construed as a limitation upon the application of the provisions of Chapters 9 (§ 13.1-601 et seq.) and 10 (§ 13.1-801 et seq.) of this title to such associations under § 13.1-343 .

(1958, c. 506; 1994, c. 217.)

The number of this section was assigned by the Virginia Code Commission for better arrangement, the number of this section in the 1958 act having been 13.1-342 .

§ 13.1-312. Declaration of policy [Not set out.].

(1956, c. 428.)

Editor's note. - This section, relating to the declaration of policy with regard to Agricultural Cooperative Associations, was enacted by Acts 1956, c. 428. In furtherance of the general policy of the Virginia Code Commission to include in the Code only provisions having general and permanent application, this section, which is limited in its purpose and scope, is not set out here, but attention is called to it by this reference.

The section catchline was inserted at the direction of the Virginia Code Commission.

§ 13.1-313. Definitions.

As used in this Act, unless the context or subject matter requires otherwise:

1. "Agricultural products" include livestock and livestock products, dairy products, poultry and poultry products, wine and viticultural products, seeds, nuts, ground stock, horticultural, floricultural, forestry, bee and any and all kinds of farm products.
2. "Supplies"   include any and all types of supplies, machinery and equipment used by farmers as producers or used by farmers as consumers.
3. "Association"   means a corporation organized under or adopting the provisions of this Act, or a foreign association or corporation authorized to do business in this Commonwealth, organized under any general or special act as a cooperative association for the mutual benefit of its members and other patrons as farmers, and which confines its operations to purposes authorized by this Act and restricts the return on the stock or membership capital and the amount of its business with nonmembers to the limits placed thereon by this Act for associations organized hereunder and which qualifies to do business in this Commonwealth under this Act.

   Associations shall be classified as and deemed to be nonprofit corporations, inasmuch as their primary object is not to pay dividends on invested capital, but to render service and provide means and facilities by or through which the producers of agricultural products may receive a reasonable and fair return for their products and obtain supplies and services on a cooperative nonprofit basis.

4. "This Act"  means this article, which may be cited as the "Agricultural Cooperative Association Act."
5. "Member"   includes the holder of a membership in an association without capital stock and the holder of voting stock in an association organized with capital stock.
6. "Person"   includes an individual, a partnership, a corporation and an association.
7. "Patron"  means a person using the marketing facilities of an association for the marketing of agricultural products, or a person using the purchasing or service facilities of an association for the purchase of supplies or the rendering of services.
8. "Board"   means the board of directors of an association.
9. "Commission"   means the State Corporation Commission of Virginia.

   (Code 1950, § 13-248; 1956, c. 428; 2010, cc. 317, 561.)

The 2010 amendments. - The 2010 amendments by cc. 317 and 561 are identical, and in the definition of "agricultural products," inserted "wine and viticultural products" and deleted "viticultural" following "floricultural."

§ 13.1-314. Qualification of incorporators.

Five or more individuals, engaged in agriculture as bona fide producers of agricultural products, or two or more associations of such producers, may form an association.

(1956, c. 428.)

§ 13.1-315. Purposes.

Such association may be organized for the purpose of engaging in any cooperative activity for producers of agricultural products in connection with:

1. Producing, assembling, marketing, buying or selling agricultural products, or harvesting, preserving, drying, processing, manufacturing, blending, canning, packing, ginning, grading, storing, warehousing, handling, transporting, shipping or utilizing such products, or manufacturing or marketing the by-products thereof.
2. Manufacturing, processing, storing, transporting, delivering, handling, buying for or furnishing supplies to its members and other patrons.
3. Performing or furnishing business or educational or other services, including the services of buildings, machinery and equipment, on a cooperative basis.
4. Financing any of the above-enumerated activities for its members.

   (Code 1950, § 13-255; 1956, c. 428.)

§ 13.1-316. Articles of incorporation.

Articles of incorporation shall be signed in triplicate by each of the incorporators and acknowledged by them, if natural persons, and, if associations, by the president and secretary of each such association, before an officer authorized to take acknowledgments, and shall state:

1. The name of the association which shall be distinguishable upon the records of the Commission from the name of any association or corporation, whether issuing shares or not issuing shares, limited liability company, business trust or limited partnership existing under the laws of this Commonwealth, or the name of any foreign corporation, whether issuing shares or not issuing shares, limited liability company, business trust or limited partnership authorized to transact business in this Commonwealth, or any corporate, limited liability company, business trust or limited partnership name reserved or registered as provided by law;
2. The address of its initial registered office (including both (i) the post-office address with street and number, if any, and (ii) the name of the county or city in which it is located) and the name of its initial registered agent at such address and that the agent is either (i) an individual who is a resident of Virginia and either a director of the corporation or a member of the Virginia State Bar or (ii) a domestic or foreign stock or nonstock corporation, limited liability company or registered limited liability partnership authorized to transact business in this Commonwealth;
3. Its purposes;
4. Whether organized with or without capital stock; and if organized with capital stock, a description thereof in accordance with the requirements of § 13.1-619 ;
5. If organized without capital stock, whether the property rights and interests of each member are equal or unequal; if unequal, the rule by which such rights and interests shall be determined;
6. The maximum number of directors, not less than five, who are to manage the affairs of the association;
7. The number of directors constituting the initial board of directors and the names and addresses of the persons who are to serve as the initial directors;
8. If the duration of a corporation is not to be perpetual, the period of its duration;
9. The articles may also contain any other provisions, consistent with law for regulating the association's business or the conduct of its affairs, the establishment of election districts, the election of delegates to represent the members residing therein and the election of directors to represent such election districts, either directly or indirectly by said delegates, for voting by proxy or mail ballot and the issuance, retirement and transfer of membership certificates and stock.

   (Code 1950, § 13-257; 1956, c. 428; 1958, c. 564; 2001, cc. 517, 541; 2003, c. 592.)

Editor's note. - Acts 2003, c. 592, cl. 3, provides: "That the provisions of this act (i) shall be applied prospectively only, (ii) shall not affect the validity of any filing made, or other action taken, prior to the effective date of this act [October 1, 2004] with respect to the name of a corporation, limited liability company, business trust, or limited partnership, and (iii) shall not be construed to require any such corporation, limited liability company, business trust, or limited partnership that was in compliance with applicable laws regarding the distinguishability of its name prior to the effective date of this act to change its name or take other action to comply with the requirements of this act."

The 2001 amendments. - The 2001 amendments by cc. 517 and 541 are identical, and in subsection (b), substituted "the agent is either (i) an individual who is a resident of Virginia and either a director" for "he is a resident of Virginia and that he is a director" and added "or (ii) a domestic or foreign stock or nonstock corporation, limited liability company or registered limited liability partnership authorized to transact business in this Commonwealth."

The 2003 amendments. - The 2003 amendment by c. 592, effective October 1, 2004, in subsection A, substituted "be distinguishable upon the records of the Commission from" for "not be the same as, or confusingly similar to," and inserted "limited liability company, business trust or limited partnership" in three places.

§ 13.1-317. Filing and recording articles of incorporation.

1. Triplicate originals of the articles of incorporation, duly signed and acknowledged together with the filing fee required to be paid, shall be delivered to the Commission. If the Commission finds that the articles comply with the requirements of law and that all required fees have been paid, it shall by order issue a certificate of incorporation, which shall be admitted to record in its office. Upon the issuance of such certificate, it shall become effective in accordance with its terms. One original counterpart of the articles of incorporation, together with the certificate of incorporation issued by the Commission, shall be certified by the Commission to the Commissioner of Agriculture and Consumer Services for filing and another counterpart shall be certified to the Director of the State Agricultural Extension Division for filing.
2. For filing and recording the certificate of incorporation, an amendment to the certificate of incorporation, or a certificate of adoption, the association shall pay such fees as conform to the laws governing corporations generally. However, for filing the certificate of incorporation of an association organized without capital stock, the association shall pay ten dollars and for filing an amendment to the certificate of incorporation, two dollars and one-half. For certifying and transmitting copies as required by this section, the association shall pay a fee of one dollar per copy.

   (1956, c. 428.)

§ 13.1-318. Amendments to the articles of incorporation.

An association may amend its articles of incorporation by the affirmative vote of two-thirds of the members voting thereon at any regular meeting, or at a special meeting called for the purpose. Notice of the proposed amendment and of the time and place of holding such meetings shall be delivered to each member, or mailed to his last known address shown by the books of the association, at least ten days prior to any such meetings. No amendment affecting the priority or preferential rights of any outstanding nonvoting stock shall be adopted until the written consent of two-thirds of the holders of such outstanding nonvoting stock has been obtained. Triplicate originals of the articles of amendment duly signed and acknowledged together with the filing fee required to be paid shall be delivered to the Commission. If the Commission finds that the articles comply with the requirements of law and that all required fees have been paid, it shall by order issue a certificate of amendment, which shall be admitted to record in its office. Upon the issuance of such certificate, it shall become effective in accordance with its terms. One original counterpart of the articles of amendment, together with the certificate of amendment issued by the Commission, shall be certified by the Commission to the Commissioner of Agriculture and Consumer Services for filing and another counterpart shall be certified to the Director of the State Agricultural Extension Division for filing.

(Code 1950, § 13-258; 1956, c. 428.)

§ 13.1-319. Bylaws.

The board of directors or members of the association, before commencing business, shall adopt bylaws not inconsistent with law or its articles of incorporation, and they may alter, amend and revise the same from time to time. The bylaws may be adopted, amended or revised by a majority vote of the board of directors, or by the vote of two-thirds of the members voting thereon at any regular or special meeting of the members or by the written assent of two-thirds of the members voting thereon by mail ballot, provided, that written notice of the proposed bylaw or bylaw amendments or revisions shall have been delivered to each member or mailed to his last known address as shown by the books of the association, at least ten days prior to any such meeting or the date on which the mail ballots must be returned to be counted. The bylaws made by the board of directors may be repealed or changed and new bylaws made by the members, and the members may prescribe that any bylaw made by them shall not be altered, amended or repealed by the directors. The bylaws may also provide for any or all of the following matters:

1. The time, place and manner of calling and conducting meetings of the members, and the number of members (which may be less than a majority) that shall constitute a quorum;
2. The manner of voting and the conditions upon which members may vote at general and special meetings by proxy and by mail or by delegates elected by district groups or other associations;
3. Subject to any provision thereon in the articles of incorporation and in this Act, the number, qualifications, compensation, duties and terms of office of directors and officers; the time of their election and the mode and manner of giving notice thereof;
4. The time, place and manner for calling and holding meetings of the directors and executive committee, and the number that shall constitute a quorum;
5. Rules consistent with law and the articles of incorporation for the management of the association, the establishment of election districts, the making of contracts, the issuance, retirement and transfer of stock, the relative rights, interests and preferences of members and stockholders, and the mode, manner and effect of the expulsion of a member;
6. Penalties for violations of the bylaws.

   One copy of the bylaws and all amendments thereto, certified by the secretary of the association, shall be transmitted to the Commissioner of Agriculture and Consumer Services and one copy to the Director of the State Agricultural Extension Division within thirty days after their adoption.

   (Code 1950, § 13-261; 1956, c. 428.)

§ 13.1-320. Powers.

1. An association shall have the capacity to act possessed by natural persons, but such association shall have authority to perform only such acts as are necessary or proper to accomplish the purposes as set forth in its articles of incorporation and which are not repugnant to law.
2. Without limiting or enlarging the grant of authority contained in subsection A of this section, it is hereby specifically provided that every such association shall have authority:
   1. To act as agent, broker or attorney-in-fact for its members, and for any subsidiary or affiliated association, and otherwise to assist or join with associations engaged in any one or more of the activities authorized by its articles of incorporation, and to hold title for its members and for subsidiary and affiliated associations to property handled or managed by the association on their behalf.
   2. To make contracts, and to exercise by its board or duly authorized officers or agents, all such incidental powers as may be necessary, suitable or proper for the accomplishment of the purposes of the association and not inconsistent with law or its articles of incorporation and that may be conducive to or expedient for the interest or benefit of the association.
   3. To make loans or advances to members or producer-patrons or to the members of an association which is itself a member or subsidiary thereof; to purchase, or otherwise acquire, endorse, discount or sell any evidence of debt, obligation or security.
   4. To establish and accumulate reserves and surplus to capital, and such other funds as may be authorized by the articles of incorporation or the bylaws.
   5. To own and hold membership in, or shares of the capital stock of, other associations and corporations and the bonds or other obligations thereof, engaged in any related activity, in producing, warehousing or marketing any of the products handled by the association or in financing its activities or of its members, and while the owner thereof, to exercise all the rights of ownership, including the right to vote thereon.
   6. If such associations are warehousing corporations, they may issue legal warehouse receipts to the association, or to any other person, and such legal warehouse receipts shall be considered as adequate collateral to the extent of the current value of the commodity represented thereby. In case such warehouse is licensed or licensed and bonded under the laws of this Commonwealth or the United States, its warehouse receipt shall not be challenged or discriminated against because of ownership or control, wholly or in part, by the associations.
   7. To acquire, hold, sell, dispose of, pledge or mortgage any property which its purposes may require, subject to any limitation prescribed by law or its articles of incorporation.
   8. To borrow money and to give its notes, bonds or other obligations therefor and secure the payment thereof in any manner consistent with law.
   9. To purchase or otherwise handle machinery, equipment, supplies and perform services for nonmembers.
   10. To market or otherwise deal in products of nonmembers to an amount not greater in annual value than such products as are dealt in for or on behalf of its members.
   11. To have a corporate seal and to alter the same at pleasure.
   12. To continue as a corporation for the time limited in its articles of incorporation, or if no time limit is specified, then perpetually.
   13. To sue and to be sued in its corporate name.
   14. To conduct business in this Commonwealth and elsewhere.
   15. To dissolve and wind up.

       (Code 1950, § 13-260; 1956, c. 428; 1964, c. 220; 1989, c. 576.)

§ 13.1-321. Members.

1. An association may admit as members only bona fide producers of agricultural products, including tenants and landlords receiving a share of the crop, and cooperative associations of such producers.
2. The articles of incorporation may limit the amount of voting stock which a member may own.
3. Under the terms and conditions prescribed in the bylaws a member shall lose his membership and his right to vote if he ceases to belong to the class eligible to membership under this section, but he shall remain subject to any liability incurred by him while a member of the association.
4. No member shall be personally liable for any debt or liability of the association.
5. No member shall have more than one vote.

   (Code 1950, § 13-263; 1956, c. 428.)

§ 13.1-322. Membership or voting stock certificates; transfers; dividends; nonvoting stock.

1. No certificate for membership or stock shall be issued until fully paid for, but promissory notes may be accepted by the association as full or partial payment. The association shall hold the stock as security for the payment of the note, but such retention as security shall not affect the member's right to vote and hold office.

   Fractional shares may be issued by capital stock associations. Certificates representing shares and certificates of membership or other evidence of the patron's equity in any fund, capital investment or other assets of the association shall be signed by the president or a vice-president or treasurer or assistant treasurer and the secretary or an assistant secretary of the association, or by facsimiles of their signatures, and may be sealed with the seal of the association, or a facsimile thereof.

2. Certificates of membership of a nonstock association shall not be transferred without the consent of the association's board of directors.
3. Voting stock in capital stock associations shall not be transferable to persons not eligible to membership in the association and such restrictions must be set forth in the bylaws of each capital stock association and printed on every stock certificate subject thereto.
4. The board of directors of an association, from time to time, may declare and the association may pay dividends on the stock or membership capital except when the declaration or payment thereof would be contrary to any restrictions contained in the articles of incorporation.
5. Net savings (which are hereby defined as being the excess of receipts over costs and expenses for each year of operations) in excess of dividends on outstanding stock or membership capital and additions to reserves shall be distributed on the basis of patronage, and the books of the association shall provide the basis for determining the interest of members and other patrons in the reserves. The distribution of patronage refunds may be restricted to members or be made at the same or a different rate for members and nonmembers. The bylaws may provide that any distribution to a nonmember, eligible for membership may be credited to such nonmember, until the amount thereof equals the value of a membership certificate or a share of the association's voting stock.
6. After a member has notified the association of his withdrawal, or after the adoption of a resolution by the board terminating his membership, the board shall appraise the value in money of his membership interest in the association and shall determine and fix the time when the association shall pay him the value of his interest, unless the member, with the consent of the board, transfers his certificate of membership.
7. An association may issue nonvoting stock to members and nonmembers. Nonvoting stock may be redeemed or retired by the association on such terms and conditions as may be provided in the articles of incorporation or bylaws and printed on the stock certificates. Payment for nonvoting stock may be made in cash, services or property as determined by the board.

   Voting stock may be issued only for money or notes or in payment of patronage refunds at par.

8. Except when its debts exceed fifty per centum of its assets, an association may purchase for cash its voting stock at book value or par value, whichever is less, and may call such stock for redemption on the same basis pursuant to a plan for rotating ownership of such stock set forth in its articles of incorporation or in its bylaws. The determination of book value by the board of directors shall be incontestable except for fraud.
9. The association may from time to time issue to each patron a certificate or other evidence of the patron's equity in any fund, capital investment or other assets of the association. Such certificate or other evidence of such equity may be transferred only to the association, or to such other purchaser as may be approved by the board of directors, upon such terms and conditions as shall be provided in the bylaws and printed thereon.
10. Notwithstanding any other provision of law, when there is held by any association any membership or patronage equity, including but not limited to membership stock, patronage refunds, patronage refund allocations, or any credit or distribution attributable to business done with or for patrons, to the credit of a person who has not had a current address on file with the association for a period of not less than three consecutive years, then the bylaws or member agreements of the association may provide that such equity shall be deemed to have been transferred by forfeiture to the association and shall thereafter be the property of the association; however, such membership or patronage equity shall be deemed forfeited to the association only if (i) the association publishes conspicuous notice of such pending forfeiture in its regular member publication, if any, and a publication of general circulation and (ii) such equity is not claimed by such person or, if such person is deceased, such person's next of kin within 180 days of such publication or such longer period as set out in the bylaws or member agreements of the association. If there is no such provision in the association's bylaws or member agreements, or if there is no publication, then any unclaimed membership or patronage equity shall be treated in accordance with the Virginia Disposition of Unclaimed Property Act (§ 55.1-2500 et seq.).
11. Any association organized with capital stock under this article may accept registrations of such stock in the names of two or more persons, payable to any one of them, or to any one of them or the survivor; and any person so named, whether the others be living or not, may accept dividend payments and withdraw from the association and receive the amount payable on withdrawal in the same manner and on the same terms as are allowed by law and the articles of incorporation and bylaws in case of any other member or stockholder and the receipt or acceptance of dividends or amounts payable on withdrawal by the person so paid shall be a valid and sufficient release and discharge of the association for any payment so made.

    (Code 1950, §§ 13-269, 13-270, 13-273 to 13-277; 1952, c. 166; 1956, c. 428; 1975, c. 403; 1981, c. 51; 2001, cc. 797, 838.)

Editor's note. - Acts 2001, cc. 797 and 838, which added subsection J, in cl. 2 provide: "Any transfer by forfeiture of membership or patronage equity, including but not limited to membership stock, patronage refunds, patronage refund allocations, or any credit or distribution attributable to business done with or for patrons, which an association subject to this act has completed prior to July 1, 2001, shall be effective if such transfer was in compliance with the bylaws or member agreements of the association in effect at the time of such transfer, without regard to the publication requirements set forth in this act, and such transfer shall not be subject to the Uniform Disposition of Unclaimed Property Act ( § 55-210.1 et seq.)."

To conform to the recodification of Title 55 by Acts 2019, c. 712, effective October 1, 2019, the following substitution was made at the direction of the Virginia Code Commission: substituted "Virginia Disposition of Unclaimed Property Act ( § 55.1-2500 et seq.)" for "Uniform Disposition of Unclaimed Property Act ( § 55-210.1 et seq.)."

The 2001 amendments. - The 2001 amendments by cc. 797 and 838 are identical, and substituted the present designations A through I for the former designations (a) through (i); inserted present subsection J; and redesignated former subsection (j) as present subsection K.

Law review. - For article, "Corporate and Business Law," see 35 U. Rich. L. Rev. 499 (2001).

§ 13.1-323. General and special meetings; how called.

After the incorporation of an association the members thereof shall hold an organization meeting at a time and place fixed by the board of directors named in the articles of incorporation and shall adopt a set of bylaws. Not less than ten days' written notice thereof shall be given to each member. An association may provide in its bylaws for one or more regular meetings each year. Special meetings of the members may be called by the board of directors, and it shall be their duty to call such meetings when ten percent of the members file with the secretary a petition demanding a special meeting and specifying the business to be considered at such meeting. Regular or special meetings may be held within or without the Commonwealth. Notice of all meetings, except as otherwise provided by law or the articles of incorporation or bylaws, shall be mailed to each member at least ten days prior to the meeting. In the case of special meetings the notice shall state the purposes for which it is called. The bylaws may provide that all notices shall be given by publication in a periodical published by or for the association, to which substantially all its members are subscribers, or in a newspaper or newspapers whose combined circulation is general in the territory in which the association operates.

(Code 1950, § 13-265; 1950, c. 238; 1956, c. 428; 1989, c. 577.)

§ 13.1-324. Directors generally; executive committee.

1. The business of the association shall be managed by a board of not less than five directors. The directors, with the exception of the public directors, shall be elected from the membership of the association or from the officers, directors or membership of a member association. The bylaws shall provide that one or more directors shall be appointed by the Director of the State Agricultural Extension Service. The director or directors so appointed shall be known as public directors. They need not be members of the association, or officers, directors or members of a member association, but shall have the same powers and rights as the directors elected by the members. A director shall hold office for the term for which he was appointed or elected and until his successor is elected, or appointed, and qualified.
2. The names of the first directors shall be stated in the articles of incorporation. Their successors shall be elected by the members at the first meeting of the members held after the incorporation of the association.
3. The number, qualifications, terms of office, manner of election or appointment, time and place of meeting and the powers and duties of the directors may, subject to the provisions of this Act and the articles of incorporation, be prescribed by the bylaws.
   1. Except as otherwise prescribed in the bylaws, a director shall be elected or appointed for a term of one year.
   2. Except as otherwise prescribed in the bylaws, vacancies in the board, other than by expiration of term, shall be filled by the remaining members of the board, unless the bylaws provide for the election of directors by districts, in which case the board shall call a special meeting of the members or delegates in the district to elect a person qualified to fill the vacancy. A director elected by the remaining members of the board shall serve until his successor is elected by the members at their next annual meeting or at any special meeting called and held prior thereto. This subsection shall not apply, however, to public directors; any vacancies occurring in the office of a public director shall be filled in the same manner as the original appointment was made.
4. The bylaws may provide that the territory in which the association has members shall be divided into districts and that the directors shall be elected according to such districts, either directly or by district delegates elected by the members in that district. In such case, the bylaws shall specify, or vest in the board of directors authority to determine, the number of directors to be elected by each district and the manner and method of apportioning the directors and of districting and redistricting the territory covered by the association. The bylaws may provide that primary elections shall be held in each district to nominate the directors apportioned thereto and that the result of all such primary elections may be ratified by the next regular meeting of the association or may be considered as a final election.
5. The bylaws may provide for an executive committee to be elected by the board of directors from their number and may allot to such committee all the functions and powers of the board subject to its general direction and control.

   (Code 1950, §§ 13-266, 13-267; 1956, c. 428.)

§ 13.1-325. Removal of director.

Any member may ask for the removal of an elected director by filing charges with the secretary or president of the association, together with a petition signed by ten per centum of the members requesting the removal of the director in question. The removal shall be voted upon at the next meeting of the members, and by two-thirds of the voting power voting thereon the association may remove the director. The director whose removal is requested shall be served with a copy of the charges not less than ten days prior to the meeting and shall have an opportunity at the meeting to be heard in person and by counsel and to present evidence; and the persons requesting the removal shall have the same opportunity. In case the bylaws provide for election of directors by districts, then the petition for removal of a director must be signed by twenty per centum of the members residing in the district from which he was elected. The board must call a special meeting of the members residing in the district to consider the removal of the director; and by two-thirds of the voting power of the members of that district voting thereon the director in question shall be removed from office.

(Code 1950, § 13-268; 1956, c. 428.)

§ 13.1-326. Officers generally.

The board shall elect a president, a secretary and a treasurer, and may elect one or more vice-presidents, and such other officers as may be authorized in the bylaws. The president and at least one of the vice-presidents must be directors, but a vice-president who is not a director cannot succeed to or fill the office of president. Any two of the offices of vice-president, secretary and treasurer may be combined in one person.

(Code 1950, § 13-267; 1956, c. 428.)

§ 13.1-327. Removal of officer.

Any member may bring charges of misconduct or incompetency against an officer by filing them with the secretary or president of the association, together with a petition signed by ten per centum of the members requesting the removal of the officer in question. The directors shall vote upon the removal of the officer at the first meeting of the board held after the hearing on the charges, and the officer may be removed by a majority vote, notwithstanding any contract the officer may have with the association, which shall terminate upon his removal anything in the contract to the contrary notwithstanding. The officer against whom such charges are made shall be served with a copy of the charges not less than ten days prior to the meeting, and shall have an opportunity at the meeting to be heard in person and by counsel, and to present evidence, and the persons making the charges shall have the same opportunity.

(Code 1950, § 13-268; 1956, c. 428.)

§ 13.1-328. Referendum.

The articles of incorporation or bylaws may provide that upon demand of two-fifths of all the directors, any matter that has been approved or passed by the board must be referred to the members for their approval before it becomes effective. No referendum shall be allowed unless it is demanded by the required number of directors at the meeting at which the matter in question is adopted. The referendum of the members may be conducted by mail ballots or by their vote taken at the next annual meeting or at a special meeting called for such purpose. Immediately upon receipt of a written petition signed by at least twenty per centum of the members, the board of directors shall require the secretary to conduct a referendum on the matter set forth in said petition.

(Code 1950, § 13-262; 1956, c. 428.)

§ 13.1-329. Marketing contracts; enforcement; inducing breach; spreading false reports.

1. An association and its members may make and execute marketing contracts, requiring the members to sell, for any period of time, not over ten years, all or any specified part of their agricultural products or specified commodities exclusively to or through the association or any facilities to be created by the association. The contract may provide that the association may sell or resell the products delivered by its members, with or without taking title thereto, and pay over to its members the resale price, after deducting all necessary selling overhead, and other costs and expenses, including (a) interest or dividends on its preferred stock, not exceeding eight per centum per annum, (b) reserves for retiring the stock, if any, (c) other proper reserves, and (d) interest or dividends not exceeding eight per centum per annum upon common stock.
2. The bylaws and the marketing contract may fix, as liquidated damages, specific sums to be paid by the member or stockholder to the association upon the breach by him of any provision of the marketing contract regarding the sale or delivery or withholding of products; and may further provide that the member will pay all costs, premium for bonds, expenses and fees in case any action is brought upon the contract by the association; and any such provision shall be valid and enforceable in the courts of this Commonwealth.
3. In the event of any such breach or threatened breach of such marketing contract by a member, the association shall be entitled to an injunction to prevent further breach of the contract, and to a decree of specific performance thereof. Pending the adjudication of such an action, and upon filing a verified complaint showing the breach or threatened breach, and upon filing a sufficient bond, the association shall be entitled to a temporary restraining order and preliminary injunction against the member.
4. Any person who knowingly induces any member or stockholder of an association or corporation organized hereunder to breach his marketing contract with the association or corporation shall be liable to the association or corporation for the full amount of damages sustained by it by reason of such breach; and any person who maliciously and knowingly spreads false reports about the finances or management of any such association or corporation shall be liable to the association or corporation aggrieved in a civil suit for the actual damage which it may sustain by reason of such false reports, and also in the penal sum of $500 for each such act, which may be recovered in the same action.
5. Any person, firm or corporation conducting a public tobacco warehouse within this Commonwealth who knowingly solicits or permits any member of any association organized hereunder to breach his marketing contract with the association by selling, offering for sale, or displaying for sale or for auction such member's products contrary to the terms of any marketing agreement of which such person or any member of such firm or any active officer or manager of such corporation has knowledge or notice, shall be liable to the association aggrieved in a civil suit in the penal sum of not less than $100 nor more than $500 for each such offense; and such association shall be entitled to an injunction against such person, firm or corporation, to prevent further breaches and a multiplicity of actions thereon. In addition, such person, firm or corporation shall pay to the association a reasonable attorney's fee and all costs involved in any such litigation or proceedings at law. Provided, however, that no such action or suit by such an association shall lie unless there has been first served upon such person, firm or corporation after such tobacco has been delivered to the warehouse, and prior to the sale thereof, a notice, in writing, stating that the products of a member of such association are about to be sold, offered for sale or displayed for sale. Such notice may be served by any peace officer or any other person, and the affidavit of the person serving the same shall be prima facie evidence of such service. It shall be the duty of any police officer, sheriff, deputy sheriff, constable or deputy constable of this Commonwealth to serve such notice upon request of any authorized representative of the association, and upon the payment of a fee of fifty cents for each such service.

   (Code 1950, §§ 13-278, 13-279; 1956, c. 428.)

Michie's Jurisprudence. - For related discussion, see 19 M.J. Warehouses and Warehousemen, § 3.

§ 13.1-330. Recordation of marketing contracts.

1. Whenever any body of agricultural producers, cooperative corporation composed of agricultural producers or cooperative marketing association incorporated under the laws of this Commonwealth, or under the laws of any other state of the United States and licensed to do business in this Commonwealth, which is engaged in marketing agricultural products, other than leguminous food products, for its members shall prepare and deliver to the clerk of any court in this Commonwealth in the office of whom deeds are admitted to record, a book to be called "the contract book of . . . . . . . . . . ." (namely the body, corporation or association), such book shall thereupon become a public record book of such clerk's office, and it shall be the duty of such clerk to record therein the matters and things authorized by the succeeding section.
2. At any time after any such book shall have been so delivered to the clerk as provided herein, the body, corporation or association which has delivered the same may request the clerk to whom such book has been delivered to record therein any marketing contracts or agreements which have been entered into by such body, corporation or association and any members thereof; provided, however, that if any such contracts or agreements be in the same words and figures as any other contracts or agreements with any other members of the body, corporation or association, and be separately signed by such members of the body, corporation or association, such body, corporation or association may have one of such contracts or agreements recorded in extenso in such book, and may furnish the clerk with a list of the names of persons appearing on such contracts as signers thereof, with the dates of the signatures respectively, whereupon the clerk shall record such names as signers of such contracts or agreements, with the dates of their signatures, respectively, so furnished. Such recordation of the list of signers so furnished shall be equivalent to the recordation in extenso of the contract or agreement of each signer thereon. Such copy of such contract or agreement and such list of names of persons appearing on such contracts as signers thereof shall be sworn to by some officer of the body, corporation or association cognizant of the facts before some officer authorized to take acknowledgments to deeds. But in no case shall any such contract or agreement be deemed to be recorded as to any signer thereof until his name shall be indexed in such book by the clerk, which indexing the clerk is hereby required to do.
3. When the provisions of the two preceding subsections shall have been complied with, and any such recordation as is therein mentioned is made in the county in which is situated the land on which the produce covered by the particular marketing contract or agreement concerned is grown or produced, such recordation shall operate as constructive notice of the existence of such contract or agreement, and of the terms thereof, and all persons contracting or dealing with any such member in relation to any such produce covered by such contract or agreement shall be bound thereby; and all rights or liens acquired by any such person in such produce subsequent to the date of such recordation shall be subject in all respects to the rights of the body, corporation or association under such contract or agreement; provided, however, that nothing herein contained shall affect the statutory lien of a landlord for advances made to a tenant, or for rent; and provided, also, that nothing herein contained shall affect a bona fide purchaser of any agricultural product, upon the floor of any public warehouse, when such purchaser is without actual notice of the rights of the body, corporation or association under such contract or agreement nor a warehouseman selling such products at public auction on his warehouse floor, without actual notice of such contract or agreement.
4. For making the recordations authorized by this section, the clerk shall be entitled to the following fees, to be paid by the body, corporation or association for which the service is performed: for recording a contract or agreement in extenso, the same fees as for recording a deed; for recording a sworn list of names when furnished as above provided, two cents for each person. No tax shall be charged on the recordations authorized hereby.

   (Code 1950, §§ 13-280 to 13-283; 1956, c. 428.)

§ 13.1-331. Associations are not in restraint of trade.

1. No association complying with the terms hereof shall be deemed to be a conspiracy, or a combination in restraint of trade, or an illegal monopoly; or be deemed to have been formed for the purpose of lessening competition or fixing prices arbitrarily, nor shall the contracts between the association and its members, or any agreements authorized in this Act, be construed as an unlawful restraint of trade, or as a part of a conspiracy or combination to accomplish an improper or illegal purpose or act.
2. An association may acquire, exchange, interpret and disseminate to its members, to other cooperative associations, and otherwise, past, present and prospective crop, market, statistical, economic and other similar information relating to the business of the association, either directly or through an agent created or selected by it or by other associations acting in conjunction with it.
3. An association may advise its members in respect to the adjustment of their current and prospective production of agricultural commodities and its relation to the prospective volume of consumption, selling prices and existing or potential surplus, to the end that every market may be served from the most convenient productive areas under a program of orderly marketing that will assure adequate supplies without undue enhancement of prices or the accumulation of any undue surplus.

   (Code 1950, § 13-284; 1956, c. 428.)

§ 13.1-332. Voluntary dissolution.

1. 1. The members of an association may at any regular meeting or any special meeting called for the purpose, upon thirty days' notice of the time, place and object of the meeting having been given as prescribed in the bylaws, by two-thirds of the voting power voting thereon, discontinue the operations of the association and direct that the association be dissolved and its affairs settled. The meeting shall by like vote designate a committee of three who, as trustees on behalf of the association and within the time fixed in their designation or any extension thereof, shall liquidate its assets, pay its debts and divide any surplus among the members in accordance with their respective rights and interests under their contracts with the association and the articles of incorporation and bylaws. A report of the proceedings had under this section, together with a list of the names and residences of the directors and officers of the association, and the names and residences of the trustees appointed, certified by the president and the secretary, shall be filed in the office of the clerk of the Commission. The Commission, upon being satisfied that the requirements of law have been complied with, shall issue a certificate of dissolution, and thereupon the association shall stand dissolved and the trustees shall proceed to settle up and adjust its business and affairs.
   2. Whenever all the members shall consent in writing to the dissolution and the appointment of three trustees for winding up the affairs of the association, no meeting or notice thereof shall be necessary, but on filing such consent with the Commission, it shall issue a certificate of dissolution, and the association shall stand dissolved and the said trustees shall proceed to settle up and adjust its business and affairs.
   3. Whenever a certificate of dissolution has been issued by the Commission, it shall certify one copy of the certificate to the Commissioner of Agriculture and Consumer Services and one copy to the Director of the State Agricultural Extension Division.
   4. The trustees may bring and defend all actions by them deemed necessary to protect and enforce the rights of the association.
   5. Any vacancies in the trusteeship may be filled by the remaining trustees.
   6. Such matters as justice may require.

      All such orders and judgments shall be binding upon the association, its property and assets, its trustees, members, creditors and all persons having claims against it.

      (1956, c. 428.)

2. In the case of an association dissolving pursuant to this section, the circuit court of the county or the circuit, corporation, or other court having equitable jurisdiction in the city where its principal office is located, upon petition of the trustees or a majority of them, or in a proper case upon the petition of a creditor or member, or upon the petition of the Attorney General upon notice to all of the trustees and to such other interested persons as the court may specify, from time to time may order and adjudge in respect to the following matters:

   (1) The giving of notice by publication or otherwise of the time and place for the presentation of all claims and demands against the association, which notice may require all creditors of and claimants against the association to present in writing and in detail at the place specified their respective accounts and demands to the trustees by a day therein specified, which shall not be less than forty days from the service or first publication of such notice;

   (2) The payment or satisfaction in whole or in part of claims and demands against the association, or the retention of moneys for such purpose;

   (3) The presentation and filing of intermediate and final accounts of the trustees, the hearing thereon, the allowance or disallowance thereof, and the discharge of the trustees, or any of them, from their duties and liabilities;

   (4) The administration of any trust or the disposition of any property held in trust by or for the association;

   (5) The sale and disposition of any remaining property of the association and the distribution or division of such property or its proceeds among the members or persons entitled thereto;

§ 13.1-333.

Repealed by Acts 1989, c. 465.

Cross references. - For present similar section, see now § 13.1-333.1 .

§ 13.1-333.1. Annual reports.

Each association subject to this chapter within six months after the close of its fiscal year shall transmit to each of its members an annual report containing the name of the association, its place of business, a general statement of its business operations during the fiscal year, showing the amount of capital stock paid up and the number of stockholders, if a stock corporation, or the number of members and the amount of the membership fees received, if a nonstock association; an income and expense statement; and its balance sheet. Any association audited by a certified public accountant may comply with this section by transmitting a copy of such audit to its members.

The term "transmit," as used in this section, may be satisfied by printing the annual report or audit in an official publication of the association.

(1989, c. 465.)

§ 13.1-334. Application to existing associations.

1. This Act shall be applicable to any existing association formed under or which has adopted the provisions of the Agricultural Cooperative Association Act, Chapter 15, Title 13, as heretofore amended, and all such associations shall have and may exercise and enjoy all the rights, privileges, authority, powers and capacity granted or afforded under and in pursuance of this Act and shall be subject to all restrictions and requirements of this Act to the same extent and effect as though organized hereunder.
2. Any agricultural cooperative marketing or purchasing association organized as a corporation under the laws of this Commonwealth may bring itself under and within the terms of this Act as if organized hereunder and may thereafter operate in pursuance of the terms hereof, and may exercise and enjoy all the rights, privileges, authority, powers and capacity granted or afforded under and in pursuance of this Act and shall be subject to all restrictions, limitations and requirements of this Act to the same extent and effect as though organized hereunder, by filing in triplicate with the Commission, articles of adoption signed by its president or one of the vice-presidents, under the seal of the corporation, attested by its secretary and acknowledged by them before an officer authorized by the laws of this Commonwealth to take acknowledgments of deeds, certifying that by resolution of the board of directors of such association duly adopted, such association has elected to bring itself within the terms of this Act. If the Commission finds that the articles comply with the requirements of law and that all required fees have been paid, it shall by order issue a certificate of adoption, which shall be admitted to record in its office. Upon the issuance of such certificate, it shall become effective in accordance with its terms. One original counterpart of the articles of adoption, together with the certificate of adoption issued by the Commission, shall be certified by the Commission to the Commissioner of Agriculture and Consumer Services for filing and another counterpart shall be certified to the Director of the State Agricultural Extension Division for filing.

   (1956, c. 428.)

§ 13.1-335. Saving clause.

This Act shall not impair or affect any act done, offense committed or right accruing, accrued or acquired, or liability, penalty, forfeiture or punishment incurred prior to the time this Act takes effect, but the same may be enjoyed, asserted, enforced, prosecuted or inflicted as fully and to the same extent as if this Act had not been passed. This Act shall not impair or affect any contract entered into by any association prior to the time this Act takes effect.

(1956, c. 428.)

§ 13.1-336. Limitations of the use of the word "cooperative."

1. No person, firm, corporation or association, domestic or foreign, hereafter commencing business in this Commonwealth shall use the word "cooperative" or any abbreviation thereof, as a part of its corporate or business name unless it has complied with the provisions of this Act or some other statute of this Commonwealth relating to cooperative associations. A foreign association organized under and complying with the cooperative law of the state of such association's creation shall be entitled to use of term "cooperative" in this Commonwealth if it has obtained the privilege of doing business in this Commonwealth under any cooperative statute of this Commonwealth.  Any person violating the provisions of this section shall be deemed guilty of a misdemeanor and shall be subject to a fine not exceeding fifty dollars. For the purpose of this section, each day's violation may be considered a separate offense.
2. Subsection A shall not apply to a corporation or association, domestic or foreign, whose purpose is to promote housing opportunities or to represent, coordinate and further the purposes of groups organized to construct, operate, or promote housing, and such corporation or association may use the term "cooperative" as part of its corporate or other business name or title.

   (Code 1950, § 13-289; 1956, c. 428; 1993, c. 822.)

§ 13.1-337. Foreign associations.

A foreign corporation that can qualify as an association, as defined in § 13.1-313 , may be authorized to do business in this Commonwealth under the provisions of this Act by complying with the laws relating to foreign corporations doing business in the Commonwealth and filing with the Commissioner of Agriculture and Consumer Services and the Director of the State Agricultural Extension Division, a copy of its charter duly certified by the Commission. It shall pay the same fees and charges as domestic associations. Upon such compliance, it shall have all the rights and privileges of like domestic associations and the entrance fee shall be computed as if a charter fee.

(Code 1950, § 13-290; 1956, c. 428; 1958, c. 564.)

§ 13.1-338. Purchasing business of other associations, persons, firms or corporations; stock issued.

Whenever an association organized hereunder with preferred capital stock shall purchase the stock or any property, or any interest in any property of any person, firm or corporation or association, it may by agreement with the other party or parties to the transaction discharge the obligation so incurred, wholly or in part, by exchanging for the acquired interest shares of its preferred capital stock to an amount which at par value would equal a fair market value of the stock or interest so purchased, as determined by the board of directors. In that case the transfer to the association of the stock or interest purchased shall be equivalent to payment in cash for the shares of stock issued.

(Code 1950, § 13-285; 1956, c. 428.)

§ 13.1-339. Merger or consolidation.

Associations shall have the power to merge or consolidate with any other like associations. Such merger or consolidation shall be effected in accordance with the general provisions of law providing for the merger or consolidation of other corporations insofar as applicable, and where not applicable in a manner analogous to that set forth in said provisions. In effecting such merger or consolidation, two-thirds of the members voting thereon at any regular meeting, or special meeting called for the purpose, shall take such action as is required of stockholders. The fair cash value of the stock or membership of any dissenting member shall be taken to mean the amount to which said member would be entitled by way of distribution of assets if said association were dissolved.

(Code 1950, § 13-259; 1956, c. 428.)

§ 13.1-340. Sale, mortgage or other disposition of assets.

The sale, lease, exchange, mortgage, pledge or other disposition of all, or substantially all, the property and assets of an association, when made in the usual and regular course of the business of the association, may be made upon such terms and conditions and for such consideration, which may consist in whole or in part of money or property, real or personal, including shares of any other corporation, domestic or foreign, as shall be authorized by its board of directors; and in such case no authorization or consent of the members shall be required.

Unless otherwise provided in the articles of incorporation, a mortgage or pledge of all or any part of the property and assets, with or without the goodwill, of an association, though not made in usual and regular course of its business, may be made for money upon such terms and conditions as shall be authorized by its board of directors and no authorization or consent of members shall be required.

A sale, lease or exchange, or a mortgage or pledge for a consideration other than money, of all, or substantially all, the property and assets, with or without the goodwill, of an association, if not made in the usual and regular course of its business, may be made upon such terms and conditions and for such consideration, which may consist in whole or in part of money or property, real or personal, including shares of any other corporation, domestic or foreign, as may be authorized in the following manner:

The board of directors shall adopt a resolution recommending such sale, lease, exchange, mortgage, pledge or other disposition and directing that it be submitted to a vote at a meeting of members having voting rights, which may be either an annual or a special meeting. Written notice stating that the purpose, or one of the purposes, of such meeting is to consider the sale, lease, exchange, mortgage, pledge or other disposition of all, or substantially all, the property and assets of the association shall be given to each member entitled to vote at such meeting, at least ten days prior to such meeting. At such meeting the members may authorize such sale, lease, exchange, mortgage, pledge or other disposition and may fix, or may authorize the board of directors to fix, any or all of the terms and conditions thereof and the consideration to be received by the association therefor. Such authorization shall require the vote of at least two-thirds of the votes entitled to be cast by members present or represented by proxy at such meeting. After such authorization by a vote of members, the board of directors, nevertheless in its discretion, may abandon such sale, lease, exchange, mortgage, pledge or other disposition of assets, subject to the rights of third parties under any contracts relating thereto, without further action or approval by members.

(1956, c. 428.)

Law review. - For note on the Virginia Takeover Act and SEC Tender Offer Rule 14d-2(b), see 22 Wm. & Mary L. Rev. 487 (1981).

§ 13.1-341. Taxes.

Nothing in this article shall be construed as exempting any association from the payment of license, income, property or other taxes, state and local; and the designation of any such association in this article as nonprofit shall not be construed as exempting it from state income taxation, notwithstanding any other provision of law. For the privilege of storing or marketing agricultural products, an association shall, however, pay only an annual license fee of ten dollars which shall be in lieu of all other corporation, franchise and income taxes, taxes on capital, taxes and charges upon reserves held by the association, and all state and local license taxes on that part of its business which is solely and exclusively the storing or marketing of agricultural products. Marketing of agricultural products shall include the functions involved in transferring title and in moving goods from producer to consumer, including buying, selling, processing, packing, storing, transporting, standardizing, financing, risk bearing and supplying market information.

(Code 1950, § 13-291; 1956, c. 428; 1982, c. 266.)

Michie's Jurisprudence. - For related discussion, see 12A M.J. Licenses, § 23.

Editor's note. - The case cited below was decided prior to the 1982 amendment of this section.

§ 13.1-342.

Reserved.

§ 13.1-343. Application of general corporation laws.

The provisions of the Virginia Stock Corporation Act (§ 13.1-601 et seq.) and of the Virginia Nonstock Corporation Act (§ 13.1-801 et seq.) shall, to the extent that they are not in conflict with or inconsistent with the provisions of this Act, apply to associations subject to this Act, each of which shall establish and maintain a registered office and a registered agent and file the annual reports required by such Acts.

(Code 1950, § 13-250; 1956, c. 428.)

§ 13.1-344. Existing associations continued.

All associations organized under or that have adopted the provisions of Chapter 15, Title 13, as heretofore amended, which are in existence at the date of the enactment of this Act, shall continue in existence subject to the terms of this Act.

(1956, c. 428.)

§ 13.1-345. Verification no longer required; signing instrument containing misstatement as perjury.

A requirement in this chapter that an instrument be verified by oath need not be complied with after July 1, 1958. A person who signs any instrument delivered to the Commission as required by this chapter knowing it to contain a misstatement of fact shall be guilty of perjury.

(1958, c. 564.)

§ 13.1-346. Definitions.

As used in this article:

"Collective reserve account" means an account on the corporate books representing the worker cooperative's entire net book value minus balances in any other equity accounts.

"Member" means an individual who has been accepted for membership in, and owns a membership share issued by, a worker cooperative.

"Membership fee" means an initial payment, if required by the articles of incorporation or bylaws of the worker cooperative, made by a worker to a worker cooperative as a condition of becoming a member.

"Patronage" means the amount of work performed for a worker cooperative, measured in accordance with criteria set forth in the articles of incorporation or bylaws of the worker cooperative.

"Worker" means an individual employed by a worker cooperative.

"Worker cooperative" means a corporation incorporated under the provisions of Article 3 (§ 13.1-618 et seq.) of Chapter 9 that has elected to be governed by this article.

(2020, c. 673.)

§ 13.1-347. Formation of worker cooperative; purpose.

1. Any corporation incorporated under Article 3 (§ 13.1-618 et seq.) of Chapter 9 may elect to be governed as a worker cooperative in accordance with the provisions of this article by so stating in its articles of incorporation or articles of amendment filed in accordance with § 13.1-710 . The offering of an employee stock ownership plan governed by 26 U.S.C. § 401 by a corporation incorporated under Article 3 (§ 13.1-618 et seq.) of Chapter 9 to its employees shall not be considered an election to be governed as a worker cooperative.
2. A worker cooperative may be formed for any lawful purpose, provided that it shall be organized and shall conduct its business primarily for the mutual benefit of its members.

   (2020, c. 673.)

§ 13.1-348. Name.

1. A worker cooperative may include the word "cooperative" or "co-op" in its corporate name.
2. No person hereafter commencing business in the Commonwealth may use the phrase "worker cooperative," "worker co-op," "employee cooperative," or "employee co-op" as a part of its corporate name unless it has elected to be governed as a worker cooperative in accordance with this article.

   (2020, c. 673.)

§ 13.1-349. Application of other laws.

Except as otherwise provided in this article, worker cooperatives shall be governed by Article 1 (§ 13.1-301 et seq.) and Chapter 9 (§ 13.1-601 et seq.).

(2020, c. 673.)

§ 13.1-350. Revocation of election to be governed as worker cooperative; limitation on mergers.

1. A worker cooperative may revoke its election to be governed as a worker cooperative under this article by a vote of two-thirds of the members and through filing appropriate articles of amendment in accordance with § 13.1-710 .
2. When any worker cooperative revokes its election in accordance with subsection A, the articles of amendment shall provide for conversion of membership shares and internal capital accounts or their conversion to securities or other property in a manner consistent with Chapter 9 (§ 13.1-601 et seq.).
3. A worker cooperative may not merge with another corporation other than a worker cooperative. Two or more worker cooperatives may merge in accordance with Article 12 (§ 13.1-715.1 et seq.) of Chapter 9. (2020, c. 673.)

§ 13.1-351. Qualifications of members; membership shares.

1. The articles of incorporation or bylaws of a worker cooperative shall establish qualifications for membership and procedures for acceptance and termination of members.
2. A worker cooperative's qualifications and procedures shall require, among such other provisions established in its articles of incorporation or bylaws, that:
   1. No individual may be accepted as a member unless the individual is employed by the worker cooperative on a full-time or part-time basis at the time of acceptance;
   2. Not fewer than two-thirds of the employees of any worker cooperative shall be individuals who are members of the worker cooperative; and
   3. No person may own more than one membership share issued by the worker cooperative.
3. An individual accepted as a member shall cease to be a member upon termination of employment with the worker cooperative except that the articles of incorporation or the bylaws may provide that an individual who retires from employment may continue to be a member of the worker cooperative without voting rights subject to terms and conditions as may be provided in the articles of incorporation or bylaws. The articles of incorporation or the bylaws shall require that (i) a retired member's membership share shall be converted to another class of shares that has no voting power and (ii) nonvoting shares may only be acquired by the conversion of membership shares to another class of shares without voting power upon their owner's retirement or upon such other event specified in the worker cooperative's articles of incorporation or bylaws.
4. A worker cooperative shall issue a class of voting shares designated as membership shares. Each member of a worker cooperative shall be issued a membership share upon payment of a membership fee, the amount of which shall be determined from time to time by the board of directors. Each member shall own only one membership share. Only members employed by the worker cooperative may own a membership share. The redemption price of membership shares shall be determined by reference to internal capital accounts established as set forth in § 13.1-354 .
5. Members of a worker cooperative shall have all the rights and responsibilities of shareholders of a corporation organized under Chapter 9 (§ 13.1-601 ) except as otherwise provided in this article. No member shall be personally liable for any debt or liability of the worker cooperative. (2020, c. 673.)

§ 13.1-352. Voting rights.

1. No shares other than membership shares shall be given voting rights in a worker cooperative.
2. The power to amend or repeal bylaws of a worker cooperative shall be in the members only, except to the extent that directors are authorized to amend or repeal the bylaws.
3. Voting on amendments to the articles of incorporation of a worker cooperative shall be limited to the members qualified to vote membership shares.
4. Each member with a membership share shall have one vote in any matter requiring voting by shareholders.

   (2020, c. 673.)

§ 13.1-353. Net earnings or losses; apportionment, distribution, and payment.

1. The net earnings or losses of a worker cooperative shall be apportioned and distributed at such times and in such manner as the articles of incorporation or bylaws shall specify.
2. Net earnings declared as patronage allocations with respect to a period of time, and paid or credited to members, shall be apportioned among the members in accordance with the ratio that each member's patronage during the period involved bears to total patronage by all members during that period.
3. The apportionment, distribution, and payment of net earnings required by subsection B may be in cash, credits, written notices of allocation, or shares without voting rights issued by the worker cooperative.

   (2020, c. 673.)

§ 13.1-354. Internal capital accounts; redemption of shares; collective reserve account.

1. A worker cooperative shall establish through its articles of incorporation or bylaws a system of internal capital accounts to reflect the book value and to determine the redemption price of membership shares, nonvoting shares, and written notices of allocation. As used in this section, "written notice of allocation" means a written instrument that discloses to a member the stated dollar amount of such member's patronage allocation and the terms for payment of that amount by the worker cooperative.
2. The articles of incorporation or bylaws of a worker cooperative may permit the periodic redemption of written notices of allocation and nonvoting shares and shall provide for recall and redemption of the membership share upon termination of membership in the cooperative.
3. The articles of incorporation or bylaws may provide for the worker cooperative to pay or credit interest on the balance in each member's internal capital account.
4. The articles of incorporation or bylaws may authorize assignment of a portion of retained net earnings and net losses to a collective reserve account. Earnings assigned to the collective reserve account may be used for any and all corporate purposes as determined by the board of directors.
5. A worker cooperative may issue nonvoting shares to members and nonmembers. Nonvoting shares may be redeemed or retired by the worker cooperative on such terms and conditions as may be provided in the articles of incorporation or bylaws. Payment for nonvoting shares may be made in cash, services, or property as determined by the board.
6. Any worker cooperative issuing shares under this article may accept registrations of such shares in the names of two or more persons, payable to any one of them, or to any one of them or the survivor, and any person so named, whether the others be living or not, may accept dividend payments and withdraw from the association and receive the amount payable on withdrawal in the same manner and on the same terms as are allowed by law and the articles of incorporation and bylaws in case of any other member or shareholder, and the receipt or acceptance of dividends or amounts payable on withdrawal by the person so paid shall be a valid and sufficient release and discharge of the association for any payment so made.

   (2020, c. 673.)

§ 13.1-355. Internal capital accounting.

1. The entire net book value of a worker cooperative shall be reflected in internal capital accounts, one for each member, and a collective reserve account.
2. A worker cooperative shall credit the paid-in membership fee and additional paid-in capital of a member to the member's internal capital account and shall also record the apportionment of retained net earnings or net losses to the members in accordance with patronage by appropriately crediting or debiting the internal capital accounts of members. The collective reserve account in an internal capital account cooperative shall reflect any paid-in capital, net losses, and retained net earnings not allocated to individual members.
3. The balances in all the internal capital accounts and collective reserve account, if any, shall be adjusted at the end of each accounting period so that the sum of the balances is equal to the net book value of the worker cooperative.

   (2020, c. 673.)

§§ 13.1-356 through 13.1-400.

Reserved.

§§ 13.1-400.1 through 13.1-400.10.

Repealed by Acts 2016, c. 250, cl. 2.

Editor's note. - Former §§ 13.1-400.1 through 13.1-400.10 relating to Automobile Clubs, were derived from Code 1950, §§ 46-546 through 46-553; 1956, Ex. Sess., c. 55; 1958, c. 244; ; 1971, Ex. Sess., c. 1; 1972, c. 684; 1981, c. 10; 1982, cc. 56, 63; 1992, c. 468; 1998, c. 16; 2001, c. 706; 2011, c. 298.

§§ 13.1-401 through 13.1-423.

Repealed by Acts 1964, c. 219.

§§ 13.1-424 through 13.1-433.

Repealed by Acts 1996, c. 216.

Editor's note. - Former §§ 13.1-424 through 13.1-433, containing the Uniform Act for the Simplification of Fiduciary Security Transfers, was enacted by Acts 1960, c. 21, and amended by Acts 1990, c. 248.

§ 13.1-434. Definitions.

As used in this chapter:

1. "Corporation" means a private or public corporation, association, or trust issuing a security.
2. "Security" includes any share of stock, bond, debenture, note or other security issued by a corporation and registered as to ownership on the books of the corporation.
3. "Transfer agent" includes any person employed or authorized to transfer securities issued by a corporation, including a registrar.

   (1960, c. 20.)

§ 13.1-435. Corporate securities registered in joint names with right of survivorship.

Whenever a security issued by a corporation organized under the laws of the Commonwealth is registered in the names of two or more persons as joint tenants with right of survivorship or in the names of persons married to each other as tenants by the entireties with right of survivorship and one of such persons dies, such corporation and any transfer agent of such corporation shall, upon receipt of evidence of death, be entitled to treat the survivor or survivors as the owner or owners of such security for all purposes and to cause such security to be registered in the name of such survivor or survivors regardless of any claim of right through the decedent or by his personal representative, unless such registration is enjoined prior to its effectuation by a court of competent jurisdiction.

(1960, c. 20; 2020, c. 900.)

The 2020 amendments. - The 2020 amendment by c. 900 substituted "the Commonwealth is" for "this Commonwealth shall be," "persons married to each other" for "a man and a woman" and "is enjoined" for "shall be enjoined."

§ 13.1-436. To what transfers of securities applicable.

This chapter shall apply to all transfers of securities by transfer agents domiciled in this Commonwealth and by all corporations incorporated under the laws of this Commonwealth and their transfer agents regardless of the place of transfer or the residence or domicile of the registered owners of any such security.

(1960, c. 20.)

§§ 13.1-437 through 13.1-500.

Reserved.

§ 13.1-501. Definitions.

1. When used in this chapter, unless the context otherwise requires: "Agent" means any individual who, as a director, officer, partner, associate, employee or sales representative of a broker-dealer or issuer, effects or undertakes to effect sales of securities, otherwise than on behalf of (i) an issuer either offering a security exempted by subdivision 1, 2, 3, 4, 7, 9, or 10 of subsection A of § 13.1-514 or effecting a transaction with a "qualified purchaser" as defined by the United States Securities and Exchange Commission or (ii) a broker-dealer effecting in this Commonwealth transactions limited to those transactions described in § 15(h)(2) of the Securities Exchange Act of 1934. "Broker-dealer" means any person engaged in the business of selling any type of security other than an interest or unit in a condominium as defined in § 55.1-2000 or cooperative housing corporation for the account of others or for his own account otherwise than with or through a broker-dealer or agent, but does not include an issuer or an agent. A bank or trust subsidiary formed under Article 3 (§ 6.2-1047 et seq.) of Chapter 10 of Title 6.2 shall not be considered to be a broker-dealer because the bank or trust subsidiary formed under Article 3 (§ 6.2-1047 et seq.) of Chapter 10 of Title 6.2 engages in any one or more of the activities specified in subparagraph (i), (ii), (iii), (iv), (v), (vi), (viii), (ix) or (x) of § 3(a)(4)(B) or in § 3(a)(5)(C) of the Securities Exchange Act of 1934 under the conditions described in connection with such laws. "Commission" means the State Corporation Commission. "Control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract, or otherwise. "Cooperative housing corporation" means a corporation in which each member is entitled, solely by reason of his membership in the corporation, to occupy for dwelling purposes a house or an apartment in a building owned or leased or to be owned or leased by the corporation or to purchase a dwelling constructed or to be constructed by the corporation. The corporation shall not be or intend to be engaged in any business or activity other than the ownership, leasing, management, or construction of residential properties for its members, except to the extent that such business or activity is incidental to the ownership, leasing, management, or construction of residential properties. The securities of the corporation shall be issued only in connection with the sale or lease of dwelling units to persons who are or thereupon become members of the corporation and shall be transferable by the purchasers only in connection with the transfer of such dwelling units or leases to other persons who are or thereupon become members. "Federal covered advisor" means any person who is registered or required to be registered under § 203 of the Investment Advisers Act of 1940 as an "investment adviser." "Federal covered security" means any security described as a "covered security" in § 18 of the Securities Act of 1933. "Guaranteed" means guaranteed as to payment of principal, interest or dividends. "Investment advisor" means any person who, for compensation, engages in the business of advising others, either directly or through publications or writings, as to the value of securities or as to the advisability of investing in, purchasing, or selling securities, or who, for compensation and as part of a regular business, issues or promulgates analyses or reports concerning securities. Investment advisor also includes financial planners and other persons who, as an integral component of other financially related services, provide the foregoing investment advisory services to others for compensation and as a part of a business or who hold themselves out as providing the foregoing investment advisory services to others for compensation. "Investment advisor" does not include (i) an investment advisor representative; (ii) a bank, a bank holding company as defined in the Bank Holding Company Act of 1956 which is not an investment company, a trust subsidiary organized under Article 3 (§ 6.2-1047 et seq.) of Chapter 10 of Title 6.2, a savings institution, a credit union, or a trust company; (iii) a lawyer, accountant, engineer, or teacher whose performance of these services is solely incidental to the practice of his profession; (iv) a broker-dealer or his agent whose performance of these services is solely incidental to the conduct of his business as a broker-dealer and who receives no special compensation for them; (v) a publisher of any newspaper, news column, newsletter, news magazine, or business or financial publication or service, whether communicated in hard copy form, or by electronic means, or otherwise, that does not consist of the rendering of advice on the basis of the specific situation of each client; (vi) any person that is a federal covered advisor; or (vii) such other persons not within the intent of this definition, as the Commission may designate by rule or determine by order pursuant to § 13.1-525 . "Investment advisor representative" means any partner, officer, director of, or a person occupying a similar status or performing similar functions, or other individual, except clerical or ministerial personnel, who is employed by or associated with (a) an investment advisor registered or required to be registered under this chapter and who does any of the following: (i) makes any recommendations or otherwise renders advice regarding securities, (ii) manages accounts or portfolios of clients, (iii) determines which recommendations or advice regarding securities should be given, (iv) prepares reports or analyses concerning securities, (v) solicits, offers or negotiates for the sale of or sells investment advisory services, or (vi) supervises employees who perform any of the foregoing; or (b) a federal covered advisor, subject to the limitations of § 203 A of the Investment Advisers Act of 1940, as the Commission may designate by rule or order. "Investment advisor representative" does not include such other persons employed by or associated with either an investment advisor or a federal covered advisor not within the intent of this definition as the Commission may designate by rule or determine by order pursuant to § 13.1-525 . "Issuer" means any person who issues or proposes to issue a security, except that:
   1. With respect to certificates of deposit, voting trust certificates or collateral trust certificates, and with respect to certificates of interest or shares in an unincorporated investment trust not having a board of directors or persons performing similar functions, or of the fixed, restricted management or unit type, the term "issuer" means the person or persons performing the acts and assuming the duties of manager;
   2. With respect to equipment trust certificates or like securities, "issuer" means the person by whom the equipment is or is to be used;
   3. With respect to oil, gas or other mineral leases, rights or royalties or interests therein, "issuer" means the owner of any such lease, right, royalty or interest (whether whole or fractional) who creates financial interests therein for the purpose of offering to more than five persons. "Nonissuer distribution" means any transaction not directly or indirectly for the benefit of the issuer. "Offer" includes every attempt or offer to dispose of, or solicitation of an offer to buy, a security or interest in a security for value. "Person" means an individual, a partnership, a corporation, an unincorporated association, a government, a subdivision of a government, or a trust in which the interests of the beneficiaries are evidenced by securities. "Sale" or "sell" includes every contract of sale of, contract to sell, or disposition of, a security or interest in a security for value. "Securities Act of 1933," "Securities Exchange Act of 1934," "Bank Holding Company Act of 1956," "Investment Advisers Act of 1940," and "Investment Company Act of 1940" mean the federal statutes of those names as now or hereafter amended. "Security" means any note; stock; treasury stock; bond; debenture; evidence of indebtedness; certificate of interest or participation in any profit-sharing agreement; collateral trust certificate; preorganization certificate of subscription; transferable share; investment contract; voting-trust certificate; certificate of deposit for a security; oil, gas or other mineral lease, right or royalty, or any interest therein; or, in general, any interest or instrument commonly known as a "security," or any certificate of interest or participation in, temporary or interim certificate for, guarantee of, or warrant or right to subscribe to or purchase, any of the foregoing. However, this definition shall not apply to any insurance policy, endowment policy, annuity contract, variable annuity contract or any contract or agreement in relation to and in consequence of any such policy or contract, issued by an insurance company subject to the supervision or control of the Commission's Bureau of Insurance when the form of such policy or contract has been duly filed with the Bureau as now or hereafter required by law. "State" means any state, territory or possession of the United States, including the District of Columbia and Puerto Rico.
2. For the purposes of Article 4 (§ 13.1-507 et seq.) of this chapter, the terms defined in this section shall not include negotiations or agreements between the issuer and any underwriter or among underwriters; or any transaction by the pledgee of a security unless made directly or indirectly for the benefit of the issuer.
3. Any security given or delivered with, or as a bonus on account of, any purchase of securities or any other thing shall be deemed to constitute part of the subject of the purchase and to have been offered and sold for value.
4. Every sale or offer of a warrant or right to purchase or subscribe to another security of the same issuer or of another person, and every sale or offer, of a security which gives the holder thereof a present or future right or privilege to convert the security into another security of the same issuer or of another person, shall be deemed to include an offer of such other security.

   (Code 1950, § 13-106; 1956, c. 428; 1966, c. 186; 1974, cc. 409, 479; 1975, c. 75; 1976, c. 229; 1987, c. 678; 1988, c. 536; 1990, c. 5; 1991, cc. 223, 418; 1992, c. 19; 1997, c. 279; 1998, c. 22; 2001, c. 722.)

Cross references. - As to the requirements of this act and the investment of public monies, see § 2.2-4508 .

As to the General Assembly Conflicts of Interest Act, see § 30-100.

As to conduct prohibited by the General Assembly Conflicts of Interest Act, see § 30-103.

As to effect of service of a lien or orders to withhold or deliver in connection with a support order, see § 63.2-1931.

Editor's note. - For the Securities Act of 1933, referred to above, see 15 U.S.C.S. § 77a et seq. For the Securities Exchange Act of 1934, referred to above, see 15 U.S.C.S. § 78a et seq. For the Bank Holding Company Act of 1956, referred to above, see 12 U.S.C.S. § 1841 et seq. For the Investment Advisers Act of 1940, referred to above, see 15 U.S.C.S. § 80b-1 et seq. For the Investment Company Act of 1940, referred to above, see 15 U.S.C.S. § 80a-1 et seq.

Acts 2001, c. 722, cl. 2 provides: "That the provisions of this act shall become effective on July 1, 2002."

Effective October 1, 2010, "Article 3 ( § 6.2-1047 et seq.) of Chapter 10 of Title 6.2" was substituted for "Article 3.1 ( § 6.1-32.1 et seq.) of Chapter 2 of Title 6.1," to conform to the recodification of Title 6.1 by Acts 2010, c. 794.

To conform to the recodification of Title 55 by Acts 2019, c. 712, effective October 1, 2019, the following substitution was made at the direction of the Virginia Code Commission: substituted "condominium as defined in § 55.1-2000" for "condominium as defined in subdivision (c) of § 55-79.2."

The 1998 amendment, in subsection A, inserted "engaged in the business of" in the paragraph defining "Broker-dealer," in the paragraph defining "Federal covered advisor," deleted "(i)" preceding "registered," and deleted "or (ii) excepted from the definition of an 'investment advisor' under § 202(a)(11) of the Investment Advisors Act of 1940" following "as an 'investment adviser'," in the paragraph defining "Investment advisor representative," in the first sentence, inserted "(a)," deleted "or who has a place of business located in this Commonwealth and is employed by or associated with a person registered or required to be registered as an investment advisor under § 203 of the Investment Advisors Act of 1940" following "registered under this chapter," substituted "recommendations" for "recommendation" following "(i) makes any," and added the language beginning "or (b) a federal covered advisor"; and added the second sentence.

The 2001 amendments. - The 2001 amendment by c. 722, effective July 1, 2002, in the paragraph defining "Broker-dealer," substituted "subdivision (c) of § 55-79.2" for " § 55-79.2 (c)," deleted "a bank, a trust subsidiary formed under Article 3.1 ( § 6.1-32.1 et seq.) of Chapter 2 of Title 6.1" following "does not include," and added the last sentence.

Law review. - For article, "The Virginia Securities Act; A Blue Sky Primer," see 45 Va. L. Rev. 303 (1959). For survey of Virginia law on business associations for the year 1969-1970, see 56 Va. L. Rev. 1536 (1970). For article on the evolution of the State Corporation Commission, see 14 Wm. & Mary L. Rev. 523 (1973). For survey of Virginia law on business associations for the year 1973-1974, see 60 Va. L. Rev. 1464 (1974); for the year 1975-1976, see 62 Va. L. Rev. 1370 (1976). For survey of Virginia administrative law and utility regulation for the year 1978-1979, see 66 Va. L. Rev. 193 (1980). For article, "The Applicability of Local Securities Acts to Multi-State Securities Transactions," see 20 U. Rich. L. Rev. 139 (1985).

For essay, "Investment Analysis and the Law of Insider Trading," see 76 Va. L. Rev. 1023 (1990).

For article surveying major developments between 1991 and 1992 that affect business and corporate law in Virginia, see "Business and Corporate Law," 26 U. Rich. L. Rev. 653 (1992).

For a casenote, "Knowing Possession vs. Actual Use: Due Process and Social Costs in Civil Insider Trading Actions," see 8 Geo. Mason L. Rev. 233 (1999).

For an article, "Retaining Mandatory Securities Disclosure: Why Issuer Choice is Not Investor Empowerment," see 85 Va. L. Rev. 1335 (1999).

For an article, "A Paradigm from Securities Law of Uninformed Supreme Court Decisionmaking," see 57 Wash. & Lee L. Rev. 497 (2000).

For article, "Corporate and Business Law," see 35 U. Rich. L. Rev. 499 (2001).

Michie's Jurisprudence. - For related discussion, see 4B M.J. Corporations, §§ 9, 105.

Editor's note. - Some of the cases below were decided under prior law.

§ 13.1-502. Unlawful offers and sales.

It shall be unlawful for any person in the offer or sale of any securities, directly or indirectly,

1. To employ any device, scheme or artifice to defraud, or
2. To obtain money or property by means of any untrue statement of a material fact or any omission to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or
3. To engage in any transaction, practice or course of business which operates or would operate as a fraud or deceit upon the purchaser.

   (1956, c. 428.)

Law review. - For survey of Virginia law on business associations for the year 1975-1976, see 62 Va. L. Rev. 1370 (1976). For article on the common law of corporate insider trading, see 39 Wash. & Lee L. Rev. 845 (1982). For article on merit regulation of the sale of securities, see 39 Wash. & Lee L. Rev. 899 (1982).

§ 13.1-503. Unlawful advice.

1. It shall be unlawful for any person who receives directly or indirectly any consideration from another person primarily for advising such other person as to the value of securities or their purchase or sale, whether through the issuance of analyses or reports or otherwise,
   1. To employ any device, scheme, or artifice to defraud such other person,
   2. To engage in any transaction, practice, or course of business which operates or would operate as a fraud or deceit upon such other person,
   3. Acting as principal for his own account, knowingly to sell any security to or purchase any security from a client, or acting as broker for a person other than such client, knowingly to effect any sale or purchase of any security for the account of such client, without disclosing to such client in writing before the completion of such transaction the capacity in which he is acting and obtaining the consent of the client to such transaction. The prohibitions of this subdivision shall not apply to any transaction with a customer of a broker-dealer if such broker-dealer is not acting as an investment advisor in relation to such transaction, or
   4. To engage in dishonest or unethical practices as the Commission may define by rule.
2. In the solicitation of advisory clients, it shall be unlawful for any person to make any untrue statement of a material fact, or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading.
3. Except as may be permitted by rule or order of the Commission, it shall be unlawful for any investment advisor to enter into, extend, or renew any investment advisory contract unless it provides in writing:
   1. That the investment advisor shall not be compensated on the basis of a share of capital gains upon or capital appreciation of the funds or any portion of the funds of the client;
   2. That no assignment of the contract may be made by the investment advisor without the consent of the other party to the contract; and
   3. That the investment advisor, if a partnership, shall notify the other party to the contract of any change in the membership of the partnership within a reasonable time after the change.
4. Subdivision 1 of subsection C of this section shall not prohibit an investment advisory contract which provides for compensation based upon the total value of a fund averaged over a definite period, or as of definite dates or taken as of a definite date.
5. "Assignment" as used in subdivision 2 of subsection C of this section includes any direct or indirect transfer or hypothecation of an investment advisory contract by the assignor or of a controlling block of the assignor's outstanding voting securities by a security holder of the assignor. If the investment advisory is a partnership, no assignment of an investment advisory contract is considered to result from the death of withdrawal of a minority of the members of the investment advisor having only a minority interest in the business of the investment advisor, or from the admission to the investment advisor of one or more members who, after admission, will be only a minority of the members and will have only a minority interest in the business.
6. The Commission may by rule or order adopt exemptions from subdivision 3 of subsection A and subdivisions 1, 2 and 3 of subsection C of this section where such exemptions are consistent with the public interest and within the purposes fairly intended by the policy and provisions of this chapter.

   (1956, c. 428; 1987, c. 678.)

Law review. - For note on implied private rights of action, see 36 Wash. & Lee L. Rev. 944 (1979).

§ 13.1-504. Registration.

1. It shall be unlawful for any person to transact business in this Commonwealth as (i) a broker-dealer or an agent, except in transactions exempted by subsection B of § 13.1-514 , unless he is so registered under this chapter; (ii) an investment advisor or investment advisor representative unless he is so registered under this chapter; or (iii) a federal covered advisor unless he has filed such documents and paid such fee as the Commission by rule or order may require.
2. The registration of an agent shall be deemed effective only so long as he is connected with a specified broker-dealer registered under this chapter or a specified issuer. When an agent begins or terminates a connection with a broker-dealer or issuer, both the agent and the broker-dealer or issuer shall promptly notify the Commission. An agent who changes his connection from one broker-dealer or issuer to another shall be required to file a new application for registration and pay the necessary fee in accordance with § 13.1-505 . It shall be unlawful for any broker-dealer or issuer to employ an unregistered agent. No agent shall be employed by more than one broker-dealer or issuer, except pursuant to such rules or regulations as the Commission shall prescribe.
3. The registration of an investment advisor representative shall be deemed effective only so long as he is connected with an investment advisor registered under this chapter or a federal covered advisor. When an investment advisor representative begins or terminates a connection with an investment advisor, the investment advisor shall promptly notify the Commission. When an investment advisor representative begins or terminates a connection with a federal covered advisor, the investment advisor representative shall promptly notify the Commission. An investment advisor representative who changes his connection from one investment advisor or federal covered advisor to another shall be required to file a new application for registration and pay the necessary fee in accordance with § 13.1-505 . It shall be unlawful for (i) any person who is required to be registered as an investment advisor under this chapter to employ an unregistered investment advisor representative or (ii) a federal covered advisor to employ, supervise, or associate with an unregistered investment advisor representative having a place of business in the Commonwealth. No investment advisor representative shall be employed by more than one investment advisor or federal covered advisor except pursuant to such rules or regulations as the Commission shall prescribe. (1956, c. 428; 1974, cc. 374, 479; 1979, c. 312; 1982, c. 407; 1987, c. 678; 1991, cc. 223, 281, 418; 1997, c. 279; 1998, cc. 22, 255; 2003, c. 595; 2007, c. 458.)

The 1998 amendments. - The 1998 amendment by c. 22, in subsection A, in the first sentence, deleted "or" preceding "(ii) an investment advisor" and added "or (iii) a federal covered advisor unless he has filed such documents and paid such fees as the Commission by rule or order may require."

The 1998 amendment by c. 255, in subsection C, in the first sentence, substituted "an investment advisor" for "a specified investment advisor" and deleted "specified" preceding "federal covered advisor," inserted "or federal covered advisor" in the fourth sentence, and added "except pursuant to such rules or regulations as the Commission shall prescribe" in the last sentence.

The 2003 amendments. - The 2003 amendment by c. 595 deleted the former last sentence of subsection A, which read: "Notwithstanding the exclusion provided by clause (vi) of § 13.1-501 in the definition of 'investment advisor,' for the period ending three years from October 11, 1996, the Commission may require the registration as an investment advisor of any federal covered advisor who fails or refuses to pay a fee required by this chapter or rule promulgated pursuant to this chapter; provided, that a delay in payment or an underpayment of a fee that is remedied within fifteen days after receipt of notice from the Commission shall not constitute a failure or refusal to pay the fee."

The 2007 amendments. - The 2007 amendment by c. 458 added the exception at the end of the last sentence in subsection B.

Law review. - For survey of Virginia law on business associations for the year 1973-1974, see 60 Va. L. Rev. 1464 (1974). For survey of Virginia law on business associations for the year 1975-1976, see 62 Va. L. Rev. 1370 (1976). For article, "The Applicability of Local Securities Acts to Multi-State Securities Transactions," see 20 U. Rich. L. Rev. 139 (1985).

For essay, "Investment Analysis and the Law of Insider Trading," see 76 Va. L. Rev. 1023 (1990).

For 2007 annual survey article, "Corporate and Business Law," see 42 U. Rich. L. Rev. 273 (2007).

Michie's Jurisprudence. - For related discussion, see 3A M.J. Brokers, § 4.

§ 13.1-504.1. Brokerage services of savings and loan associations, savings banks or service corporations of either; when registration not required.

A savings and loan association or a savings bank, or the service corporation of either, may enter into an agreement with any person or entity which is a registered broker-dealer under the applicable provisions of this chapter and under the Securities Exchange Act of 1934, for the purpose of making brokerage services available to customers of the association or savings bank. The existence of such an agreement shall not of itself be sufficient to require employees of the association, savings bank or service corporation to register as an agent under the provisions of this article, so long as the employees' activities with regard to such brokerage services are limited to the providing of clerical or ministerial services.

(1984, c. 334.)

§ 13.1-504.2. Broker-dealer services provided by credit unions; when registration not required.

A credit union may enter into an agreement with any person or entity which is a registered broker-dealer under this chapter and under the Securities Exchange Act of 1934, for the purpose of making brokerage services available to members of the credit union. The existence of such an agreement shall not of itself be sufficient to require employees of the credit union to register as an agent under the provisions of this article, so long as the employees' activities with regard to such brokerage services are limited to the providing of clerical or ministerial services.

(1988, c. 338.)

§ 13.1-505. Procedure for registration.

1. A broker-dealer, investment advisor, investment advisor representative or agent may be registered after filing with the Commission, or any entity designated by order or rule of the Commission, an application containing such relevant information as the Commission may require. He shall be registered if the Commission finds that:
   1. He is a person (and, in the case of a corporation or partnership, the natural persons who are the officers, directors or partners or who otherwise control such corporation or partnership are persons) of good character and reputation;
   2. He intends to maintain his business records in accordance with the rules of the Commission;
   3. His business knowledge and conduct and his financial responsibility are such that he is a suitable person to engage in the business;
   4. He has supplied all information required by the Commission;
   5. He is not subject to the revocation provisions of § 13.1-506 ; and
   6. He has paid the necessary fee.
2. The Commission may require as a condition of registration or renewal of registration the filing by a broker-dealer or investment advisor of a reasonable surety or other bond conditioned as the Commission may require for the protection of investors not in any case exceeding $25,000 in penalty amount as evidence of financial responsibility except that no bond shall be required where the net worth of the broker-dealer or investment advisor exceeds $25,000.
3. The Commission may require as a condition of registration the passing of a written examination as evidence of knowledge of the securities or investment advisory business.
4. All registrations and renewals thereof shall expire annually in accordance with rules and regulations promulgated by the Commission.
5. Each application for a renewal of a registration shall be filed with the Commission or any entity designated by order or rule of the Commission. Upon application for a renewal of a registration, the Commission shall have jurisdiction to determine, as of such time, the propriety of the renewal registration.
6. Each application for a registration or renewal of a registration as a broker-dealer or investment advisor shall be accompanied by a nonrefundable fee of $200, payable to the Treasurer of Virginia or any entity designated by order or rule of the Commission.
7. Each application for a registration or renewal of a registration as an agent or investment advisor representative shall be accompanied by a nonrefundable fee of not less than thirty and not more than fifty dollars, as established by order or rule of the Commission, payable to the Treasurer of Virginia or any entity designated by order or rule of the Commission.
8. For the purposes of registration as a broker-dealer or an investment advisor, a partnership shall be treated as the same partnership so long as two or more members of the partnership named in the application continue the business without change of location, if the partnership, within one month after a change in the partnership, files with the Commission a copy of a certificate filed in compliance with § 50-74.
9. The Commission shall either grant or deny each application for registration within thirty days after it is filed. However, if additional time is needed to obtain or verify information regarding the application, the Commission may extend such period as much as ninety days by giving written notice to the applicant. No more than three such extensions may be made on any one application. An extension of the initial thirty-day period, not to exceed ninety days, shall be granted upon written request of the applicant.
10. A renewal of registration shall be granted as a matter of course upon receipt of the proper application and fee together with any surety bond that the Commission may pursuant to subsection B require unless the registration was, or the renewal would be, subject to revocation under § 13.1-506 . (1956, c. 428; 1974, cc. 382, 479; 1980, c. 222; 1981, c. 244; 1984, c. 771; 1987, c. 678; 1990, c. 5; 1991, c. 281; 1992, c. 18; 1997, c. 279.)

Editor's note. - Section 50-74, which is referred to at the end of subsection H, was repealed by Acts 1996, c. 292. For provisions of the Uniform Partnership Act generally, which was enacted by Acts 1996, c. 292, see § 50-73.79 et seq.

Law review. - For survey of Virginia law on business associations for the year 1973-1974, see 60 Va. L. Rev. 1464 (1974).

§ 13.1-505.1. Post-registration provisions.

With respect to investment advisors, the Commission may require that certain information be furnished or disseminated as necessary or appropriate in the public interest or for the protection of investors and advisory clients. To the extent determined by the Commission in its discretion, information furnished to clients or prospective clients of an investment advisor that would be in compliance with the Investment Advisers Act of 1940 and the rules thereunder may be used in whole or partial satisfaction of this requirement.

(1987, c. 678; 1997, c. 279.)

§ 13.1-506. Revocation of registration.

The Commission may, by order entered after a hearing on notice duly served on the defendant not less than thirty days before the date of the hearing, revoke the registration of a broker-dealer, investment advisor, investment advisor representative or agent, or refuse to renew a registration if an application for renewal has been or is to be filed, if it finds that such an order is in the public interest and that such broker-dealer, investment advisor or any partner, officer or director of such broker-dealer or investment advisor, or any person occupying a similar status or performing similar functions, or any person directly or indirectly controlling or controlled by such broker-dealer or investment advisor or that such agent or investment advisor representative:

1. Has engaged in any fraudulent transaction;
2. Is insolvent, or in danger of becoming insolvent, either in the sense that his liabilities exceed his assets or in the sense that he cannot meet his obligations as they mature;
3. Is a person for whom a conservator or guardian has been appointed and is acting;
4. Has been convicted, within or without this Commonwealth, of any misdemeanor involving a security or any aspect of the securities or investment advisory business or any felony;
5. Has failed to furnish information or records requested by the Commission concerning his conduct of the securities or investment advisory business; or
6. [Repealed.]
7. Has failed to conduct his securities or investment advisory business in accordance with the rules of the Commission.

   (1956, c. 428; 1974, c. 479; 1981, c. 244; 1987, c. 678; 1997, c. 921.)

Editor's note. - Acts 1997, c. 921, cl. 2, provides: "That this act shall become effective January 1, 1998. The powers granted and duties imposed pursuant to this act shall apply prospectively to guardians and conservators appointed by court order entered on or after that date, or modified on or after that date if the court so directs, without regard to when the petition was filed. The procedures specified in this act governing proceedings for appointment of a guardian or conservator or termination or other modification of a guardianship or conservatorship shall apply on and after that date without regard to when the petition therefor was filed or the guardianship or conservatorship created."

The 1997 amendment, effective January 1, 1998, in subdivision 3, deleted "Has been adjudicated mentally incompetent or" at the beginning of the subdivision and substituted "conservator" for "committee."

Law review. - For survey of Virginia law on business associations for the year 1973-1974, see 60 Va. L. Rev. 1464 (1974).

Applied in Underhill Assocs. v. Coleman, 504 F. Supp. 1147 (E.D. Va. 1981).

§ 13.1-507. Registration requirement; exemptions.

It shall be unlawful for any person to offer or sell any security unless (i) the security is registered under this chapter, (ii) the security or transaction is exempted by this chapter, or (iii) the security is a federal covered security.

(Code 1950, § 13-110; 1956, c. 428; 1997, c. 279; 2003, c. 595.)

The 2003 amendments. - The 2003 amendment by c. 595 deleted the former second sentence of the section, which read: "Notwithstanding the provisions of subdivision (iii), for the period ending three years from October 11, 1996, the Commission may require the registration of a federal covered security issued by any issuer who refuses to pay a fee required by this chapter or rule promulgated pursuant to this chapter; provided, that a delay in payment or an underpayment of a fee that is remedied within fifteen days after receipt of notice from the Commission shall not constitute a refusal to pay the fee."

Law review. - For survey of Virginia law on business associations for the year 1975-1976, see 62 Va. L. Rev. 1370 (1976). For article, "The Applicability of Local Securities Acts to Multi-State Securities Transactions," see 20 U. Rich. L. Rev. 139 (1985).

§ 13.1-508. Registration by notification.

1. The following securities may be registered by notification:
   1. Any security whose issuer (which, for the purposes of this subsection, shall include any predecessor by merger, consolidation or acquisition of assets) has been in continuous operation for at least five years if there has been no default within the past three fiscal years in the payment of principal, interest or dividends on any security of the issuer with a fixed maturity or a fixed interest or dividend provision, and (where the security being registered does not have a fixed maturity or a fixed interest or dividend provision) (a) the issuer is a corporation which has assets of at least $500,000 after deduction of depreciation and other reserves, which has a net worth of at least $10,000, which is incorporated under the laws of this Commonwealth and which conducts a substantial portion of its business in this Commonwealth, or (b) the issuer during its past three fiscal years has had average net earnings applicable to all securities without a fixed maturity or a fixed interest or dividend provision (whether of one or more classes) outstanding at the date when the registration statement is filed (i) aggregating at least five percent of the amount of such outstanding securities as measured by their maximum public offering price or their market price on a day within 30 days of the date of filing the registration statement, whichever is higher, or their book value on a day within 90 days of the date of filing the registration statement if there is neither a readily determinable market price nor a public offering price or (ii) if no such securities are outstanding, then aggregating at least five percent of the amount of such securities then offered for sale based upon the maximum price at which such securities are to be offered for sale; and all accounting determinations required by this section shall be made in accordance with generally accepted accounting practices. Noncumulative preferred stock shall be deemed for the purposes of this subsection a security with a fixed dividend provision.
   2. Any security registered for nonissuer distribution if (i) any security of the same class has ever been registered or (ii) the security being registered was originally issued pursuant to an exemption in this chapter.
2. A registration statement under this section shall state the facts showing eligibility of the securities for registration by notification, the amount and maximum offering price of the securities proposed to be offered in this Commonwealth, and a copy of any prospectus to be used in connection with the offering. It shall be accompanied by a fee of 1/20 of one percent of the maximum offering price of the securities proposed to be offered in this Commonwealth; provided that the fee shall not be less than $100 nor more than $250.
3. If no stop order is in effect and no proceeding for the issuance of a stop order is pending, a registration statement under this section shall automatically become effective at three o'clock in the afternoon of the second full business day after filing of the registration statement or the last amendment thereto or at such earlier time as the Commission may determine by order, letter, telegram, or electronic means.
4. The Commission may require that a prospectus be used in connection with the offering. If the Commission requires the use of a prospectus, it shall be unlawful to sell any security registered under this section except upon delivery of a prospectus to each person to whom an offer is made. The prospectus shall contain such information specified in subsection (b) of § 13.1-510 as may be designated by the Commission as necessary for the protection of investors and such additional information as the Commission may require. (1956, c. 428; 1981, c. 168; 1984, c. 771; 1993, c. 179; 2003, c. 595.)

The 2003 amendments. - The 2003 amendment by c. 595 redesignated clauses A 1 (A) and (B) as clauses A 1 (a) and (b); in clause A 1 (i), substituted "30" for "thirty" and "90" for "ninety"; and substituted "telegram, or electronic means" for "or telegram" at the end of subsection C.

Law review. - For article, "Legal Opinions in Corporate Transactions: The Opinion That Stock Is Duly Authorized, Validly Issued, Fully Paid and Nonassessable," see 43 Wash. & Lee L. Rev. 863 (1986).

§ 13.1-509. Registration by coordination.

1. Any security for which a registration statement has been filed under the Securities Act of 1933 in connection with the same offering may be registered by coordination if no stop order or refusal order is in effect against such registration statement and no proceeding looking toward such an order is pending.
2. A registration statement under this section shall consist of the prospectus filed under the Securities Act of 1933 together with all amendments or supplements thereto and a statement of the amount and maximum offering price of the securities proposed to be offered in this Commonwealth. The Commission may require that it also include the articles of incorporation and bylaws, any agreements with underwriters, any indenture or any other instrument governing the issuance of the security to be registered, a specimen of the security and any other information documents filed under the Securities Act of 1933. The registration statement shall be accompanied by a fee of one-twentieth of one percent of the maximum aggregate offering price of the securities proposed to be offered in this Commonwealth; provided that the fee shall not be less than $200 nor more than $700, except that in the case of a unit investment trust, as that term is defined in the Investment Company Act of 1940, the fee shall not be less than $400 nor more than $1,000.
3. A registration statement under this section shall automatically become effective at the moment the federal registration statement becomes effective if all of the following conditions are satisfied: (i) No stop order is in effect and no proceeding for the issuance of a stop order is pending and (ii) the registration statement and all amendments other than a final amendment (hereinafter termed the "price amendment") which is limited substantially to information concerning the offering price, underwriting and selling discounts or commissions, amount of proceeds, conversion rates, call prices, and other matters dependent upon the offering price have been on file with the Commission, or any entity designated by order or rule of the Commission, for at least three full business days. Unless the definitive information concerning price and other matters dependent thereon has been so on file with the Commission or such entity, the registrant shall promptly notify the Commission by telephone, telegram, or electronic means of the date and time when the federal registration statement became effective and the content of the federal price amendment, if any, and shall promptly file a post-effective amendment containing the information in the federal price amendment but exclusive of exhibits. Failure to receive such notification or such post-effective amendment if required shall be grounds for the entry of a stop order retroactively denying effectiveness to the registration statement, without notice or hearing, if the Commission promptly notifies the registrant by telephone, telegram, or electronic means (and promptly confirms by letter, telegram, or electronic means when it notifies by telephone) of the issuance of such an order. If the registrant proves that he complied with the requirements of this subsection as to notice and post-effective amendment, the stop order shall be void as of the time of its entry. The Commission may, by order, letter, telegram, or electronic means, accelerate the effectiveness of any registration statement and may waive any or all of the conditions specified in clause (ii) above. If the federal registration has become effective before all of such conditions have been satisfied and they are not so waived, the registration statement under this section shall automatically become effective as soon as all of such conditions have been satisfied.

   (1956, c. 428; 1984, c. 771; 1990, c. 90; 1994, c. 10; 2003, c. 595.)

The 2003 amendments. - The 2003 amendment by c. 595 substituted "telegram, or electronic means" for "or telegram" in four places in subsection C.

Law review. - For article, "Legal Opinions in Corporate Transactions: The Opinion That Stock is Duly Authorized, Validly Issued, Fully Paid and Nonassessable," see 43 Wash. & Lee L. Rev. 863 (1986).

§ 13.1-510. Registration by qualification.

1. Any security may be registered by qualification.
2. A registration statement under this section shall contain that part of the following information as required by the Commission:
   1. With respect to the issuer and any significant subsidiary: its name, address and form of organization; the state (or foreign jurisdiction) and date of its organization; the general character of its business; and a description of its physical properties and equipment; and a statement of the general competitive conditions in the industry or business in which it is or will be engaged;
   2. With respect to every director and officer of the issuer (or person occupying a similar status or performing similar functions): his name, address and principal occupation for the past five years; the amount of securities of the issuer held by him as of a specified date within ninety days of the filing of the registration statement; the amount of the securities covered by the registration statement to which he has indicated his intention to subscribe; and a description of any material interest in any material transaction with the issuer or any significant subsidiary effected within the past three years or proposed to be effected;
   3. With respect to persons covered by subdivision (2) of this subsection: the remuneration paid during the past twelve months and estimated to be paid during the ensuing twelve months, directly or indirectly, by the issuer (together with all predecessors, parents, subsidiaries and affiliates) to all such persons in the aggregate;
   4. With respect to any person owning of record, or beneficially if known, ten percent or more of the outstanding shares of any class of equity security of the issuer: the information specified in subdivision (2) of this subsection other than his occupation;
   5. With respect to every promoter if the issuer was organized within the past three years: the information specified in subdivision (2) of this subsection, any amount paid to him within such period or intended to be paid to him and the consideration for any such payment;
   6. With respect to any person other than the issuer on whose behalf any part of the offering is to be made: his name and address; the amount of securities of the issuer held by him as of the date of the filing of the registration statement; a description of any material interest in any material transaction with the issuer or any subsidiary effected within the past three years or proposed to be effected; and a statement of his reasons for making the offering;
   7. The capitalization and long term debt (on both a current and a pro forma basis) of the issuer and any subsidiary, including (i) a description of each class of security outstanding or being registered or otherwise offered, and (ii) a statement of the amount and kind of consideration (whether in the form of cash, physical assets, services, patents, goodwill or anything else) for which the issuer or any such subsidiary has issued any of its securities within the past two years or is obligated to issue any of its securities;
   8. The kind and amount of securities to be offered; the proposed offering price or the method by which it is to be computed; any variation therefrom at which any portion of the offering is to be made to any person or class of persons other than the underwriters, with a specification of any such person or class; the basis upon which the offering is to be made if otherwise than cash; the estimated aggregate underwriting and selling discounts or commissions and finder's fees (including separately cash, securities, contracts or anything else of value to accrue to the underwriters in connection with the offering) or, if such discounts or commissions are variable, the basis of determining them and their maximum and minimum amounts; the estimated amounts of other selling expenses, including legal, engineering and accounting charges; the name and address of every underwriter and every recipient of a finders' fee; a copy of any underwriting or selling-group agreement pursuant to which the distribution is to be made, or the proposed form of any such agreement whose terms have not yet been determined; and a description of the plan of distribution of any securities which are to be offered otherwise than through an underwriter;
   9. The estimated cash proceeds to be received by the issuer from the offering; the purposes for which such proceeds are to be used by the issuer; the amount to be used for each purpose; the order of priority in which the proceeds will be used for the purposes stated; the amounts of any funds to be raised from other sources to achieve such purposes; the sources of any such funds; and, if any part of the proceeds is to be used to acquire any property (including goodwill) otherwise than in the ordinary course of business, the names and addresses of the vendors, the purchase price, the names of any persons who have received commissions in connection with such acquisition and the amounts of such commissions and any other expense in connection with such acquisition (including the cost of borrowing money to finance such acquisition);
   10. A description of any stock options (or other security options) outstanding, or to be created in connection with the offering, together with the amount of any such options held or to be held by every person required to be named in subdivisions (2), (4), (5), (6) or (8) of this subsection and by any person who holds or will hold ten percent or more in the aggregate of any such options;
   11. The dates of, parties to and general effect concisely stated of, every management or other material contract made or to be made otherwise than in the ordinary course of business if it is to be performed in whole or in part at or after the filing of the registration statement or was made within the past two years, together with a copy of every such contract; and a description of any pending litigation or proceeding to which the issuer is a party and which materially affects its business or assets (including any such litigation or proceeding known to be contemplated by governmental authorities);
   12. A copy of any prospectus, pamphlet, circular, form letter, advertisement or sales literature intended as of the effective date to be used in connection with the offering;
   13. A specimen of the security being registered; a copy of the issuer's articles of incorporation and bylaws (or their substantial equivalents) as currently in effect; and a copy of any indenture or other instrument covering the security to be registered;
   14. An opinion of counsel as to the legality of the security being registered which shall state whether the security when sold will be legally issued, fully paid and nonassessable, and, if a debt security, a binding obligation of the issuer;
   15. A balance sheet of the issuer as of a date within four months prior to the filing of the registration statement; a profit and loss statement and analysis of surplus for each of the three fiscal years preceding the date of the balance sheet and for any period between the close of the last fiscal year and the date of the balance sheet, or for the period of the issuer's and any predecessor's existence if less than three years; and if any part of the proceeds of the offering is to be applied to the purchase of any business, the same financial statements which would be required if such business were the registrant;
   16. Such additional information as the Commission may require.
3. A registration statement shall state the amount of securities to be offered in this Commonwealth and shall be accompanied by a filing fee of one-tenth of one percent of the maximum aggregate offering price at which the securities are proposed to be offered in this Commonwealth; provided that the fee shall not be less than $250 nor more than $500.
4. A registration statement under this section shall become effective when the Commission so orders.
5. It shall be unlawful to sell any security registered under this section that constitutes the whole or a part of an unsold allotment or subscription by a broker-dealer as a participant in the underwriting of such securities except upon delivery to the purchaser of a prospectus. The prospectus shall contain such part of the information specified in subsection (b) as may be designated by the Commission as necessary for the protection of investors.
6. The Commission shall have authority in its discretion to require that sales be made only pursuant to a subscription contract the form of which shall have been filed as an exhibit to the registration statement.  If the Commission requires a subscription contract, it shall be unlawful to sell any security registered under this section except pursuant to such a subscription contract duly signed by the purchaser, a copy of which shall be delivered to him.
7. [Repealed.]
8. If any prospectus, document or exhibit filed as provided in this section discloses that any of the securities sought to be registered by qualification, or as much as twenty-five percent of any class of the securities of the issuer to be outstanding, were or are intended to be issued for any patent right, copyright, trademark, process, formula, goodwill or other intangible assets, or for organization or promotion fees or expenses, the Commission may require that such securities shall be delivered in escrow to some satisfactory depository under an escrow agreement. The owners of such securities shall not be entitled to sell or transfer such securities or to withdraw such securities from escrow until the issuer in any period of thirty-six consecutive months earns an annual average of six percent of the public offering price times all shares of common stock then outstanding plus those to be outstanding through the exercise of warrants or options as computed under normal and customary accounting procedures or upon order of the Commission, when no circumstance is apparent which, in the opinion of the Commission, would warrant continuation of the escrow.  In case of dissolution or insolvency during the time such securities are held in escrow, the owners of such securities shall not participate in the assets until after the owners of all other securities shall have been paid in full. If any securities sought to be registered by qualification are to be sold for the account of the issuer, and not by underwriters who have or at the time of offering shall have purchased such securities from the issuer, the Commission may require that the proceeds from the sale of such securities be delivered in escrow to some satisfactory depository until all or a reasonable portion of the total securities originally proposed to be offered and sold shall have been sold and paid for.

   For the purposes of this section, such securities shall be deemed to have been sold and paid for at such time as the subscribers therefor deliver to, or for the benefit of, the issuer, an amount equal to the purchase price specified for such securities either in cash, a draft, check or note (other than any such instrument which is drawn without recourse) or any combination thereof.

   (1956, c. 428; 1982, c. 362; 1983, c. 517; 1984, c. 771; 1993, c. 180.)

Law review. - For article, "Legal Opinions in Corporate Transactions: The Opinion That Stock Is Duly Authorized, Validly Issued, Fully Paid and Nonassessable," see 43 Wash. & Lee L. Rev. 863 (1986).

§ 13.1-511. Effectiveness and reports.

A registration statement filed under this article may be filed by the issuer, any other person on whose behalf the offer is to be made or by any registered broker-dealer. When securities are registered, they may be offered and sold by the issuer, by such other person or by any registered broker-dealer, whether or not named in the registration statement. Every registration statement shall remain effective until revoked by the Commission or until terminated upon request of the registrant with the consent of the Commission. So long as a registration statement remains effective, all outstanding securities of the same class shall be considered to be registered for the purpose of any nonissuer distribution. So long as the registration statement remains effective, the Commission may require the registrant to file reports, not more often than quarterly, to keep reasonably current the information contained in the registration statement. The Commission may require such information to be included in the prospectus.

(1956, c. 428; 1991, c. 223; 2003, c. 595.)

The 2003 amendments. - The 2003 amendment by c. 595 deleted "except one subject to the provisions of § 13.1-512 " following "Every registration statement" at the beginning of the third sentence.

Law review. - For article, "Legal Opinions in Corporate Transactions: The Opinion That Stock Is Duly Authorized, Validly Issued, Fully Paid and Nonassessable," see 43 Wash. & Lee L. Rev. 863 (1986).

§ 13.1-512.

Repealed by Acts 2003, c. 595.

Editor's note. - Former § 13.1-512 , relating to certain investment company securities, was derived from Acts 1956, c. 428; 1982, c. 424; 1984, c. 771; 1990, c. 90; 1991, c. 223.

§ 13.1-513. Stop orders.

1. The Commission may issue a stop order denying effectiveness to, or revoking the effectiveness of, any registration statement if it finds that such an order is in the public interest and that:
   1. The registration statement together with any amendments, or any report filed by the registrant or any other document filed in connection with the registration statement contained any statement which was, at the time and in the circumstances in which it was made, false or misleading with respect to any material fact or omitted to state any material fact required to be stated therein;
   2. The applicant or registrant or any agent, partner, officer or director of the applicant or registrant (or any person occupying a similar status or performing similar functions) or any person directly or indirectly controlling or controlled by the applicant or registrant has violated, in connection with the offering, any provision of this chapter or of any other law applicable to the offering, or any rule, order or condition lawfully imposed under this chapter;
   3. Any person specified in subdivision (2) of this subsection has failed to furnish any information lawfully requested by the Commission;
   4. The right to sell the securities which are the subject of the registration statement has been denied or revoked or is suspended under any federal act applicable to the offering (and such denial, revocation or suspension is still in effect);
   5. The issuer is insolvent, either in the sense that its liabilities exceed its assets or in the sense that it cannot meet its obligations as they mature;
   6. The issuer's business includes or probably will include activities which are forbidden by law;
   7. The offering has worked or tended to work a fraud upon investors or probably will so operate; or
   8. Where a security is to be or has been registered by notification, it is not eligible for such registration.
2. No stop order shall be entered without reasonable notice to the applicant or registrant.
3. In any proceeding under this section, the Commission may refrain from issuing or, after issuing, may revoke a stop order on condition that the persons against whom it is directed correct the matters complained of on which it is based.

   (1956, c. 428; 1960, c. 71.)

§ 13.1-514. Exemptions.

1. The following securities are exempted from the securities registration requirements of this chapter:
   1. Any security (including a revenue obligation) issued or guaranteed by the United States, any state, any political subdivision of a state or any agency or corporate or other instrumentality of one or more of the foregoing; or any certificate of deposit for any of the foregoing;
   2. Any security issued or guaranteed by Canada, any Canadian province, any political subdivision of any such province, any agency or corporate or other instrumentality of one or more of the foregoing or any other foreign government with which the United States currently maintains diplomatic relations, if the security is recognized as a valid obligation by such issuer or guarantor;
   3. Any security issued by and representing an interest in or a debt of, or guaranteed by, the International Bank for Reconstruction and Development, or any national bank, or any bank or trust company organized under the laws of any state or trust subsidiary organized under the provisions of Article 3 (§ 6.2-1047 et seq.) of Chapter 10 of Title 6.2;
   4. Any security issued by and representing an interest in or a debt of, or guaranteed by, any federal savings and loan association or savings bank, or by any savings and loan association or savings bank which is organized under the laws of this Commonwealth;
   5. Any security issued or guaranteed by an insurance company licensed to transact insurance business in this Commonwealth;
   6. Any security issued by any credit union, industrial loan association or consumer finance company which is organized under the laws of this Commonwealth and is supervised and examined by the Commission;
   7. Any security issued or guaranteed by any railroad, other common carrier or public service company supervised as to its rates and the issuance of its securities by a governmental authority of the United States, any state, Canada or any Canadian province;
   8. Any security which is listed or approved for listing upon notice of issuance on the New York Stock Exchange or the American Stock Exchange or any other security of the same issuer which is of senior or substantially equal rank; any security called for by subscription rights or warrants admitted to trading in any of said exchanges; or any warrant or right to subscribe to any of the foregoing securities;
   9. Any commercial paper which arises out of a current transaction or the proceeds of which have been or are to be used for current transactions, and which evidences an obligation to pay cash within nine months after the date of issuance, exclusive of days of grace, or any renewal thereof which is likewise limited, or any guaranty of such paper or of any such renewal;
   10. Any security issued in connection with an employee's stock purchase, savings, pension, profit-sharing or similar benefit plan. The Commission may by rule or order, as to any security issued pursuant to such plan, specify or designate persons eligible to participate in such plan;
   11. Any security issued by a cooperative association organized as a corporation under the laws of this Commonwealth;
   12. Any security listed on an exchange registered with the U.S. Securities and Exchange Commission or quoted on an automated quotation system operated by a national securities association registered with the U.S. Securities and Exchange Commission and approved by regulations of the State Corporation Commission;
   13. Any security issued by any issuer organized under the laws of any foreign country and approved by rule or regulation of the Commission.
2. The following transactions are exempted from the securities, broker-dealer and agent registration requirements of this chapter except as expressly provided in this subsection:
   1. Any isolated transaction by the owner or pledgee of a security, whether effected through a broker-dealer or not, which is not directly or indirectly for the benefit of the issuer;
   2. Any nonissuer distribution by a registered broker-dealer and its registered agent of a security that has been outstanding in the hands of the public for the past five years, if the issuer in each of the past three fiscal years has lawfully paid dividends on its common stock aggregating at least four percent of its current market price;
   3. Any transaction by a registered broker-dealer and its registered agent pursuant to an unsolicited order or offer to buy;
   4. Any transaction in a bond or other evidence of indebtedness secured by a real or chattel mortgage or deed of trust or by an agreement for the sale of real estate or chattels, if the entire indebtedness secured thereby is offered and sold as a unit;
   5. Any transaction in his official capacity by a receiver, trustee in bankruptcy or other judicially appointed officer selling securities pursuant to court order;
   6. Any offer or sale to a corporation, investment company or pension or profit-sharing trust or to a broker-dealer;
   7. 1. Any sale of its securities by an issuer or any sale of securities by a registered broker-dealer and its registered agent acting on behalf of an issuer if, after the sale, such issuer has not more than 35 security holders, and if its securities have not been offered to the general public by advertisement or solicitation; or
      2. To the extent the Commission by rule or order permits, any sale of its securities by an issuer or any sale of securities by a registered broker-dealer and its registered agent acting on behalf of an issuer to not more than 35 persons in the Commonwealth during any period of 12 consecutive months, whether or not the issuer or any purchaser is then present in the Commonwealth, if the issuer or broker-dealer reasonably believes that all the purchasers in the Commonwealth are purchasing for investment, and if the securities have not been offered to the general public by advertisement or general solicitation. The Commission may, by rule or order, as to any security or transaction or any type of security or transaction, withdraw or further condition this exemption, increase or decrease the number of purchasers permitted, or waive the condition relating to their investment intent. The Commission may assess and collect in connection with any filing pursuant to this exemption a nonrefundable fee not to exceed $250. With respect to this subdivision 7, and except to the extent the Commission by rule or order may otherwise permit, the number of security holders of an issuer or the number of purchasers from an issuer, as the case may be, shall not be deemed to include the security holders of any other corporation, partnership, limited liability company, unincorporated association or trust unless it was organized to raise capital for the issuer. Notwithstanding the provisions of subdivision 15, the merger or consolidation of corporations, partnerships, limited liability companies, unincorporated associations or other entities shall be a violation of this chapter if the surviving or new entity has more than 35 security holders or purchasers and all the securities of the parties thereto were issued under this exemption, unless all of the parties thereto have been engaged in transacting business for more than two years prior to the merger or consolidation;
   8. Any transaction pursuant to an offer to existing security holders of the issuer including holders of transferable warrants issued to existing security holders and exercisable within 90 days of their issuance, if either (i) no commission or other remuneration (other than a standby commission) is paid or given directly or indirectly for soliciting any security holder in this Commonwealth or (ii) the issuer first notifies the Commission in writing of the terms of the offer and the Commission does not by order disallow the exemption within five full business days after the date of the receipt of the notice;
   9. Any offer (but not a sale) of a security for which registration statements have been filed, but are not effective, under both this chapter and the Securities Act of 1933; but this exemption shall not apply while a stop order is in effect or, after notice to the issuer, while a proceeding or examination looking toward such an order is pending under either act;
   10. The issuance of not more than three shares of common stock to one or more of the incorporators of a corporation and the initial transfer thereof;
   11. Sales of an issue of bonds, aggregating $150,000 or less, secured by a first lien deed of trust on realty situated in Virginia, to 30 persons or less who are residents of Virginia;
   12. Any offer or sale of any interest in any partnership, corporation, association or other entity created solely to provide residential housing located in the Commonwealth, provided that such offer or sale is by the issuer or by a real estate broker or real estate agent duly licensed in Virginia;
   13. The Commission is authorized to create by rule a limited offering exemption, the purpose of which shall be to further the objectives of compatibility with similar exemptions from federal securities regulation and uniformity among the states; providing that such rule shall not exempt broker-dealers or agents from the registration requirements of this chapter, except in the case of an agent of the issuer who either (i) receives no sales commission directly or indirectly for offering or selling the securities or (ii) effects transactions in a security exempt from registration under the Securities Act of 1933 pursuant to rules and regulations promulgated under § 4(2) thereof. Any filing made with the Commission pursuant to any exemption created under this subdivision shall be accompanied by a $250 fee;
   14. The issuance of any security dividend, whether the corporation distributing the dividend is the issuer of the security or not, if nothing of value is given by stockholders for the distribution other than the surrender of a right to a cash dividend where the stockholder can elect to take a dividend in cash or in a security;
   15. Any transaction incident to a right of conversion or a statutory or judicially approved reclassification, recapitalization, reorganization, quasi-reorganization, stock split, reverse stock split, merger, consolidation, sale of assets, or exchange of securities;
   16. Any offer or sale of a security issued by a Virginia church if the offer and sale are only to its members and the security is offered and sold only by its members who are Virginia residents and who do not receive remuneration or compensation directly or indirectly for offering or selling the security;
   17. Any offer or sale of securities issued by a professional business entity (as defined in subsection A of § 13.1-1102 ) to a person licensed or otherwise legally authorized to render within this Commonwealth the same professional services (as defined in subsection A of § 13.1-1102 ) rendered by the professional business entity. Notwithstanding the foregoing, nothing in this subdivision shall be deemed to provide that shares of stock, partnership or membership interests or other representations of ownership in a professional business entity are securities except to the extent otherwise provided by subsection A of this section;
   18. Any offer that is communicated on the Internet, World Wide Web or similar proprietary or common carrier electronic system and that is in compliance with requirements prescribed by rule or order of the Commission;
   19. To the extent the Commission by rule or order permits, any offer or sale to an accredited investor, as defined by the Commission, if the issuer reasonably believes before the sale that the accredited investor, either alone or with the accredited investor's representative, has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of the prospective investment. The Commission may assess and collect in connection with any filing pursuant to this exemption a nonrefundable fee not to exceed $250;
   20. Any transaction by a bank pursuant to an unsolicited offer or order to buy or sell any security, provided such transaction is not effected by an employee of the bank who is also an employee of a broker-dealer;
   21. To the extent the Commission by rule or order permits, any security issued by an entity if:
       1. The offering of the security is conducted in accordance with § 3(a)(11) of the Securities Act of 1933 and Rule 147 adopted under the Securities Act of 1933 or the U.S. Securities and Exchange Commission's Rule 147A;
       2. The offer and sale of the security are made only to residents of Virginia. However, for an offering conducted in accordance with the U.S. Securities and Exchange Commission's Rule 147A, the offer may be made accessible to residents outside of Virginia provided that the sale of the security is made only to residents of Virginia;
       3. The aggregate price of securities in an offering under this exemption does not exceed $2 million, which sum the Commission, by rule or order, may increase or decrease;
       4. The total consideration paid by any purchaser of securities in an offering under this exemption does not exceed $10,000, unless the purchaser is an accredited investor as defined by Rule 501 of the U.S. Securities and Exchange Commission's Regulation D (17 C.F.R. § 230.501). The Commission, by rule or order, may increase or decrease such limit on the total consideration to be paid by any purchaser of securities in an offering under this exemption;
       5. No compensation is paid to employees, agents, or other persons for the solicitation of, or based on the sale of, securities in connection with an offering of securities under this exemption to any person who is not registered as a broker-dealer or agent, except to the extent permitted by rule or order of the Commission;
       6. Neither the issuer nor any person related to the issuer is subject to disqualification as established by the Commission by rule or order; and
       7. The security is sold in an offering conducted in compliance with any conditions established by rule or order of the Commission, which may include:
          1. Restrictions on the nature of the issuer;
          2. Limitations on the number and manner of offerings;
          3. Disclosures required to be provided to investors, including disclosures of risk factors related to the issuer and the offering;
          4. Requirements that all proceeds received from purchasers be placed in escrow in a depository institution located in the Commonwealth until the minimum amount of the offering is raised;
          5. Filings with the Commission of notices and other materials related to the offering;
          6. Requirements regarding the preparation and submission of the issuer's financial statements, including (i) the form and content of such statements and (ii) whether such statements are required to be audited or reviewed by an independent certified public accountant in accordance with generally accepted accounting principles; and
          7. Requirements that the entity issuing the security is formed, organized, or existing under the laws of the Commonwealth. However, for an offering conducted in accordance with the U.S. Securities and Exchange Commission's Rule 147A, the entity issuing the security may be formed or organized outside the Commonwealth, provided that the entity has its principal place of business in the Commonwealth and satisfies at least one of the doing business requirements in 17 C.F.R. § 230.147A (c) 2. The Commission may assess and collect in connection with any filing pursuant to this exemption a nonrefundable fee in an amount to be set by the Commission by rule or order, provided such amount shall not exceed $500;
   22. Any offer or sale of securities conducted in accordance with Tier 2 of federal Regulation A (17 CFR 230.251 to 230.263) promulgated under § 3(b)(2) of the Securities Act of 1933 (U.S. Securities and Exchange Commission Release No. 33-9741, 80 Fed. Reg. 21806) to the extent such securities are preempted from the registration requirements of this chapter pursuant to Tier 2 of federal Regulation A. The Commission shall by rule or order prescribe any filings with the Commission of notices, renewals, and other materials. The Commission may assess and collect in connection with any filing pursuant to this exemption a nonrefundable filing fee not to exceed $500. The Commission shall provide information on its website regarding the differences between the exemption provided pursuant to this subdivision and the exemption provided pursuant to subdivision 21; and
   23. Any nonissuer distribution by or through a registered broker-dealer and its registered agent of a security that is included in an electronic exchange, marketplace, system, or disclosure repository, which exchange, marketplace, system, or disclosure repository (i) makes information freely available to the public, (ii) is registered under the Securities Exchange Act of 1934 or rules promulgated thereunder, or (iii) is an Alternative Trading System regulated by the U.S. Securities and Exchange Commission, and is approved by regulations of the State Corporation Commission.
3. In any proceeding under this chapter, the burden of proving an exemption shall be upon the person claiming it.

   (Code 1950, § 13-113; 1956, c. 428; 1966, c. 186; 1970, c. 286; 1972, c. 683; 1974, cc. 86, 830; 1975, cc. 75, 500; 1976, c. 656; 1977, c. 111; 1978, c. 397; 1981, cc. 347, 356, 362; 1982, c. 262; 1983, cc. 231, 516; 1984, cc. 298, 771; 1989, c. 388; 1990, c. 6; 1991, c. 223; 1993, c. 75; 1995, cc. 208, 213, 235; 1996, c. 16; 1997, cc. 279, 538; 1999, c. 92; 2001, c. 722; 2003, c. 595; 2007, c. 457; 2015, cc. 354, 400; 2016, c. 260; 2020, cc. 256, 279, 331.)

Editor's note. - For § 4 (2) of the Securities Act of 1933, referred to above, see 15 U.S.C.S. § 77d.

Acts 2001, c. 722, cl. 2 provides: "That the provisions of this act shall become effective on July 1, 2002."

Effective October 1, 2010, "Article 3 ( § 6.2-1047 et seq.) of Chapter 10 of Title 6.2" was substituted for "the Trust Subsidiary Act ( § 6.1-32.1 et seq.)," to conform to the recodification of Title 6.1 by Acts 2010, c. 794.

Acts 2015, cc. 354 and 400, cl. 2 provides: "That the State Corporation Commission shall report by July 1, 2016, and each year thereafter until 2020, to the Chairmen of the House and Senate Commerce and Labor Committees on the implementation of this act, including (i) any updates on federal action, (ii) the number of filings in the Commonwealth made pursuant to this act, (iii) the mean, median, and total values related to money raised under offerings made pursuant to this act, and (iv) any recommendations for revisions to this act."

Acts 2015, cc. 354 and 400, which added subdivision B 21, provide in cl. 3: "That the provisions of this act shall expire on July 1, 2020." Acts 2020, cc. 279 and 331, cl. 2 repealed Acts 2015, cc. 354 and 400, cl. 3.

The 1999 amendment, in subsection A, inserted "the Trust Subsidiary Act" at the end of subdivision 3, inserted the last sentence in subdivision 10; in subdivision B 7 b, deleted "offer or" following "order permits, any," substituted "of its securities" for "in a transaction involving the sale," inserted "or any sale of securities by a registered broker-dealer and its registered agent acting on behalf of an issuer" preceding "to not more than thirty-five," inserted "or broker-dealer" preceding "reasonably believes," and substituted "The Commission may, by rule or order, as to any security or transaction or any type of security or transaction, withdraw or further condition this exemption, increase or decrease the number of purchasers permitted, or waive the condition relating to their investment intent. The Commission may assess and collect in connection with any filing pursuant to this exemption" for "and the Commission may assess and collect in collection with any filing required by the rule or order," added "With respect to this subdivision 7, and except to the extent the commission by rule or order may otherwise permit" at the beginning of the second paragaph of subdivision B 7 b, and added subdivision B 19.

The 2001 amendments. - The 2001 amendment by c. 722, effective July 1, 2002, added subdivision B 20.

The 2003 amendments. - The 2003 amendment by c. 595 substituted "12" for "twelve," "30" for "thirty," and "35" for "thirty-five" and "90" for "ninety" throughout the section; and substituted "its members and the security is offered and sold only by its members" for "and by its members" in subdivision B 16.

The 2007 amendments. - The 2007 amendment by c. 457 inserted "but are not effective" preceding "under both this chapter" in subdivision B 9.

The 2015 amendments. - The 2015 amendments by cc. 354 and 400 are identical, expire July 1, 2020, and added subdivision B 21; and made related changes. For expiration of subdivision B 21, see Editor's note.

The 2016 amendments. - The 2016 amendment by c. 260 added subdivision B 22 and made related changes.

The 2020 amendments. - The 2020 amendment by c. 256 added subdivision B 23, and made stylistic changes.

The 2020 amendments by cc. 279 and 331 are identical, and deleted "formed, organized, or existing under the laws of the Commonwealth" in subdivision B 21; inserted "or the U.S. Securities and Exchange Commission's Rule 147A" in subdivision B 21 a; inserted the second sentence in subdivision B 21 b; added subdivision B 21 g (7); and made stylistic changes.

Law review. - For survey of Virginia law on business associations for the year 1969-1970, see 56 Va. L. Rev. 1536 (1970); for the year 1975-1976, see 62 Va. L. Rev. 1370 (1976).

For survey on business and corporate law in Virginia for 1989, see 23 U. Rich. L. Rev. 491 (1989).

For 1995 survey of business and corporate law, see 29 U. Rich. L. Rev. 825 (1995).

For article, "Corporate and Business Law," see 35 U. Rich. L. Rev. 499 (2001).

For 2007 annual survey article, "Corporate and Business Law," see 42 U. Rich. L. Rev. 273 (2007).

Michie's Jurisprudence. - For related discussion, see 4B M.J. Corporations, § 105.

§ 13.1-514.1. Exemption of certain securities by order of Commission.

1. The Commission may by order exempt from the other provisions of this chapter any security that the Commission finds:
   1. Is to be offered and sold as part of a community undertaking to attract new business or industry to the community, or to establish or continue financial assistance to an existing business or industry in the community;
   2. Is sponsored by the local chamber of commerce, by a local industrial development corporation or by other groups of representative local businessmen; and
   3. Is to be sold mainly to persons interested in the development of the community by salesmen who receive no compensation for offering and selling the security.
2. The Commission may also exempt any security it finds that is to be offered and sold by any person organized and operated not for private profit but exclusively for religious, educational, benevolent, charitable, fraternal, social, athletic or reformatory purposes, or as a chamber of commerce or trade or professional association.
3. The Commission may, by rule, exempt an offer, but not a sale, of a security from the securities and agent registration requirements of this chapter made by or on behalf of an issuer for the sole purpose of soliciting an indication of interest in receiving a prospectus (or its equivalent) for the security. The rulemaking proceeding shall give due consideration to the provisions of the national pilot project of the North American Securities Administrators Association, Inc., relating to the solicitations of indications of interest prior to the filing of a registration statement. The written documents, broadcasts and oral representations related to solicitation of an indication of interest made to potential investors are subject to the anti-fraud provisions of § 13.1-502 . If the Commission determines that such exemption should not be granted, it shall set forth the findings and conclusions upon which its decision is based in its order. (1960, c. 71; 1976, c. 656; 1993, c. 75; 1994, cc. 184, 355; 1995, c. 245; 1997, c. 289.)

§ 13.1-514.2. Primacy of Virginia law to be maintained.

1. Pursuant to section 6(c) of the federal Philanthropy Protection Act of 1995, Pub. L. 104-62, the laws of the Commonwealth of Virginia, which are referred to in subsections (a) and (b) of section 6 of the aforementioned federal law, shall not be preempted by such section.
2. On and after July 1, 1997, the provisions of this chapter together with any subsequent amendments thereto shall retain primacy and shall apply in all administrative and judicial actions.

   (1997, c. 145.)

Editor's note. - For the federal Philanthropy Protection Act of 1995, Pub. L. 104-62, § 6, referred to above, see 15 U.S.C.S. § 80a-3a.

§ 13.1-515. Advertising.

The Commission may require, subject to the limitations of § 222 of the Investment Advisers Act of 1940, in any particular case, any person who has published or circulated any advertisement or sales literature regarding a security, other than a federal covered security as defined in § 18(b)(2) of the Securities Act of 1933, or an investment advisory service to file copies thereof with the Commission.

(1956, c. 428; 1987, c. 678; 1997, c. 279.)

§ 13.1-516. Misleading filings.

It shall be unlawful for any person willfully to make or cause to be made, in any document filed with the Commission or in any proceeding under this chapter, any statement which is, at the time and in the light of the circumstances in which it is made, false or misleading in any material respect.

(1956, c. 428.)

§ 13.1-517. Consent to service of process.

Every nonresident registered as a broker-dealer, investment advisor, investment advisor representative or agent shall appoint in writing the clerk of the Commission as his agent upon whom may be served any process, notice, order or demand. Every nonresident issuer of a security registered hereunder who sells such security in this Commonwealth shall be deemed to have appointed the clerk of the Commission as his agent upon whom may be served, in any matter arising under this chapter, any process, notice, order or demand. Service may be made on the clerk in accordance with § 12.1-19.1 . A foreign corporation that has complied with § 13.1-759 or § 13.1-767 need not comply with this section.

(Code 1950, §§ 13-144, 13-145; 1956, c. 428; 1958, c. 564; 1987, c. 678; 1990, c. 263; 1991, c. 672.)

§ 13.1-518. Investigations; confidentiality of information and documents.

1. The Commission may make such investigations within or outside of this Commonwealth as it deems necessary to determine whether any person has violated or is about to violate the provisions of this chapter or any order, rule or injunction of the Commission, and may require any broker-dealer, investment advisor, investment advisor representative, issuer or agent subject to the investigation to pay the actual costs of the investigation.  The Commission shall have power to issue subpoenas and subpoenas duces tecum to require the attendance of any person and the production of any papers for the purposes of such investigation. No person shall be excused from testifying on the ground that his testimony would tend to incriminate him, but if, after asserting his claim of the privilege, he is required to testify, he shall not be prosecuted or penalized on account of any transactions concerning which he does testify.
2. Information or documents obtained or prepared by any member, subordinate or employee of the Commission in the course of any examination or investigation conducted pursuant to the provisions of this chapter shall be deemed confidential and shall not be disclosed to the public. However, nothing contained herein shall be interpreted to prohibit or limit (i) the publication of the findings, decisions, orders, judgments or opinions of the Commission; (ii) the use of any such information or documents in proceedings by or before the Commission or a hearing examiner appointed by the Commission; (iii) the disclosure of any such information or documents to any quasi-governmental entity substantially associated with law enforcement or the securities or investment advisory business approved by rule of the Commission; or (iv) the disclosure of any such information or documents to any governmental entity approved by rule of the Commission, or to any attorney for the Commonwealth, or to the Attorney General of Virginia.

   (Code 1950, § 13-134; 1956, c. 428; 1979, c. 379; 1987, c. 678; 1992, c. 157.)

Law review. - For survey of Virginia administrative law and utility regulation for the year 1978-1979, see 66 Va. L. Rev. 193 (1980).

Applied in Gannon v. SCC, 243 Va. 480 , 416 S.E.2d 446 (1992).

§ 13.1-518.1. Broker-dealers and investment advisors to file certain reports with Commission.

Every broker-dealer and investment advisor registered under this chapter shall file all reports made by such broker-dealers or investment advisors as the Commission, by rule, may require.

(1974, c. 381; 1997, c. 279.)

§ 13.1-519. Injunctions.

The Commission shall have all the power and authority of a court of record as provided in Article IX, Section 3 of the Constitution of Virginia to issue a temporary or a permanent injunction against any violation or attempted violation of any provision of this chapter or any order, rule, or regulation of the Commission issued pursuant to this chapter. For the violation of any injunction or order issued under this chapter it shall have the same power to punish for contempt as a court of equity.

(Code 1950, § 13-137; 1956, c. 428; 1971, Ex. Sess., c. 1; 1992, c. 468; 1997, c. 279.)

§ 13.1-520. Crimes.

1. Any person who shall knowingly and willfully make, or cause to be made, any false statement in any book of account or other paper of any person subject to the provisions of this chapter, or knowingly and willfully exhibit any false paper to the Commission, or who shall knowingly and willfully commit any act declared unlawful by this chapter, with the intent to defraud any purchaser of securities or user of investment advisory services or with intent to deceive the Commission as to any material fact for the purpose of inducing the Commission to take any action or refrain from taking any action pursuant to this chapter, shall be guilty of a Class 4 felony.
2. Any person who shall knowingly make or cause to be made any false statement in any book of account or other paper of any person subject to the provisions of this chapter or exhibit any false paper to the Commission or who shall commit any act declared unlawful by this chapter shall be guilty of a Class 1 misdemeanor.
3. Prosecutions under this section shall be instituted by indictments in the courts of record having jurisdiction of felonies within three years from the date of the offense.

   (Code 1950, §§ 13-152, 13-155; 1956, c. 428; 1977, c. 484; 1987, c. 678.)

Cross references. - As to punishment for Class 4 felony, see § 18.2-10.

As to punishment for Class 1 misdemeanors, see § 18.2-11.

Applied in Lintz v. Carey Manor Ltd., 613 F. Supp. 543 (W.D. Va. 1985).

§ 13.1-520.1. Commission may transmit record or complaint to locality where violation occurred.

The Commission may transmit the record of any proceeding or any complaint involving any violation of this Act to the attorney for the Commonwealth in the county or city wherein the violation occurred.

(1974, c. 253.)

§ 13.1-521. Violations punishable by the Commission.

1. The Commission may, by judgment entered after a hearing on 30 days' notice to the defendant, if it is proved that the defendant has knowingly made any misrepresentation of a material fact for the purpose of inducing the Commission to take any action or to refrain from taking action, or has violated any provision of this chapter or any order, rule, or regulation of the Commission issued pursuant to this chapter, impose a civil penalty not exceeding $10,000, which shall be collectible by the process of the Commission as provided by law.
2. In addition to imposing the penalty set forth in subsection A, or without imposing such penalty, the Commission may, in any such case, revoke any authority or registration issued by the Commission to or at the instance of the defendant.
3. Each sale of a security contrary to the provisions of this chapter shall constitute a separate violation. The Commission may in any such case under subsection A order the seller to rescind any such sale and to make restitution to the purchaser and the Commission shall consider such rescission and restitution in determining whether a penalty should be imposed on him on account of that illegal sale, and if so, the amount of such penalty.
4. Each investment advisory contract, transaction or activity contrary to the provisions of this chapter shall constitute a separate violation. The Commission may in any such case under subsection A order the investment advisor or investment advisor representative to rescind any such contract or transaction and to make restitution to the user of the investment advisory service and the Commission shall consider such rescission and restitution in determining whether a penalty should be imposed on him on account of that illegal contract, transaction or activity and, if so, the amount of such penalty.
5. The provisions of subsections C and D of this section regarding rescission and restitution apply only to this chapter.

   (Code 1950, § 13-153; 1956, c. 428; 1987, c. 678; 1990, c. 31; 2000, c. 166; 2009, c. 566.)

The 2000 amendments. - The 2000 amendment by c. 166 substituted "Violations" for "Offenses" in the catchline; in subsection A, substituted "thirty days' notice to the defendant," for "notice duly served on the defendant not less than thirty days before the date of the hearing," and inserted "civil" preceding "penalty not exceeding $5,000"; in the first sentence of subsection C, substituted "security contrary to" for "security in violation of" and substituted "violation" for "offense"; and in the first sentence of subsection D, substituted "contrary to" for "in violation of" and "a separate violation" for "a separate offense."

The 2009 amendments. - The 2009 amendment by c. 566, in subsection A, substituted "$10,000" for "$5,000"; in subsection C, substituted "in any such case under subsection A order" for "request," "purchaser and the" for "purchaser. If the seller complies with the request, the" and "rescission and restitution" for "compliance"; in subsection D, substituted "in any such case under subsection A order" for "request," deleted "if the investment advisor or investment advisor representative complies with the request" preceding "the Commission shall," substituted "rescission and restitution" for "compliance"; and added subsection E.

Law review. - For 2000 survey of Virginia corporate and business law, see 34 U. Rich. L. Rev. 697 (2000).

For annual survey article, "Corporate and Business Law," see 44 U. Rich. L. Rev. 307 (2009).

§ 13.1-522. Civil liabilities.

1. Any person who: (i) sells a security in violation of §§ 13.1-502 , 13.1-504 A, 13.1-507 (i) or (ii), 13.1-510 (e) or (f), or (ii) sells a security by means of an untrue statement of a material fact or any omission to state a material fact necessary in order to make the statement made, in the light of the circumstances under which they were made, not misleading (the purchaser not knowing of such untruth or omission), and who shall not sustain the burden of proof that he did not know, and in the exercise of reasonable care could not have known, of such untruth or omission, shall be liable to the person purchasing such security from him who may sue either at law or in equity to recover the consideration paid for such security, together with interest thereon at the annual rate of six percent, costs, and reasonable attorneys' fees, less the amount of any income received on the security, upon the tender of such security, or for the substantial equivalent in damages if he no longer owns the security.
2. Any person who (i) engages in the business of advising others, for compensation, either directly or through publications or writings, as to the value of securities or as to the advisability of investing in, purchasing, or selling securities, or who, for compensation and as a part of a regular business, issues or promulgates analyses or reports concerning securities in willful and material violation of § 13.1-503 , subsection A of § 13.1-504 , or of any rule or order under § 13.1-505.1 , or (ii) receives, directly or indirectly, any consideration from another person for advice as to the value of securities or their purchase or sale, whether through the issuance of analyses, reports or otherwise and employs any device, scheme, or artifice to defraud such other person or engages in any act, practice or course of business which operates or would operate as a fraud or deceit on such other person, shall be liable to that person who may sue either at law or in equity to recover the consideration paid for such advice and any loss due to such advice, together with interest thereon at the annual rate of six percent from the date of payment of the consideration plus costs and reasonable attorney's fees, less the amount of any income received from such advice and any other economic advantage.
3. Every person who directly or indirectly controls a person liable under subsection A or B of this section, including every partner, officer, or director of such a person, every person occupying a similar status or performing similar functions, every employee of such a person who materially aids in the conduct giving rise to the liability, and every broker-dealer, investment advisor, investment advisor representative or agent who materially aids in such conduct shall be liable jointly and severally with and to the same extent as such person, unless able to sustain the burden of proof that he did not know, and in the exercise of reasonable care could not have known, of the existence of the facts by reason of which the liability is alleged to exist. There shall be contribution as in cases of contract among the several persons so liable.
4. No suit shall be maintained to enforce any liability created under this section unless brought within two years after the transaction upon which it is based; provided, that, if any person liable by reason of subsection A, B or C of this section makes a written offer, before suit is brought, to refund the consideration paid and any loss due to any investment advice provided by such person, together with interest thereon at the annual rate of six percent, less the amount of any income received on the security or resulting from such advice, or to pay damages if the purchaser no longer owns the security, no purchaser or user of the investment advisory service shall maintain a suit under this section who has refused or failed to accept such offer within thirty days of its receipt.
5. Any tender specified in this section may be made at any time before entry of judgment.
6. Any condition, stipulation or provision binding any person acquiring any security or receiving any investment advice to waive compliance with any provision of this chapter or of any rule or order thereunder shall be void.
7. The rights and remedies provided by this chapter shall be in addition to any and all other rights and remedies that may exist at law or in equity.

   (Code 1950, § 13-150; 1956, c. 428; 1987, c. 678; 1997, c. 279.)

Law review. - For survey of Virginia property law for the year 1973-1974, see 60 Va. L. Rev. 1583 (1974). For survey of Virginia law on practice and pleading for the year 1974-1975, see 61 Va. L. Rev. 1799 (1975). For note, "Auditors' Liability-Adoption of a Reasonable Foreseeability Standard," see 18 U. Rich. L. Rev. 221 (1983). For article, "The Applicability of Local Securities Acts to Multi-State Securities Transactions," see 20 U. Rich. L. Rev. 139 (1985).

For annual survey article, "Corporate and Business Law," see 44 U. Rich. L. Rev. 307 (2009).

Michie's Jurisprudence. - For related discussion, see 12A M.J. Limitation of Actions, § 11.

§ 13.1-523. Rules and forms.

1. The Commission shall have authority from time to time to make, amend and rescind such rules and forms as may be necessary to carry out the provisions of this chapter, including rules and forms governing registration statements, applications and reports, and defining accounting, technical and trade terms used in this chapter insofar as such definitions are not inconsistent with the provisions of this chapter. Among other things, the Commission shall have authority, for the purposes of this chapter, to prescribe the content and form of financial statements and to direct whether they should be certified by independent public or certified accountants. For the purpose of rules and forms, the Commission may classify securities, persons and matters within its jurisdiction and prescribe different requirements for different classes.
2. All such rules and forms shall be available for distribution at the office of the Commission either in printed or electronic format.
3. No provision of this chapter imposing any liability shall apply to any act done or omitted in conformity with any rule of the Commission, notwithstanding that such rule may, after such act or omission, be amended, rescinded or found for any reason to be invalid.

   (1956, c. 428; 2003, c. 595.)

The 2003 amendments. - The 2003 amendment by c. 595 redesignated subsections (a) thorough (c) as subsections A through C; and in subsection B, deleted "printed or mimeographed" preceding "available," and inserted "either in printed or electronic format" at the end.

§ 13.1-523.1. Commission authority to regulate securities and investment advisory activities.

1. The Commission shall have all the power, authority and jurisdiction reserved to or conferred upon the states by the federal National Securities Markets Improvement Act of 1996 (Pub. L. No. 104-290 (1996)) to regulate securities and investment advisory activities, including the authority to require the registration of persons and securities, the filing of documents, notices, reports and information, and the payment of fees, and to exercise its administrative, investigative, judicial and legislative powers with respect thereto. The Commission shall have the authority to make, amend and rescind such rules and forms in conformance with the National Securities Markets Improvement Act of 1996 as may be necessary for the regulation of securities and investment advisory activities and transactions within its jurisdiction.
2. The Commission may by rule or order, with respect to any security that is a federal covered security under § 18(b)(4)(C) of the Securities Act of 1933, require the issuer to file a notice together with a consent to service of process where (i) the principal place of business of the issuer is in the Commonwealth or (ii) purchasers of 50 percent or more of the securities sold by the issuer pursuant to an offering made in reliance on § 18(b)(4)(C) of the Securities Act of 1933 are residents of the Commonwealth. The Commission may assess and collect in connection with any filing pursuant to this subsection a nonrefundable filing fee not to exceed $100.

   (1997, c. 279; 2017, c. 754.)

The 2017 amendments. - The 2017 amendment by c. 754 designated the existing paragraph as subsection A, and added subsection B.

§ 13.1-524. Certain records of Commission available to public; admissibility of copies; destruction.

The information contained in or filed with any registration statement, application or report shall be available to the public at the office of the Commission. Copies thereof certified by the clerk under the seal of the Commission shall be admissible in evidence in lieu of the originals, and the originals shall not be removed from the office of the Commission. But papers, documents and files may be destroyed by the Commission when, in its opinion, they no longer serve any useful purpose.

(1956, c. 428.)

§ 13.1-525. Official interpretations.

The Commission shall have jurisdiction, upon written application, payment of a filing fee of $500 and submission of such data as may be necessary for the purpose, to determine whether or not (i) a particular security or transaction is exempt from the registration requirements of this chapter, (ii) the offer or sale of a particular security would be lawful, or (iii) a person is an investment advisor or an investment advisor representative. Its determination shall be made by order, which, subject to the right of appeal, shall be conclusive on the same state of facts in any court in which the matter may come for adjudication, whether in a civil or a criminal case.

(Code 1950, § 13-112; 1956, c. 428; 1984, c. 771; 1992, c. 19.)

§ 13.1-525.1. Fees to cover expense of regulation.

The fees paid into the state treasury under this chapter, except for fees and funds collected for the Literary Fund, shall be deposited into a special fund and specifically accounted for and used by the State Corporation Commission to defray the costs of supervising, implementing, and administering the provisions of this chapter and Chapters 6 (§ 13.1-528 et seq.) and 8 (§ 13.1-557 et seq.) of this title, and Chapters 6.1 (§ 59.1-92.1 et seq.) and 7 (§ 59.1-93 et seq.) of Title 59.1. Included in the Commission's costs shall be a reasonable margin in the nature of a reserve fund. All excesses of fees collected exceeding these costs shall revert to the general fund.

(1987, c. 434.)

Editor's note. - Chapter 6 ( § 13.1-528 et seq.) of Title 13.1, referred to in this section, was repealed by Acts 1989, c. 408.

§ 13.1-526. Transition.

Registrations of dealers and agents under prior law shall continue as registrations as broker-dealers and agents under this chapter until April 30 following the effective date of this chapter. Licenses issued under § 13-128 of the Code of 1950 shall continue in effect until April 30 following the effective date of this chapter. The exemption provided for regularly established dealers by § 13-113 (11), whenever the requirements of §§ 13-116 to 13-121 inclusive have been complied with prior to the effective date of this chapter, shall continue in effect until April 30 following the effective date of this chapter and all securities for which a registration is in effect pursuant to that exemption on the effective date of the repeal of § 13-113 (11) shall be deemed to have been registered by notification under this chapter. But such registrations, licenses and exemptions may be terminated by the Commission for causes justifying termination of registrations under this chapter.

(1956, c. 428.)

Cross references. - For present provision as to exemption of securities and transactions from registration requirements, see § 13.1-514 .

§ 13.1-527. Short title.

This chapter may be cited as the Securities Act.

(1956, c. 428.)

§ 13.1-527.01.

Repealed by Acts 2015, c. 709, cl. 2.

Editor's note. - Former § 13.1-527.01 , pertaining to severability, derived from 1981, c. 169.

§ 13.1-527.1. Division created; duties.

There is hereby created in the office of the Attorney General a Division of Securities Counsel.

The duties of such Division shall be to provide legal and technical assistance to an attorney for the Commonwealth, in the preparation for a prosecution of and the prosecution of a violation of this title; provided, however, such assistance shall be rendered only upon the request of the attorney for the Commonwealth.

(1974, c. 253.)

§ 13.1-527.2. Attorneys, employees and consultants.

The Attorney General may employ and fix the salaries of such attorneys, employees and consultants, within the amounts appropriated to the Attorney General for providing legal service for the Commonwealth, as he may deem necessary for the operation of the Division of Securities Counsel to carry out its functions.

(1974, c. 253.)

§ 13.1-527.3. Commission to provide technical assistance.

The State Corporation Commission shall provide technical assistance to the Division of Securities Counsel in its investigation and preparation of a prosecution under the provisions of this title.

(1974, c. 253.)

§§ 13.1-528 through 13.1-541.

Repealed by Acts 1989, c. 408.

§ 13.1-542. Legislative intent [Not set out.].

(1970, c. 77.)

Editor's note. - This section, pertaining to the legislative intent for this chapter, was enacted by Acts 1970, c. 77. In furtherance of the general policy of the Virginia Code Commission to include in the Code only provisions having general and permanent application, this section, which is limited in its purpose and scope, is not set out here, but attention is called to it by this reference.

The section catchline was inserted at the direction of the Virginia Code Commission.

§ 13.1-542.1. Practice of certain professions by corporations.

Unless otherwise prohibited by law or regulation, the professional services defined in subsection A of § 13.1-543 may be rendered in this Commonwealth by:

1. A corporation organized as a professional corporation pursuant to the provisions of this chapter;
2. A foreign corporation that has obtained a certificate of authority pursuant to the provisions of this chapter;
3. A corporation organized pursuant to the provisions of Chapter 9 (§ 13.1-601 et seq.) or Chapter   10 (§ 13.1-801 et seq.) of this title; or
4. A foreign corporation that has obtained a certificate of authority pursuant to the provisions of Chapter 9 (§ 13.1-601 et seq.) or Chapter 10 (§ 13.1-801 et seq.) of this title. (2003, c. 678.)

Effective date. - This section became effective March 19, 2003.

Law review. - For 2007 annual survey article, "Labor and Employment Law," see 42 U. Rich. L. Rev. 489 (2007).

§ 13.1-543. Definitions.

1. As used in this chapter: "Eligible employee stock ownership plan" means an employee stock ownership plan as such term is defined in § 4975(e)(7) of the Internal Revenue Code of 1986, as amended, sponsored by a professional corporation and with respect to which:
   1. All of the trustees of the employee stock ownership plan are individuals who are duly licensed or otherwise legally authorized to render the professional services for which the professional corporation is organized under this chapter; however, if a conflict of interest exists for one or more trustees with respect to a specific issue or transaction, such trustees may appoint a special independent trustee or special fiduciary, who is not duly licensed or otherwise legally authorized to render the professional services for which the professional corporation is organized under this chapter, which special independent trustee shall be authorized to make decisions only with respect to the specific issue or transaction that is the subject of the conflict;
   2. The employee stock ownership plan provides that no shares, fractional shares, or rights or options to purchase shares of the professional corporation shall at any time be issued, sold, or otherwise transferred directly to anyone other than an individual duly licensed or otherwise legally authorized to render the professional services for which the professional corporation is organized under this chapter, unless such shares are transferred as a plan distribution to a plan beneficiary and subject to immediate repurchase by the professional corporation, the employee stock ownership plan or another person authorized to hold such shares; however:
      1. With respect to a professional corporation rendering the professional services of public accounting or certified public accounting:
         1. The employee stock ownership plan may permit individuals who are not duly licensed or otherwise legally authorized to render these services to participate in such plan, provided such individuals are employees of the corporation and hold less than a majority of the beneficial interests in such plan; and
         2. At least 51 percent of the total of allocated and unallocated equity interests in the corporation sponsoring such employee stock ownership plan are held (i) by the trustees of such employee stock ownership plan for the benefit of persons holding a valid CPA certificate as defined in § 54.1-4400, with unallocated shares allocated for these purposes pursuant to § 409(p) of the Internal Revenue Code of 1986, as amended, or (ii) by individual employees holding a valid CPA certificate separate from any interests held by such employee stock ownership plan; and
      2. With respect to a professional corporation rendering the professional services of architects, professional engineers, land surveyors, landscape architects, or certified interior designers, the employee stock ownership plan may permit individuals who are not duly licensed to render the services of architects, professional engineers, land surveyors, or landscape architects, or individuals legally authorized to use the title of certified interior designers to participate in such plan, provided such individuals are employees of the corporation and together hold not more than one-third of the beneficial interests in such plan, and that the total of the shares (i) held by individuals who are employees but not duly licensed to render such services or legally authorized to use a title and (ii) held by the trustees of such employee stock ownership plan for the benefit of individuals who are employees but not duly licensed to render such services or legally authorized to use a title, shall not exceed one-third of the shares of the corporation; and
   3. The professional corporation, the trustees of the employee stock ownership plan, and the other shareholders of the professional corporation comply with the foregoing provisions of the plan. "Professional business entity" means any entity as defined in § 13.1-603 that is duly licensed or otherwise legally authorized under the laws of the Commonwealth or the laws of the jurisdiction under whose laws the entity is formed to render the same professional service as that for which a professional corporation or professional limited liability company may be organized, including, but not limited to, (i) a professional limited liability company as defined in § 13.1-1102 , (ii) a professional corporation as defined in this subsection, or (iii) a partnership that is registered as a registered limited liability partnership registered under § 50-73.132, all of the partners of which are duly licensed or otherwise legally authorized to render the same professional services as those for which the partnership was organized. "Professional corporation" means a corporation whose articles of incorporation set forth a sole and specific purpose permitted by this chapter and that is either (i) organized under this chapter for the sole and specific purpose of rendering professional service other than that of architects, professional engineers, land surveyors, or landscape architects, or using a title other than that of certified interior designers and, except as expressly otherwise permitted by this chapter, that has as its shareholders or members only individuals or professional business entities that are duly licensed or otherwise legally authorized to render the same professional service as the corporation, including the trustees of an eligible employee stock ownership plan or (ii) organized under this chapter for the sole and specific purpose of rendering the professional services of architects, professional engineers, land surveyors, or landscape architects, or using the title of certified interior designers, or any combination thereof, and at least two-thirds of whose shares are held by persons duly licensed within the Commonwealth to perform the services of an architect, professional engineer, land surveyor, or landscape architect, including the trustees of an eligible employee stock ownership plan, or by persons legally authorized within the Commonwealth to use the title of certified interior designer; or (iii) organized under this chapter or under Chapter 10 (§ 13.1-801 et seq.) for the sole and specific purpose of rendering the professional services of one or more practitioners of the healing arts, licensed under the provisions of Chapter 29 (§ 54.1-2900 et seq.) of Title 54.1, or one or more nurse practitioners, licensed under Chapter 29 (§ 54.1-2900 et seq.) of Title 54.1, or one or more optometrists licensed under the provisions of Chapter 32 (§ 54.1-3200 et seq.) of Title 54.1, or one or more physical therapists and physical therapist assistants licensed under the provisions of Chapter 34.1 (§ 54.1-3473 et seq.) of Title 54.1, or one or more practitioners of the behavioral science professions, licensed under the provisions of Chapter 35 (§ 54.1-3500 et seq.), 36 (§ 54.1-3600 et seq.) or 37 (§ 54.1-3700 et seq.) of Title 54.1, or one or more practitioners of audiology or speech pathology, licensed under the provisions of Chapter 26 (§ 54.1-2600 et seq.) of Title 54.1, or one or more clinical nurse specialists who render mental health services licensed under Chapter 30 (§ 54.1-3000 et seq.) of Title 54.1 and registered with the Board of Nursing, or any combination of practitioners of the healing arts, optometry, physical therapy, the behavioral science professions, and audiology or speech pathology, and all of whose shares are held by or all of whose members are individuals or professional business entities duly licensed or otherwise legally authorized to perform the services of a practitioner of the healing arts, nurse practitioners, optometry, physical therapy, the behavioral science professions, audiology or speech pathology or of a clinical nurse specialist, including the trustees of an eligible employee stock ownership plan; however, nothing herein shall be construed so as to allow any member of the healing arts, optometry, physical therapy, the behavioral science professions, audiology or speech pathology or a nurse practitioner or clinical nurse specialist to conduct his practice in a manner contrary to the standards of ethics of his branch of the healing arts, optometry, physical therapy, the behavioral science professions, audiology or speech pathology, or nursing, as the case may be. "Professional service" means any type of personal service to the public that requires as a condition precedent to the rendering of such service or use of such title the obtaining of a license, certification, or other legal authorization and shall be limited to the personal services rendered by pharmacists, optometrists, physical therapists and physical therapist assistants, practitioners of the healing arts, nurse practitioners, practitioners of the behavioral science professions, veterinarians, surgeons, dentists, architects, professional engineers, land surveyors, landscape architects, certified interior designers, public accountants, certified public accountants, attorneys-at-law, insurance consultants, audiologists or speech pathologists, and clinical nurse specialists. For the purposes of this chapter, the following shall be deemed to be rendering the same professional service: 1. Architects, professional engineers, and land surveyors; and 2. Practitioners of the healing arts, licensed under the provisions of Chapter 29 (§ 54.1-2900 et seq.) of Title 54.1; nurse practitioners, licensed under the provisions of Chapter 29 (§ 54.1-2900 et seq.) of Title 54.1; optometrists, licensed under the provisions of Chapter 32 (§ 54.1-3200 et seq.) of Title 54.1; physical therapists and physical therapist assistants, licensed under the provisions of Chapter 34.1 (§ 54.1-3473 et seq.) of Title 54.1; practitioners of the behavioral science professions, licensed under the provisions of Chapters 35 (§ 54.1-3500 et seq.), 36 (§ 54.1-3600 et seq.), and 37 (§ 54.1-3700 et seq.) of Title 54.1; and one or more clinical nurse specialists who render mental health services, licensed under Chapter 30 (§ 54.1-3000 et seq.) of Title 54.1 and are registered with the Board of Nursing.
2. Persons who practice the healing art of performing professional clinical laboratory services within a hospital pathology laboratory shall be legally authorized to do so for purposes of this chapter if such persons (i) hold a doctorate degree in the biological sciences or a board certification in the clinical laboratory sciences and (ii) are tenured faculty members of an accredited medical school that is an "institution" as that term is defined in § 23.1-1100.

   (1970, c. 77; 1972, c. 180; 1980, cc. 701, 757; 1981, c. 217; 1985, c. 576; 1989, c. 665; 1990, cc. 481, 595; 1992, cc. 13, 16; 1994, c. 349; 1999, c. 83; 2000, cc. 194, 688, 763; 2003, c. 678; 2006, cc. 672, 715; 2008, c. 265; 2009, c. 309; 2017, c. 314; 2020, c. 726.)

Editor's note. - Acts 2006, cc. 672 and 715, cl. 2 provides: "That the Board for Accountancy shall promulgate regulations to implement the provisions of this act to be effective within 280 days of its enactment."

At the direction of the Virginia Code Commission, "23.1-1101" was substituted for "23-14" in subsection B to conform to the recodification of Title 23 by Acts 2016, c. 588, effective October 1, 2016.

Acts 2017, c. 314, cl. 2 provides: "That the provisions of this act shall be effective retroactively to October 1, 2016."

The 1999 amendment, in subsection A, inserted "nurse practitioners" in the first sentence and inserted "nurse practitioners, licensed under the provisions of Chapter 29 ( § 54.1-2900 et seq.) of Title 54.1" in subdivision 2; and inserted "or one or more nurse practitioners licensed under Chapter 29 ( § 54.1-2900 et seq.) of Title 54.1" in clause (iii) of subsection B.

The 2000 amendments. - The 2000 amendment by c. 194, in subsection B, substituted "a corporation whose articles of incorporation set forth a sole and specific purpose permitted by this chapter and which is either (i) organized" for "(i) a corporation organized," and at the beginning of clauses (ii) and (iii), deleted "a corporation which is."

The 2000 amendment by c. 688 inserted "physical therapists and physical therapist assistants, licensed under the provisions of Chapter 34.1 ( § 54.1-3473 et seq.) of Title 54.1" in subdivision A 2; in subsection B, near the middle, inserted "or one or more physical therapists and physical therapist assistants licensed under the provisions of Chapter 34.1 ( § 54.1-3473 et seq.) of Title 54.1," and inserted "physical therapy" following "optometry" in four places.

The 2000 amendment by c. 763 inserted "certified interior designers" in subsection A; and in subsection B, in clause (i), substituted "using a title other than that of certified landscape architects or certified interior designers" for "certified landscape architects," in clause (ii), substituted "using the title of certified landscape architects or certified interior designers" for "certified landscape architects," deleted "or otherwise legally authorized" following "duly licensed," and substituted "or by persons legally authorized within the Commonwealth to use the title of certified landscape architect or certified interior designer" for "certified landscape architect," and made minor stylistic changes.

The 2003 amendments. - The 2003 amendment by c. 678, effective March 19, 2003, inserted the subsection A designator preceding the formerly undesignated introductory clause; deleted the former subsection A and B designators preceding the paragraphs defining "professional service" and "professional corporation"; redesignated former subsection C as present subsection B; and near the end of the paragraph defining "professional corporation" in subsection A, inserted "nurse practitioners" following "healing arts" substituted "professions, audiology" for "professions, or audiology" three times, and inserted "nurse practitioner or" preceding "clinical nurse."

The 2006 amendments. - The 2006 amendments by cc. 672 and 715 are identical, and rewrote this section.

The 2008 amendments. - The 2008 amendment by c. 265, in subsection A, added the definition of "Professional business entity"; and in the definition of "Professional corporation" in clause (i), inserted "or members" following "that has as its shareholders," substituted "or professional business entities that" for "who themselves," and deleted "and of which shareholders at least one is duly licensed or otherwise legally authorized to render such professional service within the Commonwealth" following "an eligible employee stock ownership plan" and substituted "individuals or professional business entities" for "persons" in clause (iii).

The 2009 amendments. - The 2009 amendment by c. 309, in subdivision 2 b, near the beginning, deleted "certified" preceding "landscape architects," near the middle, inserted "or landscape architects," made a related change and deleted "certified landscape architects or" following "use the title of"; in the paragraph defining "Professional corporation," in clauses (i) and (ii), inserted "or landscape architects," made a related change and deleted "certified landscape architects or" preceding "certified interior designers" three times; and in the paragraph defining "Professional service," deleted "certified" preceding "landscape architects."

The 2017 amendments. - The 2017 amendment by c. 314, effective retroactively to October 1, 2016, substituted "medical school that is an 'institution' as that term is defined in § 23.1-1100" for "medical college or university that is an 'educational institution' within the meaning of § 23.1-1101" in subsection B; and made minor stylistic changes.

The 2020 amendments. - The 2020 amendment by c. 726 deleted "who renders mental health services" following the first instance of "specialist" in clause (iii) of the definition of "Professional corporation" in the definition of "Professional corporation" in subsection A.

Law review. - For survey of Virginia law on business associations for the year 1969-1970, see 56 Va. L. Rev. 1536 (1970); for the year 1972-1973, see 59 Va. L. Rev. 1412 (1973); for the year 1975-1976, see 62 Va. L. Rev. 1370 (1976).

For survey on business and corporate law in Virginia for 1989, see 23 U. Rich. L. Rev. 491 (1989); for the year 2000, see 34 U. Rich. L. Rev. 697 (2000).

For 2000 survey of Virginia corporate and business law, see 34 U. Rich. L. Rev. 697 (2000).

For 2006 survey article, "Labor and Employment Law," see 41 U. Rich. L. Rev. 203 (2006).

For 2007 annual survey article, "Corporate and Business Law," see 42 U. Rich. L. Rev. 273 (2007).

For annual survey article, "Corporate and Business Law," see 44 U. Rich. L. Rev. 307 (2009).

§ 13.1-544. Who may organize and become shareholder.

1. An individual or group of individuals (i) duly licensed or otherwise legally authorized to render the same professional services other than those of architects, professional engineers or land surveyors, or to use a title other than those of certified landscape architects or certified interior designers, of which at least one is duly licensed or otherwise legally authorized to render such professional services within the Commonwealth, or (ii) complying with the provisions of § 13.1-549 and duly licensed to render within the Commonwealth the professional services of architects, professional engineers or land surveyors, or legally authorized to use within the Commonwealth the title of certified landscape architects or certified interior designers, or any combination thereof, may organize a professional corporation for pecuniary profit under the provisions of Chapter 9 (§ 13.1-601 et seq.) of this title or organize a professional corporation as a nonstock corporation under the provisions of Chapter 10 (§ 13.1-801 et seq.) of this title, for the sole and specific purpose of rendering the same and specific professional service, subject to any laws, not inconsistent with the provisions of this chapter, which are applicable to the practice of that profession in the corporate form.
2. An eligible employee stock ownership plan or any individual or group of individuals described in clause (i) or (ii) of subsection A may become a shareholder or shareholders of a professional corporation for pecuniary profit under the provisions of Chapter 9 (§ 13.1-601 et seq.) of this title, for the sole and specific purpose of rendering the same and specific professional service, subject to any laws, not inconsistent with the provisions of this chapter, that are applicable to the practice of that profession in the corporate form.
3. Any individual or group of individuals described in clause (i) or (ii) of subsection A may become a member or members of a professional corporation organized as a nonstock corporation under the provisions of Chapter 10 (§ 13.1-801 et seq.) of this title for the sole and specific purpose of rendering such professional services, subject to any laws, not inconsistent with the provisions of this chapter, that are applicable to the practice of that profession in the corporate form. (1970, c. 77; 1981, c. 58; 1989, c. 665; 1994, c. 349; 2000, c. 763; 2006, cc. 672, 715.)

Editor's note. - Acts 2006, cc. 672 and 715, cl. 2 provides: "That the Board for Accountancy shall promulgate regulations to implement the provisions of this act to be effective within 280 days of its enactment."

The 2000 amendments. - The 2000 amendment by c. 763, in clause (i), substituted "to use a title other than those of certified landscape architects or certified interior designers" for "certified landscape architects," and in clause (ii), deleted "or otherwise legally authorized" preceding "to render," and inserted "legally authorized to use within the Commonwealth the title of" preceding "certified landscape architects" and inserted "or certified interior designers" thereafter, and made minor stylistic changes.

The 2006 amendments. - The 2006 amendments by cc. 672 and 715 are identical, and added the subsection designations; in subsection A, deleted "and become a shareholder or shareholders of" following "may organize" and substituted "organize a professional corporation as" for "become a member or members of"; added subsection B; and in subsection C, added the language beginning "Any individual or group" and ending "organized as a," substituted "under the provisions of Chapter 10 ( § 13.1-801 et seq.) of this title" for "so organized," "subject to any laws, not inconsistent with the provisions of" for "shall be subject to all limitations and restrictions imposed by" and added "that are applicable to the practice of that profession in the corporate form."

Law review. - For 2000 survey of Virginia corporate and business law, see 34 U. Rich. L. Rev. 697 (2000).

§ 13.1-544.1. Use of initials "P.C." or "PC" in corporate name.

Any professional corporation as defined in § 13.1-543 may, but is not required to, use the initials "P.C." or "PC," or the phrase "professional corporation" or "a professional corporation," at the end of its corporate name. Such initials or phrase may be used in the place of any word or abbreviation required by subsection A of § 13.1-630 .

(1972, c. 577; 1973, c. 136; 1981, c. 58; 2002, c. 77; 2003, cc. 592, 678.)

Editor's note. - Acts 2003, c. 592, cl. 3, provides: "That the provisions of this act (i) shall be applied prospectively only, (ii) shall not affect the validity of any filing made, or other action taken, prior to the effective date of this act [October 1, 2004] with respect to the name of a corporation, limited liability company, business trust, or limited partnership, and (iii) shall not be construed to require any such corporation, limited liability company, business trust, or limited partnership that was in compliance with applicable laws regarding the distinguishability of its name prior to the effective date of this act to change its name or take other action to comply with the requirements of this act."

The 2002 amendments. - The 2002 amendment by c. 77 rewrote the section.

The 2003 amendments. - The 2003 amendment by c. 592, effective October 1, 2004, deleted "but shall not be considered in determining whether a corporate name is distinguishable upon the records of the Commission" at the end.

The 2003 amendment by c. 678, effective March 19, 2003, deleted "subsection B of" preceding " § 13.1-543 ."

Law review. - For article reviewing changes in Virginia corporate and business law from June 2001 through May 2002, see 37 U. Rich. L. Rev. 1 (2002).

§ 13.1-544.2. Certificate of authority for foreign professional corporations.

1. Notwithstanding any other provision of this chapter, a foreign professional corporation, organized under the laws of a jurisdiction other than the Commonwealth of Virginia to perform a professional service of the type defined in subsection A of § 13.1-543 , may apply for and obtain a certificate of authority to render such professional services in Virginia on the following terms and conditions:
   1. Only stockholders and employees licensed or otherwise legally qualified by this Commonwealth may perform the professional service in Virginia.
   2. The professional corporation must meet every requirement of this chapter except the requirement that its stockholders be licensed to perform the professional service in this Commonwealth.
   3. The powers of any foreign professional corporation admitted under this section shall not exceed the powers permitted to domestic professional corporations under this chapter.
2. In order to qualify, a foreign professional corporation shall make application to the Commission as provided in § 13.1-759 and shall make such application for and secure a certificate of authority as may be required by § 13.1-549 ; and, in addition, shall be required to set forth the name and address of each stockholder of the corporation who will be providing the professional service in this Commonwealth and whether such stockholder is licensed, or otherwise legally qualified, to perform the professional service in Virginia. (1978, c. 674; 2002, c. 77; 2003, c. 678.)

The 2002 amendments. - The 2002 amendment by c. 77 substituted "subsection A of § 13.1-543 " for "subdivision A 1 of § 13.1-543 " in the introductory paragraph of subsection A.

The 2003 amendments. - The 2003 amendment by c. 678, effective March 19, 2003, deleted "all of" preceding "its stockholders" in subdivision A 2.

§ 13.1-545.

Repealed by Acts 1988, c. 765, effective January 1, 1989.

§ 13.1-545.1. Merger with foreign professional corporation or foreign professional limited liability company.

Any corporation organized under this chapter may merge with one or more foreign professional corporations that have obtained a certificate of authority to transact business in the Commonwealth pursuant to § 13.1-544.2 , or one or more foreign professional limited liability companies that have obtained a certificate of registration to transact business in the Commonwealth pursuant to § 13.1-1105 , only if the professional corporations and the professional limited liability companies are organized to render the same professional service, provided that (i) the merger is permitted by the laws of the jurisdiction under which each such foreign professional corporation or foreign professional limited liability company is organized, (ii) if the surviving or new professional business entity is a professional corporation organized and operating under the laws of the Commonwealth, all of its shareholders shall be licensed or otherwise legally authorized to render the same professional service as the corporation, provided that if such service is that of architects, professional engineers, land surveyors or certified landscape architects, or any combination thereof, at least two-thirds of its shares shall be held by individuals who are licensed or otherwise legally authorized within the Commonwealth to render the applicable service, and (iii) if the surviving or new professional business entity is a professional limited liability company organized and operating under the laws of the Commonwealth, all of its members and managers shall be licensed or otherwise legally authorized to render the same professional service as the professional limited liability company, provided that if such service is that of architects, professional engineers, land surveyors or certified landscape architects, or any combination thereof, at least two-thirds of its membership interests shall be held by individuals or professional business entities that are licensed or otherwise legally authorized within the Commonwealth to render the applicable service.

(1978, c. 674; 1987, c. 425; 1994, c. 349; 2008, c. 509.)

The 2008 amendments. - The 2008 amendment by c. 509 rewrote the section, which read: "Any corporation organized under this chapter may merge or consolidate with a foreign professional corporation which has qualified to do business in this Commonwealth pursuant to § 13.1-544.2 only if both corporations are organized to render the same professional service; provided that (i) such merger or consolidation is permitted by the laws of the state under which such foreign professional corporation is organized, and (ii) if the surviving or new professional corporation is organized and operating under the laws of Virginia, all stockholders of such remaining professional corporation shall be licensed or otherwise legally authorized to render the same professional service as the corporation, provided that if such service is that of architects, professional engineers, land surveyors or certified landscape architects, or any combination thereof, at least two-thirds of such stockholders shall be licensed or otherwise legally authorized within this Commonwealth to render the applicable service."

§ 13.1-546. How corporation may render professional services; nonprofessional employees and officers; organizers and shareholders need not be employees, etc.

No corporation organized and incorporated under this chapter may render professional services except through its officers, employees, independent contractors, and agents who are duly licensed or otherwise legally authorized to render such professional services, and only shareholders, officers, employees, independent contractors, and agents licensed or otherwise legally qualified by this Commonwealth may perform the professional service in Virginia; provided, however, this provision shall not be interpreted to preclude clerks, secretaries, bookkeepers, technicians and other assistants who are not usually and ordinarily considered by custom and practice to be rendering professional service to the public for which a license or other legal authorization is required from acting as employees of a professional corporation and performing their usual duties or from acting as officers of a professional corporation; and provided further that nothing contained in this chapter shall be interpreted to require that the right of an individual to be a shareholder of a corporation organized under this chapter, or to organize such a corporation, is dependent upon the present or future existence of an employment relationship between him and such corporation, or his present or future active participation in any capacity in the production of the income of such corporation or in the performance of the services rendered by such corporations.

(1970, c. 77; 1994, c. 349; 2003, c. 786.)

The 2003 amendments. - The 2003 amendment by c. 786 inserted "independent contractors" in two places near the beginning of the section.

Law review. - For survey of Virginia law on business associations for the year 1969-1970, see 56 Va. L. Rev. 1536 (1970); for the year 1975-1976, see 62 Va. L. Rev. 1370 (1976).

§ 13.1-546.1. Professional law corporations may qualify as executor, administrator or in other fiduciary capacity.

A professional corporation engaged in the practice of law, as a part of the practice of law, may act as an executor, trustee or administrator of an estate, or guardian for an infant, or in any other fiduciary capacity. Any officer, employee or agent of a professional corporation engaged in the practice of law who is duly licensed as an attorney in the Commonwealth may perform necessary fiduciary responsibilities on behalf of the corporation.

(1989, c. 154.)

Law review. - For survey on wills, trusts, and estates in Virginia for 1989, see 23 U. Rich. L. Rev. 859 (1989).

§ 13.1-547. Professional relationships not affected; liability for debts, etc., of corporation, its directors, officers and employees.

The provisions of this chapter shall not be construed to alter or affect the professional relationship between a person furnishing professional services and a person receiving such service either with respect to liability arising out of such professional service or the confidential relationship between the person rendering the professional service and the person receiving such professional service, if any, and all such confidential relationships enjoyed under the laws of this Commonwealth, whether now in existence, or hereafter enacted, shall remain inviolate. A director, officer, agent or employee of a professional corporation shall not, by reason of being any director, officer, agent or employee of such corporation, be personally liable for any debts or claims against, or the acts or omissions of the corporation or of another director, officer, agent or employee of the corporation, but the corporation shall be liable for the acts or omissions of its directors, officers, agents, employees and servants to the same extent to which any other corporation would be liable for the acts or omissions of its directors, officers, agents, employees and servants while they are engaged in carrying on the corporate business.

(1970, c. 77; 1984, c. 448.)

Law review. - For survey of Virginia law on business associations for the year 1969-1970, see 56 Va. L. Rev. 1536 (1970). For comment, "Limited Liability for Shareholders in Virginia Professional Corporations: Fact or Fiction?," see 21 U. Rich. L. Rev. 571 (1987).

§ 13.1-548. Corporation not to engage in other business; investment of funds.

No corporation organized under this chapter shall engage in any business other than the rendering of the professional services for which it was specifically incorporated; provided, however, nothing in this chapter or in any other provisions of existing law applicable to corporations shall be interpreted to prohibit such corporation from investing its funds in real estate, mortgages, stocks, bonds or any other type of investments, from owning real or personal property, or from exercising any other investment power granted to corporations under this title and not in conflict with the provisions of this chapter.

(1970, c. 77; 1975, c. 543.)

§ 13.1-549. Qualifications of shareholders; special provisions for corporations rendering services of architects, professional engineers, landscape architects and land surveyors, and using the title of certified interior designers.

1. A corporation rendering the services of architects, professional engineers, land surveyors, or landscape architects, or using the title of certified interior designers, or any combination thereof, shall issue not less than two-thirds of its shares to individuals or professional business entities duly licensed to render the services of architect, professional engineer, land surveyor, or landscape architect, or to individuals legally authorized to use the title of certified interior designer, and the remainder of said shares may be issued only to and held by individuals who are employees of the corporation whether or not such employees are licensed to render professional services or authorized to use a title. For a corporation using the title of certified interior designers and providing the services of architects, professional engineers or land surveyors, or any combination thereof, not less than two-thirds of its shares shall be held by individuals or professional business entities who are duly licensed. No other professional corporation, except for a corporation engaged in the practice of accounting as described in § 13.1-549.1 , may issue any of its shares to anyone other than an individual or professional business entity who is duly licensed or otherwise legally authorized to render the same specific professional services as those for which the corporation was incorporated, including trustees of an eligible employee stock ownership plan. Notwithstanding the above limitations, a professional corporation may (i) issue its shares to a partnership each of the partners of which is duly licensed or otherwise legally authorized to render the same professional services as those for which the corporation was incorporated or (ii) issue any of its shares to, and have as shareholders, directly or indirectly, whether through shares, fractional shares, or rights or options to purchase shares, the trustees of an eligible employee stock ownership plan.
2. As an additional prerequisite for a corporation engaging in the practice of the professions of architecture, professional engineering, land surveying, or landscape architecture, or using the title of certified interior designer, or any combination thereof, such corporation shall secure a certificate of authority, which may be renewable and may be either general or limited, from the Board for Architects, Professional Engineers, Land Surveyors, Certified Interior Designers and Landscape Architects. Such certificate of authority shall be issued or renewed by the Board when in its discretion such corporation is in compliance with rules and regulations which shall be promulgated by the said Board consistent with its jurisdiction to provide adequate safeguards for the public's health, welfare and safety. The fees for a certificate of authority as described above shall be the same fees as provided for in Chapter 4 (§ 54.1-400 et seq.) of Title 54.1.

   (1970, c. 77; 1972, c. 655; 1980, c. 757; 1998, c. 27; 2000, cc. 191, 763; 2006, cc. 672, 715; 2008, c. 265; 2009, c. 309.)

The 1998 amendment deleted "State" preceding "Board" throughout this section; substituted "employees are licensed" for "employees be licensed" in the first sentence of the first paragraph; in the second paragraph, inserted "Certified Interior Designers" in the first sentence and substituted "Chapter 4 ( § 54.1-400 et seq.) of Title 54.1" for "Chapter 4 of Title 54.1 of the Code" in the last sentence.

The 2000 amendments. - The 2000 amendment by c. 191 inserted "except for a corporation engaged in the practice of accounting as described in § 13.1-549.1 ," in the second sentence of the first paragraph.

The 2000 amendment by c. 763 rewrote the first sentence of the first paragraph, inserting references to certified interior designers, added the second sentence of the first paragraph, and in the first sentence of the second paragraph, inserted "or using the title of" preceding "certified landscape" and substituted "architect or certified interior designer" for "architect" thereafter, and made minor stylistic changes.

The 2006 amendments. - The 2006 amendments by cc. 672 and 715 are identical, and added the subsection designations; in subsection A, in the first sentence, substituted "shares" for "capital stock" following "two-thirds of its" and "shares" for "stock" following "remainder of said"; in the second sentence, substituted "a corporation" for "those corporations" and "its shares" for "the capital stock of the corporation"; in the third sentence, substituted "shares" for "capital stock" and added "including trustees of an eligible employee stock ownership plan"; in the fourth sentence, inserted the clause (i) designation, substituted "shares" for "stock" following "issue its" and added clause (ii); in the first sentence in subsection B, substituted "As an additional" for "It is further provided, as an additional" and deleted "that" following "combination thereof"; and made minor stylistic changes.

The 2008 amendments. - The 2008 amendment by c. 265, in subsection A, inserted "or professional business entities" in the first and second sentences and "or professional business entity" in the third sentence.

The 2009 amendments. - The 2009 amendment by c. 309, in subsection A, inserted "or landscape architects' and "or landscape architect" and deleted "certified landscape architects or' preceding "certified interior designers' and "certified landscape architect or' preceding "certified interior designer'; inserted "or landscape architecture" and deleted "certified landscape architect or' preceding "certified interior designer' in subsection B.

Law review. - For survey of Virginia law on business associations for the year 1969-1970, see 56 Va. L. Rev. 1536 (1970); for the year 1975-1976, see 62 Va. L. Rev. 1370 (1976).

For 2000 survey of Virginia corporate and business law, see 34 U. Rich. L. Rev. 697 (2000).

For annual survey article, "Corporate and Business Law," see 44 U. Rich. L. Rev. 307 (2009).

§ 13.1-549.1. Special provision for corporation engaged in practice of accounting.

Before any professional corporation may engage in the practice of accounting in this Commonwealth it shall first obtain and maintain any registration required for such corporation by Chapter 44 (§ 54.1-4400 et seq.) of Title 54.1. A corporation rendering the services of accounting shall issue not less than fifty-one percent of its shares to individuals or professional business entities duly licensed or otherwise legally authorized to render the services of accounting, including trustees of an eligible employee stock ownership plan, and the remainder of said shares may be issued only to and held by individuals who are employees of the corporation, whether or not such employees are licensed or otherwise authorized to render professional services.

(1972, c. 180; 2000, c. 191; 2006, cc. 672, 715; 2008, c. 265.)

The 2000 amendments. - The 2000 amendment by c. 191 inserted the reference to § 54.1-2000 et seq. (now § 54.1-4400 et seq.) in the first sentence and added the last sentence.

The 2006 amendments. - The 2006 amendments by cc. 672 and 715 are identical, and in the second sentence, substituted "shares" for "capital stock" preceding "to individuals," inserted "including trustees of an eligible employee stock ownership plan" and substituted "shares" for "stock" preceding "may be issued."

The 2008 amendments. - The 2008 amendment by c. 265 inserted "or professional business entities" following "shares to individuals" in the second sentence.

Law review. - For annual survey article, "Corporate and Business Law," see 44 U. Rich. L. Rev. 307 (2009).

§ 13.1-549.2. Registration certificate required for corporation engaged in practice of law.

Before any professional corporation may engage in the practice of law in this Commonwealth, it shall first obtain and maintain a registration certificate required for such corporation by Chapter 39 of Title 54.1. Any such professional corporation which has been issued a certificate of incorporation before June 1, 1973, shall be issued a registration certificate upon the payment of the required fee and upon compliance with § 54.1-3902 on or before January 1, 1974.

(1973, c. 484.)

Law review. - For survey of Virginia law on business associations for the year 1972-1973, see 59 Va. L. Rev. 1412 (1973).

OPINIONS OF THE ATTORNEY GENERAL

Foreign business trust need not obtain certificate of authority before filing fictitious name certificate. - A foreign business trust is not required to obtain a certificate of authority before filing a fictitious name certificate as a foreign business trust is not included within definitions of business entities required to obtain either a certificate of authority or certificate of registration. See opinion of Attorney General to The Honorable John T. Frey, Clerk, Circuit Court of Fairfax County, 00-039, 2000 Va. AG LEXIS 40 (6/12/00).

§ 13.1-549.3.

Repealed by Acts 1994, c. 349.

Editor's note. - Former § 13.1-549.3 , relating to special provisions for law corporations as to qualifications of shareholders, was enacted by Acts 1984, c. 448.

§ 13.1-550. Transfer of shares.

1. No shareholder of a corporation organized under this chapter may sell or transfer his shares in such corporation except to (i) the corporation, (ii) another individual or professional business entity who is eligible to be a shareholder of such corporation, (iii) a qualified charitable remainder trust as defined in subsection B, or (iv) the trustees of an eligible employee stock ownership plan. In the case of a corporation rendering the services of architects, professional engineers, land surveyors and certified landscape architects, or any combination thereof, no person who is not duly licensed or otherwise legally authorized to render one such service shall be eligible unless at least two-thirds of the remaining shares after the sale or transfer shall be held by individuals or professional business entities duly licensed or otherwise legally authorized to perform one such service.
2. As used in this section, "qualified charitable remainder trust" means a trust meeting the requirements of § 664 of the United States Internal Revenue Code of 1986, as amended, and which meets all of the following conditions:
   1. Has one or more current income beneficiaries, all of which are eligible to be a shareholder in the corporation under § 13.1-544 .
   2. Has a trustee or independent special trustee who:
      1. Is eligible to be a shareholder in the corporation under § 13.1-544 ; and
      2. Has exclusive authority over the shares of the corporation while the shares are held in the trust.
   3. Has one or more irrevocably designated charitable remaindermen, all of which must at all times be domiciled or maintain a local chapter in the Commonwealth of Virginia.
   4. When transferring any assets during the term of the trust to charitable organizations, the distributions are made only to charitable organizations described in § 170(c) of the Internal Revenue Code that are domiciled or maintain a local chapter in this Commonwealth. (1970, c. 77; 1980, c. 757; 1999, c. 100; 2006, cc. 672, 715; 2008, c. 265.)

The 1999 amendment inserted the subsection A designator at the beginning of the first paragraph, and inserted "or to a qualified charitable remainder trust as described in subsection B" in the first sentence of subsection A, and added subsection B.

The 2006 amendments. - The 2006 amendments by cc. 672 and 715 are identical, and in subsection A, inserted the clause designations; substituted "the" for "said" in clause (i), "defined" for "described" in clause (iii), added clause (iv) and made related changes.

The 2008 amendments. - The 2008 amendment by c. 265, in subsection A, inserted "or professional business entity" in clause (i) and substituted "individuals or professional business entities" for "persons" in the second sentence.

Law review. - For annual survey article, "Corporate and Business Law," see 44 U. Rich. L. Rev. 307 (2009).

§ 13.1-551. Disqualification of shareholder.

If any officer, shareholder, agent or employee of a corporation organized under this chapter who has been rendering professional service to the public becomes legally disqualified to render such professional services within this Commonwealth, he shall immediately sever all employment with, and financial interests in such corporation except that he may be a shareholder subject to the provisions of this chapter. A corporation's failure to require compliance with this provision shall constitute a ground for the forfeiture of its articles of incorporation and the termination of its corporate existence by the State Corporation Commission.

(1970, c. 77; 2002, c. 77.)

The 2002 amendments. - The 2002 amendment by c. 77 substituted "the termination of its corporate existence" for "its dissolution" near the end of the section.

§ 13.1-552. Conversion into nonprofessional corporation; disposition of shares of deceased or disqualified shareholders.

1. A corporation under this chapter shall have perpetual existence until its corporate existence is terminated in accordance with other provisions of this title.
2. Whenever all shareholders of a corporation licensed under this chapter cease at any one time and for any reason to be licensed, certified or registered in the particular field of endeavor for which the corporation was organized, or by the vote of the holders of at least two-thirds of its outstanding capital stock, the corporation thereupon shall be treated as converted into, and shall operate henceforth solely as, a corporation under applicable provisions of this title, exclusive of this chapter, but may be reconverted upon removal of the disability or by the vote of the holders of at least two-thirds of its outstanding capital stock.
3. Within one year following the date of death of a shareholder, or his disqualification as hereinbefore provided, all of the shares of such shareholders shall be transferred to, and acquired by, the corporation or persons qualified to own the shares, if the provisions of subsection B are inapplicable. If no other provision to accomplish this transfer and acquisition is in effect and carried out within this period, the corporation thereafter shall purchase and redeem all of the decedent shareholder's shares of stock at book value, determined as of the end of the month immediately preceding death or disqualification. The book value shall be determined from the books and records of the corporation in accordance with the generally accepted accounting principles on the accrual method of accounting. No subsequent adjustment of this book value, whether by the corporation itself, by federal income tax audit made and agreed to, or by a court decision which has become final, shall alter the redemption price. Nothing contained in this section shall prevent the parties involved from making any other arrangement or provision in the corporate articles, bylaws, or by contract to transfer the shares of a (i) deceased or disqualified shareholder or (ii) disqualified charitable remainder trust to the corporation or to persons qualified to own the shares, whether made before or after (i) the death or disqualification of the shareholder or (ii) the disqualification of a charitable remainder trust, provided that within the one-year period herein specified all the stock involved shall have been so transferred.

   (1970, c. 77; 1999, c. 100; 2002, c. 77.)

The 1999 amendment, in the last sentence in subsection (c), inserted "(i)" in two places, inserted "or (ii) disqualified charitable remainder trust," and inserted "or (ii) the disqualification of a charitable remainder trust."

The 2002 amendments. - The 2002 amendment by c. 77 substituted the A through C designators for the (a) through (c) designators; substituted "its corporate existence is terminated" for "dissolved" in subsection A; deleted "exclusive of treasury stock" following "capital stock" twice in subsection B; and substituted "subsection B" for "subsection (b)" in the first sentence of subsection C.

Law review. - For survey of Virginia law on business associations for the year 1969-1970, see 56 Va. L. Rev. 1536 (1970).

§ 13.1-553. Board of directors.

1. Except as provided in an agreement adopted pursuant to § 13.1-671.1 or 13.1-852.1 that is not in conflict with § 13.1-544 , a professional corporation organized pursuant to the provisions of this chapter shall be governed by a board of directors, which shall have the full management of the business and affairs of the corporation and continuing exclusive authority to make management decisions on its behalf, including the power and authority to delegate to its agents, officers, and employees, and to delegate by a management agreement or another agreement with, or otherwise to, other persons managerial duties and tasks related to the corporation's operations, and no shareholder or member shall have the power to bind the corporation within the scope of its business or profession merely by virtue of his being a shareholder or member. To the extent the board of directors is eliminated or its make-up or manner of selection is modified by an agreement adopted pursuant to § 13.1-671.1 or 13.1-852.1 , only individuals or entities licensed or otherwise legally authorized to render the same professional services within the Commonwealth as the services provided by the professional corporation or its shareholders or members shall supervise and direct the provision of professional services of that professional corporation or its shareholders or members within the Commonwealth; however, in the case of a corporation rendering the services of architects, professional engineers, land surveyors, landscape architects, or certified interior designers, or any combination thereof, such supervision and direction may be provided by individuals who are employees of the corporation and are not duly licensed to render such professional services so long as at least two-thirds of the individuals providing such supervision and direction are employees of the corporation and duly licensed to render such professional services.
2. The articles of incorporation may prescribe the manner in which the board of directors shall be chosen and the number thereof. No individual not duly licensed or otherwise duly authorized to render the professional services of the corporation shall be a member of the board of directors, except that the board of directors of a corporation rendering the services of architects, professional engineers, land surveyors, landscape architects, or certified interior designers, or any combination thereof, may have as members employees of the corporation who are not authorized to render the professional services of the corporation, provided that such employee-directors do not constitute more than one-third of all of the members of the board of directors.
3. The board of directors, including the first board of directors, shall consist of one or more individuals. The number of directors shall be fixed by the bylaws except as to the number of the first board of directors, which shall be fixed by the articles of incorporation. The number of directors may be increased or decreased from time to time by amendment of the bylaws, unless the articles of incorporation provide that a change in the number of directors shall be made only by amendment of the articles of incorporation. In the absence of a bylaw fixing the number of directors, the number shall be the same as that stated in the articles of incorporation.

   (1970, c. 77; 1978, c. 828; 1982, c. 590; 1995, c. 322; 2006, c. 649; 2007, c. 629; 2009, c. 309; 2010, c. 532.)

The 2006 amendments. - The 2006 amendment by c. 649 inserted the second sentence.

The 2007 amendments. - The 2007 amendment by c. 629 inserted "including the power and authority to delegate to its agents, officers, and employees, and to delegate by a management agreement or another agreement with, or otherwise to, other persons managerial duties and tasks related to the corporation's operations" preceding "and no shareholder" in the first sentence.

The 2009 amendments. - The 2009 amendment by c. 309 deleted the clause (i) designator preceding "in the case of a corporation," inserted "or landscape architects" following "land surveyors" and made a related change, deleted clause (ii) which read: "in the case of a corporation rendering the services of certified landscape architects, such supervision and direction may be provided by individuals who are employees of the corporation and are not legally authorized to use the title of certified landscape architect so long as at least two-thirds of the individuals providing such supervision and direction are employees of the corporation and legally authorized to use such a title" and deleted "certified" preceding "landscape architect" and "landscape architects" in the third and fourth sentences.

The 2010 amendments. - The 2010 amendment by c. 532, in subsection A, inserted "or 13.1-852.1 " twice, inserted "or member" following "shareholder" twice, inserted "or members" following "shareholders" twice, and inserted "or certified interior designers" following "landscape architects"; rewrote subsection B; substituted "individuals" for "members" in subsection C; and made related changes.

Law review. - For survey of Virginia law on business associations for the year 1975-1976, see 62 Va. L. Rev. 1370 (1976).

For 2006 survey article, "Health Care Law," see 41 U. Rich. L. Rev. 179 (2006).

For 2007 annual survey article, "Corporate and Business Law," see 42 U. Rich. L. Rev. 273 (2007).

§ 13.1-554.

Repealed by Acts 2002, ch. 346.

Editor's note. - Former § 13.1-554 , relating to state and local revenue licenses, was enacted by Acts 1970, c. 77.

§ 13.1-554.1. Income and property taxes.

All professional corporations organized or qualifying under the provisions of this chapter, shall be taxed as corporations for income tax purposes and shall be subject to the provisions of Chapter 3 (§ 58.1-300 et seq.) of Title 58.1, entitled "Income Taxes," insofar as these provisions are applicable to corporations, and property owned by such corporations shall be taxed in the actual form in which it may exist and not as capital. The provisions of this section shall be effective January 1, 1971.

(1972, c. 214.)

Law review. - For survey of Virginia law on taxation for the year 1971-1972, see 58 Va. L. Rev. 1338 (1972).

§ 13.1-555. Merger.

A professional corporation operating pursuant to the terms of this chapter may merge with one or more corporations, limited liability companies, or domestic partnerships only if the surviving corporation, limited liability company, or domestic partnership is a professional corporation, a professional limited liability company, or a domestic partnership all of the partners of which are professional corporations, professional limited liability companies, or individuals duly licensed or otherwise legally authorized to render the same professional services as those for which the surviving professional corporation, professional limited liability company, or domestic partnership was incorporated or organized.

(1970, c. 77; 2008, c. 509.)

The 2008 amendments. - The 2008 amendment by c. 509 rewrote the section, which read: "A professional corporation operating pursuant to the terms of this chapter may consolidate or merge with another corporation only if the professional corporation is the surviving corporation."

§ 13.1-556. Application of Chapter 9 or Chapter 10 of this title.

The provisions of Chapter 9 (§ 13.1-601 et seq.) or Chapter 10 (§ 13.1-801 et seq.), as the case may be, of this title shall be applicable to professional corporations organized under the provisions of this chapter. Where a conflict arises between the provisions found in Chapter 9, or Chapter 10, as the case may be, and this chapter, this chapter shall control.

(1970, c. 77; 1972, c. 84; 2000, c. 194.)

The 2000 amendments. - The 2000 amendment by c. 194, in the first and second sentences, inserted "or Chapter 10 ( § 13.1-801 et seq.), as the case may be."

Law review. - For 2000 survey of Virginia corporate and business law, see 34 U. Rich. L. Rev. 697 (2000).

§ 13.1-557. Short title.

This chapter shall be known as the "Retail Franchising Act."

(1972, c. 561.)

Law review. - For survey of Virginia law on business associations for the year 1972-1973, see 59 Va. L. Rev. 1412 (1973). For article on the evolution of the State Corporation Commission, see 14 Wm. & Mary L. Rev. 523 (1973).

§ 13.1-558. Policy of the Commonwealth.

It is hereby declared to be the policy of the Commonwealth, through the exercise by the General Assembly of its power to regulate commerce partly or wholly within the Commonwealth of Virginia, to correct as rapidly as practicable such inequities as may exist in the franchise system so as to establish a more even balance of power between franchisors and franchisees; to require franchisors to deal fairly with their franchisees with reference to all aspects of the franchise relationship and to provide franchisees more direct, simple, and complete judicial relief against franchisors who fail to deal in a lawful manner with them.

(1972, c. 561.)

§ 13.1-559. Definitions; applicability of chapter.

1. As used in this chapter, unless the context otherwise requires:

   "Commission" means the State Corporation Commission.

   "Controlling person" means a natural person who is an officer, director, or partner, or who occupies a similar status or performs a similar function, of a franchisor organized as a corporation, partnership, or other entity, or any person who possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of a franchisor, whether through the ownership of voting securities, by contract, or otherwise.

   "Franchise" means a written contract or agreement between two or more persons, by which:

   1. A franchisee is granted the right to engage in the business of offering, selling or distributing goods or services at retail under a marketing plan or system prescribed in substantial part by a franchisor;
   2. The operation of the franchisee's business pursuant to such plan or system is substantially associated with the franchisor's trademark, service mark, trade name, logotype, advertising or other commercial symbol designating the franchisor or its affiliate; and
   3. The franchisee is required to pay, directly or indirectly, a franchise fee of $500 or more.

      "Franchise fee" means a fee or charge for the right to enter into or maintain a business under a franchise, including a payment or deposit for goods, services, rights, or training, but not including: (i) the payment of a bona fide wholesale price for starting and continuing inventory of goods for resale or (ii) the payment at fair market value for the purchase or lease of real property, fixtures, equipment, or supplies necessary to enter into or maintain the business.

      "Franchisee" means a person to whom a franchise is granted or sold.

      "Franchisor" means a person, including a subfranchisor, who grants or sells, or offers to grant or sell, a franchise.

      "Offer" or "offer to sell" includes every attempt to offer to dispose of or grant, and every solicitation of an offer to buy, a franchise or an interest in a franchise for value.

      "Place of business" means a building or portion thereof from which the goods or services authorized by the franchise are sold or offered for sale in person by the franchisee or employees or agents of the franchisee, or a truck or van used in the sale of such goods which is of a type designated by the franchisor and is equipped and marked in conformance with requirements of the franchisor.

      "Preopening obligations" means the franchisor's obligations to provide to the franchisee, prior to the opening of the franchisee's business, real estate, improvements, equipment, inventory, training, or other items to be included in the offering.

      "Sale" or "sell" includes every contract or agreement of sale or grant of, contract to sell, or disposition of a franchise or interest in a franchise for value.

      "Subfranchisor" means a person who is authorized by a franchisor to grant a franchise within a particular geographic region.

2. This chapter shall apply only to a franchise the performance of which contemplates or requires the franchisee to establish or maintain a place of business within the Commonwealth of Virginia.

   A franchise does not include a contract or agreement by which a retailer of goods or services is granted the right either (i) to utilize a marketing plan or system to promote the sale or distribution of goods or services which are incidental and ancillary to the principal business of the retailer (sales under such a plan or system accounting for less than 20 percent of the retailer's gross sales being deemed incidental and ancillary); or (ii) to sell goods or services within, or appurtenant to, a retail business establishment as a department or division thereof provided such retailer is not required to purchase such goods or services from the operator of such establishment.

   (1972, c. 561; 1978, c. 670; 1990, c. 420; 1991, c. 475; 2007, c. 668; 2009, c. 148.)

The 2007 amendments. - The 2007 amendment by c. 668 rewrote subsection A making stylistic changes and rearranging definitions alphabetically.

The 2009 amendments. - The 2009 amendment by c. 148, effective March 6, 2009, in subsection A, added the definitions of "Offer" or "offer to sell" and "Sale" or "sell"; inserted "or sold" in the definition of "Franchisee" and inserted "or sells" and "or sell" in the definition of "Franchisor"; and made a minor syslistic change in the last paragraph of subsection B.

§ 13.1-560. Registration required.

It shall be unlawful for any person to sell or offer to sell a franchise in this Commonwealth unless the franchise is registered under the provisions of this chapter or exempted from registration by rule or order of the Commission.

(1972, c. 561; 1978, c. 670; 2007, c. 668; 2009, c. 148.)

The 2007 amendments. - The 2007 amendment by c. 668 added "or exempted from registration by rule or order of the Commission" to the end of the paragraph.

The 2009 amendments. - The 2009 amendment by c. 148, effective March 6, 2009, substituted "sell or offer to sell" for "grant or offer to grant."

§ 13.1-561. Procedure for registration; bond; renewal; fee.

1. A franchise may be registered after filing with the Commission an application containing such relevant information as the Commission may require. The franchise shall be registered if the Commission finds that the franchisor, including any controlling person of the franchisor, is a person of good character and reputation and that all information required of the applicant by the Commission has been supplied, that none of the grounds for revocation enumerated in § 13.1-562 are applicable to the franchise, and that the required fee has been paid.
2. The Commission may require, as a condition of registration or renewal of registration: (i) the escrow or deferral of franchise fees and other funds paid by the franchisee to the franchisor until the franchisor's preopening obligations are fulfilled, if the grounds enumerated in clause (i) of subdivision A 2 of § 13.1-562 exist, or (ii) the filing by a franchisor of a surety bond conditioned upon the payment of all criminal and civil penalties provided in this chapter in an amount determined by the Commission to be adequate to protect the public and all franchisees of the franchisor, taking into proper account the marketing plan or system to be franchised, the goods or services to be offered, whether or not the franchisor has a regular place of business in this Commonwealth, and any other facts indicating the necessary amount of the bond.
3. The Commission shall by rule or order prescribe the procedures for filing an application for exemption, amendments to the exemption, and when an exemption or renewal becomes effective.
4. All registrations, exemptions and renewals thereof shall expire at midnight on the annual date of their effectiveness. However, the Commission may extend such expiration of an exemption as much as 45 days.
5. Each application for the registration or exemption of a franchise shall be accompanied by a fee of $500, payable to the Treasurer of Virginia. Each application for the renewal of a franchise registration or exemption, including any amendments to the registration or exemption application which accompany or are part of the application for renewal, shall be accompanied by a fee of $250 payable to the Treasurer of Virginia. Unless submitted in connection with an application for renewal, each amendment or group of amendments to a registration or exemption application submitted after the application has been granted shall be accompanied by a fee of $100, payable to the Treasurer of Virginia. If the application for registration, exemption or renewal is withdrawn or is not granted, or if the registration or exemption application is not amended, the fee shall not be returnable.
6. For the purposes of registration, exemption or renewal of registration of a franchise, a partnership shall be treated as the same partnership so long as two or more members of the partnership named in the application continue the business without change of location, and if the partnership, within one month after a change in the partnership, files with the Commission a copy of a certificate filed in compliance with § 50-74.

   (1972, c. 561; 1978, c. 670; 1991, c. 475; 1992, c. 158; 2007, c. 668.)

Cross references. - For provisions of the Uniform Partnership Act, generally, see § 50-73.79 et seq.

Editor's note. - Section 50-74, which is referred to at the end of subsection F, was repealed by Acts 1996, c. 292.

The 2007 amendments. - The 2007 amendment by c. 668 inserted clause (i) and the clause (ii) designation in subsection B; inserted subsection C and redesignated the remaining subsections accordingly; in subsection D, inserted "exemptions" and added the last sentence; and inserted "or exemption" six times in subsection E and once in subsection F.

§ 13.1-561.1. Fees to cover expense of regulation.

The fees paid into the state treasury under this chapter, except for fees and funds collected for the Literary Fund, shall be deposited into a special fund and specifically accounted for and used by the State Corporation Commission to defray the costs of supervising, implementing, and administering the provisions of this chapter and Chapters 5 (§ 13.1-501 et seq.) and 6 (§ 13.1-528 et seq.) of this title, and Chapters 6.1 (§ 59.1-92.1 et seq.) and 7 (§ 59.1-93 et seq.) of Title 59.1. Included in the Commission's costs shall be a reasonable margin in the nature of a reserve fund. All excesses of fees collected exceeding these costs shall revert to the general fund.

(1987, c. 434.)

Editor's note. - Chapter 6 ( § 13.1-528 et seq.) of Title 13.1, referred to in this section, was repealed by Acts 1989, c. 408.

§ 13.1-562. Revocation of or refusal to renew registration.

1. The Commission may, by order entered after a hearing on notice duly served on the defendant not less than thirty days before the date of the hearing, revoke the effectiveness of a franchise registration (or refuse to renew a registration if an application for renewal has been or is to be filed) if it finds that such an order is in the public interest or that the franchisor or any controlling person of the franchisor:
   1. Has engaged in any fraudulent transaction;
   2. Is insolvent, or in danger of becoming insolvent, either (i) in the sense that his liabilities exceed his assets or (ii) in the sense that he cannot meet his obligations as they mature;
   3. Is a person for whom a conservator or guardian has been appointed and is acting;
   4. Has been convicted, within or without this Commonwealth, of any misdemeanor involving a franchise, or any felony;
   5. Has failed to furnish information requested by the Commission concerning the conduct of his business; or
   6. Has violated any of the provisions of this chapter.
2. If it appears to the Commission that it is in the public interest and that there exists one or more of the grounds enumerated in subdivisions (1) through (6) of subsection A of this section, the Commission may so notify the franchisor. The franchisor shall have seven business days from the date of the written notice from the Commission within which to file a written response to the matters addressed in the notice. If (i) the Commission notified, or reasonably attempted to notify, the franchisor in writing, (ii) it appears to be in the public interest, and (iii) either the Commission, after consideration of the franchisor's response, reasonably believes the ground or grounds exist or a response is not filed in a timely manner, the Commission may summarily enter an order suspending the effectiveness of the franchisor's registration pending final determination of any proceeding under this section. The Commission shall promptly send a copy of the suspension order to the franchisor and each of its subfranchisors, if any are known to the Commission. At a minimum, the order shall set forth the basis for the suspension as well as the franchisor's or subfranchisor's right to file a written request for a hearing within twenty-one days after the date of entry of the order. If a hearing is requested in a timely manner, the Commission, after notice and an opportunity for a hearing as soon as practicable, may modify or vacate the suspension order or continue it in effect until final determination of the proceeding under this section. If a hearing is not requested in a timely manner, the suspension order shall remain in effect until it is modified or vacated by the Commission.

   (1972, c. 561; 1978, c. 670; 1991, c. 475; 1997, c. 921; 2007, c. 668.)

Editor's note. - Acts 1997, c. 921, cl. 2, provides: "That this act shall become effective January 1, 1998. The powers granted and duties imposed pursuant to this act shall apply prospectively to guardians and conservators appointed by court order entered on or after that date, or modified on or after that date if the court so directs, without regard to when the petition was filed. The procedures specified in this act governing proceedings for appointment of a guardian or conservator or termination or other modification of a guardianship or conservatorship shall apply on and after that date without regard to when the petition therefor was filed or the guardianship or conservatorship created."

The 1997 amendment, effective January 1, 1998, in subdivision A (3), deleted "Has been adjudicated mentally incompetent or" at the beginning of the subdivision and substituted "conservator" for "committee."

The 2007 amendments. - The 2007 amendment by c. 668 made minor stylistic changes to the subdivision designations in subsection A and inserted "(i)" and "(ii)" in subdivision A 2.

§ 13.1-563. Unlawful offers.

It shall be unlawful for any person, in connection with the sale or offer to sell a franchise in this Commonwealth, directly or indirectly:

1. To employ any device, scheme, or artifice to defraud;
2. To make any untrue statement of a material fact or to omit to state a material fact necessary in order to avoid misleading the offeree;
3. To engage in any transaction, practice, or course of business that operates or would operate as a fraud or deceit upon the franchisee; or
4. To fail to provide the franchisee a copy of (i) the franchise agreement and (ii) such disclosure document as may be required by rule or order of the Commission.

   (1972, c. 561; 1978, c. 670; 1991, c. 475; 2009, c. 148.)

The 2009 amendments. - The 2009 amendment by c. 148, effective March 6, 2009, substituted "sale or offer to sell" for "grant or offer to grant" in the introductory language; redesignated former subdivisions (a) through (c) and (e) as subdivisions 1 through 4; deleted former subdivision (d), which read: "[Repealed.]"; and substituted "that" for "which" in subdivision 3.

Law review. - For article, "Enforcement of Arbitration Clauses Against Deceived Franchisees," see 21 U. Rich. L. Rev. 391 (1987).

§ 13.1-564. Unlawful cancellation of franchise; undue influence.

It shall be unlawful for a franchisor to cancel a franchise without reasonable cause or to use undue influence to induce a franchisee to surrender any right given to him by any provision contained in the franchise.

(1972, c. 561.)

Law review. - For survey of Virginia law on business associations for the year 1972-1973, see 59 Va. L. Rev. 1412 (1973). For article, "The Supreme Court and the Per Se Tying Rule: Cutting the Gordian Knot," see 66 Va. L. Rev. 1235 (1980). For article, "Enforcement of Arbitration Clauses Against Deceived Franchisees," see 21 U. Rich. L. Rev. 391 (1987).

§ 13.1-565. Voidable franchises.

Any franchise may be declared void by the franchisee at his option by sending a written declaration of that fact and the reasons therefor to the franchisor by registered or certified mail if:

1. The franchisor's offer to sell a franchise was unlawful, as provided in § 13.1-560 or § 13.1-563 , provided that the franchisee send such written declaration within 72 hours after discovery thereof but not more than 90 days after execution of the franchise;
2. The franchisee was not afforded the opportunity to negotiate with the franchisor on all provisions within the franchise, except that such negotiations shall not result in the impairment of the uniform image and quality standards of the franchise, provided that the franchisee send such written declaration within 30 days after execution of the franchise; or
3. The franchisee was not furnished a copy of the franchise agreement and disclosure documents at least 72 hours prior to execution of the franchise, provided that the franchisee send such written declaration within 30 days after execution of the franchise.

   (1972, c. 561; 1978, c. 670; 1979, c. 104; 1991, c. 475; 2009, c. 148.)

The 2009 amendments. - The 2009 amendment by c. 148, effective March 6, 2009, redesignated former subdivisions (a) through (c) as subdivisions 1 through 3; substituted "sell" for "grant" in subdivision 1; and made minor stylistic changes.

§ 13.1-566. Service of process on nonresident franchisor.

Every nonresident franchisor who has a franchise registered hereunder and which is not a corporation complying with § 13.1-759 or § 13.1-767 shall appoint in writing the clerk of the Commission as his agent upon whom may be served any process, notice, order or demand. Every nonresident franchisor who sells or offers to sell a franchise registered hereunder and every nonresident franchisor whose franchise is sold or offered to be sold in this Commonwealth shall be deemed to have appointed the clerk of the Commission as his agent upon whom may be served, in any matter arising under this chapter any process, notice, order or demand. Service may be made on the clerk in accordance with § 12.1-19.1 .

(1972, c. 561; 1978, c. 670; 1990, c. 263; 1991, c. 672; 2009, c. 148.)

The 2009 amendments. - The 2009 amendment by c. 148, effective March 6, 2009, in the second sentence, substituted "sells or offers to sell" for "grants or offers to grant" and "sold or offered to be sold" for "granted or offered to be granted."

§ 13.1-567. Investigations; confidentiality of information and documents.

The Commission may make such investigations within or outside of this Commonwealth as it deems necessary to determine whether any person has violated the provisions of this chapter or any order or injunction of the Commission, and any franchisor found guilty of such a violation may be required to pay the actual costs of the investigation including the time of the investigator. The Commission shall have power to issue subpoenas and subpoenas duces tecum to require the attendance of any person and the production of any papers for the purposes of such investigation. No person shall be excused from testifying on the ground that his testimony would tend to incriminate him, but if, after asserting his claim to the privilege, he is required to testify, he shall not be prosecuted or penalized on account of any transactions concerning which he does testify.

Information or documents obtained or prepared by any member, subordinate or employee of the Commission in the course of any examination or investigation conducted pursuant to the provisions of this chapter shall be deemed confidential and shall not be disclosed to the public; provided, however, that nothing contained herein shall be interpreted to prohibit or limit (i) the publication of the findings, decisions, orders, judgments or opinions of the Commission; (ii) the use of any such information or documents in proceedings by or before the Commission or a hearing examiner appointed by the Commission; (iii) the disclosure of any such information or documents to any quasi-governmental entity substantially associated with the retail franchising business approved by rule of the Commission; or, (iv) the disclosure of any such information or documents to any governmental entity approved by rule of the Commission, or to any attorney for the Commonwealth, or to the Attorney General of Virginia.

(1972, c. 561; 1979, c. 379.)

§ 13.1-568. Injunctions.

The Commission shall have all the power and authority of a court of record as provided in Article IX, Section 3 of the Constitution of Virginia to issue temporary and permanent injunctions against violations or attempted violations of this chapter or any order issued pursuant to this chapter. For the violation of any injunction or order issued under this chapter it shall have the same power to punish for contempt as a court of equity.

(1972, c. 561; 1992, c. 468.)

§ 13.1-569. Crimes.

1. Any person who shall knowingly and willfully make, or cause to be made, any false statement in any book of account or other paper of any person subject to the provisions of this chapter, or knowingly and willfully exhibit any false paper to the Commission, or who shall knowingly and willfully commit any act declared unlawful by this chapter with the intent to defraud any franchisee or with intent to deceive the Commission as to any material fact for the purpose of inducing the Commission to take any action or refrain from taking any action pursuant to this chapter, shall be guilty of a Class 4 felony.
2. Any person who shall knowingly make or cause to be made any false statement in any book of account or other paper of any person subject to the provisions of this chapter or exhibit any false paper to the Commission or who shall commit any act declared unlawful by this chapter shall be guilty of a misdemeanor, and on conviction, be punished by a fine of not less than $100 nor more than $5,000, or by confinement in jail for not less than thirty days nor more than one year, or by both such fine and imprisonment.
3. Prosecutions under this section shall be instituted by indictments in the courts of record having jurisdiction of felonies within three years from the date of the offense.

   (1972, c. 561; 1978, c. 670.)

Cross references. - As to punishment for Class 4 felonies, see § 18.2-10.

Applied in Crone v. Richmond Newspapers, Inc., 238 Va. 248 , 384 S.E.2d 77 (1989).

§ 13.1-569.1. Commission may transmit record or complaint to locality where violation occurred.

The Commission may transmit the record of any proceeding or complaint involving any violation of this chapter to the attorney for the Commonwealth in the county or city wherein the violation occurred.

(1978, c. 670.)

§ 13.1-570. Violations punishable by Commission.

The Commission may, by judgment entered after a hearing on thirty days' notice to the defendant, if it be proved that the defendant has knowingly made any misrepresentation of a material fact for the purpose of inducing the Commission to take any action or to refrain from taking action, or has violated any provision of this chapter or any order, rule, or regulation of the Commission issued pursuant to this chapter, impose a civil penalty not exceeding $25,000, which shall be collectible by the process of the Commission as provided by law.

Each franchise entered into contrary to the provisions of this chapter shall constitute a separate violation. The Commission may request the franchisor to rescind any franchise and to make restitution to the franchisee. If the franchisor complies with the request, the Commission shall consider such compliance in determining whether a penalty should be imposed on him on account of that illegal franchise, and if so, the amount of such penalty.

(1972, c. 561; 1990, c. 31; 1991, c. 475; 2000, c. 166.)

The 2000 amendments. - The 2000 amendment by c. 166 substituted "Violations" for "Offenses" in the catchline; in the first paragraph, substituted "thirty days' notice to the defendant" for "notice duly served on the defendant not less than thirty days before the date of the hearing" and inserted "civil" preceding "penalty not exceeding $25,000"; and in the first sentence of the second paragraph, substituted "contrary to" for "in violation of" and substituted "violation" for "offense."

§ 13.1-571. Civil remedies.

1. Any franchisee who has declared the franchise void under § 13.1-565 or who has suffered damages by reason of any violation of § 13.1-564 may bring an action against its franchisor to recover the damages sustained by reason thereof. Such franchisee, if successful, shall also be entitled to the costs of the action, including reasonable attorney's fees.
2. No suit shall be maintained to enforce any liability created under this section unless brought within four years after the cause of action upon which it is based arose.
3. Any condition, stipulation or provision binding any person to waive compliance with any provision of this chapter or of any rule or order thereunder shall be void; provided, however, that nothing contained herein shall bar the right of a franchisor and franchisee to agree to binding arbitration of disputes consistent with the provisions of this chapter.
4. The rights and remedies provided by this section shall be in addition to any and all other rights and remedies that may exist at law or in equity.

   (1972, c. 561.)

§ 13.1-572. Rules and forms.

1. The Commission shall have authority from time to time to make, amend and rescind such rules and forms as may be necessary to carry out the provisions of this chapter, including, but not limited to rules and forms governing disclosure documents, applications and reports, escrow and deferral of franchise fees and other funds paid by the franchisee, and defining accounting, technical and trade terms used in this chapter not inconsistent with the provisions of this chapter. The Commission shall have the authority, for the purpose of this chapter to prescribe the content and form of financial statements and to direct whether they should be certified by independent public or certified accountants. For the purpose of rules and forms, the Commission may classify franchises, persons and matters within its jurisdiction and prescribe different requirements for different classes.
2. All such rules and forms shall be printed or mimeographed and available for distribution at the office of the Commission.

   (1972, c. 561; 1978, c. 670; 2007, c. 668.)

The 2007 amendments. - The 2007 amendment by c. 668 inserted "escrow and deferral of franchise fees and other funds paid by the franchisee" in subsection A, and made minor stylistic changes to the subsection designations.

§ 13.1-573. Certain records of Commission available to public; admissibility of copies; destruction.

The information contained in or filed with any registration statement, application or report shall be available to the public at the office of the Commission. Copies thereof certified by the clerk under the seal of the Commission shall be admissible in evidence in lieu of the originals, and the originals shall not be removed from the office of the Commission. However, papers, documents and files may be destroyed by the Commission when, in its opinion, they no longer serve any useful purpose.

(1972, c. 561.)

§ 13.1-574. Effective date.

The provisions of this chapter shall apply to grants and offers to grant franchises on and after July 1, 1972.

(1972, c. 561.)

§ 13.1-601. Short title.

This chapter shall be known as the Virginia Stock Corporation Act.

(Code 1950, § 13.1-1 ; 1956, c. 428; 1985, c. 522.)

Cross references. - As to financial institutions and services, generally, see Title 6.2 ( § 6.2-100 et seq.).

As to the Virginia Business Trust Act, see Chapter 14 ( § 13.1-1200 et seq.).

Editor's note. - At its 1983 session, the General Assembly directed the Virginia Code Commission to make a careful study of Chapters 1 ( § 13.1-1 et seq.) and 2 ( § 13.1-201 et seq.) of this title and to report its findings in the form of a revision. The report, entitled "Report of the Virginia Code Commission on the Revision of Chapters 1 and 2 of Title 13.1 of the Code of Virginia," was published as House Document 13 of the 1985 session, and contains revisor's notes and comments which, while valuable, are too voluminous for inclusion here. The Code Commission's draft of the revision formed the basis of Chapter 522 of the Acts of 1985, which repealed Chapters 1 and 2 of this title and enacted in lieu thereof Chapters 9 ( § 13.1-601 et seq.), 10 ( § 13.1-801 et seq.), and 11 ( § 13.1-981 et seq.) of this title.

Many of the cases cited in the notes under Chapters 9 and 10 were decided under corresponding provisions of former law.

Law review. - For article, "The New Virginia Stock Corporation Act: A Primer," see 20 U. Rich. L. Rev. 67 (1985).

For a review of corporate law in Virginia for year 1999, see 33 U. Rich. L. Rev. 841 (1999).

For an article, "Misunderstanding Director Duties: The Strange Case of Virginia," see 56 Wash. & Lee L. Rev. 1127 (1999).

For an essay, "New Game Plan or Business as Usual? A Critique of the Team Production Model of Corporate Law," see 86 Va. L. Rev. 1001 (2000).

For 2000 survey of Virginia corporate and business law, see 34 U. Rich. L. Rev. 697 (2000).

For article reviewing changes in Virginia corporate and business law from June 2001 through May 2002, see 37 U. Rich. L. Rev. 1 (2002).

For article summarizing significant features of 2005 amendments to the Virginia Stock Corporation Act, see 40 U. Rich. L. Rev. 165 (2005).

For annual survey article, "Corporate and Business Law," see 44 U. Rich. L. Rev. 307 (2009).

§ 13.1-602. Reservation of power to amend or repeal.

The General Assembly shall have power to amend or repeal all or part of this Act at any time and all domestic and foreign corporations subject to this Act shall be governed by the amendment or repeal.

(Code 1950, § 13.1-129; 1956, c. 428; 1985, c. 522.)

§ 13.1-603. Definitions.

As used in this chapter:

"Articles of incorporation" means all documents constituting, at any particular time, the charter of a corporation. It includes the original charter issued by the General Assembly, a court or the Commission and all amendments including certificates of consolidation, serial designation, reduction, correction, and merger. It excludes articles of share exchange filed by an acquiring corporation. When the articles of incorporation have been restated pursuant to any articles of restatement, amendment, domestication, or merger, it includes only the restated articles of incorporation, including any articles of serial designation, without the accompanying articles of restatement, amendment, domestication, or merger. When used with respect to a foreign corporation, the "articles of incorporation" of such entity means the document that is equivalent to the articles of incorporation of a domestic corporation.

"Authorized shares" means the shares of all classes a domestic or foreign corporation is authorized to issue.

"Beneficial shareholder" means a person that owns the beneficial interest in shares, which may be a record shareholder or a person on whose behalf shares are registered in the name of an intermediary as nominee.

"Certificate," when relating to articles filed with the Commission, means the order of the Commission that makes the articles effective, together with the articles.

"Commission" means the State Corporation Commission of Virginia.

"Conspicuous" means so written, displayed, or presented that a reasonable person against whom the writing is to operate should have noticed it. For example, text that is italicized, is in boldface, contrasting colors, or capitals, or is underlined, is conspicuous.

"Corporation" or "domestic corporation" means a corporation authorized by law to issue shares, irrespective of the nature of the business to be transacted, organized under this chapter or existing pursuant to the laws of the Commonwealth on January 1, 1986, or which, by virtue of articles of incorporation, amendment, or merger, has become a domestic corporation of the Commonwealth, even though also being a corporation organized under laws other than the laws of the Commonwealth, or that has become a domestic corporation of the Commonwealth pursuant to Article 12.1 (§ 13.1-722.1:1 et seq.) or Article 12.2 (§ 13.1-722.8 et seq.) of this chapter or Article 15 (§ 13.1-1081 et seq.) of Chapter 12.

"Deliver" or "delivery" means any method of delivery used in conventional commercial practice, including delivery by hand, mail, commercial delivery, and, if authorized in accordance with § 13.1-610 , electronic transmission.

"Derivative proceeding" means a civil suit in the right of a domestic corporation or, to the extent provided in Article 8.1 (§ 13.1-672.1 et seq.), a foreign corporation.

"Disinterested director" means, except with respect to Article 14 (§ 13.1-725 et seq.), a director who, at the time action is to be taken under subdivision B 5 of § 13.1-619 , § 13.1-672.4 , 13.1-691 , 13.1-699 , or 13.1-701 , does not have (i) a financial interest in a matter that is the subject of such action or (ii) a familial, financial, professional, employment, or other relationship with a person who has a financial interest in the matter, either of which would reasonably be expected to impair the objectivity of the director's judgment when participating in the action, and if the action is to be taken under § 13.1-699 or 13.1-701 , is also not a party to the proceeding. The presence of one or more of the following circumstances shall not by itself prevent a person from being a disinterested director: (i) nomination or election of the director to the board by any director who is not a disinterested director with respect to the matter or by any person that has a material relationship with that director, acting alone or participating with others; (ii) service as a director of another corporation of which a director who is not a disinterested director with respect to the matter, or any person that has a material relationship with that director, is or was also a director; or (iii) at the time action is to be taken under § 13.1-672.4 , status as a named defendant, as a director against whom action is demanded, or as a director who approved the act being challenged.

"Distribution" means a direct or indirect transfer of cash or other property, except the corporation's own shares, or incurrence of indebtedness by a corporation to or for the benefit of its shareholders in respect of any of its shares. A distribution may be in the form of a payment of a dividend; a purchase, redemption, or other acquisition of shares; a distribution of indebtedness of the corporation; a distribution in liquidation; or otherwise. Distribution does not include an acquisition by a corporation of its shares from the estate or personal representative of a deceased shareholder, or any other shareholder, but only to the extent the acquisition is effected using the proceeds of insurance on the life of such deceased shareholder and the board of directors approved the policy and the terms of the redemption prior to the shareholder's death.

"Document" means (i) any tangible medium on which information is inscribed, and includes handwritten, typed, printed, or similar instruments and copies of such instruments, or (ii) an electronic record.

"Domestic" with respect to an entity, means an entity governed as to its internal affairs by the organic law of the Commonwealth.

"Domestic business trust" has the same meaning as specified in § 13.1-1201 .

"Domestic limited liability company" has the same meaning as specified in § 13.1-1002 .

"Domestic limited partnership" has the same meaning as specified in § 50-73.1.

"Domestic nonstock corporation" has the same meaning as "domestic corporation" as specified in § 13.1-803 .

"Domestic partnership" means an association of two or more persons to carry on as co-owners a business for profit formed under § 50-73.88, or predecessor law of the Commonwealth, and includes, for all purposes of the laws of the Commonwealth, a registered limited liability partnership.

"Effective date," when referring to a document for which effectiveness is contingent upon issuance of a certificate by the Commission, means the time and date determined in accordance with § 13.1-606 .

"Effective date of notice" is defined in subdivision A 9 of § 13.1-610 .

"Electronic" means relating to technology having electrical, digital, magnetic, wireless, optical, electromagnetic, or similar capabilities.

"Electronic record" means information that is stored in an electronic or other nontangible medium and is retrievable in paper form through an automated process used in conventional commercial practice, unless otherwise authorized in accordance with subdivision A 10 of § 13.1-610 .

"Electronic transmission" or "electronically transmitted" means any form or process of communication, not directly involving the physical transfer of paper or another tangible medium, that (i) is suitable for the retention, retrieval, and reproduction of information by the recipient, and (ii) is retrievable in paper form by the recipient through an automated process used in conventional commercial practice, unless otherwise authorized in accordance with subdivision A 10 of § 13.1-610 .

"Eligible entity" means a domestic or foreign unincorporated entity or a domestic or foreign nonstock corporation.

"Eligible interests" means interests or memberships.

"Employee" includes, unless otherwise provided in the bylaws, an officer but not a director. A director may accept duties that make the director also an employee.

"Entity" includes any domestic or foreign corporation; any domestic or foreign nonstock corporation; any domestic or foreign unincorporated entity; any estate or trust; and any state, the United States and any foreign government.

"Expenses" means reasonable expenses of any kind that are incurred in connection with a matter.

"Filing entity" means an unincorporated entity other than a general partnership.

"Foreign," with respect to an entity, means an entity governed as to its internal affairs by the organic law of a jurisdiction other than the Commonwealth.

"Foreign business trust" has the same meaning as specified in § 13.1-1201 .

"Foreign corporation" means a corporation authorized by law to issue shares, organized under laws other than the laws of the Commonwealth.

"Foreign limited liability company" has the same meaning as specified in § 13.1-1002 .

"Foreign limited partnership" has the same meaning as specified in § 50-73.1.

"Foreign nonstock corporation" means a corporation that is incorporated under a law other than the law of the Commonwealth and would, based on its public organic record, be a nonstock corporation if incorporated under the law of the Commonwealth.

"Foreign partnership" means an association of two or more persons to carry on as co-owners of a business for profit formed under the laws of any state or jurisdiction other than the Commonwealth, and includes, for all purposes of the laws of the Commonwealth, a foreign registered limited liability partnership.

"Foreign registered limited liability partnership" has the same meaning as specified in § 50-73.79.

"Foreign unincorporated entity" means a foreign partnership, foreign limited liability company, foreign limited partnership, or foreign business trust.

"Government subdivision" includes authority, county, district, and municipality.

"Governor" means any person under whose authority the powers of an entity are exercised and under whose direction the activities and affairs of the entity are managed pursuant to the organic law governing the entity and its organic rules.

"Includes" and "including" denote a partial definition as a nonexclusive list.

"Individual" means a natural person.

"Interest" means either or both of the following rights under the organic law governing an unincorporated entity:

1. The right to receive distributions from the entity either in the ordinary course or upon liquidation; or
2. The right to receive notice or to vote on issues involving its internal affairs, other than as an agent, assignee, proxy or person responsible for managing its business and affairs. "Interest holder" means a person who holds of record an interest. "Interest holder liability" means: 1. Personal liability for a debt, obligation, or other liability of a domestic or foreign corporation or domestic or foreign eligible entity that is imposed on a person:
   1. Solely by reason of the person's status as a shareholder, member, or interest holder; or
   2. By the articles of incorporation of the domestic corporation or the organic rules of the eligible entity or foreign corporation that make one or more specified shareholders, members, or interest holders, or categories of shareholders, members, or interest holders, liable in their capacity as shareholders, members, or interest holders for all or specified liabilities of the corporation or eligible entity; or 2. An obligation of a shareholder, member, or interest holder under the articles of incorporation of a domestic corporation or the organic rules of an eligible entity or foreign corporation to contribute to the entity. For purposes of the foregoing, except as otherwise provided in the articles of incorporation of a domestic corporation or the organic law or organic rules of an eligible entity or a foreign corporation, interest holder liability arises under subdivision 1 when the corporation or eligible entity incurs the liability. "Jurisdiction of formation" means the state or country the law of which includes the organic law governing a domestic or foreign corporation or eligible entity. "Means" denotes an exhaustive definition. "Membership" means the rights of a member in a domestic or foreign nonstock corporation or limited liability company. "Merger" means a transaction pursuant to § 13.1-716 or 13.1-766.1 . "Notice" is defined in § 13.1-610 . "Organic law" means the statute governing the internal affairs of a domestic or foreign corporation or eligible entity. "Organic rules" means the public organic record and private organic rules of a domestic or foreign corporation or eligible entity. "Person" includes an individual and an entity. "Principal office" means the office, in or out of the Commonwealth, where the principal executive offices of a domestic or foreign corporation are located, or, if there are no such offices, the office, in or out of the Commonwealth, so designated by the board of directors. The designation of the principal office in the most recent annual report filed pursuant to § 13.1-775 shall be conclusive for purposes of this chapter. "Private organic rules" means (i) the bylaws of a domestic or foreign corporation or nonstock corporation or (ii) the rules, regardless of whether in writing, that govern the internal affairs of an unincorporated entity, are binding on all its interest holders, and are not part of its public organic record. Where private organic rules have been amended or restated, the term means the private organic rules as last amended or restated. "Proceeding" includes civil suit and criminal, administrative, and investigatory action. "Protected series" has the same meaning as specified in § 13.1-1002 . "Public corporation" means a corporation that has shares listed on a national securities exchange or regularly traded in a market maintained by one or more members of a national or affiliated securities association. "Public organic record" means (i) the articles of incorporation of a domestic or foreign corporation or nonstock corporation or (ii) the document, the filing of which is required to create an unincorporated entity. Where a public organic record has been amended or restated, the term means the public organic record as last amended or restated. "Record date" means the date fixed for determining the identity of the corporation's shareholders and their shareholdings for purposes of this chapter. The determinations shall be made as of the close of business at the principal office of the corporation on the record date unless another time for doing so is specified when the record date is fixed. "Record shareholder" means (i) the person in whose name shares are registered in the records of the corporation or (ii) the person identified as the beneficial owner of shares in a beneficial ownership certificate pursuant to § 13.1-664 on file with the corporation to the extent of the rights granted by such certificate. "Registered limited liability partnership" has the same meaning as specified in § 50-73.79. "Secretary" means the corporate officer or other individual to whom the board of directors has delegated responsibility under subsection C of § 13.1-693 for custody of the minutes of the meetings of the board of directors and of the shareholders and for authenticating records of the corporation. "Series limited liability company" has the same meaning as specified in § 13.1-1002 . "Share exchange" means a transaction pursuant to § 13.1-717 . "Shareholder" means a record shareholder. "Shares" means the units into which the proprietary interests in a corporation are divided. "Sign" or "signature" means, with present intent to authenticate or adopt a document: (i) to execute or adopt a tangible symbol to a document, and includes any manual, facsimile, or conformed signature; or (ii) to attach to or logically associate with an electronic transmission an electronic sound, symbol, or process, and includes an electronic signature in an electronic transmission. "State" when referring to a part of the United States, includes a state, commonwealth, and the District of Columbia, and their agencies and governmental subdivisions; and a territory or insular possession, and their agencies and governmental subdivisions, of the United States. "Subscriber" means a person who subscribes for shares in a corporation, whether before or after incorporation. "Subsidiary" means, as to any corporation, any other corporation of which it owns, directly or indirectly, voting shares entitled to cast a majority of the votes entitled to be cast generally in an election of directors of such other corporation. "Unincorporated entity" or "domestic unincorporated entity" means a domestic partnership, limited liability company, limited partnership or business trust. "United States" includes district, authority, bureau, commission, department, and any other agency of the United States. "Unrestricted voting trust beneficial owner" means, with respect to any shareholder rights, a voting trust beneficial owner whose entitlement to exercise the shareholder right in question is not inconsistent with the voting trust agreement. "Voting group" means all shares of one or more classes or series that under the articles of incorporation or this chapter are entitled to vote and be counted together collectively on a matter at a meeting of shareholders. All shares entitled by the articles of incorporation or this chapter to vote generally on the matter are for that purpose a single voting group. "Voting power" means the current power to vote in the election of directors. "Voting trust beneficial owner" means an owner of a beneficial interest in shares of the corporation held in a voting trust established pursuant to subsection A of § 13.1-670 . "Writing" or "written" means any information in the form of a document. (Code 1950, § 13.1-2; 1956, c. 428; 1962, c. 44; 1975, c. 500; 1985, c. 522; 1992, cc. 575, 802; 1993, c. 200; 1994, c. 122; 1997, cc. 190, 801; 2001, c. 545; 2002, cc. 1, 285; 2003, cc. 340, 728; 2005, c. 765; 2006, c. 663; 2007, c. 165; 2010, c. 782; 2012, c. 706; 2015, c. 611; 2016, c. 288; 2019, c. 734; 2020, c. 1226.)

Editor's note. - Acts 1994, c. 122, which amended this section, in cl. 2 provides: "[t]hat the provisions of this act shall apply retroactively to filings made with the State Corporation Commission which fall within the scope of this act."

Acts 1997, c. 801, cl. 2, provides: "That the provisions of this act shall become effective on January 1, 1998. The powers granted and duties imposed pursuant to this act shall apply prospectively to guardians and conservators appointed by court order entered on or after that date, or modified on or after that date if the court so directs, without regard to when the petition was filed. The procedures specified in this act governing proceedings for appointment of a guardian or conservator or termination or other modification of a guardianship shall apply on and after that date without regard to when the petition therefor was filed or the guardianship or conservatorship created."

Acts 2001, c. 545, cl. 3, as amended by Acts 2002, c. 1, effective January 30, 2002, provides: "That the provisions of this act shall become effective on February 1, 2002; however, no domestication pursuant to Article 12.1 ( § 13.1-722.2 et seq.) of Chapter 9 of Title 13.1 shall occur prior to July 1, 2002, and no conversion pursuant to Article 12.2 ( § 13.1-722.8 et seq.) of Chapter 9 of Title 13.1 shall occur prior to July 1, 2002, unless the converting entity is (i) a domestic corporation incorporated before July 1, 1970, and (ii) the corporation is authorized to issue 5,000 shares or more."

Acts 2003, c. 340, cl. 2, provides: "That the provisions of this act that amend and reenact §§ 8.9A-406 , 8.9A-408 , 13.1-1001.1 , 13.1-1003 , 13.1-1012 , 50-73.2, 50-73.84, and 50-73.144 of the Code of Virginia and that amend the Code of Virginia by adding sections numbered 13.1-1010.4 and 13.1-1023.1 shall become effective on July 1, 2003, and that all other provisions of this act shall become effective on October 1, 2003."

Acts 2016, c. 288, cl. 3 provides: "That the provisions of this act shall not affect the validity of any filing made, or other action taken, before the effective date of this act with respect to (i) the conversion of a domestic or foreign partnership or limited partnership to a limited liability company or (ii) the domestication of a non-United States entity as a limited liability company."

Acts 2020, c. 1226, cl. 3 provides: "That the provisions of the first and second enactments of this act shall become effective July 1, 2021."

The 1997 amendment by c. 801, effective January 1, 1998, substituted "incapacitated" for "incompetent" in the paragraph defining "Individual."

The 2001 amendments. - The 2001 amendment by c. 545, effective February 1, 2002, inserted "or which has become a domestic corporation of this Commonwealth pursuant to Article 12.1 ( § 13.1-722.2 et seq.) or Article 12.2 ( § 13.1-722.8 et seq.) of this chapter" at the end of the definition of "Corporation" or "domestic corporation." See Editor's note.

The 2002 amendments. - The 2002 amendment by c. 285 inserted the paragraph defining "Electronic transmission."

The 2003 amendments. - The 2003 amendment by c. 340, effective October 1, 2003, inserted the definitions of "Domestic business trust" and "Foreign business trust."

The 2003 amendment by c. 728 added the paragraph defining "Public corporation."

The 2005 amendments. - The 2005 amendment by c. 765 inserted "domestication" in the definition of "Articles of incorporation" twice in the fourth sentence, substituted "the Commonwealth" for "this Commonwealth" throughout, substituted "chapter" for "Act" in the definition of "Corporation," rewrote definitions "Deliver," "Entity," "Individual," "Public corporation" and "Record date," inserted "Disinterested director," "Domestic nonstock corporation," "Eligible entity," "Eligible interests," "Foreign nonstock corporation," "Foreign unincorporated entity," "Interest," "Membership," "Organic document," "Organic law," "Subsidiary," "Unincorporated entity" and "Voting power," in the definition of "Electronic transmission," deleted "of the Uniform Electronic Transactions Act" following " § 59.1-480" in the second sentence and deleted the third sentence, which formerly read: "For purposes of §§ 13.1-657 and 13.1-685 , a written consent and the signing thereof may be accomplished by one or more electronic transmissions," inserted "unless otherwise provided in the bylaws" in the definition of "Employee" and made a related changes.

The 2006 amendments. - The 2006 amendment by c. 663, in the second sentence of the paragraph defining "Articles of incorporation," inserted "consolidation, serial designation, reduction, correction and," "for" following "except" and substituted "that does not include an amendment to the survivor's articles of incorporation" for "consolidation, serial designation, reduction or correction."

The 2007 amendments. - The 2007 amendment by c. 165, in the definition of "Articles of incorporation," inserted "share" in the third sentence and substituted "articles of restatement, amendment" for "articles of amendment" twice in the fourth sentence.

The 2010 amendments. - The 2010 amendment by c. 782, in the definition of "conspicuous," inserted "displayed, or presented" and substituted "text that is italicized, is in boldface, contrasting colors, or capitals, or is underlined" for "printing in italics or boldface or, contrasting color, or typing in capitals, or underlined"; inserted "if authorized in accordance with § 13.1-610 " in the definition "deliver"; added the definitions of "document," "electronic," and "electronic record"; rewrote the definition of "electronic transmission"; and added the definitions of "sign" and "writing."

The 2012 amendments. - The 2012 amendment by c. 706, in the definition of "State," substituted "state, commonwealth, and the District of Columbia, and" for "state and commonwealth, and" and "territory or insular possession" for "territory and insular possession."

The 2015 amendments. - The 2015 amendment by c. 611 deleted "except for a certificate of merger with a subsidiary pursuant to § 13.1-719 that does not include an amendment to the survivor's articles of incorporation" at the end of the second sentence of the definition for "Articles of incorporation."

The 2016 amendments. - The 2016 amendment by c. 288 substituted "that" for "which," deleted "or Article 12.2 ( § 13.1-722.8 et seq.)" following "( § 13.1-722.2 et seq.)" and inserted "or Article 15 ( § 13.1-1081 et seq.) of Chapter 12" at the end in the definition of "Corporation."

The 2019 amendments. - The 2019 amendment by c. 734 rewrote the section.

The 2020 amendments. - The 2020 amendment by c. 1226, effective July 1, 2021, substituted "a foreign partnership, foreign limited liability company, foreign limited partnership, or foreign business trust" for "an unincorporated entity whose internal affairs are governed by the organic law of a jurisdiction other than the Commonwealth" in the definition for "Foreign unincorporated entity"; deleted the definition for "Partnership"; and added the definitions for "Protected series" and "Series limited liability company."

Law review. - For 2007 annual survey article, "Corporate and Business Law," see 42 U. Rich. L. Rev. 273 (2007).

Michie's Jurisprudence. - For related discussion, see 12A M.J. Limited Liability Companies, § 48.

§ 13.1-604. Filing requirements.

1. A document shall satisfy the requirements of this section, and of any other section that adds to or varies these requirements, to be entitled to be filed with the Commission.
2. To be entitled to be filed with the Commission, this chapter shall require or permit the document to be filed with the Commission.
3. The document shall contain the information required by this chapter and may contain other information as well.
4. The document shall be typewritten or printed or, if electronically transmitted, shall be in a format that can be retrieved or reproduced in typewritten or printed form. The typewritten or printed portion shall be in black. Photocopies, or other reproduced copies, of typewritten or printed documents may be filed. In every case, information in the document shall be legible and the document shall be capable of being reformatted and reproduced in copies of archival quality.
5. The document shall be in the English language. A corporate name need not be in English if written in English letters or Arabic or Roman numerals. The articles of incorporation, duly authenticated by the official having custody of corporate records in the jurisdiction of formation of the foreign corporation, that are required of foreign corporations need not be in English if accompanied by a reasonably authenticated English translation.
6. The document shall be signed in the name of the domestic or foreign corporation:
   1. By the chairman or any vice-chairman of the board of directors, the president, or any other of its officers;
   2. If directors have not been selected or the corporation has not been formed, by an incorporator; or
   3. If the corporation is in the hands of a receiver, trustee, or other court-appointed fiduciary, by that fiduciary.
7. Any annual report required to be filed by § 13.1-775 shall be signed in the name of the corporation by an officer or director listed in the report or, if the corporation is in the hands of a receiver, trustee, or other court-appointed fiduciary, by that fiduciary.
8. The person executing the document shall sign it and state beneath or opposite his signature his name and the capacity in which the document is signed. The document may but need not contain a corporate seal, attestation, acknowledgment, or verification.
9. If, pursuant to any provision of this chapter, the Commission has prescribed a mandatory form for the document, the document shall be in or on the prescribed form.
10. The document shall be delivered to the Commission for filing and shall be accompanied by the correct filing fee, and any franchise tax, charter or entrance fee, registration fee, or penalty required by this chapter to be paid at the time of delivery for filing.
11. The Commission may accept the electronic transmission of any document or other information required or permitted to be filed by this chapter and may prescribe the methods of execution, recording, reproduction and certification of electronically transmitted information pursuant to § 59.1-496.
12. Whenever a provision of this chapter permits any of the terms of a plan or a filed document to be dependent on facts objectively ascertainable outside the plan or filed document, the following provisions apply:
    1. The plan or filed document shall specify the nationally recognized news or information medium in which the facts can be found or otherwise state the manner in which the facts can be objectively ascertained. The manner in which the facts will operate upon the terms of the plan or filed document shall be set forth in the plan or filed document.
    2. The facts may include:
       1. Any of the following that is available in a nationally recognized news or information medium either in print or electronically: statistical or market indices, market prices of any security or group of securities, interest rates, currency exchange rates, or similar economic or financial data;
       2. A determination or action by any person or body, including the corporation or any other party to a plan or filed document; or
       3. The terms of, or actions taken under, an agreement to which the corporation is a party, or any other agreement or document.
    3. As used in this subsection:
       1. "Filed document" means a document filed with the Commission under § 13.1-619 or Article 11 (§ 13.1-705 et seq.), 12 (§ 13.1-715.1 et seq.), 12.1 (§ 13.1-722.1:1 et seq.), 12.2 (§ 13.1-722.8 et seq.), 16 (§ 13.1-742 et seq.), or 22 (§ 13.1-782 et seq.); and
       2. "Plan" means a plan of domestication, conversion, merger, or share exchange.
    4. The following terms of a plan or filed document may not be made dependent on facts outside the plan or filed document:
       1. The name and address of any person required in a filed document;
       2. A purpose that is required to be set forth in a filed document;
       3. The registered office address of any entity required in a filed document;
       4. The name or qualification of the registered agent of any entity required in a filed document;
       5. The number of authorized shares and the designation and terms, including the preferences, rights, and limitations of each class or series of shares;
       6. The effective date of a filed document; and
       7. Any required statement in a filed document of the date on which the underlying transaction was approved or the manner in which that approval was given.
    5. If a term of a filed document is made dependent on a fact objectively ascertainable outside of the filed document, and that fact is not objectively ascertainable by reference to a source described in subdivision 2 a or a document that is a matter of public record, nor has notice of the fact been given by the corporation to the affected shareholders, then the corporation shall file with the Commission articles of amendment setting forth the fact promptly after the time when the fact referred to is first ascertainable or thereafter changes. Articles of amendment under this subdivision are deemed to be authorized by the authorization of the original filed document or plan to which they relate and may be filed by the corporation without further action by the board of directors or the shareholders.
    6. The provisions of subdivisions 1, 2, and 5 shall not be considered by the Commission in deciding whether the terms of a plan or filed document comply with the requirements of law. (1985, c. 522; 1986, c. 231; 1995, c. 70; 2000, c. 995; 2005, c. 765; 2010, c. 782; 2015, c. 623; 2019, c. 734; 2020, c. 1226.)

Editor's note. - Acts 2019, c. 734, cl. 4, as amended by Acts 2020, c. 1226, cl. 5 provides: "That until July 1, 2021, the term 'conversion,' when used in any provision of the first enactment of this act, shall be construed to mean 'entity conversion.' "

Acts 2020, c. 1226, cl. 3 provides: "That the provisions of the first and second enactments of this act shall become effective July 1, 2021."

The 2000 amendments. - The 2000 amendment by c. 995 added "pursuant to § 59.1-496" at the end of subsection K.

The 2005 amendments. - The 2005 amendment by c. 765 inserted "or if electronically transmitted shall be in a format that can be retrieved or reproduced in typewritten or printed form" in the first sentence of subsection D; in subsection H substituted "a corporate" for "the corporate", deleted "an" following "corporate seal" "by the secretary or an assistant secretary and an" following "attestation", and deleted "or proof" following "verification", and made a stylistic change; deleted "or by § 13.1-775.1 " at the end of subsection J; added subsection L.

The 2010 amendments. - The 2010 amendment by c. 782 substituted "signed" for "executed" in subsections F and G; inserted "domestic or foreign" in subsection F; and in subsection H, substituted "signing" for "executing" and deleted "sign it and" following "document shall."

The 2015 amendments. - The 2015 amendment by c. 623 inserted "or, if the corporation is in the hands of a receiver, trustee, or other court-appointed fiduciary, by that fiduciary" in subsection G.

The 2019 amendments. - The 2019 amendment by c. 734 rewrote subsection B, which read: "The document shall be one that this chapter requires or permits to be filed with the Commission"; in subsection E, substituted "jurisdiction of formation of the foreign" for "state or country under whose law the," and substituted "that" for "is incorporated, which"; in subdivision F 1, deleted "authorized to act on behalf of the corporation" following "officers"; in subsection H, substituted "executing" for "signing," inserted "sign it and" and substituted "the document is signed" for "he signs. Any signature may be a facsimile"; in subsection J, substituted "correct" for "required," inserted "or penalty" and added "to be paid at the time of delivery for filing" at the end; in subsection K, substituted "transmission of any document or other information" for "filing of any information"; in subdivision L 3 a., inserted "12.1 ( § 13.1-722.1:1 et seq.), 12.2 ( § 13.1-722.8 et seq.), 16 ( § 13.1-742 et seq.), or 22 ( § 13.1-782 et seq.)"; in subdivision L 5, substituted "nor has" for "or the affected shareholders have not received," substituted "fact been given by the corporation to the affected shareholders" for "fact from the corporation," and deleted "objectively" preceding "ascertainable"; and made stylistic changes.

The 2020 amendments. - The 2020 amendment by c. 1226, effective July 1, 2021, inserted subdivision L 4 b and redesignated the remaining subdivisions accordingly; inserted "address" in subdivision L 4 c; inserted "name or qualification of the" in subdivision L 4 d; substituted "the designation and terms, including the preferences, rights, and limitations" for "designation" in subdivision L 4 e.

Law review. - For 1994 survey of Virginia business and corporate law, see 28 U. Rich. L. Rev. 923 (1994).

Michie's Jurisprudence. - For related discussion, see 4B M.J. Corporations, § 149.

§ 13.1-604.1. Filings with the Commission pursuant to reorganization.

1. Notwithstanding anything to the contrary contained in § 13.1-604 , 13.1-619 , 13.1-707 , 13.1-718 , 13.1-722.4 , 13.1-722.11 , or 13.1-742 , whenever, pursuant to any applicable statute of the United States relating to reorganizations of corporations, a plan of reorganization of a corporation has been confirmed by the decree or order of a court of competent jurisdiction, the corporation may put into effect and carry out the plan and decrees of the court relative thereto, (i) through one or more amendments to the corporation's articles of incorporation containing terms and conditions permitted by this chapter; (ii) through a plan of merger, share exchange, domestication, or conversion; or (iii) through dissolution or termination, without action by the board of directors or shareholders to carry out the plan of reorganization ordered or decreed by such court of competent jurisdiction under federal statute.
2. The individual or individuals designated by the court shall file with the Commission articles of amendment, merger, share exchange, domestication, conversion, dissolution, or termination, which, in addition to the matters otherwise required or permitted by law to be set forth therein, shall set forth:
   1. The name of the corporation;
   2. Any provision relating to the amendment or amendments; plan of merger, share exchange, domestication, or conversion; or dissolution or termination approved by the court;
   3. The name of the court and the date of the court's order or decree approving the amendment, plan of merger, share exchange, domestication, conversion, dissolution, or termination;
   4. The title and case number, if any, of the reorganization proceeding in which the order or decree was entered; and
   5. A statement that the court had jurisdiction of the proceeding under federal statute.
3. If the Commission finds that the articles of amendment, merger, share exchange, domestication, conversion, dissolution, or termination comply with the requirements of law and that all required fees have been paid, it shall issue a certificate of amendment, merger, share exchange, domestication, conversion, dissolution, or termination.
4. This section does not apply after entry of a final decree in the reorganization proceeding even though the court retains jurisdiction of the proceeding for limited purposes unrelated to consummation of the reorganization plan.

   (1988, c. 194; 2005, c. 765; 2012, c. 130; 2019, c. 734.)

Editor's note. - Acts 2019, c. 734, cl. 4, as amended by Acts 2020, c. 1226, cl. 5 provides: "That until July 1, 2021, the term 'conversion,' when used in any provision of the first enactment of this act, shall be construed to mean 'entity conversion.'"

The 2005 amendments. - The 2005 amendment by c. 765 in subsection A substituted "chapter" for "Act" and made a stylistic change.

The 2012 amendments. - The 2012 amendment by c. 130, throughout the section, inserted "entity conversion" following "share exchange" and "termination" following "dissolution"; in subsection A, substituted " § 13.1-604 , 13.1-619 , 13.1-710 , 13.1-711 , 13.1-720 , 13.1-722.12 , 13.1-743 , or 13.1-750 " for " § 13.1-604 , 13.1-619 , 13.1-720 or 13.1-743 " and "one or more amendments" for "an amendment or amendments"; substituted "Any provision relating to the amendment or amendments" for "The text of each amendment" in subdivision B 2; in subdivision B 3, inserted "name of the court and the" and deleted "articles of" preceding "amendment"; inserted "and case number, if any" in subdivision B 4; and made related changes.

The 2019 amendments. - The 2019 amendment by c. 734 substituted "domestication, conversion" for "entity conversion" throughout; in subsection A, substituted "13.1-604, 13.1-619 , 13.1-707 , 13.1-718 , 13.1-722.4 , 13.1-722.11 , or 13.1-742 " for "13.1-604, 13.1-619 , 13.1-710 , 13.1-711 , 13.1-720 , 13.1-722.12 , 13.1-743 , or 13.1-750 "; and made stylistic changes.

Law review. - For survey article, "Corporate and Business Law," see 48 U. Rich. L. Rev. 39 (2013).

§ 13.1-605. Issuance of certificate by Commission; recordation of documents.

1. Whenever this chapter conditions the effectiveness of a document upon the issuance of a certificate by the Commission to evidence the effectiveness of the document, the Commission shall by order issue the certificate if it finds that the document complies with the requirements of law and that all required fees have been paid. The Commission shall admit any such certificate to record in its office.
2. Whenever the Commission is directed to admit any document to record in its office, it shall cause it to be spread upon its record books or to be recorded or reproduced in any other manner the Commission may deem suitable. Except as otherwise provided by law, the Commission may furnish information from and provide access to any of its records by any means the Commission may deem suitable.

   (Code 1950, § 13.1-126; 1956, c. 428; 1982, c. 375; 1984, c. 295; 1985, c. 522; 1986, c. 231; 1987, c. 183; 1988, c. 405; 1989, c. 152.)

Law review. - For survey on business and corporate law in Virginia for 1989, see 23 U. Rich. L. Rev. 491 (1989).

For article, "Administrative Aspects of State Corporation Law," see 28 U. Rich. L. Rev. 1 (1994).

§ 13.1-606. Effective time and date of document.

1. Except as otherwise provided in § 13.1-607 and Article 1.1 (§ 13.1-614.1 et seq.), a certificate issued by the Commission is effective at the time such certificate is issued, unless the certificate relates to articles filed with the Commission and the articles state that the certificate shall become effective at a later time or date specified in the articles. In that event, the certificate shall become effective at the earlier of the time and date so specified or 11:59 p.m. on the fifteenth day after the date on which the certificate is issued by the Commission. If a delayed effective date is specified, but no time is specified, the effective time shall be 12:01 a.m. on the date specified. Any other document filed with the Commission shall be effective when accepted for filing unless otherwise provided for in this chapter.
2. Notwithstanding subsection A, any certificate that has a delayed effective time or date shall not become effective if, prior to the effective time and date, a statement of cancellation signed by each party to the articles to which the certificate relates is delivered to the Commission for filing. If the Commission finds that the statement of cancellation complies with the requirements of law, it shall, by order, cancel the certificate.
3. A statement of cancellation shall contain:
   1. The name of the corporation;
   2. The name of the articles and the date on which the articles were filed with the Commission;
   3. The time and date on which the Commission's certificate becomes effective; and
   4. A statement that the articles are being canceled in accordance with this section.
4. Notwithstanding subsection A, for purposes of §§ 13.1-630 and 13.1-762 , any certificate that has a delayed effective date shall be deemed to be effective when the certificate is issued.
5. For articles with a delayed effective date and time, the effective date and time shall be Eastern time.

   (1985, c. 522; 2019, c. 734.)

The 2019 amendments. - The 2019 amendment by c. 734, in subsection A, inserted "Except as otherwise provided in § 13.1-607 and Article 1.1 ( § 13.1-614.1 et seq.)" at the beginning, and inserted "If a delayed effective date is specified, but no time is specified, the effective time shall be 12:01 a.m. on the date specified"; rewrote subsection B, which read: "Notwithstanding subsection A of this section, any certificate that has a delayed effective time and date shall not become effective if, prior to the effective time and date, the parties to the articles to which the certificate relates file a request for cancellation with the Commission and the Commission, by order, cancels the certificate"; added subsections C and E; and made stylistic changes.

§ 13.1-607. Correcting filed articles.

1. Articles filed with the Commission may be corrected if (i) the articles contain an inaccuracy; (ii) the articles were not properly authorized or defectively signed, attested, sealed, verified, or acknowledged; or (iii) the electronic transmission of the articles to the Commission was defective.
2. Articles are corrected by filing with the Commission articles of correction that:
   1. Set forth the name of the corporation prior to filing;
   2. Describe the articles to be corrected, including their effective date;
   3. Specify the inaccuracy or defect to be corrected;
   4. Correct the inaccuracy or defect; and
   5. State that the corporation authorized the correction and the date of such authorization.
3. If the Commission finds that the articles of correction comply with the requirements of law and that all required fees have been paid, it shall issue a certificate of correction. Upon the issuance of a certificate of correction by the Commission, the articles of correction shall become effective as of the effective date and time of the articles they correct except as to persons relying on the uncorrected articles and adversely affected by the correction. As to those persons, articles of correction are effective upon the issuance of the certificate of correction.
4. No articles of correction shall be accepted by the Commission when received more than 30 days after the effective date of the certificate relating to the articles to be corrected.

   (1985, c. 522; 2005, c. 765; 2007, c. 165; 2008, cc. 91, 509; 2019, c. 734.)

The 2005 amendments. - The 2005 amendment by c. 765, in subsection A, inserted (i) preceding, and deleted (i) following, "the articles," and substituted "inaccuracy" for "incorrect statement or," inserted "the articles" following (ii), added clause (iii) and made a related change; divided former subdivision B 1 into present subdivisions B 1, B 1 a, and B 1 b, substituted "inaccuracy" for "incorrect statement" and "defect" for "defective execution" in B 1 b and made stylistic changes; and substituted "30 days" for "nine days" in subsection D.

The 2007 amendments. - The 2007 amendment by c. 165, in subsection A, deleted "domestic or foreign" preceding "corporation" near the beginning and inserted "to the Commission" near the end; rewrote subsection B; inserted "and time" in the first sentence of subsection C; and substituted "correction may be filed with the Commission" for "correction shall be accepted by the Commission when received" in subsection D.

The 2008 amendments. - The 2008 amendment by c. 91 inserted "not properly authorized or" preceding "defectively" in clause (ii) of subsection A; and substituted "inaccurate or defective matter" for "inaccuracy and defect" in subdivisions B 3 and B 4.

The 2008 amendment by c. 509 substituted "shall be accepted by the Commission when received more" for "may be filed with the Commission more" in subsection D.

The 2019 amendments. - The 2019 amendment by c. 734, in subsection A, deleted "The board of directors of a corporation may authorize correction of any" from the beginning, inserted "may be corrected" and substituted "signed" for "executed"; rewrote subsection B, which read: "Articles are corrected by filing with the Commission articles of correction setting forth: 1. The name of the corporation prior to filing; 2. A description of the articles to be corrected, including their effective date; 3. Each inaccurate or defective matter that is to be corrected; 4. The correction of each inaccurate or defective matter; and 5. A statement that the board of directors authorized the correction and the date of such authorization"; in subsection C, inserted the first sentence; and made stylistic changes.

§ 13.1-608. Evidentiary effect of copy of filed document.

A certificate delivered with a copy of any document admitted to the records of the Commission, bearing the signature of the clerk of the Commission or a member of the staff of the office of the clerk, which in either case may be in facsimile, and the seal of the Commission, which may be in facsimile, is conclusive evidence that the document has been admitted to the records of the Commission.

(1985, c. 522; 2005, c. 765; 2019, c. 734.)

The 2005 amendments. - The 2005 amendment by c. 765 deleted "or an assistant clerk," inserted "or a member of the staff of the office of the clerk, which in either case may be in facsimile" following "the Commission," inserted "which may be in facsimile" preceding "is conclusive."

The 2019 amendments. - The 2019 amendment by c. 734 substituted "delivered with" for "attached to."

§ 13.1-609. Certificate of good standing.

1. Anyone may apply to the Commission to furnish a certificate of good standing for a domestic or foreign corporation.
2. The certificate of good standing shall state that the corporation is in good standing in the Commonwealth and shall set forth:
   1. The domestic corporation's corporate name or the foreign corporation's corporate name and, if applicable, the designated name adopted for use in the Commonwealth;
   2. That (i) the domestic corporation is duly incorporated under the law of the Commonwealth, the date of its incorporation, which is the original date of incorporation or formation of the domesticated or converted corporation if the corporation was domesticated or converted from a foreign jurisdiction or was converted from a domestic eligible entity, and the period of its duration if less than perpetual, or (ii) the foreign corporation is authorized to transact business in the Commonwealth; and
   3. If requested, a list of all certificates relating to articles filed with the Commission that have been issued by the Commission with respect to such corporation and their respective effective dates.
3. A domestic corporation or a foreign corporation authorized to transact business in the Commonwealth shall be deemed to be in good standing if:
   1. All fees, fines, penalties, and interest assessed, imposed, charged or to be collected by the Commission pursuant to this chapter have been paid except for any annual registration fee that is not due;
   2. An annual report required by § 13.1-775 has been delivered to and accepted by the Commission; and
   3. No certificate of dissolution, certificate of withdrawal, or order of reinstatement prohibiting the domestic corporation from engaging in business until it changes its corporate name has been issued or such certificate or prohibition has not become effective or no longer is in effect.
4. The certificate may state any other facts of record in the office of the clerk of the Commission that may be requested by the applicant.
5. Subject to any qualification stated in the certificate, a certificate of good standing issued by the Commission may be relied upon as conclusive evidence that the domestic or foreign corporation is in good standing in the Commonwealth.

   (1985, c. 522; 1988, c. 405; 1993, c. 60; 2005, c. 765; 2006, c. 663; 2019, c. 734; 2020, c. 1226; 2021, Sp. Sess. I, c. 487.)

Editor's note. - Acts 2020, c. 1226, cl. 3 provides: "That the provisions of the first and second enactments of this act shall become effective July 1, 2021."

Acts 2021, Sp. Sess. I, c. 487, cl. 4 provides: "That the provisions of this act (i) shall be applied prospectively only; (ii) shall not affect the validity of any filing made, or other action taken, prior to July 1, 2021, with respect to the name of a stock corporation, nonstock corporation, limited liability company, business trust, or limited partnership; and (iii) shall not be construed to require any such stock corporation, nonstock corporation, limited liability company, business trust, or limited partnership that was in compliance with applicable laws regarding the distinguishability of its name prior to July 1, 2021, to change its name or take other action to comply with the requirements of this act."

The 2005 amendments. - The 2005 amendment by c. 765 substituted "the Commonwealth" for "this Commonwealth" in subdivision B 2 and subsection E; and deleted "or Title 12.1" following "chapter" in subdivision C 1.

The 2006 amendments. - The 2006 amendment by c. 663, in subdivision C 3, inserted "or order of reinstatement prohibiting the domestic corporation from engaging in business until it changes its corporate name" and made a related change and inserted "or prohibition."

The 2019 amendments. - The 2019 amendment by c. 734, in subsection B, inserted "of good standing"; in subdivision B 2, inserted "which is the original date of incorporation of the domesticated corporation if the corporation was domesticated from a foreign jurisdiction"; in subdivision C 1, added "except for any annual registration fee that is not due" at the end; and in subdivision C 3, inserted "has not become effective or"; and made stylistic changes.

The 2020 amendments. - The 2020 amendment by c. 1226, effective July 1, 2021, substituted "and, if applicable, the designated name adopted for use in this the Commonwealth" for "used in this Commonwealth" in subdivision B 1; in subdivision B 2, inserted "or formation" and "or converted" twice in clause (i).

The 2021 Sp. Sess. I amendments. - The 2021 amendment by Sp. Sess. I, c. 487, effective July 1, 2021, added "or was converted from a domestic eligible entity" in subdivision B 2. For applicability clause, see Editor's note.

§ 13.1-610. Notices and other communications.

1. For purposes of this chapter, except for notice to or from the Commission:
   1. A notice shall be in writing except that oral notice of any meeting of the board of directors may be given if expressly authorized by the articles of incorporation or bylaws.
   2. Unless otherwise agreed between the sender and the recipient, words in a notice or other communication under this chapter shall be in the English language. A notice or other communication may be given by any method of delivery, except that electronic transmissions shall be in accordance with this section. If the methods of delivery are impracticable, a notice or other communication may be given by a broad non-exclusionary dissemination to the public, which may include a newspaper of general circulation in the area where the notice is intended to be given, or by radio, television, or other form of public communication in the area where the notice is intended to be given or other methods of distribution that the corporation has previously identified to its shareholders.
   3. A notice or other communication to a domestic or foreign corporation authorized to transact business in the Commonwealth may be delivered to the corporation's registered agent at its registered office or to the secretary at the corporation's principal office shown in its most recent annual report or, in the case of a foreign corporation that has not yet delivered an annual report, in its application for a certificate of authority.
   4. A notice or other communication may be delivered by electronic transmission if consented to by the recipient or if otherwise authorized by subsection B.
   5. Any consent under subdivision 4 may be revoked by the person who consented by written or electronic notice to the person to whom the consent was delivered. Any such consent is deemed revoked if (i) the corporation is unable to deliver two consecutive electronic transmissions given by the corporation in accordance with such consent and (ii) such inability becomes known to the secretary or an assistant secretary of the corporation or to the transfer agent or other person responsible for the giving of notice or other communications; however, the inadvertent failure to treat such inability as a revocation shall not invalidate any meeting or other action.
   6. Unless otherwise agreed between the sender and the recipient, an electronic transmission is received when:
      1. It enters an information processing system that the recipient has designated or uses for the purpose of receiving electronic transmissions or information of the type sent, and from which the recipient is able to retrieve the electronic transmission; and
      2. It is in a form capable of being processed by that system.
   7. Receipt of an electronic acknowledgment from an information processing system described in subdivision 6 a establishes that an electronic transmission was received. However, such receipt of an electronic acknowledgment, by itself, does not establish that the content sent corresponds to the content received.
   8. An electronic transmission is received under this section even if no individual is aware of its receipt.
   9. A notice or other communication, if in a comprehensible form or manner, is effective at the earliest of the following:
      1. If in physical form, the earliest of when it is actually received or when it is left at:
         1. A shareholder's address shown on the corporation's record of shareholders maintained by the corporation pursuant to subsection C of § 13.1-770 ;
         2. A director's residence or usual place of business;
         3. The corporation's principal office; or
         4. The corporation's registered office when left with the corporation's registered agent;
      2. If mailed postage prepaid and correctly addressed to a shareholder, upon deposit in the United States mail;
      3. If mailed by United States mail postage prepaid and correctly addressed to a recipient other than a shareholder, the earliest of when it is actually received or: (i) if sent by registered or certified mail return receipt requested, the date shown on the return receipt, signed by or on behalf of the addressee; or (ii) five days after it is deposited in the United States mail;
      4. If an electronic transmission, when it is received as provided in subdivision 7; and
      5. If oral, when communicated.
   10. A notice or other communication may be in the form of an electronic transmission that cannot be directly reproduced in paper form by the recipient through an automated process used in conventional commercial practice only if (i) the electronic transmission is otherwise retrievable in perceivable form, and (ii) the sender and the recipient have consented in writing to the use of such form of electronic transmission.
2. If this chapter prescribes requirements for notices or other communications in particular circumstances, those requirements govern. If articles of incorporation or bylaws prescribe requirements for notices or other communications not inconsistent with this section or other provisions of this chapter, those requirements govern. The articles of incorporation or bylaws may authorize or require delivery of notices of meetings of directors by electronic transmission.
3. Without limiting the manner by which notice otherwise may be given effectively to shareholders, any notice to shareholders given by a public corporation, under any provision of this chapter, the articles of incorporation, or the bylaws, shall be effective if given in a manner permitted by the rules and regulations under the federal Securities Exchange Act of 1934, provided that the corporation has first received any affirmative written consent or implied consent required under those rules and regulations.
4. If any provisions of this chapter are deemed to modify, limit, or supersede the federal General Electronic Signatures in Global and National Commerce Act, 15 U.S.C. § 7001 et seq., the provisions of this chapter shall control to the maximum extent permitted by § 102(a)(2) of that federal act or any successor provision of that federal act.
5. Whenever notice would otherwise be required to be given under any provision of this chapter to a shareholder, the notice need not be given if:
   1. Notices to shareholders of two consecutive annual meetings, and all notices of meetings during the period between two consecutive annual meetings, have been sent, other than by electronic transmission, to such shareholder at such shareholder's address as shown on the records of the corporation and have been returned undeliverable or could not be delivered; or
   2. All, but not less than two, distributions to shareholders during a 12-month period, or two consecutive distributions to shareholders during a period of more than 12 months, have been sent to such shareholder at such shareholder's address as shown on the records of the corporation and have been returned undeliverable or could not be delivered.

      If any shareholder, for which notice is not required, delivers to the corporation a written notice setting forth such shareholder's then-current address, the requirement that notice be given shall be reinstated.

      (1985, c. 522; 2002, c. 285; 2003, c. 728; 2005, c. 765; 2007, c. 165; 2010, c. 782; 2019, c. 734; 2020, c. 1226; 2021, Sp. Sess. I, c. 487.)

Editor's note. - For the Securities Exchange Act of 1934, referred to above, see 15 U.S.C.S. § 78a et seq.

Acts 2020, c. 1226, cl. 3 provides: "That the provisions of the first and second enactments of this act shall become effective July 1, 2021."

Acts 2021, Sp. Sess. I, c. 487, cl. 4 provides: "That the provisions of this act (i) shall be applied prospectively only; (ii) shall not affect the validity of any filing made, or other action taken, prior to July 1, 2021, with respect to the name of a stock corporation, nonstock corporation, limited liability company, business trust, or limited partnership; and (iii) shall not be construed to require any such stock corporation, nonstock corporation, limited liability company, business trust, or limited partnership that was in compliance with applicable laws regarding the distinguishability of its name prior to July 1, 2021, to change its name or take other action to comply with the requirements of this act."

The 2002 amendments. - The 2002 amendment by c. 285 added subsection H.

The 2003 amendments. - The 2003 amendment by c. 728 added subsection I.

The 2005 amendments. - The 2005 amendment by c. 765 added "except for notice to or from the Commission" at the end of the introductory language; added the last sentence in subsection A; in the first sentence of subsection B, inserted "mail or other method of delivery or by," substituted "voicemail" for "telegraph, teletype," and deleted "form of wire or wireless communications or by mail or private carrier," in subsection C, deleted "when mail" following "is effective," inserted "(i) upon deposit in the United States mail" following "is effective," added "or (ii) when electronically transmitted to the shareholder in a manner authorized by the shareholder"; in subsection E, substituted "subsection C" for "subdivisions B and," and deleted "of this section" preceding "written notice"; deleted "as evidenced by the postmarks" preceding "if mailed" and made a stylistic change in subdivision E 2.

The 2007 amendments. - The 2007 amendment by c. 165 substituted "to the secretary of the corporation" for "to the corporation or its secretary" in subsection D.

The 2010 amendments. - The 2010 amendment by c. 782 rewrote the section.

The 2019 amendments. - The 2019 amendment by c. 734 redesignated former subsections A through L as subdivisions 1 through 12, respectively; in subdivision 2, inserted "under this chapter" preceding "by any method," deleted "or sent" following "be given," substituted "given by a broad non-exclusionary dissemination to the public, which may include" for "communicated by publication in," and added "or other methods of distribution that the corporation has previously identified to its shareholders" at the end; in subdivision 4, inserted "otherwise" preceding "authorized"; in subdivision 5, inserted "however" following "other communications"; in subdivision 9 a (3), substituted "office" for "principal place of business"; in subdivision 9 c, inserted "return" preceding "receipt, signed" and inserted "United States"; in subdivision 12, inserted "federal"; added subdivision 13; updated internal references; and made stylistic changes.

The 2020 amendments. - The 2020 amendment by c. 1226, effective July 1, 2021, redesignated former subdivisions 1 through 10 as subdivisions A 1 through A 10, and subdivisions 11 through 13 as subsections B through D; inserted "principal" in subdivision A 9 a (3); and updated an internal reference.

The 2021 Sp. Sess. I amendments. - The 2021 amendment by Sp. Sess. I, c. 487, effective July 1, 2021, added subsection E. For applicability clause, see Editor's note.

Law review. - For article reviewing changes in Virginia corporate and business law from June 2001 through May 2002, see 37 U. Rich. L. Rev. 1 (2002).

For 2002 survey of Virginia technology law, see 37 U. Rich. L. Rev. 341 (2002).

§ 13.1-610.1. Householding.

1. A corporation shall be deemed to have delivered written notice or any other report or statement under this chapter, the articles of incorporation or the bylaws to all shareholders who share a common address as shown on the corporation's current record of shareholders if:
   1. The corporation delivers one copy of the notice, report or statement to the common address;
   2. The corporation addresses the notice, report or statement to those shareholders either as a group or to each of those shareholders individually or to the shareholders in a form to which each of those shareholders has consented; and
   3. Each of those shareholders consents, including any implied consent pursuant to subsection B, to delivery of a single copy of such notice, report or statement to the shareholders' common address.
2. Any shareholder who fails to object by written notice to the corporation, within 60 days of written notice by the corporation of its intention to deliver single copies of notices, reports, or statements to shareholders who share a common address as permitted by subsection A, shall be deemed to have consented to receiving such single copy at the common address, provided that the notice of intention states that consent may be revoked and the method for revoking such consent.
3. Any consent pursuant to this section shall be revocable by any shareholder who delivers written notice of revocation to the corporation. If such written notice of revocation is delivered, the corporation shall begin providing individual notices, reports, or other statements to the revoking shareholder no later than 30 days after delivery of the written notice of revocation.

   (2007, c. 165; 2019, c. 734.)

The 2019 amendments. - The 2019 amendment by c. 734, in subsection B, substituted "deliver" for "send" preceding "single copies," and added "provided that the notice of intention states that consent may be revoked and the method for revoking such consent"; and made stylistic changes.

Law review. - For 2007 annual survey article, "Corporate and Business Law," see 42 U. Rich. L. Rev. 273 (2007).

§ 13.1-611. Number of shareholders.

1. For purposes of this chapter, the following identified as a shareholder in a corporation's current record of shareholders constitutes one shareholder:
   1. Three or fewer co-owners;
   2. A corporation, limited liability company, partnership, limited partnership, business trust, trust, estate, or other entity; or
   3. The trustees, guardians, custodians, or other fiduciaries of a single trust, estate, or account.
2. For purposes of this chapter, shareholdings registered in substantially similar names constitute one shareholder if it is reasonable to believe that the names represent the same person.

   (1985, c. 522; 2005, c. 765; 2019, c. 734.)

The 2005 amendments. - The 2005 amendment by c. 765, in subdivision A 2, inserted "limited liability company," "limited partnership, business trust."

The 2019 amendments. - The 2019 amendment by c. 734, in subdivision A 1, substituted "Three or fewer" for "Two or more."

§ 13.1-612. Penalty for signing false document.

1. It shall be unlawful for any person to sign a document that the person knows is false in any material respect with intent that the document be delivered to the Commission for filing.
2. Anyone who violates the provisions of this section shall be guilty of a Class 1 misdemeanor.

   (Code 1950, § 13.1-134; 1958, c. 564; 1975, c. 500; 1985, c. 522; 2019, c. 734.)

Cross references. - As to punishment for Class 1 misdemeanors, see § 18.2-11.

The 2019 amendments. - The 2019 amendment by c. 734 substituted "that the person" for "he."

§ 13.1-613. Unlawful to transact or offer to transact business as a corporation unless authorized.

It shall be unlawful for any person to transact business in this Commonwealth as a corporation or to offer or advertise to transact business in this Commonwealth as a corporation unless the alleged corporation is either a domestic corporation or a foreign corporation authorized to transact business in this Commonwealth. Any person who violates this section shall be guilty of a Class 1 misdemeanor.

(Code 1950, § 13.1-135; 1958, c. 565; 1981, c. 320; 1985, c. 522.)

Cross references. - As to punishment for Class 1 misdemeanors, see § 18.2-11.

§ 13.1-614. Hearing and finality of Commission action; injunctions.

1. The Commission shall have no power to grant a hearing with respect to any certificate issued by the Commission with respect to any articles filed with the Commission except on a petition by a shareholder filed with the Commission and delivered to the corporation within 30 days after the effective date of the certificate, in which the shareholder asserts that the certification of corporate action contained in the articles contains a misstatement of a material fact as to compliance with statutory requirements, specifying the particulars thereof. After hearing, on notice in writing to the corporation and the shareholder, the Commission shall determine the issues and revoke or refuse to revoke its order accordingly.
2. No court in or outside of the Commonwealth shall have jurisdiction to enjoin or delay the holding of any meeting of directors or shareholders for the purpose of authorizing or consummating any amendment, correction, merger, share exchange, domestication, conversion, dissolution, or termination of corporate existence or the execution or filing with the Commission of any articles or other documents for such purpose, except pursuant to subsection D of § 13.1-661 or for fraud. No court in or outside of the Commonwealth, except the Supreme Court by way of appeal as authorized by law, shall have jurisdiction to review, reverse, correct, or annul any action of the Commission, within the scope of its authority, with regard to any articles, certificate, order, objection, or petition, or to suspend or delay the execution or operation thereof, or to enjoin, restrain, or interfere with the Commission in the performance of its official duties.
3. Notwithstanding any provision of subsection A to the contrary, the Commission shall have the power to act upon articles of correction filed by the corporation pursuant to § 13.1-607 or upon a petition filed by a corporation at any time to correct Commission records so as to eliminate the effects of clerical errors and of filings made by a person or persons without authority to act for the corporation, or on the Commission's own motion to correct Commission records so as to eliminate the effects of clerical errors committed by its staff. (Code 1950, § 13.1-125; 1956, c. 428; 1975, c. 500; 1985, c. 522; 2005, c. 765; 2008, c. 91; 2010, c. 782; 2015, c. 623; 2019, c. 734.)

Cross references. - As to appeals from the State Corporation Commission, see Va. Sup. Ct. Rule 5:21.

Editor's note. - Acts 2019, c. 734, cl. 4, as amended by Acts 2020, c. 1226, cl. 5 provides: "That until July 1, 2021, the term 'conversion,' when used in any provision of the first enactment of this act, shall be construed to mean 'entity conversion.'"

The 2005 amendments. - The 2005 amendment by c. 765, in subsection A, substituted "grant a hearing" for "grant a rehearing," "10 days" for "ten days"; in subsection B, substituted "the Commonwealth" for "this Commonwealth," inserted "share" following "merger," inserted "domestication, conversion" following "exchange," substituted "termination of corporate existence" for "dissolution" and "the Commonwealth" for "this Commonwealth."

The 2008 amendments. - The 2008 amendment by c. 91 substituted "30 days" for "10 days" in the first sentence of subsection A; and added subsection C.

The 2010 amendments. - The 2010 amendment by c. 782 substituted "subsection D" for "subsection C" in subsection B.

The 2015 amendments. - The 2015 amendment by c. 623 inserted "or of its own motion to correct Commission records so as to eliminate the effects of clerical errors committed by its staff" at the end of subsection C.

The 2019 amendments. - The 2019 amendment by c. 734, in subsection A, inserted "delivered to" preceding "the corporation"; in subsection B, substituted "in or outside of" for "within or without" twice, and inserted "correction" and "dissolution"; in subsection C, inserted "articles of correction filed by the corporation pursuant to § 13.1-607 or upon" and substituted "on the Commission's" for "of its"; and made stylistic changes.

§ 13.1-614.1. Definitions.

As used in this article:

"Corporate action" means any action taken by or on behalf of the corporation, including any action taken by the incorporator, the board of directors, a committee, an officer or agent of the corporation, or the shareholders.

"Date of the defective corporate action" means the date, or the approximate date if the exact date is unknown, the defective corporate action was purported to have been taken.

"Defective corporate action" means (i) any corporate action purportedly taken that is, and at the time such corporate action was purportedly taken would have been, within the power of the corporation, but is void or voidable due to a failure of authorization, or (ii) an over-issuance of shares.

"Failure of authorization" means the failure to authorize, approve, or otherwise effect a corporate action in compliance with the provisions of this chapter, the articles of incorporation or bylaws, a corporate resolution, or any plan or agreement to which the corporation is a party, if and to the extent such failure would render such corporate action voidable.

"Over-issuance of shares" means the purported issuance of:

1. Shares of a class or series in excess of the number of shares of the class or series the corporation had the power to issue under § 13.1-638 at the time of such issuance; or
2. Shares of any class or series that was not then authorized for issuance by the articles of incorporation. "Putative shares" means the shares of any class or series of the corporation, including shares issued upon exercise of rights, options, warrants, or other securities convertible into shares of the corporation, or interests with respect to such shares, that were created or issued as a result of a defective corporate action, that (i) but for any failure of authorization would constitute valid shares or (ii) cannot be determined by the board of directors to be valid shares. "Valid shares" means the shares of any class or series of the corporation that have been duly authorized and validly issued in accordance with this chapter, including as a result of ratification or validation under this article. "Validation effective time" with respect to any defective corporate action ratified under this article means the later of: 1. The time at which the ratification of the defective corporate action is approved by the shareholders or, if approval of shareholders is not required, the time at which the notice required by § 13.1-614.5 becomes effective in accordance with § 13.1-610 ; and 2. The time at which any document filed in accordance with § 13.1-614.7 becomes effective. The validation effective time shall not be affected by the filing or pendency of a proceeding under § 13.1-614.8 or otherwise, unless ordered by the Commission. (2019, c. 734; 2020, c. 1226.)

Editor's note. - Acts 2019, c. 734, cl. 3, as amended by Acts 2020, c. 1226, cl. 5 provides: "That the provisions of this act (i) amending and reenacting §§ 13.1-615 , 13.1-615 .1, 13.1-616 , 13.1-632 , 13.1-721.1 , and 13.1-722.2 through 13.1-722.13 of the Code of Virginia; (ii) amending the Code of Virginia by adding in Chapter 9 of Title 13.1 an article numbered 1.1, consisting of sections numbered 13.1-614.1 through 13.1-614.8 , and by adding sections numbered 13.1-712.1 , 13.1-722.1:1, 13.1-722.7 :1, and 13.1-722.12 :1; and (iii) repealing §§ 13.1-722.4 , 13.1-722.7 , and 13.1-722.14 of the Code of Virginia shall become effective on July 1, 2021."

Acts 2020, c. 1226, cl. 3 provides: "That the provisions of the first and second enactments of this act shall become effective July 1, 2021."

The 2020 amendments. - The 2020 amendment by c. 1226, effective July 1, 2021, substituted "Commission" for "court" in the last paragraph of the section.

§ 13.1-614.2. Defective corporate actions.

1. A defective corporate action shall not be void or voidable if ratified in accordance with § 13.1-614.3 or validated in accordance with § 13.1-614.8 .
2. Ratification under § 13.1-614.3 or validation under § 13.1-614.8 shall not be deemed to be the exclusive means of ratifying or validating any defective corporate action, and the absence or failure of ratification in accordance with this article shall not, of itself, affect the validity or effectiveness of any corporate action properly ratified under this chapter, common law, or otherwise, nor shall it create a presumption that any such corporate action is or was a defective corporate action or void or voidable.
3. In the case of an over-issuance of shares, putative shares shall be valid shares effective as of the date originally issued or purportedly issued upon:
   1. The effectiveness under this article and under Article 11 (§ 13.1-705 et seq.) of an amendment of the articles of incorporation authorizing, designating, or creating such shares; or
   2. The effectiveness of any other corporate action under this article ratifying the authorization, designation, or creation of such shares. (2019, c. 734.)

Editor's note. - Acts 2019, c. 734, cl. 3, as amended by Acts 2020, c. 1226, cl. 5 provides: "That the provisions of this act (i) amending and reenacting §§ 13.1-615 , 13.1-615 .1, 13.1-616 , 13.1-632 , 13.1-721.1 , and 13.1-722.2 through 13.1-722.13 of the Code of Virginia; (ii) amending the Code of Virginia by adding in Chapter 9 of Title 13.1 an article numbered 1.1, consisting of sections numbered 13.1-614.1 through 13.1-614.8 , and by adding sections numbered 13.1-712.1 , 13.1-722.1:1, 13.1-722.7 :1, and 13.1-722.12 :1; and (iii) repealing §§ 13.1-722.4 , 13.1-722.7 , and 13.1-722.14 of the Code of Virginia shall become effective on July 1, 2021."

§ 13.1-614.3. Ratification of defective corporate actions.

1. To ratify a defective corporate action under this section, other than the ratification of an election of the initial board of directors under subsection B, the board of directors shall adopt resolutions ratifying the action in accordance with § 13.1-614.4 , stating:
   1. The defective corporate action to be ratified and, if the defective corporate action involved the issuance of putative shares, the number and type of putative shares purportedly issued;
   2. The date of the defective corporate action;
   3. The nature of the failure of authorization with respect to the defective corporate action to be ratified; and
   4. That the board of directors approves the ratification of the defective corporate action.
2. In the event that a defective corporate action to be ratified relates to the election of the initial board of directors of the corporation under subdivision A 2 of § 13.1-623 , a majority of the persons who, at the time of the ratification, are exercising the powers of directors may take an action stating:
   1. The name of the person or persons who first took action in the name of the corporation as the initial board of directors of the corporation;
   2. The earlier of the date on which such persons first took such action or were purported to have been elected as the initial board of directors; and
   3. That the ratification of the election of such person or persons as the initial board of directors is approved.
3. If any provision of this chapter, the articles of incorporation or bylaws, any corporate resolution or any plan or agreement to which the corporation is a party in effect at the time action under subsection A is taken requires shareholder approval or would have required shareholder approval at the date of the occurrence of the defective corporate action, the ratification of defective corporate action approved in the action taken by the directors under subsection A shall be submitted to the shareholders for approval in accordance with § 13.1-614.4 .
4. Unless otherwise provided in the action taken by the board of directors under subsection A, after the action by the board of directors has been taken and, if required, approved by the shareholders, the board of directors may abandon the ratification at any time before the validation effective time without further action of the shareholders.

   (2019, c. 734.)

Editor's note. - Acts 2019, c. 734, cl. 3, as amended by Acts 2020, c. 1226, cl. 5 provides: "That the provisions of this act (i) amending and reenacting §§ 13.1-615 , 13.1-615 .1, 13.1-616 , 13.1-632 , 13.1-721.1 , and 13.1-722.2 through 13.1-722.13 of the Code of Virginia; (ii) amending the Code of Virginia by adding in Chapter 9 of Title 13.1 an article numbered 1.1, consisting of sections numbered 13.1-614.1 through 13.1-614.8 , and by adding sections numbered 13.1-712.1 , 13.1-722.1:1, 13.1-722.7 :1, and 13.1-722.12 :1; and (iii) repealing §§ 13.1-722.4 , 13.1-722.7 , and 13.1-722.14 of the Code of Virginia shall become effective on July 1, 2021."

§ 13.1-614.4. Action of ratification.

1. The quorum and voting requirements applicable to a ratifying action by the board of directors under subsection A of § 13.1-614.3 shall be the quorum and voting requirements applicable to the corporate action proposed to be ratified at the time such ratifying action is taken.
2. If the ratification of the defective corporate action requires approval by the shareholders under subsection C of § 13.1-614.3 , and if the approval is to be given at a meeting, the corporation shall notify each holder of valid and putative shares, regardless of whether entitled to vote, as of the record date for notice of the meeting and as of the date of the occurrence of defective corporate action, provided that notice shall not be required to be given to holders of valid or putative shares whose identities or addresses for notice cannot be determined from the records of the corporation. The notice shall state that the purpose, or one of the purposes, of the meeting, is to consider ratification of a defective corporate action and shall be accompanied by (i) either a copy of the action taken by the board of directors in accordance with subsection A of § 13.1-614.3 or the information required by subdivisions A 1 through A 4 of § 13.1-614.3 and (ii) a statement that any claim that the ratification of such defective corporate action and any putative shares issued as a result of such defective corporate action should not be effective, or should be effective only on certain conditions, shall be brought within 120 days from the applicable validation effective time.
3. Except as provided in subsection D with respect to the voting requirements to ratify the election of a director, the quorum and voting requirements applicable to the approval by the shareholders required by subsection C of § 13.1-614.3 shall be the quorum and voting requirements applicable to the corporate action proposed to be ratified at the time of such shareholder approval.
4. The approval by shareholders to ratify the election of a director requires that the votes cast within the voting group favoring such ratification exceed the votes cast opposing such ratification of the election at a meeting at which a quorum is present.
5. Putative shares on the record date for determining the shareholders entitled to vote on any matter submitted to shareholders under subsection C of § 13.1-614.3 , and without giving effect to any ratification of putative shares that becomes effective as a result of such vote, shall neither be entitled to vote nor counted for quorum purposes in any vote to approve the ratification of any defective corporate action.
6. If the approval under this section of putative shares would result in an over-issuance of shares, in addition to the approval required by § 13.1-614.3 , the corporation shall approve an amendment of the articles of incorporation under Article 11 (§ 13.1-705 et seq.) to increase the number of shares of an authorized class or series or to authorize the creation of a class or series of shares so there is no over-issuance of shares. (2019, c. 734.)

Editor's note. - Acts 2019, c. 734, cl. 3, as amended by Acts 2020, c. 1226, cl. 5 provides: "That the provisions of this act (i) amending and reenacting §§ 13.1-615 , 13.1-615 .1, 13.1-616 , 13.1-632 , 13.1-721.1 , and 13.1-722.2 through 13.1-722.13 of the Code of Virginia; (ii) amending the Code of Virginia by adding in Chapter 9 of Title 13.1 an article numbered 1.1, consisting of sections numbered 13.1-614.1 through 13.1-614.8 , and by adding sections numbered 13.1-712.1 , 13.1-722.1:1, 13.1-722.7 :1, and 13.1-722.12 :1; and (iii) repealing §§ 13.1-722.4 , 13.1-722.7 , and 13.1-722.14 of the Code of Virginia shall become effective on July 1, 2021."

§ 13.1-614.5. Notice.

1. Unless shareholder approval is required under subsection C of § 13.1-614.3 , prompt notice of an action taken under § 13.1-614.3 shall be given to each holder of valid and putative shares, regardless of whether entitled to vote, as of (i) the date of such action by the board of directors and (ii) the date of the defective corporate action ratified, provided that notice shall not be required to be given to holders of valid and putative shares whose identities or addresses for notice cannot be determined from the records of the corporation.
2. The notice shall contain (i) either a copy of the action taken by the board of directors in accordance with subsection A or B of § 13.1-614.3 or the information required by subdivisions A 1 through 4 or B 1, 2, and 3 of § 13.1-614.3 , as applicable, and (ii) a statement that any claim that the ratification of the defective corporate action and any putative shares issued as a result of such defective corporate action should not be effective, or should be effective only on certain conditions, shall be brought within 120 days from the applicable validation effective time.
3. No notice under this section is required with respect to any action required to be submitted to shareholders for approval under subsection C of § 13.1-614.3 if notice is given in accordance with § 13.1-614.4 .
4. A notice required by this section may be given in any manner permitted by § 13.1-610 and for any public corporation may be given by means of a filing or furnishing of such notice with the U.S. Securities and Exchange Commission. (2019, c. 734.)

Editor's note. - Acts 2019, c. 734, cl. 3, as amended by Acts 2020, c. 1226, cl. 5 provides: "That the provisions of this act (i) amending and reenacting §§ 13.1-615 , 13.1-615 .1, 13.1-616 , 13.1-632 , 13.1-721.1 , and 13.1-722.2 through 13.1-722.13 of the Code of Virginia; (ii) amending the Code of Virginia by adding in Chapter 9 of Title 13.1 an article numbered 1.1, consisting of sections numbered 13.1-614.1 through 13.1-614.8 , and by adding sections numbered 13.1-712.1 , 13.1-722.1:1, 13.1-722.7 :1, and 13.1-722.12 :1; and (iii) repealing §§ 13.1-722.4 , 13.1-722.7 , and 13.1-722.14 of the Code of Virginia shall become effective on July 1, 2021."

§ 13.1-614.6. Effect of ratification.

From and after the validation effective time, and without regard to the 120-day period during which a claim may be brought under § 13.1-614.8 :

1. Each defective corporate action ratified in accordance with § 13.1-614.3 shall not be void or voidable as a result of the failure of authorization identified in the action taken under subsection A or B of § 13.1-614.3 and shall be deemed a valid corporate action effective as of the date of the defective corporate action;
2. The issuance of each putative share or fraction of a putative share purportedly issued pursuant to a defective corporate action identified in the action taken under § 13.1-614.3 shall not be void or voidable, and each such putative share or fraction of a putative share shall be deemed to be an identical share or fraction of a valid share as of the time it was purportedly issued; and
3. Any corporate action taken subsequent to the defective corporate action ratified in accordance with this article in reliance on such defective corporate action having been validly effected and any subsequent defective corporate action resulting directly or indirectly from such original defective corporate action shall be valid as of the time taken.

   (2019, c. 734.)

Editor's note. - Acts 2019, c. 734, cl. 3, as amended by Acts 2020, c. 1226, cl. 5 provides: "That the provisions of this act (i) amending and reenacting §§ 13.1-615 , 13.1-615 .1, 13.1-616 , 13.1-632 , 13.1-721.1 , and 13.1-722.2 through 13.1-722.13 of the Code of Virginia; (ii) amending the Code of Virginia by adding in Chapter 9 of Title 13.1 an article numbered 1.1, consisting of sections numbered 13.1-614.1 through 13.1-614.8 , and by adding sections numbered 13.1-712.1 , 13.1-722.1:1, 13.1-722.7 :1, and 13.1-722.12 :1; and (iii) repealing §§ 13.1-722.4 , 13.1-722.7 , and 13.1-722.14 of the Code of Virginia shall become effective on July 1, 2021."

§ 13.1-614.7. Filings.

1. After a defective corporate action is ratified under this article for a document required by this chapter to be filed with the Commission, the corporation shall deliver to the Commission for filing:
   1. If a filing with the Commission was previously made with respect to such defective corporate action and the Commission issued with respect thereto a certificate, the articles of ratification, which may serve to amend or substitute for the filing previously made; or
   2. If no filing with the Commission was previously made with respect to such defective corporate action, the articles required by this chapter.
2. The document required by subsection A shall set forth:
   1. The defective corporate action that is the subject of the document, including, in the case of any defective corporate action involving the issuance of putative shares, the number and type of putative shares issued and the date or dates upon which such putative shares were purported to have been issued;
   2. The date of the defective corporate action;
   3. The nature of the failure of authorization in respect of the defective corporate action;
   4. A statement that the defective corporate action was ratified in accordance with § 13.1-614.3 , including the date on which the board of directors ratified such defective corporate action and the date, if any, on which the shareholders approved the ratification of such defective corporate action; and
   5. The information required by subsection C.
3. The document required by subsection A shall also contain the following information:
   1. If a filing with the Commission was previously made in respect of the defective corporate action and no changes to such filing are required to give effect to the ratification of such defective corporate action in accordance with § 13.1-614.3 , the filed document shall set forth (i) the name, title and filing date of the filing previously made and any articles of correction to that filing and (ii) a statement that a copy of the filing previously made, together with any articles of correction to that filing, is attached as an exhibit;
   2. If a filing with the Commission was previously made in respect of the defective corporate action and such filing requires any change to give effect to the ratification of such defective corporate action in accordance with § 13.1-614.3 , the document shall set forth (i) the name, title, and filing date of the filing previously made and any articles of correction to that filing, (ii) a statement that a filing containing all of the information required to be included under the applicable section or sections of this chapter to give effect to such defective corporate action is attached as an exhibit, and (iii) the date and time that the document is deemed to have become effective; or
   3. If a filing with the Commission was not previously made in respect of the defective corporate action and the defective corporate action ratified under § 13.1-614.3 would have required a filing under any other section of this chapter, the document shall set forth (i) all of the information required to be included under the applicable section or sections of this chapter to give effect to such defective corporate action and (ii) the date and time that the document is deemed to have become effective.
4. If the Commission finds that the document required by subsection A complies with the requirements of law and that all required fees have been paid, it shall issue a certificate of ratification of defective corporate action or the certificate required by this chapter for the articles that were filed.

   (2019, c. 734; 2020, c. 1226.)

Editor's note. - Acts 2019, c. 734, cl. 3, as amended by Acts 2020, c. 1226, cl. 5 provides: "That the provisions of this act (i) amending and reenacting §§ 13.1-615 , 13.1-615 .1, 13.1-616 , 13.1-632 , 13.1-721.1 , and 13.1-722.2 through 13.1-722.13 of the Code of Virginia; (ii) amending the Code of Virginia by adding in Chapter 9 of Title 13.1 an article numbered 1.1, consisting of sections numbered 13.1-614.1 through 13.1-614.8 , and by adding sections numbered 13.1-712.1 , 13.1-722.1:1, 13.1-722.7 :1, and 13.1-722.12 :1; and (iii) repealing §§ 13.1-722.4 , 13.1-722.7 , and 13.1-722.14 of the Code of Virginia shall become effective on July 1, 2021."

Acts 2020, c. 1226, cl. 3 provides: "That the provisions of the first and second enactments of this act shall become effective July 1, 2021."

The 2020 amendments. - The 2020 amendment by c. 1226, effective July 1, 2021, deleted "filed" preceding "document" throughout the section; redesignated and rewrote subsection A, which formerly read: "If the defective corporate action ratified under this article would have required under any other section of this chapter a filing with the Commission in accordance with this chapter, then, regardless of whether a filing was previously made in respect of such defective corporate action and in lieu of a filing otherwise required by this chapter, the corporation shall make the required filing or, as appropriate, an amended filing in accordance with this section, and such filing shall serve to amend or substitute for any other filing with the Commission with respect to such defective corporate action required by the chapter"; inserted "required by subsection A" in the introductory language of subsections A and B; in subdivisions C 2 and C 3, inserted "with the Commission" and substituted "the document" for "such filing"; in clause (i) of subdivision C 3, deleted "a statement that a filing containing" at the beginning and deleted "is attached as an exhibit" at the end of clause (i); in subsection D, inserted "required by subsection A" and added "or the certificate required by this chapter for the articles that were filed" at the end; and made stylistic changes.

§ 13.1-614.8. Commission proceedings regarding validity of corporate actions.

1. Upon application by the corporation, any successor entity to the corporation, a director of the corporation, any shareholder, beneficial shareholder, or unrestricted voting trust beneficial owner of the corporation, including any such shareholder, beneficial shareholder, or unrestricted voting trust beneficial owner as of the date of the defective corporate action ratified under § 13.1-614.3 , or any other person claiming to be substantially and adversely affected by a ratification under § 13.1-614.3 , the Commission may:
   1. Determine the validity and effectiveness of any corporate action or defective corporate action;
   2. Determine the validity and effectiveness of any ratification under § 13.1-614.3;
   3. Determine the validity of any putative shares; and
   4. Modify or waive any of the procedures specified in § 13.614.3 or 13.1-614.4 to ratify a defective corporate action.
2. In connection with an action under this section, the Commission may make such findings or orders and take into account any factors or considerations regarding such matters as it deems proper under the circumstances.
3. Service of process of the application under subsection A on the corporation may be made in any manner provided by statutes of the Commonwealth or by rule of the Commission for service on the corporation, and no other party need be joined in order for the Commission to adjudicate the matter. In an action filed by the corporation, the Commission may require notice of the action be provided to other persons specified by the Commission and permit such other persons to intervene in the action.
4. Notwithstanding any other provision of this section or otherwise under applicable law, any action asserting that the ratification of any defective corporate action and any putative shares issued as a result of such defective corporate action should not be effective, or should be effective only on certain conditions, shall be brought in a petition filed within 120 days of the validation effective time.

   (2019, c. 734.)

Editor's note. - Acts 2019, c. 734, cl. 3, as amended by Acts 2020, c. 1226, cl. 5 provides: "That the provisions of this act (i) amending and reenacting §§ 13.1-615 , 13.1-615 .1, 13.1-616 , 13.1-632 , 13.1-721.1 , and 13.1-722.2 through 13.1-722.13 of the Code of Virginia; (ii) amending the Code of Virginia by adding in Chapter 9 of Title 13.1 an article numbered 1.1, consisting of sections numbered 13.1-614.1 through 13.1-614.8 , and by adding sections numbered 13.1-712.1 , 13.1-722.1:1, 13.1-722.7 :1, and 13.1-722.12 :1; and (iii) repealing §§ 13.1-722.4 , 13.1-722.7 , and 13.1-722.14 of the Code of Virginia shall become effective on July 1, 2021."

§ 13.1-615. Fees to be collected by Commission; application of payment; payment of fees prerequisite to Commission action; exceptions.

1. The Commission shall assess the registration fees and shall charge and collect the filing fees, charter fees, and entrance fees imposed by law. The Commission shall have authority to certify to the Comptroller directing refund of any overpayment of a fee, or of any fee collected for a document that is not accepted for filing, at any time within one year from the date of its payment. When the Commission receives payment of an annual registration fee assessed against a domestic or foreign corporation, such payment shall be applied against any unpaid annual registration fees previously assessed against such corporation, including any penalties incurred thereon, beginning with the assessment or penalty that has remained unpaid for the longest period of time.
2. The Commission shall not file or issue with respect to any domestic or foreign corporation any document or certificate specified in this chapter, except the annual report required by § 13.1-775 , a statement of change pursuant to § 13.1-635 or 13.1-764 , and a statement of resignation pursuant to § 13.1-636 or 13.1-765 , until all fees, fines, penalties, and interest assessed, imposed, charged, or to be collected by the Commission pursuant to this chapter or Title 12.1 have been paid by or on behalf of such corporation. Notwithstanding the foregoing, the Commission may file or issue any document or certificate with respect to a domestic or foreign corporation that has been assessed an annual registration fee if the document or certificate is filed or issued with an effective date that is on or before the due date of the corporation's annual registration fee payment in any year, provided that the Commission shall not issue a certificate of domestication with respect to a foreign corporation, a certificate of conversion with respect to a foreign eligible entity, or a certificate of conversion with respect to a domestic corporation that will become a domestic eligible entity until the annual registration fee has been paid by or on behalf of that corporation or eligible entity.
3. A domestic or foreign corporation shall not be required to pay the annual registration fee assessed against it pursuant to subsection B of § 13.1-775.1 in any year if (i) the Commission issues or files any of the following types of certificate or instrument and (ii) the certificate or instrument is effective on or before the annual registration fee due date:
   1. A certificate of termination of corporate existence, a certificate of domestication for a domestic corporation, or a certificate of conversion for a domestic corporation that will become a foreign eligible entity;
   2. A certificate of withdrawal for a foreign corporation;
   3. A certificate of merger or an authenticated copy of an instrument of merger for a domestic or foreign corporation that has merged into a surviving domestic corporation or eligible entity or into a surviving foreign corporation or eligible entity; or
   4. An authenticated copy of an instrument of conversion for a foreign corporation that has converted to a different entity type. The Commission shall cancel the annual registration fee assessments specified in this subsection that remain unpaid.
4. A foreign corporation that has amended its articles of incorporation to reduce the number of shares it is authorized to issue, effective prior to its annual registration fee assessment date pursuant to subsection B of § 13.1-775.1 of a given year, and has timely filed an authenticated copy of the amendment with the Commission pursuant to § 13.1-760 after its annual registration fee assessment date pursuant to subsection B of § 13.1-775.1 shall have its annual registration fee reassessed to reflect the new number of authorized shares.
5. Annual registration fee assessments that have been paid shall not be refunded.

   (Code 1950, § 13.1-122; 1956, c. 428; 1985, c. 522; 1988, c. 405; 1989, c. 152; 1991, c. 309; 1997, c. 216; 2001, c. 545; 2002, c. 1; 2005, c. 765; 2006, c. 659; 2007, c. 810; 2009, c. 216; 2010, c. 753; 2015, c. 623; 2019, c. 734; 2021, Sp. Sess. I, c. 487.)

Editor's note. - Acts 2019, c. 734, cl. 3, as amended by Acts 2020, c. 1226, cl. 5 provides: "That the provisions of this act (i) amending and reenacting §§ 13.1-615 , 13.1-615 .1, 13.1-616 , 13.1-632 , 13.1-721.1 , and 13.1-722.2 through 13.1-722.13 of the Code of Virginia; (ii) amending the Code of Virginia by adding in Chapter 9 of Title 13.1 an article numbered 1.1, consisting of sections numbered 13.1-614.1 through 13.1-614.8 , and by adding sections numbered 13.1-712.1 , 13.1-722.1:1, 13.1-722.7 :1, and 13.1-722.12 :1; and (iii) repealing §§ 13.1-722.4 , 13.1-722.7 , and 13.1-722.14 of the Code of Virginia shall become effective on July 1, 2021."

Acts 2019, c. 734, cl. 4, as amended by Acts 2020, c. 1226, cl. 5 provides: "That until July 1, 2021, the term 'conversion,' when used in any provision of the first enactment of this act, shall be construed to mean 'entity conversion.'"

Acts 2021, Sp. Sess. I, c. 487, cl. 4 provides: "That the provisions of this act (i) shall be applied prospectively only; (ii) shall not affect the validity of any filing made, or other action taken, prior to July 1, 2021, with respect to the name of a stock corporation, nonstock corporation, limited liability company, business trust, or limited partnership; and (iii) shall not be construed to require any such stock corporation, nonstock corporation, limited liability company, business trust, or limited partnership that was in compliance with applicable laws regarding the distinguishability of its name prior to July 1, 2021, to change its name or take other action to comply with the requirements of this act."

The 1997 amendment, effective January 1, 1998, in the last paragraph, substituted "its annual report due date pursuant to subsection C of § 13.1-775 " for "March 15 " in two places and substituted "its annual assessment date pursuant to subsection B of § 13.1-775.1 " for "January 1 " in two places.

The 2001 amendments. - The 2001 amendment by c. 545, effective February 1, 2002, in the first sentence of the second paragraph of subsection B, substituted "that has ceased" for "which has ceased," inserted "in this Commonwealth" and "certificate of incorporation surrender or certificate of entity conversion." See Editor's note.

The 2005 amendments. - The 2005 amendment by c. 765, in subsection B, substituted "the Commonwealth" for "this Commonwealth," and "that has" for "which has" three times.

The 2006 amendments. - The 2006 amendment by c. 659, in subsection B, in the first paragraph, in the first sentence, substituted "file or issue with respect to any domestic or foreign corporation" for "issue any certificate or file," inserted "or certificate" and "a statement of change pursuant to § 13.1-635 or 13.1-764 , and a statement of resignation pursuant to § 13.1-636 or 13.1-765 ," and inserted "by or on behalf of such corporation" at the end, deleted the former second sentence, which read: "However, a certificate of termination of corporate existence may be issued under the provisions of § 13.1-751 without requiring prepayment of any such assessment" and added the present second sentence, and substituted "a certificate of termination of corporate existence pursuant to § 13.1-751 " for "such a certificate" in the last sentence, and substituted "canceling" for "cancelling" in the third sentence of the last paragraph.

The 2007 amendments. - The 2007 amendment by c. 810, in subsection B, substituted "on or before" for "prior to" and inserted the proviso at the end of the second sentence; and deleted the former last sentence, which read: "Except as provided hereinafter, the issuance of a certificate of termination of corporate existence pursuant to § 13.1-751 shall not have the effect of releasing any obligation that has accrued in favor of the Commonwealth on account of such assessment"; inserted designators for subsections C through E; in subsection C, substituted "on or before" for "prior to" in the first and second sentences and substituted "cancel" for "enter an order withdrawing and canceling" and "subsection" for "section" in the third sentence.

The 2009 amendments. - The 2009 amendment by c. 216, in subsection C, substituted "an authenticated copy of the instrument of merger" for "the certificate of merger" in the second sentence and inserted the third sentence.

The 2010 amendments. - The 2010 amendment by c. 753 added the last sentence in subsection A.

The 2015 amendments. - The 2015 amendment by c. 623 inserted "annual" preceding "report" in subsection B; rewrote subsection C; in subsection D, substituted "A" for "Any" at the beginning, twice inserted "registration fee" before "assessment date" and inserted "annual" preceding "registration fee reassessed"; and substituted "Annual registration fee" for "Registration fee" in subsection E.

The 2019 amendments. - The 2019 amendment by c. 734, effective July 1, 2021, in subdivisions C 1 and 4, deleted "entity" preceding "conversion."

The 2021 Sp. Sess. I amendments. - The 2021 amendment by Sp. Sess. I, c. 487, effective July 1, 2021, in subsection B, inserted "a certificate of conversion with respect to a foreign eligible entity, or a certificate of conversion with respect to a domestic corporation that will become a domestic eligible entity" and added "or eligible entity"; and in subdivision C 1, substituted "domestication for a domestic corporation" for "incorporation surrender" and added "that will become a foreign eligible entity." For applicability clause, see Editor's note.

Law review. - For article, "The New Virginia Stock Corporation Act: A Primer, " see 20 U. Rich. L. Rev. 67 (1985).

§ 13.1-615.1. Charter and entrance fees for corporations.

1. Every domestic corporation, upon the granting of its charter or upon its incorporation by domestication or conversion, shall pay a charter fee into the state treasury, and every foreign corporation, when it obtains from the State Corporation Commission a certificate of authority to transact business in the Commonwealth, shall pay an entrance fee into the state treasury. The fee in each case is to be ascertained and fixed as follows:

   For any domestic or foreign corporation whose number of authorized shares is 1,000,000 or fewer shares: $50 for each 25,000 shares or fraction thereof;

   For any domestic or foreign corporation whose number of authorized shares is more than 1,000,000 shares: $2,500.

2. For any foreign corporation that files articles of domestication and that had authority to transact business in the Commonwealth at the time of such filing, the charter fee to be charged upon domestication shall be an amount equal to the difference between the amount that would be required by this section and the amount already paid as an entrance fee by such corporation.
3. Whenever by articles of amendment, articles of merger, articles of correction, or articles of ratification, the number of authorized shares of any domestic or foreign corporation or of the surviving corporation is increased, the charter or entrance fee to be charged shall be an amount equal to the difference between the amount already paid as a charter or entrance fee by such corporation and the amount that would be required by this section to be paid if the increased number of authorized shares were being stated at that time in the original articles of incorporation.
4. For any domestic nonstock corporation, limited liability company, business trust, limited partnership, or partnership that files articles of conversion to become a domestic corporation and that had previously converted from a domestic corporation, the charter fee to be charged upon conversion shall be an amount equal to the difference between the amount that would be required by this section and the amount already paid as a charter fee by the domestic nonstock corporation, limited liability company, business trust, limited partnership, or partnership when it was a domestic corporation.
5. For any domestic nonstock corporation that files articles of conversion to become a domestic corporation and that was not previously incorporated as a domestic corporation, the charter fee to be charged shall be an amount equal to the difference between the amount already paid as a charter fee by the domestic nonstock corporation upon its incorporation and the amount that would be required by this section to be paid in accordance with the number of authorized shares in the corporation's amended and restated articles of incorporation.
6. If no charter or entrance fee has been heretofore paid to the Commonwealth, the amount to be paid shall be the same as would have to be paid on original incorporation or application for authority to transact business.

   (1988, c. 405; 2001, c. 545; 2002, c. 1; 2007, c. 810; 2008, c. 509; 2015, c. 623; 2019, c. 734; 2020, c. 1226; 2021, Sp. Sess. I, c. 487.)

Editor's note. - Acts 2019, c. 734, cl. 3, as amended by Acts 2020, c. 1226, cl. 5 provides: "That the provisions of this act (i) amending and reenacting §§ 13.1-615 , 13.1-615 .1, 13.1-616 , 13.1-632 , 13.1-721.1 , and 13.1-722.2 through 13.1-722.13 of the Code of Virginia; (ii) amending the Code of Virginia by adding in Chapter 9 of Title 13.1 an article numbered 1.1, consisting of sections numbered 13.1-614.1 through 13.1-614.8 , and by adding sections numbered 13.1-712.1 , 13.1-722.1:1, 13.1-722.7 :1, and 13.1-722.12 :1; and (iii) repealing §§ 13.1-722.4 , 13.1-722.7 , and 13.1-722.14 of the Code of Virginia shall become effective on July 1, 2021."

Acts 2019, c. 734, cl. 4, as amended by Acts 2020, c. 1226, cl. 5 provides: "That until July 1, 2021, the term 'conversion,' when used in any provision of the first enactment of this act, shall be construed to mean 'entity conversion.'"

Acts 2020, c. 1226, cl. 3 provides: "That the provisions of the first and second enactments of this act shall become effective July 1, 2021."

Acts 2021, Sp. Sess. I, c. 487, cl. 4 provides: "That the provisions of this act (i) shall be applied prospectively only; (ii) shall not affect the validity of any filing made, or other action taken, prior to July 1, 2021, with respect to the name of a stock corporation, nonstock corporation, limited liability company, business trust, or limited partnership; and (iii) shall not be construed to require any such stock corporation, nonstock corporation, limited liability company, business trust, or limited partnership that was in compliance with applicable laws regarding the distinguishability of its name prior to July 1, 2021, to change its name or take other action to comply with the requirements of this act."

The 2019 amendments. - The 2019 amendment by c. 734, effective July 1, 2021, in the first paragraph of subsection A, substituted "upon its incorporation by domestication or conversion" for "upon domestication"; in subsection E, deleted "entity" preceding "conversion" twice; added subsection F; and redesignated former subsection F as G.

The 2020 amendments. - The 2020 amendment by c. 1226, effective July 1, 2021, substituted "articles of merger articles of correction, or articles of ratification," for "or, articles of merger" in subsection D.

The 2021 Sp. Sess. I amendments. - The 2021 amendment by Sp. Sess. I, c. 487, effective July 1, 2021, deleted former subsection C, which read: "For any foreign corporation that files an application for a certificate of authority to transact business in the Commonwealth and that had previously surrendered its articles of incorporation as a domestic corporation, the entrance fee to be charged upon obtaining a certificate of authority to transact business in the Commonwealth shall be an amount equal to the difference between the amount that would be required by this section and the amount already paid as a charter fee by such corporation" and redesignated the remaining subsections accordingly; in subsection D, inserted twice both "nonstock corporation" and "business trust, limited partnership, or partnership"; and in subsection E, substituted "conversion" for "restatement" and inserted "and that was not previously incorporated as a domestic corporation." For applicability clause, see Editor's note.

§ 13.1-616. Fees for filing documents or issuing certificates.

The Commission shall charge and collect the following fees, except as provided in § 12.1-21.2 :

1. For filing of articles of conversion to convert a corporation to an eligible entity, the fee shall be $100.
2. For filing any one of the following, the fee shall be $25:
   1. Articles of incorporation or domestication.
   2. Articles of conversion to convert an eligible entity to a corporation.
   3. Articles of amendment or restatement.
   4. Articles of merger or share exchange.
   5. Articles of correction.
   6. Articles of ratification.
   7. An application of a foreign corporation for a certificate of authority to transact business in the Commonwealth.
   8. An application of a foreign corporation for an amended certificate of authority to transact business in the Commonwealth.
   9. A copy of an amendment of the articles of incorporation of a foreign corporation holding a certificate of authority to transact business in the Commonwealth.
   10. A copy of articles of merger of a foreign corporation holding a certificate of authority to transact business in the Commonwealth.
   11. A copy of an instrument of conversion of a foreign corporation holding a certificate of authority to transact business in the Commonwealth.
   12. An application to register or to renew the registration of a corporate name.
3. For filing any one of the following, the fee shall be $10:
   1. An application to reserve or to renew the reservation of a corporate name.
   2. A notice of transfer of a reserved corporate name.
   3. An application for use of an indistinguishable name.
   4. Articles of dissolution.
   5. Articles of revocation of dissolution.
   6. Articles of termination of corporate existence.
   7. An application for a certificate of withdrawal of a foreign corporation.
   8. A notice of release of a registered name.
4. For issuing a certificate pursuant to § 13.1-781 , the fee shall be $6. (Code 1950, §§ 13-18, 13.1-123, 13.1-124.1; 1956, c. 428; 1958, c. 564; 1964, c. 551; 1972, c. 579; 1975, c. 500; 1981, c. 522; 1982, c. 460; 1984, c. 294; 1985, c. 522; 1988, c. 405; 1995, c. 368; 2001, c. 545; 2002, c. 1; 2004, c. 274; 2005, c. 765; 2007, cc. 771, 810; 2012, c. 130; 2019, c. 734; 2020, c. 1226.)

Editor's note. - Acts 2019, c. 734, cl. 3, as amended by Acts 2020, c. 1226, cl. 5 provides: "That the provisions of this act (i) amending and reenacting §§ 13.1-615 , 13.1-615 .1, 13.1-616 , 13.1-632 , 13.1-721.1 , and 13.1-722.2 through 13.1-722.13 of the Code of Virginia; (ii) amending the Code of Virginia by adding in Chapter 9 of Title 13.1 an article numbered 1.1, consisting of sections numbered 13.1-614.1 through 13.1-614.8 , and by adding sections numbered 13.1-712.1 , 13.1-722.1:1, 13.1-722.7 :1, and 13.1-722.12 :1; and (iii) repealing §§ 13.1-722.4 , 13.1-722.7 , and 13.1-722.14 of the Code of Virginia shall become effective on July 1, 2021."

Acts 2019, c. 734, cl. 4, as amended by Acts 2020, c. 1226, cl. 5 provides: "That until July 1, 2021, the term 'conversion,' when used in any provision of the first enactment of this act, shall be construed to mean 'entity conversion.'"

Acts 2020, c. 1226, cl. 3 provides: "That the provisions of the first and second enactments of this act shall become effective July 1, 2021."

The 2001 amendments. - The 2001 amendment by c. 545, effective February 1, 2002, inserted "except as provided in § 12.1-21.2 " in the introductory sentence and inserted "domestication, entity conversion or incorporation surrender" in subdivision A 1. See Editor's note.

The 2004 amendments. - The 2004 amendment by c. 274, in subsection A, substituted "$25" for "twenty-five dollars" in the introductory paragraph and added subdivision A 9; substituted "$10" for "ten dollars" in subsection B; substituted "$5" for "five dollars" in subsection C; and made minor stylistic changes.

The 2005 amendments. - The 2005 amendment by c. 765 inserted "or to renew the reservation of" in subdivision B 1.

The 2007 amendments. - The 2007 amendment by c. 771 redesignated subdivisions and substituted "pursuant to § 13.1-781 , the fee shall be $6" for "of change of name, the fee shall be $5" in subdivision 3.

The 2007 amendment by c. 810 designated former subsections A through C as present subdivisions 1 through 3; in subdivision 1, deleted "entity conversion" preceding "or incorporation surrender" near the end; added present subdivision 1 b; and redesignated former subdivisions 1 b through 1 i as present subdivisions 1 c through 1 j.

The 2012 amendments. - The 2012 amendment by c. 130 substituted "An application for a certificate" for "A statement" at the beginning of subdivision 2 g.

The 2019 amendments. - The 2019 amendment by c. 734, effective July 1, 2021, added subdivision 1; redesignated former subdivisions 1 through 3 as 2 through 4; in subdivision 2 a., deleted "or incorporation surrender" at the end; in subdivisions 2 b. and 2 j., deleted "entity" preceding "conversion"; in subdivision 2 b., substituted "an eligible entity" for "a domestic limited liability company"; added subdivisions 2 k. and 3 h.; and made stylistic changes.

The 2020 amendments. - The 2020 amendment by c. 1226, effective July 1, 2021, inserted subdivision 2 f, and redesignated the remaining subdivisions accordingly.

Law review. - For article, "Corporate and Business Law," see 35 U. Rich. L. Rev. 499 (2001).

§ 13.1-617.

Repealed by Acts 2001, c. 545, cl. 2, as amended by Acts 2002, c. 1, effective February 1, 2002.

Editor's note. - Acts 2001, c. 545, cl. 3, as amended by Acts 2002, c. 1, provides: "That the provisions of this act shall become effective on February 1, 2002; however, no domestication pursuant to Article 12.1 ( § 13.1-722.2 et seq.) of Chapter 9 of Title 13.1 shall occur prior to July 1, 2002, and no conversion pursuant to Article 12.2 ( § 13.1-722.8 et seq.) of Chapter 9 of Title 13.1 shall occur prior to July 1, 2002, unless the converting entity is (i) a domestic corporation incorporated before July 1, 1970, and (ii) the corporation is authorized to issue 5,000 shares or more."

Former § 13.1-617 , relating to miscellaneous charges, was derived from Code 1950, §§ 13-18, 13.1-124; 1956, c. 428; 1964, c. 551; 1970, c. 3; 1982, c. 460; 1984, c. 771; 1985, c. 522; 1986, c. 622; 1989, c. 152; 1991, c. 123; 1992, c. 377.

§ 13.1-618. Incorporators.

One or more persons may act as the incorporator or incorporators of a corporation by signing and delivering articles of incorporation to the Commission for filing.

(Code 1950, § 13.1-48; 1956, c. 428; 1968, c. 42; 1972, c. 606; 1985, c. 522; 2015, c. 623.)

The 2015 amendments. - The 2015 amendment by c. 623 inserted "the incorporator or" preceding "incorporators"; substituted "delivering" for "filing" and "to the Commission for filing" for "with the Commission."

Law review. - For article, "The New Virginia Stock Corporation Act: A Primer," see 20 U. Rich. L. Rev. 67 (1985).

Michie's Jurisprudence. - For related discussion, see 4B M.J. Corporations, § 19.

§ 13.1-619. Articles of incorporation.

1. The articles of incorporation shall set forth:
   1. A corporate name for the corporation that satisfies the requirements of § 13.1-630 ;
   2. The number of shares the corporation is authorized to issue;
   3. If more than one class or series of shares is authorized, the number of authorized shares of each class or series and a distinguishing designation for each class or series; and
   4. The address of the corporation's initial registered office (including both (i) the post-office address with street and number, if any, and (ii) the name of the city or county in which it is located), and the name of its initial registered agent at that office, and that the agent is either (i) an individual who is a resident of Virginia and either a director of the corporation or a member of the Virginia State Bar or (ii) a domestic or foreign stock or nonstock corporation, limited liability company, or registered limited liability partnership authorized to transact business in the Commonwealth.
2. The articles of incorporation may set forth:
   1. The names and addresses of the individuals who are to serve as the initial directors;
   2. Any provision defining or denying the preemptive right of shareholders to acquire unissued shares of the corporation;
   3. Provisions not inconsistent with law regarding:
      1. The purpose or purposes for which the corporation is organized;
      2. The management of the business and regulation of the affairs of the corporation;
      3. Defining, limiting, and regulating the powers of the corporation, its board of directors, and shareholders;
      4. A par value for authorized shares or classes or series of shares; or
      5. Imposing interest holder liability on shareholders;
   4. Any provision that under this chapter is required or permitted to be set forth in the bylaws; and
   5. A provision limiting or eliminating any duty of a director or any other person to offer the corporation the right to have or participate in any, or one or more classes or categories of, business opportunities, before the pursuit or taking of the opportunity by the director or other person, provided that any application of such a provision to an officer or a related person of that officer (i) also requires approval of that application by the board of directors, subsequent to the effective date of the provision, by action of disinterested directors taken in compliance with the same procedures as are set forth in § 13.1-691 , and (ii) may be limited by the approving action of the board of directors.
3. The articles of incorporation need not set forth any of the corporate powers enumerated in this chapter.
4. Provisions of the articles of incorporation may be made dependent upon facts objectively ascertainable outside the articles of incorporation in accordance with subsection L of § 13.1-604 . (Code 1950, § 13.1-49; 1956, c. 428; 1958, c. 564; 1975, c. 500; 1985, c. 522; 1986, c. 622; 1993, c. 113; 2000, c. 162; 2001, cc. 517, 541; 2005, c. 765; 2019, c. 734.)

Cross references. - For other provisions as to shares and distributions, see § 13.1-638 et seq.

The 2000 amendments. - The 2000 amendment by c. 162, in subdivision 4 (ii) of subsection A, deleted "or" following "professional corporation" and substituted the language beginning "or registered limited liability partnership" and ending "under § 54.1-3902" for "registered under § 54.1-3902."

The 2001 amendments. - The 2001 amendments by cc. 517 and 541, are identical, and in subdivision A 4, inserted "an individual who is" in clause (i), and in clause (ii), substituted "a domestic or foreign stock or nonstock corporation, limited liability company" for "a professional corporation, professional limited liability company," and substituted "partnership authorized to transact business in this Commonwealth" for "partnership registered with the Virginia State Bar under § 54.1-3902."

The 2005 amendments. - The 2005 amendment by c. 765, in subsection A 3, inserted "or series" three times; substituted "the Commonwealth" for "this Commonwealth" in subdivision A 4; and added subsection D.

The 2019 amendments. - The 2019 amendment by c. 734 rewrote subdivision B 3, which read: "Provisions not inconsistent with law: a. Stating the purpose or purposes for which the corporation is organized; b. Regarding the management of the business and regulation of the affairs of the corporation; c. Defining, limiting, and regulating the powers of the corporation, its directors, and shareholders; d. Establishing a par value for authorized shares or classes or series of shares; and"; added subdivision B 5; and made stylistic changes.

Law review. - For article, "Corporate and Business Law," see 35 U. Rich. L. Rev. 499 (2001).

For article, "Corporate and Business Law," see 54 U. Rich. L. Rev. 73 (2019).

Editor's note. - The cases below were decided under prior law.

§ 13.1-620. Special kinds of business.

1. If any corporation is to conduct the business of a bank or trust company, that shall be stated in the articles of incorporation and the corporation shall not have power to conduct other business except as may be related to or incidental to the banking or trust company business.
2. If any corporation is to conduct the business of an insurance company, that shall be stated in the articles of incorporation and the articles shall further set forth the class or classes of insurance the corporation proposes to undertake and the corporation shall not have power to conduct other business except as may be related to or incidental to the insurance business.
3. If any corporation is to conduct the business of a savings and loan association or savings bank, that shall be stated in the articles of incorporation and the corporation shall not have power to conduct other business except as may be related to or incidental to the stated business.
4. If any corporation is to conduct the business of a railroad or other public service company, that shall be stated in the articles of incorporation and a brief description of the business shall be included. Otherwise the corporation shall not have the power to conduct a public service business or to exercise any of the privileges of a public service company. No corporation shall be organized under this chapter for the purpose of conducting in this Commonwealth more than one kind of public service business except that the telephone and telegraph businesses or the water and sewer businesses may be combined, but this provision shall not limit the powers of domestic corporations existing on January 1, 1986. No corporation organized under this chapter to conduct the business of a public service company shall have general business powers in this Commonwealth. Corporations organized under this chapter to conduct the business of a public service company may, however, conduct in this Commonwealth other public service business or nonpublic service business so far as may be related to or incidental to its stated business as a public service company and in any other state such business as may be authorized or permitted by the laws thereof. Nothing in this subsection shall limit the powers of such corporation in respect of the securities of other corporations or of limited liability companies.
5. If one or more of the purposes set forth in the articles of incorporation is to own, manage or control any plant or equipment or any part of a plant or equipment within the Commonwealth for the conveyance of telephone messages or for the production, transmission, delivery or furnishing of heat, light, power or water, including heated or chilled water, or sewerage facilities, either directly or indirectly, to or for the public, the Commission shall not issue a certificate of incorporation unless the articles of incorporation expressly state that the corporation is to conduct business as a public service company.
6. Whether or not classified elsewhere in the Code as public service companies the following are not required to incorporate as public service companies: a person authorized by the Federal Communications Commission to provide commercial mobile service, household goods carriers, petroleum tank truck carriers, bottled gas companies, taxicab companies, community television companies, charter party carriers, restricted parcel carriers, sight-seeing carriers, companies excluded from the definition of "public utility" by § 56-265.1(b)(4) or by § 56-1.2 and compressed natural gas filling stations.
7. A water or sewer company that proposes to serve more than fifty customers shall incorporate as a public service company. A water or sewer company shall not serve more than fifty customers unless its articles of incorporation state that the corporation is to conduct business as a public service company. The two preceding sentences shall not apply to a water or sewer company incorporated before and operating a water or sewer system on January 1, 1970; however, as to any water or sewer system serving more than fifty customers, upon application to the Commission by a majority of the customers or by the company, a hearing may be held after thirty days' notice to the company and the system's customers or a majority thereof, and the Commission may order such, if any, improvements or rate changes or both as are just and reasonable. Upon ordering into effect any rate changes or improvements found to be just and reasonable, the water or sewer system shall remain subject to the Commission's regulatory authority in the same manner as a public utility for such reasonable period as the Commission may direct. Nothing in this subsection shall apply to persons described in § 56-1.2.

   (Code 1950, § 13.1-50; 1956, c. 428; 1968, c. 110; 1970, c. 127; 1972, c. 123; 1974, c. 285; 1976, c. 284; 1981, c. 285; 1985, c. 522; 1990, c. 488; 1991, c. 263; 1993, cc. 61, 265, 419; 1995, c. 281; 1996, c. 16.)

Cross references. - As to public utility and schedules defined, see § 56-232.

§ 13.1-621. Issuance of certificate of incorporation.

If the Commission finds that the articles of incorporation comply with the requirements of law and that all required fees have been paid, it shall issue a certificate of incorporation. When the certificate of incorporation is effective, the corporate existence shall begin. Upon becoming effective, the certificate of incorporation shall be conclusive evidence that all conditions precedent required to be performed by the incorporators have been complied with and that the corporation has been incorporated under this chapter.

(Code 1950, §§ 13-25, 13-26, 13.1-51, 13.1-52; 1956, c. 428; 1985, c. 522.)

Michie's Jurisprudence. - For related discussion, see 4B M.J. Corporations, §§ 19, 21.

§ 13.1-622. Liability for preincorporation transactions.

All persons purporting to act as or on behalf of a corporation, knowing there was no incorporation under this chapter, are jointly and severally liable for all liabilities created while so acting except for any liability to any person who also knew that there was no incorporation.

(1985, c. 522.)

CIRCUIT COURT OPINIONS

Individual liability for promissory note. - The present action was not barred by res judicata, as in the earlier federal case, plaintiff sued a company for failure to pay on a promissory note, and in the instant case, plaintiff sued defendant in his individual capacity pursuant to his potential statutory liability under § 13.1-622 , so neither the parties nor the cause of action were the same. Seitz v. Ejtemai,, 2004 Va. Cir. LEXIS 106 (Fairfax County Apr. 19, 2004).

§ 13.1-623. Organization of corporation.

1. After incorporation:
   1. If initial directors are named in the articles of incorporation, the initial directors shall hold an organizational meeting, at the call of a majority of the directors, to complete the organization of the corporation by appointing officers, adopting bylaws, and carrying on any other business brought before the meeting; or
   2. If initial directors are not named in the articles of incorporation, the incorporator or incorporators shall hold an organizational meeting at the call of a majority of the incorporators:
      1. To elect a board of directors and complete the organization of the corporation; or
      2. To elect a board of directors who shall complete the organization of the corporation.
2. Action required or permitted by this chapter to be taken by incorporators or the initial directors at an organizational meeting may be taken without a meeting if the action taken is evidenced by one or more written consents describing the action taken and signed by each incorporator or initial director.
3. An organizational meeting may be held in or out of the Commonwealth.

   (Code 1950, § 13.1-54; 1956, c. 428; 1972, c. 606; 1974, c. 71; 1975, c. 500; 1985, c. 522; 2019, c. 734.)

The 2019 amendments. - The 2019 amendment by c. 734, in subdivision A 2, inserted "of incorporation" following "articles"; in subdivision A 2 b, inserted "a board of"'; in subsection B, substituted "chapter" for "Act," inserted "or the initial directors" following "incorporators," and added "or initial director" at the end; and made a stylistic change.

§ 13.1-624. Bylaws.

1. The incorporators or board of directors of a corporation shall adopt initial bylaws for the corporation.
2. The bylaws of a corporation may contain any provision that is not inconsistent with law or the articles of incorporation.
3. The bylaws may contain one or more of the following provisions:
   1. A requirement that if the corporation solicits proxies or consents with respect to an election of directors, the corporation include in its proxy statement and any form of its proxy or consent, to the extent and subject to such procedures or conditions as are provided in the bylaws, one or more individuals nominated by a shareholder in addition to individuals nominated by the board of directors; and
   2. A requirement that any or all internal corporate claims shall be brought exclusively in a circuit court or a federal district court in the Commonwealth and, if so specified, in any additional courts in the Commonwealth or in any other jurisdictions in which the corporation maintains its principal office. As used in this subdivision, "internal corporate claims" means (i) any derivative action or proceeding brought on behalf of the corporation; (ii) any action for breach of duty to the corporation or the corporation's shareholders by any current or former officer, director, or shareholder of the corporation; (iii) any action asserting a claim arising pursuant to this chapter or the corporation's articles of incorporation or bylaws; or (iv) any action asserting a claim governed by the internal affairs doctrine that is not included in clause (i), (ii), or (iii). Notwithstanding any other provision of this chapter to the contrary, to the extent any provision of this chapter allows or requires an action or proceeding to be brought in the circuit court of the county or city where the corporation's principal office or registered office is located or in any other specified court location, such action or proceeding shall instead be brought in a court in the Commonwealth specified in a bylaw, if any, authorized by this subdivision and adopted prior to the commencement of such action or proceeding.
4. A provision of the bylaws adopted under subdivision C 2 shall not have the effect of conferring jurisdiction on any court or over any person or claim, and shall not apply if none of the courts specified by such provision has the requisite personal and subject matter jurisdiction. If the court or courts specified in a provision adopted under subdivision C 2 do not have the requisite personal and subject matter jurisdiction and another court of the Commonwealth does have such jurisdiction, then the internal corporate claim may be brought in such other court of the Commonwealth, notwithstanding that such other court of the Commonwealth is not specified in such provision, and in any other court specified in such provision that has the requisite jurisdiction. No provision of the articles of incorporation or the bylaws may prohibit bringing an internal corporate claim in the courts of the Commonwealth or require any such claim to be determined by arbitration.
5. Notwithstanding subdivision B 2 of § 13.1-714 , the shareholders in amending, repealing, or adopting a bylaw described in subdivision C 1 may not limit the authority of the board of directors to amend or repeal any condition or procedure set forth in, or to add any procedure or condition to, such a bylaw to provide for a reasonable, practicable, and orderly process. (Code 1950, §§ 13-10, 13.1-24; 1956, c. 428; 1985, c. 522; 2010, c. 782; 2015, c. 611; 2019, c. 734; 2020, c. 1226.)

Editor's note. - Acts 2020, c. 1226, cl. 3 provides: "That the provisions of the first and second enactments of this act shall become effective July 1, 2021."

The 2010 amendments. - The 2010 amendment by c. 782 deleted "for managing the business and regulating the affairs of the corporation" following "any provision" in subsection B; and added subsections C and D.

The 2015 amendments. - The 2015 amendment by c. 611 substituted "more" for "both" in subsection C; added subdivision C 3; and made related changes.

The 2019 amendments. - The 2019 amendment by c. 734 deleted former subdivision C 2, which read: "A requirement that the corporation reimburse the expenses incurred by a shareholder in soliciting proxies or consents in connection with an election of directors, to the extent and subject to such procedures or conditions as are provided in the bylaws, provided that no bylaw so adopted shall apply to elections for which any record date precedes its adoption; and"; rewrote subdivision C 2, which read: "A requirement that a circuit court or a federal district court in the Commonwealth or the jurisdiction in which the corporation has its principal office shall be the sole and exclusive forum for (i) any derivative action brought on behalf of the corporation; (ii) any action for breach of duty to the corporation or the corporation's shareholders by any current or former officer or director of the corporation; or (iii) any action against the corporation or any current or former officer or director of the corporation arising pursuant to this chapter or the corporation's articles of incorporation or bylaws"; added subsection D; in subsection E, deleted "in order" following "such a bylaw"; and made stylistic changes.

The 2020 amendments. - The 2020 amendment by c. 1226, effective July 1, 2021, deleted "with" following "other jurisdictions" in the first sentence of subdivision C 2.

Law review. - For comment, "Private Ordering in the Old Dominion: A Solution to Frivolous Litigation or the Elimination of a Fundamental Shareholder Right?" see 53 U. Rich. L. Rev. 297 (2018).

§ 13.1-625. Emergency bylaws.

1. Unless the articles of incorporation provide otherwise, the board of directors of a corporation may adopt bylaws to be effective only in an emergency defined in subsection D of this section. The emergency bylaws, which are subject to amendment or repeal by the shareholders, may make all provisions necessary for managing the corporation during the emergency, including provisions that may be inconsistent with one or more provisions of this chapter with respect to:
   1. Procedures for calling a meeting of the board of directors;
   2. Quorum requirements for the meeting; and
   3. Designation of additional or substitute directors.
2. All provisions of the regular bylaws not inconsistent with the emergency bylaws remain effective during the emergency. The emergency bylaws are not effective after the emergency ends.
3. Corporate action taken in good faith in accordance with the emergency bylaws:
   1. Binds the corporation; and
   2. May not be used to impose liability on a director, officer, employee, or agent of the corporation.
4. An emergency exists for purposes of this section and § 13.1-628 if there is a catastrophic event, including an attack on the United States or in any locality in which the corporation conducts its business or customarily holds meetings of the board of directors or shareholders, an epidemic or pandemic, or a declaration of a national emergency by the United States government or an emergency by the government of the locality in which the corporation's principal office is located, that affects the corporation and regardless of whether a quorum of the board of directors or a committee can be readily convened for action. (Code 1950, § 13.1-24.1; 1962, c. 102; 1975, c. 500; 1985, c. 522; 2019, c. 734; 2021, Sp. Sess. I, c. 487.)

Editor's note. - Acts 2021, Sp. Sess. I, c. 487, cl. 4 provides: "That the provisions of this act (i) shall be applied prospectively only; (ii) shall not affect the validity of any filing made, or other action taken, prior to July 1, 2021, with respect to the name of a stock corporation, nonstock corporation, limited liability company, business trust, or limited partnership; and (iii) shall not be construed to require any such stock corporation, nonstock corporation, limited liability company, business trust, or limited partnership that was in compliance with applicable laws regarding the distinguishability of its name prior to July 1, 2021, to change its name or take other action to comply with the requirements of this act."

The 2019 amendments. - The 2019 amendment by c. 734, in subsection B, substituted "not inconsistent" for "consistent"; in subdivision C 2, substituted "director, officer, employee, or agent of the corporation" for "corporate director, officer, employee, or agent"; and in subsection D, deleted "corporation's" preceding "board of."

The 2021 Sp. Sess. I amendments. - The 2021 amendment by Sp. Sess. I, c. 487, effective July 1, 2021, added "provisions that may be inconsistent with one or more provisions of this chapter with respect to" to the introductory language of subsection A; and rewrote subsection D, which read, "An emergency exists for purposes of this section if a quorum of the board of directors cannot readily be assembled because of some catastrophic event." For applicability clause, see Editor's note.

§ 13.1-626. Purposes.

Every corporation incorporated under this Act has the purpose of engaging in any lawful business unless a more limited purpose is (i) set forth in the articles of incorporation, or (ii) required to be set forth in the articles of incorporation by § 13.1-620 , or any other law of this Commonwealth.

(1985, c. 522.)

Law review. - For article, "The New Virginia Stock Corporation Act: A Primer," see 20 U. Rich. L. Rev. 67 (1985).

§ 13.1-627. General powers.

1. Unless its articles of incorporation provide otherwise, every corporation has perpetual duration and succession in its corporate name and has the same powers as an individual to do all things necessary or convenient to carry out its business and affairs, including, without limitation, power:
   1. To sue and be sued, complain and defend in its corporate name;
   2. To have a corporate seal, which may be altered at will, and to use it, or a facsimile of it, by impressing or affixing it or in any other manner reproducing it;
   3. To make and amend bylaws, not inconsistent with its articles of incorporation or with the laws of the Commonwealth;
   4. To purchase, receive, lease, or otherwise acquire, and own, hold, improve, use and otherwise deal with, real or personal property, or any legal or equitable interest in property, wherever located;
   5. To sell, convey, mortgage, pledge, lease, exchange, and otherwise dispose of all or any part of its property;
   6. To purchase, receive, subscribe for, or otherwise acquire, own, hold, vote, use, sell, mortgage, lend, pledge, or otherwise dispose of, and deal in and with shares or other interests in, or obligations of, any other entity;
   7. To make contracts and guarantees, incur liabilities, borrow money, issue its notes, bonds, and other securities and obligations, which may be convertible into or include the option to purchase other securities or property of the corporation, and secure any of its obligations by mortgage or pledge of any of its property, franchises, or income;
   8. To lend money, invest, and reinvest its funds, and receive and hold real and personal property as security for repayment;
   9. To conduct its business, locate offices, and exercise the powers granted by this chapter in or outside of the Commonwealth;
   10. To elect directors and appoint officers, employees, and agents of the corporation, define their duties, fix their compensation, and lend them money and credit;
   11. To pay pensions and establish pension plans, pension trusts, profit sharing plans, share bonus plans, share option plans, share purchase plans and benefit and incentive plans for any or all of the current or former directors, officers, employees, and agents of the corporation or any of its subsidiaries;
   12. To make donations for the public welfare or for religious, charitable, scientific, literary or educational purposes, except that corporations subject to regulation as to rates by the Commission shall not have power to make donations in excess of five percent of net income computed before federal and state taxes on income and without taking into account any deduction for gifts;
   13. Except as otherwise provided in subsection B, to be a promoter, partner, member, associate, or manager of any partnership, joint venture, trust, or other entity;
   14. To make payments or donations, or do any other act, not inconsistent with this section or any other applicable law, that furthers the business and affairs of the corporation;
   15. To pay compensation, or to pay additional compensation, to any or all directors, officers and employees on account of services previously rendered to the corporation, whether or not an agreement to pay such compensation was made before such services were rendered;
   16. To insure for its benefit the life of any of its directors, officers or employees, to insure the life of any shareholder for the purpose of acquiring at his death shares owned by such shareholder and to continue such insurance after the relationship terminates;
   17. To cease its corporate activities and surrender its corporate franchise; and
   18. To have and exercise all powers necessary or convenient to effect any or all of the purposes for which the corporation is organized.
2. Each corporation other than a public service company, a banking corporation, an insurance corporation, a savings institution, or a credit union shall have power to enter into partnership agreements, joint ventures, or other associations of any kind with any person or persons. The foregoing limitations on public service companies, banking corporations, insurance corporations, savings institutions, and credit unions shall not apply to the purchase by any such entity of any security of a limited liability company. The term "public service company" as used in this subsection shall not apply to railroads, which shall have the power given other corporations generally by this subsection. The foregoing limitation on public service companies shall not apply to partnership agreements, joint ventures, or other associations where the purposes of such partnerships, joint ventures, or other associations are activities that the public service company could lawfully engage in without participation in a partnership, joint venture, or association and will require an equity investment by the public service company and debt with recourse to the public service company of an amount not more than one percent of its net equity as measured at the end of the most recent fiscal year so long as all such partnerships, joint ventures, and associations collectively will require an equity investment by the public service company and debt with recourse to the public service company of less than five percent of the net equity of the public service company as measured at the end of the most recent fiscal year. Upon application by the public service company, the Commission may approve any partnership agreements, joint ventures, or other associations that exceed the equity investment criteria set forth above. The foregoing limitation on public service companies shall not apply to partnership agreements, joint ventures, or other associations between telephone companies and telephone companies, whether in corporate or other form, or between telephone companies and commonly owned affiliates of telephone companies for the purpose of providing domestic cellular radio telecommunication service.
3. Privileges and powers conferred and restrictions and requirements imposed by other titles of the Code on railroads or other public service companies, banking corporations, insurance corporations, savings and loan associations, credit unions, industrial loan associations, or other special types of corporations, shall not be deemed repealed or amended by any provision of this chapter except where specifically so provided.
4. Each corporation that is deemed a private foundation, as defined in § 509 of the Internal Revenue Code, unless its articles of incorporation expressly provide otherwise, shall distribute its income and, if necessary, principal, for each taxable year at such time and in such manner as not to subject such corporation to tax under § 4942 of the Internal Revenue Code. Such corporation shall not engage in any act of self-dealing, as defined in § 4941(d) of the Internal Revenue Code, retain any excess business holdings, as defined in § 4943(c) of the Internal Revenue Code, make any investments in such manner as to give rise to liability for the tax imposed by § 4944 of the Internal Revenue Code, or make any taxable expenditures, as defined in § 4945(d) of the Internal Revenue Code. This subsection shall apply to any corporation organized after December 31, 1969, under this chapter or under the Virginia Stock Corporation Act (§ 13.1-601 et seq.) enacted by Chapter 428 of the 1956 Acts of General Assembly; and to any corporation organized before January 1, 1970, only for its taxable years beginning on and after January 1, 1972, unless the exceptions provided in § 508(e)(2)(A) or (B) of the Internal Revenue Code shall apply or unless the board of directors of such corporation shall elect that such restrictions as contained in this subsection shall not apply by filing written notice of such election with the Attorney General and the clerk of the Commission on or before December 31, 1971. Each reference to a section of the Internal Revenue Code made in this subsection shall include future amendments to such Code sections and corresponding provisions of future internal revenue laws. (Code 1950, § 13.1-2.1; 1975, c. 500; 1977, c. 508; 1983, c. 534; 1984, c. 406; 1985, c. 522; 1993, cc. 61, 143, 419; 1994, c. 452; 1996, cc. 16, 257; 2005, c. 765; 2015, c. 611; 2019, c. 734.)

The 2005 amendments. - The 2005 amendment by c. 765 substituted "the Commonwealth" for "this Commonwealth" in subdivision A 3; in subdivision A 9, substituted "chapter within" for "Act within"; substituted "associations of" for "association of" in subsection B; and substituted "chapter except" for "Act except" in subsection C.

The 2015 amendments. - The 2015 amendment by c. 611 deleted "for managing the business and regulating the affairs of the corporation" at the end of subdivision A 3.

The 2019 amendments. - The 2019 amendment by c. 734, in subdivision A 7, inserted "securities and" preceding "obligations, which may"; in subdivision A 9, substituted "chapter in or outside of" for "chapter within or without"; added subdivision A 13; and made stylistic changes.

Michie's Jurisprudence. - For related discussion, see 3A M.J. Canals and Canal Companies, § 6; 4B M.J. Corporations, §§ 34, 44, 46, 201, 207, 209, 214, 215, 240; 14A M.J. Partnership, § 6.

§ 13.1-628. Emergency powers.

1. In anticipation of or during an emergency, as described in subsection D of § 13.1-625 , the board of directors of a corporation may:
   1. Modify lines of succession to accommodate the incapacity of any director, officer, employee, or agent; and
   2. Relocate the principal office, designate alternative principal offices or regional offices, or authorize the officers to do so.
2. During such an emergency, unless emergency bylaws provide otherwise:
   1. Notice of a meeting of the board of directors need be given only to those directors whom it is practicable to reach and may be given in any practicable manner, including by electronic transmission, press release, publication, or radio; and
   2. One or more officers of the corporation present at a meeting of the board of directors may be deemed by a majority of the directors present at the meeting to be directors for the meeting, in order of rank and within the same rank in order of seniority, as necessary to achieve a quorum.
3. During such an emergency, the board of directors, or, if a quorum cannot be readily convened for a meeting, a majority of the directors present, may:
   1. Take any action that it determines to be practical and necessary to address circumstances of the emergency with respect to a meeting of shareholders notwithstanding anything to the contrary in this chapter or in the articles of incorporation or bylaws, including (i) to postpone any such meeting to a later time or date, with the record date for determining the shareholders entitled to notice of, and to vote at, such meeting applying to the postponed meeting irrespective of § 13.1-660 , unless the board of directors fixes a new record date, and (ii) with respect to a corporation subject to the reporting requirements of § 13(a) or 15(d) of the federal Securities Exchange Act of 1934, as amended, to notify shareholders of any postponement, a change of the place of the meeting, or a change to hold the meeting solely by means of remote communication pursuant to § 13.1-660 .2 solely by a document publicly filed by the corporation with the U.S. Securities and Exchange Commission pursuant to § 13, 14, or 15(d) of the federal Securities Exchange Act of 1934, as amended; and
   2. With respect to any distribution that has been declared as to which the record date has not occurred, cancel such distribution, change the amount of such distribution, or change the record date or the payment date to a later date; provided that, in any such case, the corporation gives notice of such action to shareholders as promptly as practicable thereafter, and in any event before the record date theretofore in effect. Such notice, in the case of a corporation subject to the reporting requirements of § 13(a) or 15(d) of the federal Securities Exchange Act of 1934, as amended, may be given solely by a document publicly filed by the corporation with the U.S. Securities and Exchange Commission pursuant to § 13, 14, or 15(d) of the federal Securities Exchange Act of 1934, as amended. No person shall be liable and no meeting of shareholders shall be postponed or voided for the failure to make a list of shareholders available pursuant to § 13.1-661 if it was not practicable to allow inspection during such an emergency.
4. Corporate action taken in good faith during such an emergency under this section to further the ordinary business affairs of the corporation:
   1. Binds the corporation; and
   2. May not be used to impose liability on a director, officer, employee, or agent of the corporation.

      (1985, c. 522; 2005, c. 765; 2021, Sp. Sess. I, c. 487.)

Editor's note. - Acts 2021, Sp. Sess. I, c. 487, cl. 4 provides: "That the provisions of this act (i) shall be applied prospectively only; (ii) shall not affect the validity of any filing made, or other action taken, prior to July 1, 2021, with respect to the name of a stock corporation, nonstock corporation, limited liability company, business trust, or limited partnership; and (iii) shall not be construed to require any such stock corporation, nonstock corporation, limited liability company, business trust, or limited partnership that was in compliance with applicable laws regarding the distinguishability of its name prior to July 1, 2021, to change its name or take other action to comply with the requirements of this act."

The 2005 amendments. - The 2005 amendment by c. 765 deleted "of this section" following "subsection D" in subsections A and B; in subdivision C 2, deleted "corporate" following "liability on a" and added "of the corporation."

The 2021 Sp. Sess. I amendments. - The 2021 amendment by Sp. Sess. I, c. 487, effective July 1, 2021, substituted "as described in subsection D of § 13.1-625 " for "defined in subsection D" in subsection A in the introductory language; substituted "During such an emergency" for "During an emergency defined in subsection D" in subsection B in the introductory language; substituted "by electronic transmission, press release, publication, or radio" for "by publication and radio" in subdivision B 1; inserted new subsection C and redesignated former subsection C as subsection D; and deleted former subsection D, which read: "An emergency exists for purposes of this section if a quorum of the corporation's board of directors cannot readily be assembled because of some catastrophic event.'' For applicability clause, see Editor's note.

§ 13.1-629. Lack of power to act.

1. Except as provided in subsection B, the validity of corporate action may not be challenged on the ground that the corporation lacks or lacked power to act.
2. A corporation's power to act may be challenged:
   1. In a proceeding by a shareholder against the corporation to enjoin the act;
   2. In a proceeding by the corporation, directly, derivatively, or through a receiver, trustee, or other legal representative, against an incumbent or former director, officer, employee, or agent of the corporation; or
   3. In a proceeding against the corporation before the Commission.
3. In a shareholder's proceeding under subdivision 1 of subsection B to enjoin an unauthorized corporate act, if equitable and if all affected persons are parties to the proceeding, the court may enjoin or set aside the act and may award damages for loss, except anticipated profits, suffered by the corporation or another party because of enjoining the unauthorized act.

   (Code 1950, § 13.1-5; 1956, c. 428; 1985, c. 522; 2019, c. 734.)

The 2019 amendments. - The 2019 amendment by c. 734, in subsection A, substituted "the validity of" for "of this section"; in subsection C, deleted "of this section" preceding "to enjoin," and inserted "if equitable and if all affected persons are parties to the proceeding"; and made stylistic changes.

§ 13.1-630. Corporate name.

1. A corporate name shall contain the word "corporation," "incorporated," "company," or "limited," or the abbreviation "corp.," "inc.," "co.," or "ltd." Such words and their corresponding abbreviations may be used interchangeably for all purposes.
2. A corporate name shall not contain:
   1. Any language stating or implying that the corporation will conduct any of the special kinds of businesses listed in § 13.1-620 unless it proposes in fact to engage in such special kind of business;
   2. The word "redevelopment" unless the corporation is organized as an urban redevelopment corporation pursuant to Chapter 190 of the Acts of Assembly of 1946, as amended;
   3. Any word, abbreviation, or combination of characters that states or implies the corporation is a limited liability company, a limited partnership, a registered limited liability partnership, or a protected series of a series limited liability company; or
   4. Any word or phrase that is prohibited by law for such corporation.
3. Except as authorized by subsection D, a corporate name shall be distinguishable upon the records of the Commission from:
   1. The name of any corporation, whether issuing shares or not issuing shares, existing under the laws of the Commonwealth or authorized to transact business in the Commonwealth;
   2. A corporate name reserved or registered under § 13.1-631 , 13.1-632 , 13.1-830 or 13.1-831 ;
   3. The designated name adopted by a foreign corporation, whether issuing shares or not issuing shares, because its real name is unavailable for use in the Commonwealth;
   4. The name of a domestic limited liability company or a foreign limited liability company registered to transact business in the Commonwealth;
   5. A limited liability company name reserved under § 13.1-1013 ;
   6. The designated name adopted by a foreign limited liability company because its real name is unavailable for use in the Commonwealth;
   7. The name of a domestic business trust or a foreign business trust registered to transact business in the Commonwealth;
   8. A business trust name reserved under § 13.1-1215 ;
   9. The designated name adopted by a foreign business trust because its real name is unavailable for use in the Commonwealth;
   10. The name of a domestic limited partnership or a foreign limited partnership registered to transact business in the Commonwealth;
   11. A limited partnership name reserved under § 50-73.3; and
   12. The designated name adopted by a foreign limited partnership because its real name is unavailable for use in the Commonwealth.
4. A domestic corporation may apply to the Commission for authorization to use a name that is not distinguishable upon the Commission's records from one or more of the names described in subsection C. The Commission shall authorize use of the name applied for if the other entity consents to the use in writing and submits an undertaking in a form satisfactory to the Commission to change its name to a name that is distinguishable upon the records of the Commission from the name of the applying corporation.
5. The use of assumed names or fictitious names, as provided for in Chapter 5 (§ 59.1-69 et seq.) of Title 59.1, is not affected by this chapter.
6. The Commission, in determining whether a corporate name is distinguishable upon its records from the name of any of the business entities listed in subsection C, shall not consider any word, phrase, abbreviation, or designation required or permitted under this section and § 13.1-544.1 , subsection A of § 13.1-1012 , § 13.1-1104 , subsection A of § 50-73.2, and subdivision A 2 of § 50-73.78 to be contained in the name of a business entity formed or organized under the laws of the Commonwealth or authorized or registered to transact business in the Commonwealth. (Code 1950, § 13.1-6; 1956, c. 428; 1968, c. 241; 1975, c. 500; 1985, c. 522; 1986, c. 232; 2003, c. 592; 2005, cc. 379, 765; 2009, c. 216; 2012, c. 63; 2019, c. 734; 2020, c. 1226; 2021, Sp. Sess. I, c. 487.)

Cross references. - As to corporate name of savings institutions, see § 6.2-1116 .

Editor's note. - Acts 2003, c. 592, cl. 3, provides: "That the provisions of this act (i) shall be applied prospectively only, (ii) shall not affect the validity of any filing made, or other action taken, prior to the effective date of this act [October 1, 2004] with respect to the name of a corporation, limited liability company, business trust, or limited partnership, and (iii) shall not be construed to require any such corporation, limited liability company, business trust, or limited partnership that was in compliance with applicable laws regarding the distinguishability of its name prior to the effective date of this act to change its name or take other action to comply with the requirements of this act."

Acts 2012, c. 63, cl. 2 provides: "That the provisions of this act (i) shall be applied prospectively only; (ii) shall not affect the validity of any filing made, or other action taken, prior to the effective date of this act with respect to the name of a corporation, limited liability company, business trust, or limited partnership; and (iii) shall not be construed to require any such corporation, limited liability company, business trust, or limited partnership that was in compliance with applicable laws regarding the propriety of its name prior to the effective date of this act to change its name or take other action to comply with the requirements of this act."

Acts 2020, c. 1226, cl. 3 provides: "That the provisions of the first and second enactments of this act shall become effective July 1, 2021."

Acts 2021, Sp. Sess. I, c. 487, cl. 4 provides: "That the provisions of this act (i) shall be applied prospectively only; (ii) shall not affect the validity of any filing made, or other action taken, prior to July 1, 2021, with respect to the name of a stock corporation, nonstock corporation, limited liability company, business trust, or limited partnership; and (iii) shall not be construed to require any such stock corporation, nonstock corporation, limited liability company, business trust, or limited partnership that was in compliance with applicable laws regarding the distinguishability of its name prior to July 1, 2021, to change its name or take other action to comply with the requirements of this act."

The 2003 amendments. - The 2003 amendment by c. 592, effective October 1, 2004, rewrote subsection C; and added subsection F.

The 2005 amendments. - The 2005 amendment by c. 379, effective March 21, 2005, in subsection F, added "designation" and substituted "section and § 13.1-544.1 , subsection A of § 13.1-1012 , § 13.1-1104 , subdivision 1 of § 50-73.2, and subdivision A 2 of § 50-73.78" for "chapter, Chapters 7 ( § 13.1-542 et seq.), 10 ( § 13.1-801 et seq.), 13 ( § 13.1-1100 et seq.), and 14 ( § 13.1-1200 et seq.) of this title, and Chapter 2.1 ( § 50-73.1 et seq.) of Title 50"; and made minor stylistic changes.

The 2005 amendment by c. 765 deleted "of this section" following "subsection D" in subsection C; substituted "the Commission" for "its" and deleted "of this section" following "subsection C" in subsection D; and made stylistic changes throughout the section.

The 2009 amendments. - The 2009 amendment by c. 216, in subsection B, added subdivision B 2, redesignated former subdivision B 2 as subdivision B 3 and made a related change; and in subsection D, substituted "the" for "1. The," inserted "a" preceding "form" and deleted "2. [Repealed.]" at the end.

The 2012 amendments. - The 2012 amendment by c. 63 inserted present subdivision B 3; substituted "subsection A" for "subdivision 1" in subsection F; and made related changes.

The 2019 amendments. - The 2019 amendment by c. 734, in subdivision B 1, substituted "the corporation will conduct any" for "it will transact one."

The 2020 amendments. - The 2020 amendment by c. 1226, effective July 1, 2021, substituted "a limited partnership, or a protected series of a series limited liability company" for "or, a limited partnership" in subdivision B 3.

The 2021 Sp. Sess. I amendments. - The 2021 amendment by Sp. Sess. I, c. 487, effective July 1, 2021, substituted "Acts of Assembly of 1946" for "1946 Acts of Assembly" in subdivision B 2; and inserted "a registered limited liability partnership" in subdivision B 3. For applicability clause, see Editor's note.

Law review. - For article, "The New Virginia Stock Corporation Act: A Primer," see 20 U. Rich. L. Rev. 67 (1985).

Michie's Jurisprudence. - For related discussion, see 4B M.J. Corporations, § 36.

§ 13.1-631. Reserved name.

1. A person may apply to the Commission to reserve the exclusive use of a corporate name, including a designated name for a foreign corporation. The corporate name applied for need not comply with subsection A of § 13.1-630 . If the Commission finds that the corporate name applied for is distinguishable upon the records of the Commission, it shall reserve the name for the applicant's exclusive use for a 120-day period.
2. The owner of a reserved corporate name may renew the reservation for successive periods of 120 days each by filing with the Commission, during the 45-day period preceding the date of expiration of the reservation, a renewal application.
3. The owner of a reserved corporate name may transfer the reservation to another person by delivering to the Commission a notice of the transfer, signed by the applicant for whom the name was reserved, and specifying the name and address of the transferee.
4. A reserved corporate name may be used by its owner in connection with (i) the formation of, or an amendment to change the name of, a domestic stock or nonstock corporation, limited liability company, business trust, or limited partnership; (ii) an application for a certificate of authority or registration to transact business in the Commonwealth as a foreign stock or nonstock corporation, limited liability company, business trust, or limited partnership; or (iii) an amended application for such authority or registration, provided that the proposed name complies with the provisions of § 13.1-630 , 13.1-762 , 13.1-829 , 13.1-924 , 13.1-1012 , 13.1-1054 , 13.1-1214 , 13.1-1244 , 50-73.2, or 50-73.56, as the case may be. (Code 1950, § 13.1-7; 1956, c. 428; 1985, c. 522; 2005, c. 765; 2015, c. 444; 2019, c. 734.)

The 2005 amendments. - The 2005 amendment by c. 765 added "by filing with the Commission, during the 45-day period preceding the date of expiration of the reservation, a renewal application" at the end of subsection B.

The 2015 amendments. - The 2015 amendment by c. 444 in subsection A, deleted "whose corporate name is not available" at the end of the first sentence, added the second sentence, and substituted "distinguishable upon the records of the Commission" for "available" in the last sentence; substituted "signed" for "executed" in subsection C; added subsection D; and made minor stylistic changes.

The 2019 amendments. - The 2019 amendment by c. 734, in subsection D, inserted "of" following "the formation"; and made a stylistic change.

§ 13.1-632. Registered name.

1. A foreign corporation may register its corporate name, or its corporate name with any addition required by § 13.1-762 , if the name is distinguishable upon the records of the Commission.
2. A foreign corporation registers its corporate name, or its corporate name with any addition required by § 13.1-762 , by filing with the Commission (i) an application setting forth its corporate name, or its corporate name with any addition required by § 13.1-762 , the state or country and date of its incorporation, and a brief description of the nature of the business in which it is engaged; and (ii) a certificate setting forth that such corporation is in good standing, or a document of similar import, from the state or country of incorporation, executed by the official who has custody of the records pertaining to corporations.
3. Except as provided in subsection F, registration is effective for one year after the date an application is filed.
4. If the Commission finds that the corporate name applied for is available, it shall register the name for the applicant's exclusive use.
5. A foreign corporation whose registration is effective may renew it for the succeeding year by filing with the Commission, during the 60-day period preceding the date of expiration of the registration, a renewal application that complies with the requirements of subsection B. The renewal application is effective when filed in accordance with this section and, except as provided in subsection F, renews the registration for one year after the date the registration would have expired if such subsequent renewal of the registration had not occurred.
6. A foreign corporation whose registration is effective may thereafter obtain a certificate of authority to transact business in the Commonwealth under the registered name or consent in writing to the use of that name by a corporation thereafter incorporated under this chapter or by another foreign corporation thereafter authorized to transact business in the Commonwealth. The registration terminates when the domestic corporation is incorporated or the foreign corporation obtains a certificate of authority to transact business in the Commonwealth or consents to the authorization of another foreign corporation to transact business in the Commonwealth under the registered name.
7. A foreign corporation that has in effect a registration of its corporate name may release such name by filing a notice of release of a registered name with the Commission.

   (Code 1950, § 13.1-8; 1956, c. 428; 1981, c. 522; 1984, c. 771; 1985, c. 522; 1995, c. 114; 2005, c. 765; 2019, c. 734.)

Editor's note. - Acts 2019, c. 734, cl. 3, as amended by Acts 2020, c. 1226, cl. 5 provides: "That the provisions of this act (i) amending and reenacting §§ 13.1-615 , 13.1-615 .1, 13.1-616 , 13.1-632 , 13.1-721.1 , and 13.1-722.2 through 13.1-722.13 of the Code of Virginia; (ii) amending the Code of Virginia by adding in Chapter 9 of Title 13.1 an article numbered 1.1, consisting of sections numbered 13.1-614.1 through 13.1-614.8 , and by adding sections numbered 13.1-712.1 , 13.1-722.1:1, 13.1-722.7 :1, and 13.1-722.12 :1; and (iii) repealing §§ 13.1-722.4 , 13.1-722.7 , and 13.1-722.14 of the Code of Virginia shall become effective on July 1, 2021."

The 2019 amendments. - The 2019 amendment by c. 734, effective July 1, 2021, in subsection A, deleted "from the corporate names that are not available under subsection C of § 13.1-630 " from the end; deleted the designation for former subdivision B 1; deleted former subdivision B 2, which read: "Paying to the Commission a registration fee in the amount of $20"; redesignated the former final paragraph of subsection B as subsection C and redesignated former subsections C through F as D through G, respectively; in subsection E, deleted "and paying a renewal fee of $20" preceding "The renewal"; updated an internal reference; and made stylistic changes.

§ 13.1-633.

Repealed by Acts 2007, c. 771, cl. 2.

Editor's note. - Former § 13.1-633 , relating to property title records, was derived from Code 1950, § 13.1-127; 1956, c. 428; 1985, c. 522; 1996, c. 282; 2005, c. 765.

§ 13.1-634. Registered office and registered agent.

1. Each corporation shall continuously maintain in the Commonwealth:
   1. A registered office that may be the same as any of its places of business; and
   2. A registered agent, who shall be:
      1. An individual who is a resident of the Commonwealth and (i) either an officer or director of the corporation or (ii) a member of the Virginia State Bar and whose business office is identical with the registered office; or
      2. A domestic or foreign stock or nonstock corporation, limited liability company, or registered limited liability partnership authorized to transact business in the Commonwealth, the business office of which is identical with the registered office; provided such a registered agent (i) shall not be its own registered agent and (ii) shall designate by instrument in writing, acknowledged before a notary public, one or more natural persons at the office of the registered agent upon whom any process, notice or demand may be served and shall continuously maintain at least one such person at that office. Whenever any such person accepts service, a photographic copy of such instrument shall be attached to the return.
2. The sole duty of the registered agent is to forward to the corporation at its last known address any process, notice, or demand that is served on the registered agent.

   (Code 1950, § 13.1-9; 1956, c. 428; 1975, c. 407; 1976, c. 4; 1985, c. 522; 1993, c. 113; 2000, c. 162; 2001, cc. 517, 541; 2019, c. 734.)

The 2000 amendments. - The 2000 amendment by c. 162, in subdivision A 2 b, deleted "or" following "professional corporation," inserted "or registered limited liability partnership" preceding "registered" and inserted "with the Virginia State Bar" thereafter.

The 2001 amendments. - The 2001 amendments by cc. 517 and 541 are identical, and substituted "Commonwealth and either an officer" for "Commonwealth, is an officer" in subdivision a of subsection A; rewrote subdivision b of subsection A; and in subsection B, inserted "process" and "or demand."

The 2019 amendments. - The 2019 amendment by c. 734, in subdivision A 2 a., added the designations for clauses (i) and (ii); and made stylistic changes.

Law review. - For article, "The New Virginia Stock Corporation Act: A Primer," see 20 U. Rich. L. Rev. 67 (1985).

For article, "Corporate and Business Law," see 35 U. Rich. L. Rev. 499 (2001).

§ 13.1-635. Change of registered office or registered agent.

1. A corporation may change its registered office or registered agent, by filing with the Commission a statement of change on a form prescribed and furnished by the Commission that sets forth:
   1. The name of the corporation;
   2. The address of its current registered office;
   3. If the current registered office is to be changed, the post office address, including the street and number, if any, of the new registered office, and the name of the city or county in which it is to be located;
   4. The name of its current registered agent;
   5. If the current registered agent is to be changed, the name of the new registered agent; and
   6. That after the change or changes are made, the corporation will be in compliance with the requirements of § 13.1-634 .
2. A statement of change shall forthwith be filed with the Commission by a corporation whenever its registered agent dies, resigns or ceases to satisfy the requirements of § 13.1-634 .
3. A corporation's registered agent may sign a statement of change as required above if (i) the business address of the registered agent changes to another post office address within the Commonwealth or (ii) the name of the registered agent has been legally changed. A corporation's new registered agent may sign and submit for filing a statement of change as required above if (a) the former registered agent is a business entity that has been merged into the new registered agent, (b) the instrument of merger is on record in the office of the clerk of the Commission, and (c) the new registered agent is an entity that is qualified to serve as a registered agent pursuant to § 13.1-634 . In either instance, the registered agent or surviving entity shall forthwith file a statement of change as required above, which shall recite that a copy of the statement of change shall be mailed to the principal office address of the corporation on or before the business day following the day on which the statement of change is filed. (Code 1950, § 13.1-10; 1956, c. 428; 1958, c. 564; 1975, c. 500; 1976, c. 4; 1985, c. 522; 1986, c. 622; 1987, c. 183; 1988, c. 405; 2003, c. 597; 2010, cc. 434, 782; 2019, c. 734.)

Cross references. - For effect on corporate existence a failure to file a statement of change has on status of organization, see § 13.1-752 .

The 2003 amendments. - The 2003 amendment by c. 597 rewrote subsection C, which formerly read: "If a registered agent changes his business address to another place within this Commonwealth, he shall change the address of the registered office of any corporation of which he is a registered agent by filing a statement as required above except that it need be signed, either manually or in facsimile, only by the registered agent and must recite that a copy of the statement has been mailed to the corporation."

The 2010 amendments. - The 2010 amendment by c. 434, in subsection A, substituted "filing with" for "filing in the office of" and "prescribed and furnished" for "supplied"; in subsection B, substituted "filed with" for "filed in the office of"; and rewrote subsection C.

The 2010 amendment by c. 782 deleted "either manually or in facsimile" following "need be signed" in subsection C.

The 2019 amendments. - The 2019 amendment by c. 734, in subsection A, substituted "by filing" for "or both, upon filing"; in subsection C, substituted "statement of change" for "statement" five times.

§ 13.1-636. Resignation of registered agent.

1. A registered agent may resign as agent for the corporation by signing and filing with the Commission a statement of resignation stating (i) the name of the corporation, (ii) the name of the agent, and (iii) that the agent resigns from serving as registered agent for the corporation. The statement of resignation shall be accompanied by a certification that the registered agent will have a copy of the statement mailed to the principal office of the corporation by certified mail on or before the business day following the day on which the statement is filed. When the statement of resignation takes effect, the registered office is also discontinued.
2. A statement of resignation takes effect on the earlier of (i) 12:01 a.m. on the thirty-first day after the date on which the statement was filed with the Commission or (ii) the date on which a statement of change in accordance with § 13.1-635 to appoint a registered agent is filed with the Commission. (1985, c. 522; 2005, c. 765; 2010, c. 434; 2019, c. 734; 2020, c. 1226; 2021, Sp. Sess. I, c. 487.)

Cross references. - For the effect failing to file a statement of change, following a resignation under this section, can have on the status of the corporation, see § 13.1-752 and note thereunder.

Editor's note. - Acts 2020, c. 1226, cl. 3 provides: "That the provisions of the first and second enactments of this act shall become effective July 1, 2021."

Acts 2021, Sp. Sess. I, c. 487, cl. 4 provides: "That the provisions of this act (i) shall be applied prospectively only; (ii) shall not affect the validity of any filing made, or other action taken, prior to July 1, 2021, with respect to the name of a stock corporation, nonstock corporation, limited liability company, business trust, or limited partnership; and (iii) shall not be construed to require any such stock corporation, nonstock corporation, limited liability company, business trust, or limited partnership that was in compliance with applicable laws regarding the distinguishability of its name prior to July 1, 2021, to change its name or take other action to comply with the requirements of this act."

The 2005 amendments. - The 2005 amendment by c. 765, in the first sentence of subsection A, substituted "the agency" for "his agency," "a certification" for "his certification" and "the registered agent" for "he."

The 2010 amendments. - The 2010 amendment by c. 434, in subsection A, substituted "a statement" for "his statement" and "shall mail" for "has mailed" and inserted "on or before the business day following the day on which the statement is filed."

The 2019 amendments. - The 2019 amendment by c. 734 rewrote the section, which read: "A. A registered agent may resign the agency appointment by signing and filing with the Commission a statement of resignation accompanied by a certification that the registered agent shall mail a copy thereof to the principal office of the corporation by certified mail on or before the business day following the day on which the statement is filed. The statement of resignation may include a statement that the registered office is also discontinued. B. The agency appointment is terminated, and the registered office discontinued if so provided, on the thirty-first day after the date on which the statement was filed."

The 2020 amendments. - The 2020 amendment by c. 1226, effective July 1, 2021, substituted "When the statement of resignation takes effect" for "The statement of resignation may include a statement that" in the last sentence of subsection A.

The 2021 Sp. Sess. I amendments. - The 2021 amendment by Sp. Sess. I, c. 487, effective July 1, 2021, inserted "to appoint a registered agent" in subsection B. For applicability clause, see Editor's note.

§ 13.1-637. Service on corporation.

1. A corporation's registered agent is the corporation's agent for service of process, notice, or demand required or permitted by law to be served on the corporation. The registered agent may by instrument in writing, acknowledged before a notary public, designate a natural person or persons in the office of the registered agent upon whom any such process, notice or demand may be served and may, by instrument in writing, authorize service of process by facsimile by the sheriff, provided acknowledgement of receipt of service is returned by facsimile to the sheriff. Whenever any person so designated by the registered agent accepts service of process or whenever service is by facsimile, a photographic copy of the instruments designating the person or authorizing the method of service and receipt shall be attached to the return.
2. Whenever a corporation fails to appoint or maintain a registered agent in this Commonwealth, or whenever its registered agent cannot with reasonable diligence be found at the registered office, then the clerk of the Commission shall be an agent of the corporation upon whom service may be made in accordance with § 12.1-19.1 .
3. This section does not prescribe the only means, or necessarily the required means, of serving a corporation.

   (Code 1950, §§ 13-12, 13-14, 13.1-11; 1956, c. 428; 1985, c. 522; 1986, c. 622; 1991, c. 672; 1995, c. 411; 2001, cc. 517, 541.)

Cross references. - As to service on domestic corporations generally, see § 8.01-299 ; for foreign corporations, see § 8.01-301 .

The 2001 amendments. - The 2001 amendments by cc. 517 and 541 are identical, and in the second sentence of subsection A, inserted "natural" preceding "person or persons" and substituted "acknowledgement" for "acknowlegement."

Law review. - For 1985 survey of Virginia civil procedure and practice, see 19 U. Rich. L. Rev. 657 (1985).

Michie's Jurisprudence. - For related discussion, see 14B M.J. Process, § 23.

§ 13.1-638. Authorized shares.

1. The articles of incorporation shall set forth any classes of shares and series of shares within a class, and the number of shares of each class and series, that the corporation is authorized to issue. If more than one class or series of shares is authorized, the articles of incorporation shall prescribe a distinguishing designation for each class or series and, before the issuance of shares of a class or series, describe the terms, including the preferences, rights and limitations of that class or series. Except to the extent varied as permitted by this section or by subsection B of § 13.1-646 , all shares of a class or series shall have terms, including preferences, rights, and limitations, that are identical with those of other shares of the same class or series.
2. The articles of incorporation shall authorize:
   1. One or more classes or series of shares that together have full voting rights; and
   2. One or more classes or series of shares, which may be the same class or classes or series as those with voting rights, that together are entitled to receive the net assets of the corporation upon dissolution.
3. The articles of incorporation may authorize one or more classes or series of shares that:
   1. Have special, conditional, or limited voting rights, or no right to vote, except to the extent otherwise provided by this chapter;
   2. Are redeemable or convertible as specified in the articles of incorporation:
      1. At the option of the corporation, the shareholder, or another person or upon the occurrence of a specified event;
      2. For cash, indebtedness, securities, or other property; and
      3. At prices and in amounts specified or determined in accordance with a formula;
   3. Entitle the holders to distributions, calculated in any manner, including distributions that may be cumulative, noncumulative or partially cumulative;
   4. Have preference over any other class or series of shares with respect to distributions, including distributions upon the dissolution of the corporation; or
   5. Entitle the holders to other specified rights, including a right that no transaction of a specified nature shall be consummated while any such shares remain outstanding except upon the assent of the holders of all or a specified portion of such shares.
4. Any of the terms of shares may be made dependent upon facts objectively ascertainable outside the articles of incorporation in accordance with subsection L of § 13.1-604 .
5. Any of the terms of shares may vary among holders of the same class or series so long as such variations are expressly set forth in the articles of incorporation.
6. The description of the preferences, rights, and limitations of classes or series of shares in subsection C is not exhaustive.

   (Code 1950, §§ 13.1-12, 13.1-13; 1956, c. 428; 1958, c. 564; 1985, c. 522; 1990, c. 423; 2005, c. 765; 2019, c. 734.)

The 2005 amendments. - The 2005 amendment by c. 765 rewrote the section.

The 2019 amendments. - The 2019 amendment by c. 734, in subsection A, substituted "before the issuance" for "shall describe, prior to the issuance"; in subdivision B 1, substituted "full" for "unlimited"; in subdivision C 3, substituted "distributions that may be" for "dividends that may be"; in subdivision C 5, inserted "the holders of" following "assent of"; and made stylistic changes.

Law review. - For article, "The New Virginia Stock Corporation Act: A Primer," see 20 U. Rich. L. Rev. 67 (1985).

For survey on business and corporate law in Virginia for 1989, see 23 U. Rich. L. Rev. 491 (1989).

For 2007 annual survey article, "Corporate and Business Law," see 42 U. Rich. L. Rev. 273 (2007).

Michie's Jurisprudence. - For related discussion, see 4B M.J. Corporations, §§ 53, 146.

§ 13.1-639. Terms of class or series determined by board of directors.

1. If the articles of incorporation so provide, the board of directors, without shareholder action, may, by adoption of an amendment of the articles of incorporation:
   1. Classify any unissued shares into one or more classes or into one or more series within one or more classes;
   2. Reclassify any unissued shares of any class into one or more classes or into one or more series within one or more classes; or
   3. Reclassify any unissued shares of any series of any class into one or more classes or into one or more series within one or more classes.
2. If the board of directors acts pursuant to subsection A, it shall determine the terms, including the preferences, rights and limitations, to the same extent permitted under § 13.1-638 , of:
   1. Any class of shares before the issuance of any shares of that class, or
   2. Any series within a class before the issuance of any shares of that series.
3. Unless the articles of incorporation otherwise provide, the board of directors, without shareholder action, may, by adoption of an amendment of the articles of incorporation, delete from the articles of incorporation any provisions originally adopted by the board of directors without shareholder action fixing the terms, including the preferences, limitations, and rights of any class of shares or series within a class, provided there are no shares of such class or series then outstanding.
4. Unless the articles of incorporation otherwise provide, the board of directors of a corporation that is registered as an open-end management investment company under the federal Investment Company Act of 1940, without shareholder action, may, by adoption of an amendment of the articles of incorporation:
   1. Classify any unissued shares into one or more classes or into one or more series within one or more classes; or
   2. Reclassify any unissued shares of any class into one or more classes or into one or more series within one or more classes; or
   3. Reclassify any unissued shares of any series of any class into one or more classes or into one or more series within one or more classes.
5. When the board of directors has adopted an amendment of the articles of incorporation pursuant to subsection A, C, or D, the corporation shall file with the Commission articles of amendment pursuant to § 13.1-710 with the addition, when the board of directors has acted pursuant to subsection A, of any determination made pursuant to subsection B. If the Commission finds that the articles of amendment comply with the requirements of law and that all required fees have been paid, it shall issue a certificate of amendment. Shares of any class or series that are classified or reclassified under this section by the articles of amendment shall not be issued until the certificate of amendment is effective.
6. Whenever the articles of incorporation provide that the board of directors may classify or reclassify unissued shares in the manner prescribed in subsection A, the articles of incorporation shall be deemed to authorize the board of directors to adopt pursuant to this section an amendment to the articles of incorporation without shareholder action unless the articles of incorporation specifically state that shareholder action is required.

   (Code 1950, § 13.1-14; 1956, c. 428; 1975, c. 500; 1985, c. 522; 1988, c. 193; 2005, c. 765; 2006, c. 330; 2019, c. 734; 2021, Sp. Sess. I, c. 487.)

Editor's note. - For the Investment Company Act of 1940, referred to above, see 15 U.S.C.S. § 80a-1 et seq.

Acts 2021, Sp. Sess. I, c. 487, cl. 4 provides: "That the provisions of this act (i) shall be applied prospectively only; (ii) shall not affect the validity of any filing made, or other action taken, prior to July 1, 2021, with respect to the name of a stock corporation, nonstock corporation, limited liability company, business trust, or limited partnership; and (iii) shall not be construed to require any such stock corporation, nonstock corporation, limited liability company, business trust, or limited partnership that was in compliance with applicable laws regarding the distinguishability of its name prior to July 1, 2021, to change its name or take other action to comply with the requirements of this act."

The 2005 amendments. - The 2005 amendment by c. 765 rewrote the section.

The 2006 amendments. - The 2006 amendment by c. 330 rewrote former subsection C as subsection E; redesignated former subsection D as subsection C, and in subsection C inserted "without shareholder action," "by adoption of an amendment of the articles of incorporation" and deleted the last sentence, which read: "Such deletion shall be set forth in articles of amendment, which may become effective without shareholder action"; and added subsection D.

The 2019 amendments. - The 2019 amendment by c. 734, in subsection C, inserted "terms, including the" following "fixing the"; in subsection D, inserted "federal" preceding "Investment Company"; and rewrote subsection E, which read: "When the board of directors has adopted an amendment of the articles of incorporation pursuant to subsection A, C or D, the corporation shall file with the Commission articles of amendment that set forth: 1. The name of the corporation; 2. The text of the amendment, including any determination made pursuant to subsection B; 3. The date it was adopted; and 4. A statement that the amendment was duly adopted by the board of directors. If the Commission finds that the articles comply with the requirements of law and that all required fees have been paid, it shall issue a certificate of amendment. Shares of any class or series that are the subject of the articles of amendment shall not be issued until the certificate of amendment is effective."

The 2021 Sp. Sess. I amendments. - The 2021 amendment by Sp. Sess. I, c. 487, effective July 1, 2021, added subsection F. For applicability clause, see Editor's note.

Law review. - For survey on business and corporate law in Virginia for 1989, see 23 U. Rich. L. Rev. 491 (1989).

For 2007 annual survey article, "Corporate and Business Law," see 42 U. Rich. L. Rev. 273 (2007).

Michie's Jurisprudence. - For related discussion, see 4B M.J. Corporations, § 135.

§ 13.1-640. Issued and outstanding shares.

1. A corporation may issue the number of shares of each class or series authorized by the articles of incorporation. Shares that are issued are outstanding shares until they are reacquired, redeemed, converted, or canceled.
2. The reacquisition, redemption or conversion of outstanding shares is subject to the limitations of subsection C of this section and to § 13.1-653 .
3. At all times that shares of the corporation are issued and outstanding, one or more shares that together have full voting rights and one or more shares that together are entitled to receive the net assets of the corporation upon dissolution shall be outstanding.

   (1985, c. 522; 2019, c. 734.)

Editor's note. - Acts 2019, c. 734, cl. 4, as amended by Acts 2020, c. 1226, cl. 5 provides: "That until July 1, 2021, the term 'conversion,' when used in any provision of the first enactment of this act, shall be construed to mean 'entity conversion.'"

The 2019 amendments. - The 2019 amendment by c. 734, in subsection C, substituted "full voting rights" for "unlimited voting rights."

§ 13.1-641. Fractional shares.

1. Unless the articles of incorporation provide otherwise, a corporation may, if authorized by its board of directors, issue fractions of a share or in lieu of doing so may:
   1. Pay in cash the value of fractions of a share;

      2 Issue scrip in registered or bearer form entitling the holder to receive a full share upon surrendering enough scrip to equal a full share; or

      3. Arrange for disposition of fractional shares held by the shareholders.

2. Each certificate representing scrip shall be conspicuously labeled "Scrip" and shall contain the applicable information required by subsection B of § 13.1-647 .
3. The holder of a fractional share is entitled to exercise the rights of a shareholder, including the rights to vote and to receive distributions, including distributions upon dissolution. The holder of scrip is not entitled to any rights of a shareholder unless the scrip provides for them.
4. The board of directors may authorize the issuance of scrip subject to any condition, including that:
   1. The scrip will become void if not exchanged for full shares before a specified date; and
   2. The shares for which the scrip is exchangeable may be sold by the corporation and the proceeds paid to the scrip holders.
5. When a corporation is to pay in cash the value of fractions of a share such value shall be determined by the board of directors. A good faith judgment of the board of directors as to the value of a fractional share is conclusive.

   (Code 1950, § 13.1-21; 1956, c. 428; 1958, c. 564; 1966, c. 466; 1975, c. 500; 1984, c. 613; 1985, c. 522; 2005, c. 765; 2019, c. 734.)

The 2005 amendments. - The 2005 amendment by c. 765 inserted "of directors" following "the board" in subsection E.

The 2019 amendments. - The 2019 amendment by c. 734 rewrote subsection A, which read: "A. A corporation may, if authorized by its board of directors: 1. Issue fractions of a share or pay in money the value of fractions of a share; 2. Arrange for disposition of fractional shares by the shareholders; or 3. Issue scrip in registered or bearer form entitling the holder to receive a full share upon surrendering enough scrip to equal a full share"; in subsection B, inserted "applicable" preceding "information"; in subsection C, substituted "rights to vote and to receive distributions, including distributions upon" for "right to vote, to receive dividends, and to participate in the assets of the corporation upon," and substituted "any rights of a shareholder" for "of these rights"; in subsection D, substituted "condition, including that" for "condition considered desirable, including"; in subsection E, substituted "cash" for "money"; and made stylistic changes.

§ 13.1-642. Subscription for shares before incorporation.

1. A subscription for shares entered into before incorporation is irrevocable for six months unless the subscription agreement provides a longer or shorter period or all the subscribers agree to revocation.
2. The board of directors may determine the payment terms of subscriptions for shares that were entered into before incorporation, unless the subscription agreement specifies them. A call for payment by the board of directors must be uniform so far as practicable as to all shares of the same class or series, unless the subscription agreement specifies otherwise.
3. Shares issued pursuant to subscriptions entered into before incorporation are fully paid and nonassessable when the corporation receives the consideration specified in the subscription agreement.
4. If a subscriber defaults in payment of cash or property under a subscription agreement entered into before incorporation, the corporation may collect the amount owed as any other debt. The articles of incorporation, bylaws, or the subscription agreement may prescribe other penalties for nonpayment but a subscription and the installments already paid on it may not be forfeited unless the corporation demands the amount due by written notice to the subscriber and it remains unpaid for at least 20 days after the effective date of the notice.
5. If a subscription for unissued shares is forfeited for nonpayment under subsection D, the corporation may sell the shares subscribed for. If the shares are sold by reason of any forfeiture for more than the amount due on the subscription, the corporation shall pay the excess, after deducting the expense of sale, to the subscriber or the subscriber's representative.
6. A subscription agreement entered into after incorporation is a contract between the subscriber and the corporation subject to § 13.1-643 . (Code 1950, §§ 13-98, 13.1-15; 1956, c. 428; 1972, c. 580; 1975, c. 500; 1985, c. 522; 2005, c. 765; 2019, c. 734.)

The 2005 amendments. - The 2005 amendment by c. 765 substituted "20 days" for "twenty days" in subsection D; and deleted "of this section" following "subsection D" in subsection E.

The 2019 amendments. - The 2019 amendment by c. 734, in subsection A, substituted "a longer or shorter period" for "otherwise"; and in subsection D, substituted "cash" for "money."

Michie's Jurisprudence. - For related discussion, see 4B M.J. Corporations, §§ 77, 81, 84.

§ 13.1-643. Issuance of shares.

1. The powers granted in this section to the board of directors may be reserved to the shareholders by the articles of incorporation.
2. Any issuance of shares must be authorized by the board of directors. Shares may be issued for consideration consisting of any tangible or intangible property or benefit to the corporation, including cash, promissory notes, services performed, contracts for services to be performed, or other securities of the corporation.
3. Before the corporation issues shares, the board of directors, or if authorized by subdivision D 7 of § 13.1-689 , a committee of the board of directors or a senior executive officer, shall determine that the consideration received or to be received for the shares to be issued is adequate. That determination is conclusive insofar as the adequacy of consideration for the issuance of shares relates to whether the shares are validly issued, fully paid and nonassessable. When such a determination has been made and the corporation has received the consideration, the shares issued therefor are fully paid and nonassessable.
4. The corporation may place in escrow shares issued for a contract for future services or benefits or a promissory note, or make other arrangements to restrict the transfer of the shares, and may credit distributions in respect of the shares against their purchase price, until the services are performed, the benefits are received or the note is paid. If the services are not performed, the benefits are not received, or the note is not paid, the shares escrowed or restricted and the distributions credited may be canceled in whole or part.
5. Where it cannot be determined that outstanding shares are fully paid and nonassessable, there shall be a conclusive presumption that such shares are fully paid and nonassessable if the board of directors makes a good faith determination that there is no substantial evidence that the full consideration for such shares has not been paid.

   (Code 1950, §§ 13-97, 13-98, 13.1-15, 13.1-17; 1956, c. 428; 1958, c. 564; 1964, c. 352; 1972, c. 580; 1975, c. 500; 1985, c. 522; 2019, c. 734.)

The 2019 amendments. - The 2019 amendment by c. 734, in subsection C, substituted "Before the corporation issues shares, the board of directors, or if authorized by subdivision D 7 of § 13.1-689 , a committee of the board of directors or a senior executive officer, shall determine" for "A good faith determination by the board of directors" in the first sentence, inserted "That determination" and "for the issuance of shares" in the second sentence, deleted "the board of directors has made" following "When" and inserted "has been made" in the last sentence.

Michie's Jurisprudence. - For related discussion, see 4B M.J. Corporations, § 73.

§ 13.1-644. Liability of shareholders and others.

1. A purchaser from a corporation of the corporation's own shares is not liable to the corporation or the corporation's creditors with respect to the shares except to pay the consideration for which the shares were authorized to be issued as provided in § 13.1-643 or specified in the subscription agreement.
2. A person who becomes a transferee of shares in good faith and without knowledge that the consideration determined for the shares pursuant to § 13.1-643 or specified in the subscription agreement has not been paid is not personally liable for any unpaid portion of the consideration, but the initial transferor remains liable therefor.
3. An executor, administrator, conservator, guardian, trustee, assignee for the benefit of creditors, or receiver shall not, in any event, be personally liable to the corporation as transferee of a purchaser from the corporation of the corporation's own shares but the estate of the purchaser and the purchaser's assets in the hands of such personal representative shall be so liable.
4. A shareholder is not personally liable for any liabilities of the corporation, including liabilities arising from the acts of the corporation, except to the extent provided in a provision of the articles of incorporation permitted by subdivision B 3 (e) of § 13.1-619 .
5. No pledgee or other holder of shares as collateral security shall be personally liable as a shareholder.

   (Code 1950, §§ 13-97, 13.1-22; 1956, c. 428; 1975, c. 500; 1985, c. 522; 2019, c. 734.)

The 2019 amendments. - The 2019 amendment by c. 734, in subsection A, deleted "under § 13.1-642 " at the end; in subsection B, deleted "pursuant to § 13.1-642 " following "specified in the subscription agreement"; added subsection D; and made stylistic changes.

Michie's Jurisprudence. - For related discussion, see 3A M.J. Banks and Banking, § 15; 4B M.J. Corporations, §§ 56, 70, 72, 137.

§ 13.1-645. Share dividends.

1. Unless the articles of incorporation provide otherwise, shares may be issued pro rata and without consideration to the corporation's shareholders or to the shareholders of one or more classes or series of shares. An issuance of shares under this subsection is a share dividend.
2. Shares of one class or series may not be issued as a share dividend in respect of shares of another class or series unless (i) the articles of incorporation so authorize, (ii) a majority of the votes entitled to be cast by the class or series to be issued approve the issue, or (iii) there are no outstanding shares of the class or series to be issued. For purposes of this subsection, if a security convertible into or carrying a right to subscribe for or acquire shares of the class or series to be issued is outstanding, the holders shall be deemed to be holders of the class or series.
3. If the board of directors does not fix the record date for determining shareholders entitled to a share dividend, it is the date the board of directors authorizes the share dividend.

   (Code 1950, §§ 13-37, 13.1-19; 1956, c. 428; 1972, c. 580; 1975, c. 500; 1985, c. 522; 2019, c. 734.)

The 2019 amendments. - The 2019 amendment by c. 734, in subsection A, inserted "or shares" at the end of the first sentence.

Michie's Jurisprudence. - For related discussion, see 4B M.J. Corporations, § 114.

§ 13.1-646. Share rights, options, warrants, and other awards.

1. Subject to the provisions of § 13.1-651 , a corporation may issue rights, options or warrants for the purchase of shares or other securities of the corporation. Unless reserved to the shareholders in the articles of incorporation, the board of directors or, if authorized pursuant to subdivision D 7 of § 13.1-689 , a committee of the board of directors or a senior executive officer, may authorize the issuance of rights, options, or warrants and determine (i) the terms and conditions upon which the rights, options, or warrants are issued and (ii) the terms, including the consideration for which the shares or other securities are to be issued. The authorization for the corporation to issue such rights, options, or warrants constitutes authorization of the issuance of the shares or other securities for which the rights, options, or warrants are exercisable.
2. Notwithstanding the provisions of subsection A of § 13.1-638 , the terms and conditions of rights, options, or warrants issued by a corporation may include, without limitation, restrictions or conditions that (i) preclude or limit the exercise, transfer, or receipt thereof by designated persons or classes of persons or by any transferee or transferees of such persons or classes of persons or (ii) invalidate or void such rights, options, or warrants held by designated persons or classes of persons or by any transferee or transferees of such persons or classes of persons. Any action or determination by the board of directors or, if authorized pursuant to subdivision D 7 of § 13.1-689 , a committee of the board of directors, with respect to the issuance, the terms and conditions of or the redemption of rights, options, or warrants shall be subject to the provisions of § 13.1-690 and shall be valid if taken or determined in compliance therewith.
3. The board of directors may, subject to such limitations as the board of directors may establish, authorize one or more officers to (i) designate the recipients of rights, options, warrants, or other equity compensation awards that involve the issuance of shares and (ii) determine, within an amount and subject to any other limitations established by the board of directors and, if applicable, the shareholders, the number of such rights, options, warrants, or other equity compensation awards and the terms and conditions thereof to be received by the recipients, provided that an officer may not use such authority to designate himself as a recipient of such rights, options, warrants, or other equity compensation awards.

   (1985, c. 522; 1986, c. 74; 1988, c. 442; 1990, c. 423; 1992, c. 472; 2005, c. 765; 2010, c. 782; 2019, c. 734.)

The 2005 amendments. - The 2005 amendment by c. 765, in subsection A, in the first sentence, deleted "Unless reserved to the shareholders in the articles of incorporation and" at the beginning of the subsection, deleted "create or" following "corporation may," inserted "or other securities" and deleted "upon such terms and conditions and for such consideration, if any, and such purposes as may be approved by the board of directors" at the end thereof, and added the last two sentences; and in subsection B, deleted "and conditions" following "the terms," "created or" preceding "issued by," in the first sentence, and substituted "terms of or the redemption" for "terms and conditions or redemption" in the second sentence.

The 2010 amendments. - The 2010 amendment by c. 782 added subsection C.

The 2019 amendments. - The 2019 amendment by c. 734 inserted "and conditions" following "the terms" throughout; in subsection A, inserted "or, if authorized pursuant to subdivision D 7 of § 13.1-689 , a committee of the board of directors or a senior executive officer"; in subsection B, inserted the designation for clause (i), substituted "by any transferee or transferees of such persons or classes of persons or (ii)" for "that," inserted "or by any transferee or transferees of such persons or classes of persons" and "or, if authorized pursuant to subdivision D 7 of § 13.1-689 , a committee of the board of directors"; in subsection C, inserted "subject to such limitations as the board of directors may establish," inserted "of directors" following "the board," deleted "or any other person specified by the board of directors" following "to designate himself"; and made stylistic changes.

Law review. - For 1987 survey of Virginia business and corporate law, see 21 U. Rich. L. Rev. 645 (1987).

For 1991 survey of business and corporate law, see 25 U. Rich. L. Rev. 627 (1991).

§ 13.1-647. Form and content of certificates evidencing shares.

1. Shares may but need not be represented by certificates. Unless this chapter or another statute expressly provides otherwise, the rights and obligations of shareholders are identical regardless of whether their shares are represented by certificates.
2. At a minimum each share certificate shall state on its face:
   1. The name of the corporation and that it is organized under the law of the Commonwealth;
   2. The name of the person to whom issued; and
   3. The number and class of shares and the designation of the series, if any, the certificate represents.
3. If the corporation is authorized to issue different classes of shares or series of shares within a class, (i) the designations, rights, preferences, and limitations applicable to each class and series; (ii) any variations in rights, preferences, and limitations among the holders of the same class or series; and (iii) the authority of the board of directors to determine variations for future series shall be summarized on the front or back of each certificate for shares of such class or series. Alternatively, each certificate may state conspicuously on its front or back that the corporation will furnish the shareholder this information on request in writing and without charge.
4. Each share certificate shall be signed by two officers, who may be the same individual, designated in the bylaws or by the board of directors. Unless otherwise provided in the articles of incorporation or bylaws, any or all of the signatures on the certificate may be facsimile.
5. If the person who signed a share certificate no longer holds office when the certificate is issued, the certificate is nevertheless valid.

   (Code 1950, § 13.1-20; 1956, c. 428; 1958, c. 564; 1972, c. 580; 1984, c. 613; 1985, c. 522; 1986, c. 623; 1990, c. 227; 2005, c. 765; 2019, c. 734.)

The 2005 amendments. - The 2005 amendment by c. 765 substituted "this chapter" for "this Act" in subsection A; deleted "relative" following "the designations" in the first sentence of subsection C; substituted "such person" for "he" in the last sentence of subsection D; and substituted "corporation that" for "corporation which" in subsection E.

The 2019 amendments. - The 2019 amendment by c. 734 rewrote the section.

§ 13.1-648. Shares without certificates.

1. Unless the articles of incorporation or bylaws provide otherwise, the board of directors of a corporation may authorize the issuance of some or all of the shares of any or all of its classes or series without certificates. The authorization does not affect shares already represented by certificates until they are surrendered to the corporation.
2. Within a reasonable time after the issuance or transfer of shares without certificates, the corporation shall deliver to the shareholder a written statement of the information required on certificates by subsections B and C of § 13.1-647 , and, if applicable, § 13.1-649 . (Code 1950, § 13.1-20; 1956, c. 428; 1958, c. 564; 1972, c. 580; 1984, c. 613; 1985, c. 522; 2019, c. 734.)

The 2019 amendments. - The 2019 amendment by c. 734 substituted "issuance" for "issue" throughout; and in subsection B, substituted "deliver to" for "send."

§ 13.1-649. Restriction on transfer of shares and other securities.

1. The articles of incorporation, the bylaws, an agreement among shareholders, or an agreement between shareholders and the corporation may impose restrictions on the transfer or registration of transfer of shares of the corporation. A restriction does not affect shares issued before the restriction was adopted unless the holders of the shares are parties to the restriction agreement or voted in favor of the restriction.
2. A restriction on the transfer or registration of transfer of shares is valid and enforceable against the holder or a transferee of the holder if the restriction is authorized by this section and its existence is noted conspicuously on the front or back of the certificate or is contained in the information statement required by subsection B of § 13.1-648 . Unless so noted or contained, a restriction is not enforceable against a person without knowledge of the restriction.
3. A restriction on the transfer or registration of transfer of shares is authorized:
   1. To maintain the corporation's status when it is dependent on the number or identity of its shareholders;
   2. To preserve exemptions under federal or state securities law; or
   3. For any other reasonable purpose.
4. A restriction on the transfer or registration of transfer of shares may:
   1. Obligate the shareholder first to offer the corporation or other persons (separately, consecutively, or simultaneously) an opportunity to acquire the restricted shares;
   2. Obligate the corporation or other persons (separately, consecutively, or simultaneously) to acquire the restricted shares;
   3. Require the corporation, the holders of any class or series of its shares, or other persons to approve the transfer of the restricted shares, if the requirement is not manifestly unreasonable; or
   4. Prohibit the transfer of the restricted shares to designated persons or classes of persons, if the prohibition is not manifestly unreasonable.
5. For purposes of this section, "shares" includes any warrants, rights, or options to acquire any shares or any security or other obligation of the corporation convertible into or carrying a right to subscribe for or acquire any such shares or warrants, rights, or options to acquire any such shares.

   (1985, c. 522; 2005, c. 765; 2015, c. 611; 2019, c. 734.)

The 2005 amendments. - The 2005 amendment by c. 765 rewrote subsection E.

The 2015 amendments. - The 2015 amendment by c. 611 in subsection B, deleted "transfer of" following "A restriction on the transfer or registration of" at the beginning and "is contained" following "certificate or."

The 2019 amendments. - The 2019 amendment by c. 734, in subsection A, inserted "the" preceding "bylaws"; in subsection B, inserted "transfer of" preceding "shares of the corporation," inserted "is contained" following "certificate or," and inserted "or contained" following "noted"; in subdivision C 2, substituted "or" for "and" at the end; in subdivision D 3, substituted "class or series of its shares, or other persons" for "class of its shares, or another person"; in subsection E, inserted "or carrying a right to subscribe for or acquire"; and made stylistic changes.

Law review. - For survey on business and corporate law in Virginia for 1989, see 23 U. Rich. L. Rev. 491 (1989).

§ 13.1-650. Expense of issue.

A corporation may pay the expenses of selling or underwriting its shares, and of organizing or reorganizing the corporation, from the consideration received for shares.

(1985, c. 522.)

§ 13.1-651. Shareholders' preemptive rights.

1. Unless limited or denied in the articles of incorporation and subject to the limitations in subsection C, the shareholders of a corporation incorporated on or before December 31, 2005, have a preemptive right, granted on uniform terms and conditions prescribed by the board of directors to provide a fair and reasonable opportunity to exercise the right, to acquire proportional amounts of the corporation's unissued shares upon the decision of the board of directors to issue them.
2. Unless otherwise provided for in the articles of incorporation, the shareholders of a corporation incorporated after December 31, 2005, do not have a preemptive right to acquire the corporation's unissued shares.
3. Except to the extent that the articles of incorporation expressly provide otherwise, when there are preemptive rights, the following apply:
   1. The shareholders of the corporation have a preemptive right, granted on uniform terms and conditions prescribed by the board of directors to provide a fair and reasonable opportunity to exercise the right, to acquire proportional amounts of the corporation's unissued shares upon the decision of the board of directors to issue them.
   2. A shareholder may waive the shareholder's preemptive right. A waiver evidenced by a writing is irrevocable even though it is not supported by consideration.
   3. There is no preemptive right with respect to:
      1. Shares issued as compensation to officers, employees, or agents of the corporation, its subsidiaries, or affiliates;
      2. Shares issued to satisfy conversion or option rights created to provide compensation to directors, officers, employees, or agents of the corporation, its subsidiaries, or affiliates;
      3. Shares that are issued within six months from the effective date of the certificate of incorporation; or
      4. Shares issued for consideration other than for cash.
   4. Holders of shares of any class with preferential rights to distributions have no preemptive rights with respect to shares of any other class.
   5. Holders of shares of any class without preferential rights to distributions have no preemptive rights with respect to shares of any class with preferential rights to distributions unless the shares with preferential rights are convertible into, or carry a right to subscribe for or acquire, shares without preferential rights.
   6. Holders of shares of any class without general voting rights and without preferential rights to distributions have no preemptive rights with respect to shares of any class with general voting rights but without preferential rights to distributions.
   7. Shares subject to preemptive rights that are not acquired by shareholders may be issued to any person for a period of one year after being offered to shareholders at a consideration set by the board of directors that is not lower than the consideration set for the exercise of preemptive rights. An offer at a lower consideration or after the expiration of one year is subject to the shareholders' preemptive rights.
4. For purposes of this section, "shares" includes any warrants, rights, or options to acquire any shares or any security or other obligation of the corporation convertible into or carrying a right to subscribe for or acquire any such shares or warrants, rights, or options to acquire any such shares.

   (Code 1950, § 13.1-23; 1956, c. 428; 1975, c. 500; 1985, c. 522; 2005, c. 765; 2019, c. 734.)

Editor's note. - Acts 2019, c. 734, cl. 4, as amended by Acts 2020, c. 1226, cl. 5 provides: "That until July 1, 2021, the term 'conversion,' when used in any provision of the first enactment of this act, shall be construed to mean 'entity conversion.'"

The 2005 amendments. - The 2005 amendments by c. 765, in subsection A, substituted "the limitations in subsections D through G" for "the limitation in subsection C of this section" and inserted "incorporated on or before December 31, 2005"; added subsection B; redesignated former subsections B through H as subsections C through I; in present subsection C, substituted "the shareholder's" for "his"; and rewrote subsection I.

The 2019 amendments. - The 2019 amendment by c. 734, in subsection A, substituted "subsection C" for "subsections D through G"; in subsection B, substituted "do not have a preemptive right" for "have no preemptive right," and deleted "upon the decision of the board of directors to issue them" from the end; in subsection C, inserted "when there are preemptive rights, the following apply"; inserted subdivision C 1; added the designation for subdivision C 2; redesignated former subsections D through H as subdivisions C 3 through 7; in subdivision C 3, deleted "Unless expressly conferred in the article of incorporation" from the beginning; rewrote subdivision C 3 a., which read: "Shares issued to officers or employees of the corporation or of its subsidiaries pursuant to a plan approved by the shareholders"; inserted subdivisions C 3 b. and c.; rewrote subdivision C 3 d., which read: "Shares sold other than for money"; in subdivisions C 4 through 6, deleted "or assets" following "distributions" throughout; in subdivision C 4, inserted "other" preceding "class"; in subdivision C 6, inserted "of any class" following "shares"; in subdivision C 7, deleted "Except to the extent that the articles of incorporation expressly provide otherwise" from the beginning; redesignated former subsection I as D; in subsection D, deleted "such" preceding "shares or," inserted "or carrying a right to subscribe for or acquire" and deleted "into" preceding "warrants, rights"; and made stylistic changes.

Michie's Jurisprudence. - For related discussion, see 4B M.J. Corporations, §§ 54, 131.

§ 13.1-652. Corporation's acquisition of its own shares.

1. A corporation may acquire its own shares, and shares so acquired constitute authorized but unissued shares of the same class, if any, but undesignated as to series.
2. If the articles of incorporation prohibit the reissuance of acquired shares or if the board of directors has authorized the reduction in the number of authorized shares by the number of shares acquired, the number of authorized shares shall be reduced by the number of shares acquired effective when the certificate of amendment is effective. The corporation shall deliver to the Commission for filing articles of amendment that shall set forth:
   1. The name of the corporation;
   2. The reduction in the number of authorized shares, itemized by class and series;
   3. The total number of authorized shares, itemized by class and series, remaining after reduction of the shares; and
   4. A statement that the reduction in the number of authorized shares was required by the articles of incorporation or was adopted by the board of directors without shareholder approval pursuant to this section, with the date of adoption.
3. The articles of amendment may be adopted by the board of directors without shareholder action.
4. If the Commission finds that the articles of amendment comply with the requirements of law and that all required fees have been paid, it shall issue a certificate of amendment.

   (Code 1950, §§ 13.1-65, 13.1-66; 1956, c. 428; 1958, c. 564; 1985, c. 522; 2005, c. 765; 2019, c. 734; 2020, c. 1226.)

Editor's note. - Acts 2020, c. 1226, cl. 3 provides: "That the provisions of the first and second enactments of this act shall become effective July 1, 2021."

The 2005 amendments. - The 2005 amendment by c. 765 inserted "if any" following "same class" in subsection A.

The 2019 amendments. - The 2019 amendment by c. 734 rewrote subsection B, which read: "If the articles of incorporation prohibit the reissue of acquired shares, the number of authorized shares is reduced by the number of shares acquired, effective upon the issuance of a certificate of amendment. The corporation shall file with the Commission articles of amendment setting forth"; in subdivision B 4, substituted "required by the articles of incorporation or was adopted" for "authorized," and added "with the date of adoption" at the end; redesignated the former second paragraph of subdivision B 4 as subsection C, and redesignated former subsection C as D; and made stylistic changes.

The 2020 amendments. - The 2020 amendment by c. 1226, effective July 1, 2021, inserted "without shareholder approval pursuant to this section" in subdivision B 4.

§ 13.1-653. Distributions to shareholders.

1. The board of directors may authorize and the corporation may make distributions to its shareholders, subject to restriction by the articles of incorporation and the limitation in subsection C.
2. The board of directors may fix the record date for determining shareholders entitled to a distribution. If the board of directors does not fix the record date for determining shareholders entitled to a distribution, other than one involving a purchase, redemption, or other acquisition of the corporation's shares, the record date is the date the board of directors authorizes the distribution.
3. No distribution may be made if, after giving it effect:
   1. The corporation would not be able to pay its debts as they become due in the usual course of business; or
   2. The corporation's total assets would be less than the sum of its total liabilities plus (unless the articles of incorporation permit otherwise) the amount that would be needed, if the corporation were to be dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of shareholders whose preferential rights are superior to those receiving the distribution.
4. The board of directors may base a determination that a distribution is not prohibited under subsection C either on financial statements prepared on the basis of accounting practices and principles that are reasonable in the circumstances or on a fair valuation or other method that is reasonable in the circumstances. For any public corporation, reliance upon the most recent financial statements that have been prepared in accordance with generally accepted accounting principles in the United States shall be deemed to be reasonable in the circumstances if the financial statements have been audited by independent certified public accountants whose certification does not include a going concern qualification.
5. Except as provided in subsection G, the effect of a distribution under subsection C is measured:
   1. In the case of a distribution by purchase, redemption, or other acquisition of the corporation's shares, as of the earlier of (i) the date cash or other property is transferred or debt to a shareholder incurred by the corporation or (ii) the date the shareholder ceases to be a shareholder with respect to the acquired shares;
   2. In the case of any other distribution of indebtedness, as of the date the indebtedness is distributed; and
   3. In all other cases, as of (i) the date the distribution is authorized if the payment occurs within 120 days after the date of authorization or (ii) the date payment is made if it occurs more than 120 days after the date of authorization.
6. A corporation's indebtedness to a shareholder incurred by reason of a distribution made in accordance with this section is at parity with the corporation's indebtedness to its general, unsecured creditors except to the extent subordinated by agreement.
7. Indebtedness of a corporation, including indebtedness issued as a distribution, is not considered a liability for purposes of determinations under subsection C if its terms provide that payment of principal and interest is made only if and to the extent that payment of a distribution to shareholders could then be made under this section. If such indebtedness is issued as a distribution, each payment of principal or interest is treated as a distribution, the effect of which is measured on the date the payment is actually made.
8. This section shall not apply to distributions in liquidation under Article 16 (§ 13.1-742 et seq.). (Code 1950, §§ 13-206, 13.1-4, 13.1-43, 13.1-62; 1956, c. 428; 1962, c. 14; 1979, c. 175; 1985, c. 522; 2005, c. 765; 2019, c. 734.)

The 2005 amendments. - The 2005 amendment by c. 765 deleted "of this section" following "in subsection C" in subsection A; substituted "purchase, redemption or other acquisition of the corporation's" for "repurchase or reacquisition" in subsection B; in subsection D, deleted "of this section" following "subsection C" and added the last sentence; in subsection E, added "Except as provided in subsection G, the effect" and deleted "of this section" following "subsection C" and made a related change; and added subsections G and H.

The 2019 amendments. - The 2019 amendment by c. 734, in subsection B, inserted the first sentence, and in the second sentence, substituted "the record date" for "it"; in subdivision E 1, substituted "cash" for "money," and inserted "to a shareholder" preceding "incurred"; and made stylistic changes.

Law review. - For annual survey article, "Corporate and Business Law," see 46 U. Rich. L. Rev. 41 (2011).

Michie's Jurisprudence. - For related discussion, see 4B M.J. Corporations, § 108.

§ 13.1-654. Annual meeting.

1. Unless directors are elected by written consent in lieu of an annual meeting as permitted by § 13.1-657 , a corporation shall hold a meeting of shareholders annually at a time stated in or fixed in accordance with the bylaws, except that a corporation registered under the federal Investment Company Act of 1940 is not required to hold an annual meeting in any year in which the election of directors is not required to be held under the federal Investment Company Act of 1940 unless the articles of incorporation or bylaws of the corporation require an annual meeting to be held.
2. Except as otherwise determined by the board of directors acting pursuant to subsection C of § 13.1-660.2 , annual meetings may be held, in or outside of the Commonwealth at the place stated in or fixed in accordance with the bylaws or, if not inconsistent with the bylaws, in the notice of the meeting.
3. The failure to hold an annual meeting at the time stated in or fixed in accordance with the corporation's bylaws does not affect the validity of any corporate action.

   (Code 1950, § 13.1-25; 1956, c. 428; 1975, c. 500; 1985, c. 522; 1990, c. 228; 2003, c. 728; 2005, c. 765; 2007, c. 165; 2012, c. 706; 2017, c. 646; 2019, c. 734.)

Editor's note. - For the Investment Company Act of 1940, referred to above, see 15 U.S.C.S. § 80a-1 et seq.

The 2003 amendments. - The 2003 amendment by c. 728, in subsection A, deleted "if the articles of incorporation or bylaws of" following "except that," deleted "so provide, the corporation" following the first occurrence of "1940," and added "unless the articles of incorporation or bylaws of the corporation require an annual meeting to be held"; added present subsection C; and redesignated former subsection C as present subsection D.

The 2005 amendments. - The 2005 amendment by c. 765, in subsection A, inserted "a meeting of shareholders" following "shall hold" and deleted "a meeting of shareholders" following "with the bylaws."

The 2007 amendments. - The 2007 amendment by c. 165 added "Unless directors are elected by written consent in lieu of an annual meeting as permitted by § 13.1-657 " at the beginning of subsection A; and substituted "the Commonwealth" for "this Commonwealth" in subsection B.

The 2012 amendments. - The 2012 amendment by c. 706 deleted former subsection C, which read: "If the articles of incorporation or bylaws so provide, shareholders may participate in an annual meeting by use of any means of communication by which all shareholders participating may simultaneously hear each other during the meeting. A shareholder participating in a meeting by this means is deemed to be present in person at the meeting," and redesignated former subsection D as C.

The 2017 amendments. - The 2017 amendment by c. 646 substituted "Except as otherwise determined by the board of directors acting pursuant to subsection C of § 13.1-660.2 " for "Annual" in subsection B.

The 2019 amendments. - The 2019 amendment by c. 734, in subsection A, inserted "federal" preceding "Investment Company" twice; and rewrote subsection B, which read: "Except as otherwise determined by the board of directors acting pursuant to subsection C of § 13.1-660.2 , shareholders' meetings may be held at such place, in or out of the Commonwealth, as may be provided in the bylaws or, where not inconsistent the bylaws, in the notice of the meeting"; and made a stylistic change.

Law review. - For article, "The New Virginia Stock Corporation Act: A Primer," see 20 U. Rich. L. Rev. 67 (1985).

For survey article, "Corporate and Business Law," see 48 U. Rich. L. Rev. 39 (2013).

§ 13.1-655. Special meeting.

1. A corporation shall hold a special meeting of shareholders:
   1. On call of the chairman of the board of directors, the president, the board of directors, or the person or persons authorized to do so by the articles of incorporation or bylaws; or
   2. In the case of a corporation that is not a public corporation and that has 35 or fewer shareholders of record, if the holders of at least 20 percent of all the votes entitled to be cast on an issue proposed to be considered at the special meeting sign, date, and deliver to the corporation's secretary one or more written demands for the meeting describing the purpose or purposes for which it is to be held. For such a corporation, the articles of incorporation may provide for an increase or decrease in the percentage stated in this subdivision or may prohibit shareholders from calling a special meeting.
2. Unless otherwise provided in the articles of incorporation, a written demand for a special meeting may be revoked by a writing, including an electronic transmission, to that effect received by the corporation's secretary before the start of the special meeting.
3. If not otherwise fixed under § 13.1-656 or 13.1-660 , the record date for determining shareholders entitled to demand a special meeting shall be the first date on which a signed shareholder demand is delivered to the corporation's secretary. No written demand for a special meeting shall be effective unless, within 60 days of the earliest date on which such a demand delivered to the corporation's secretary as required by this section was signed, written demands signed by shareholders that satisfy the requirements of subsection A have been delivered to the corporation's secretary.
4. Except as otherwise determined by the board of directors acting pursuant to subsection C of § 13.1-660.2 , special meetings of shareholders may be held in or outside of the Commonwealth at the place stated in or fixed in accordance with the bylaws. If no place is so stated or fixed, special meetings shall be held at the corporation's principal office.
5. Only business within the purpose or purposes described in the meeting notice required by subsection C of § 13.1-658 may be conducted at a special meeting of shareholders. (Code 1950, § 13.1-25; 1956, c. 428; 1975, c. 500; 1985, c. 522; 2003, c. 728; 2005, c. 765; 2012, c. 706; 2017, c. 646; 2019, c. 734.)

The 2017 amendments. - The 2017 amendment by c. 646 substituted "a corporation that is not a public corporation and that has" for "corporations having" in subdivision A 2; and substituted "Except as otherwise determined by the board of directors acting pursuant to subsection C of § 13.1-660.2 " for "Special" in subsection D.

The 2003 amendments. - The 2003 amendment by c. 728 substituted "35" for "thirty-five" and "20" for "twenty" in subdivision A 2; added present subsection E; and redesignated former subection E as present subsection F.

The 2005 amendments. - The 2005 amendment by c. 765 added the last sentence in subdivision A 2; and rewrote subsection B.

The 2012 amendments. - The 2012 amendment by c. 706 deleted former subsection E, which read "If the articles of incorporation or bylaws so provide, shareholders may participate in a special shareholders' meeting by use of any means of communication by which all shareholders participating may simultaneously hear each other during the meeting. A shareholder participating in a meeting by this means is deemed to be present in person at the meeting," and redesignated former subsection F as E.

The 2019 amendments. - The 2019 amendment by c. 734, in subdivision A 2, in the last sentence, inserted "For such a corporation" at the beginning, and added "or may prohibit shareholders from calling a special meeting" at the end; in subsection B, substituted "corporation's secretary before the start of the" for "corporation prior to the receipt by the corporation of demands sufficient in number to require the holding of a"; rewrote subsections C and D, which read: "If not otherwise fixed under § 13.1-656 or 13.1-660 , the record date for determining shareholders entitled to demand a special meeting is the date the first shareholder signs the demand. D. Except as otherwise determined by the board of directors acting pursuant to subsection C of § 13.1-660 .2, shareholders' meetings may be held at such place in or out of this Commonwealth as may be provided in the bylaws or, where not inconsistent with the bylaws, in the notice of the meeting"; and made stylistic changes.

Applied in Hager v. Gibson, 188 Bankr. 194 (E.D. Va. 1995).

§ 13.1-656. Court-ordered meeting.

1. The circuit court of the city or county where a corporation's principal office is located or, if none in the Commonwealth, where its registered office is located, may, after notice to the corporation, order a meeting of shareholders to be held:
   1. On petition of any shareholder of the corporation if an annual meeting was not held or action by written consent in lieu of an annual meeting did not become effective within 15 months after its last annual meeting or, if there has been no annual meeting, the date of its incorporation; or
   2. On petition of one or more shareholders who signed a demand for a special meeting valid under subsection A of § 13.1-655 if:
      1. Notice of the special meeting was not given within 30 days after the first day on which the requisite number of such demands have been delivered to the corporation's secretary; or
      2. The special meeting was not held in accordance with the notice.
2. The court may fix the date, time, and place of the meeting, determine the shares entitled to participate in the meeting, specify a record date or dates for determining shareholders entitled to notice of and to vote at the meeting, prescribe the form and content of the meeting notice, fix the quorum required for specific matters to be considered at the meeting, or direct that the shares represented at the meeting constitute a quorum for action on those matters, and enter other orders necessary to accomplish the purpose or purposes of the meeting.

   (1985, c. 522; 2005, c. 765; 2007, c. 165; 2010, c. 782; 2019, c. 734.)

The 2005 amendments. - The 2005 amendment by c. 765 inserted "of shareholders" following "a meeting" in subsection A; substituted "15 months" for "fifteen months" in subdivision A 1; and substituted "30 days" for "thirty days" in subdivision A 2 a.

The 2007 amendments. - The 2007 amendment by c. 165 substituted "the Commonwealth" for "this Commonwealth" in the introductory paragraph of subsection A, and inserted "or action by written consent in lieu thereof did not become effective" in subdivision A 1.

The 2010 amendments. - The 2010 amendment by c. 782 inserted "or dates" following "record date" in subsection B.

The 2019 amendments. - The 2019 amendment by c. 734, in subdivision A 1, deleted "entitled to participate in an annual meeting" following "corporation," and substituted "of an annual meeting" for "thereof"; rewrote subdivision A 2, which read: "On petition of a shareholder who signed a demand for a special meeting that satisfies the requirements of § 13.1-655 if"; in subdivision A 2 a., substituted "first day on which the requisite number of such demands have been" for "date the demand was"; in subsection B, inserted "date" following "may fix the" and "fix the quorum required for specific matters to be considered at the meeting, or direct that the shares represented at the meeting constitute a quorum for action on those matters"; and made stylistic changes.

§ 13.1-657. Action without meeting.

1. Action required or permitted by this chapter to be taken at a shareholders' meeting may be taken without a meeting if the action is taken by all the shareholders entitled to vote on the action, in which case no action by the board of directors shall be required. The action shall be evidenced by one or more written consents bearing the date of signature and describing the action taken, signed by all the shareholders entitled to vote on the action and delivered to the corporation's secretary for filing by the corporation with the minutes of the meeting or corporate records.
2. The articles of incorporation may authorize action by shareholders by less than unanimous written consent, provided that the taking of such action is consistent with any requirements that may be set forth in the articles of incorporation, the bylaws, or this section; however, unless the articles of incorporation of a public corporation authorized action by shareholders by less than unanimous written consent as of April 1, 2018, the shareholders of the public corporation shall not be entitled to act by less than unanimous written consent even if so authorized by the articles of incorporation if the articles of incorporation or bylaws of such public corporation allow the holders of 30 percent or fewer of all votes entitled to be cast to demand the calling of a special meeting of shareholders. For action by shareholders by less than unanimous written consent to be valid:
   1. It shall be an action that this chapter requires or permits to be taken at a shareholders' meeting;
   2. The articles of incorporation shall authorize action by shareholders by less than unanimous written consent and, if a public corporation at the time of such authorization in addition to the other limitations in this subsection B, the inclusion of the authorization in the articles of incorporation was approved by each voting group entitled to vote by the greater of:
      1. The vote of that voting group required by the articles of incorporation to amend the articles of incorporation; or
      2. More than two-thirds of all votes that the voting group is entitled to cast on the amendment;
   3. At least 10 days before the holders of more than 10 percent of the outstanding shares of any voting group entitled to vote on the action to be taken have signed the written consent, the corporation's secretary shall have received a copy of the form of written consent setting forth the action to be taken;
   4. If required by this chapter, the articles of incorporation, or the bylaws, the board of directors shall have approved this action; and
   5. The holders of not less than the minimum number of outstanding shares of each voting group entitled to vote on the action that would be required to take the action at a shareholders' meeting at which all shares of each voting group entitled to vote on the action were present and voted shall have signed written consents setting forth the action to be taken.
3. A written consent shall bear the date on which each shareholder signed the consent and be delivered to the corporation's secretary for inclusion in the minutes or filing with the corporate records.
4. If not otherwise fixed under § 13.1-656 or 13.1-660 and if prior action by the board of directors is not required respecting the action to be taken without a meeting, the record date for determining the shareholders entitled to take action without a meeting shall be the first date on which a signed written consent is delivered to the corporation's secretary. If not otherwise fixed under § 13.1-656 or 13.1-660 and if prior action by the board of directors is required respecting the action to be taken without a meeting, the record date shall be the close of business on the day the action of the board is taken. No written consent shall be effective to take the action referred to in such consent unless, within 60 days of the earliest date on which a consent delivered to the corporation's secretary as required by this section was signed, written consents signed by the holders of shares having sufficient votes to take the corporate action have been delivered to the corporation's secretary. A written consent may be revoked by a writing to that effect delivered to the corporation's secretary before unrevoked written consents sufficient in number to take the corporate action are delivered to the corporation.
5. A consent signed pursuant to the provisions of this section has the effect of a vote taken at a meeting and may be described as such in any document. Unless the articles of incorporation, bylaws, or a resolution of the board of directors provides for a reasonable delay to permit tabulation of written consents, the action taken by written consent shall be effective when (i) written consents signed by the holders of shares having sufficient votes to adopt or take the action are delivered to the corporation's secretary or (ii) if an effective date is specified therein, as of such date provided such consent states the date of execution by the consenting shareholder.
6. For purposes of this section, a written consent and the signing thereof may be accomplished by one or more electronic transmissions.
7. Any person, whether or not then a shareholder, may provide that a consent in writing as a shareholder shall be effective at a future time, including the time when an event occurs, but such future time shall not be more than 60 days after such provision is made. Any such consent shall be deemed to have been made for purposes of this section at the future time so specified for the consent to be effective, provided that (i) the person is a shareholder at such future time and (ii) the person did not revoke the consent prior to such future time. Any such consent may be revoked, in the manner provided in subsection D, prior to its becoming effective.
8. If this chapter requires that notice of a proposed action be given to nonvoting shareholders and the action is to be taken by written consent of the voting shareholders, the corporation shall give its nonvoting shareholders written notice of the action not more than 10 days after (i) written consents sufficient to take the action have been delivered to the corporation's secretary, or (ii) such later date that tabulation of consents is completed pursuant to an authorization under subsection E. The notice shall reasonably describe the action taken and contain or be accompanied by the same material that, under any provision of this chapter, would have been required to be sent to nonvoting shareholders in a notice of a meeting at which the proposed action would have been submitted to the shareholders for action.
9. If action is taken by less than unanimous written consent of the voting shareholders, the corporation shall give its nonconsenting voting shareholders written notice of the action not more than 10 days after (i) written consents sufficient to take the action have been delivered to the corporation's secretary or (ii) such later date that tabulation of consents is completed pursuant to an authorization under subsection E. The notice shall reasonably describe the action taken and contain or be accompanied by the same material, that under any provision of this chapter, would have been required to be sent to voting shareholders in a notice of a meeting at which the action would have been submitted to the shareholders for action.
10. The notice requirements in subsections H and I shall not delay the effectiveness of actions taken by written consent, and a failure to comply with such notice requirements shall not invalidate actions taken by written consent, provided that this subsection shall not be deemed to limit judicial power to fashion any appropriate remedy in favor of a shareholder adversely affected by a failure to give such notice within the required time period.

    (Code 1950, § 13.1-28; 1956, c. 428; 1985, c. 522; 1999, c. 416; 2003, c. 728; 2005, c. 765; 2007, c. 165; 2008, c. 91; 2010, c. 782; 2012, c. 706; 2015, c. 611; 2018, cc. 267, 308; 2019, c. 734; 2020, c. 1226.)

Editor's note. - Acts 2020, c. 1226, cl. 3 provides: "That the provisions of the first and second enactments of this act shall become effective July 1, 2021."

The 1999 amendment, in subsection A, designated the first sentence as subdivision A 1 and in subdivision A 1, substituted "prior notice" for "action by the board of directors," and inserted "in which case no action by the board of directors shall be required," added subdivision A 2, designated the second through the fourth sentences as subdivision A 3, and in subdivision A 3, substituted "the shareholders entitled to take such action without a meeting" for "all the shareholders entitled to vote on the action" in the first sentence, in the second sentence, deleted "unanimous" preceding "written consent," and substituted "the requisite consents" for "all consents," and substituted "the requisite consents" for "all consents" in the third sentence; in subsection C, deleted "unanimous" preceding "vote of voting," and inserted "at a meeting" following "shareholders," added subsections D and E, redesignated former subsection D as subsection F and in subsection F, in the first sentence, deleted "unanimous" preceding "consent of" and substituted "action not less than five" for "proposed action at least ten," and deleted "proposed" preceding "action would" in the second sentence.

The 2003 amendments. - The 2003 amendment by c. 728 deleted former subsection E, defining "Public corporation" and redesignated former subsection F as present subsection E.

The 2005 amendments. - The 2005 amendment by c. 765 substituted "corporate action" for "action" throughout; substituted "this chapter" for "this Act" in subdivisions A 1, A 2 and subsection E, inserted "of this subsection" in subdivision A 2, in subdivision A 3, inserted "bearing the date of execution and" in the first sentence, deleted the former third sentence, which read: "A shareholder may withdraw consent only by delivering a written notice of withdrawal to the corporation prior to the time that the requisite consents are in the possession of the corporation"; rewrote subsection B; inserted the first sentence in subsection C; in subsection D, substituted "before it" for "before the action" in the first sentence and substituted "a vote" for "action" at the end of the second sentence; and in subsection E, inserted "proposed corporate" and substituted "before it" for "before the action" in the first sentence, and substituted "a vote" for "action" at the end of the second sentence.

The 2007 amendments. - The 2007 amendment by c. 165 rewrote the section.

The 2008 amendments. - The 2008 amendment by c. 91 inserted "adopted or" preceding "taken" and "adopt or" preceding "take" and deleted "corporate" preceding "action" throughout the section; inserted "adoption or taking of the" near the beginning of the second sentence of subsection A; deleted "corporate" preceding "action" in the third sentence of subsection C; rewrote subsection D; and deleted "not less than 15 days before the action becomes effective" following "written notice of the action" in the first sentence of subsections E and F.

The 2010 amendments. - The 2010 amendment by c. 782 deleted subsections G and H, which read: "G. An electronic transmission may be used to consent to an action, if the electronic transmission contains or is accompanied by information from which the corporation can determine the date on which the electronic transmission was signed and that the electronic transmission was authorized by the shareholder, the shareholder's agent or the shareholder's attorney-in-fact. "H. Delivery of a written consent to the corporation under this section is effected by delivery to the corporation's registered agent at its registered office or to the secretary of the corporation at its principal office."

The 2012 amendments. - The 2012 amendment by c. 706 rewrote subsection B.

The 2015 amendments. - The 2015 amendment by c. 611 substituted "shareholders"' for "shareholder's"; added subsection E; and redesignated former subsections E and F as subsections F and G.

The 2018 amendments. - The 2018 amendments by cc. 267 and 308 are nearly identical, and in subsection B, substituted "however, unless the articles of incorporation of a public corporation authorized action by shareholders by less than unanimous written consent as of April 1, 2018, the shareholders of the public corporation shall not be entitled to act by less than unanimous written consent even if so authorized by the articles of incorporation if the articles of incorporation or bylaws of such public corporation allow the holders of 30 percent or fewer of all votes entitled be cast to demand the calling of a special meeting of shareholders. For action by shareholders by less than unanimous written consent" for "For such action"; and in subdivision B 2, inserted "and in addition to the other limitations in this subsection B." Subsection B has been set out in the form above at the direction of the Virginia Code Commission.

The 2019 amendments. - The 2019 amendment by c. 734 deleted "adopted or" preceding "taken" throughout; in subsection A, deleted "adoption or the taking of the" preceding "action shall be," inserted "bearing the date of signature and" deleted "bearing the date of each signature" preceding "and deleted," and substituted "the corporation's secretary for filing by the corporation with the minutes of the meeting or corporate" for "the corporation for inclusion in the minutes or filing with the corporate"; in subsection B, deleted "corporation's" preceding "articles of" throughout; in subdivision B 3, inserted "At least 10 days" at the beginning, and substituted "signed" for "executed"; added subdivision B 4; redesignated the former second paragraph of subdivision B 5 as subsection C; in subsections C, D, and E, substituted "corporation's secretary" for "corporation" throughout; in subsection D, substituted "action by the board of directors" for "board action," substituted "action of the board is taken" for "resolution of the board taking such prior action is adopted," substituted "in such consent" for "therein," and inserted "corporate" preceding "action" twice; in subsection E, inserted "taken" following "a vote"; inserted subsection F; in subsection H and I, substituted "corporation's secretary" for "corporation" throughout; added subsection J; and made stylistic changes.

The 2020 amendments. - The 2020 amendment by c. 1226, effective July 1, 2021, substituted "or" for "and" at the end of subdivision B 2 a.

Law review. - For a review of corporate law in Virginia for year 1999, see 33 U. Rich. L. Rev. 841 (1999).

For 2007 annual survey article, "Corporate and Business Law," see 42 U. Rich. L. Rev. 273 (2007).

For annual survey article, "Corporate and Business Law," see 44 U. Rich. L. Rev. 307 (2009).

For survey article, "Corporate and Business Law," see 48 U. Rich. L. Rev. 39 (2013).

Applied in In re Old Grind Co., 99 Bankr. 317 (Bankr. W.D. Va. 1989).

CIRCUIT COURT OPINIONS

Stock purchase agreement that one shareholder did not sign held void. - Stock purchase agreement (SPA) was void for failing to comply with subdivision B 1 b of § 13.1-671.1 , since it was not signed by all the stockholders. That a majority shareholder signed, as an individual, a consent containing a resolution authorizing him as president of the corporation to sign agreements necessary to sell its stock of the company did not make his signature as president on the SPA his de facto individual signature. Booker v. Humphreys, 73 Va. Cir. 543, 2007 Va. Cir. LEXIS 12 (Lancaster County 2007).

§ 13.1-658. Notice of meeting.

1. Except as otherwise provided in subsection F, a corporation shall notify shareholders of the date, time, and place, if any, of each annual and special shareholders' meeting no fewer than 10 nor more than 60 days before the meeting date except that notice of a shareholders' meeting to act on an amendment of the articles of incorporation, a plan of merger, share exchange, domestication, or conversion, a proposed sale of assets pursuant to § 13.1-724 , or the dissolution of the corporation shall be given not fewer than 25 nor more than 60 days before the meeting date. If the board of directors has authorized participation by means of remote communication pursuant to § 13.1-660.2 for holders of any class or series of shares, the notice to the holders of such class or series of shares shall describe the means of remote communication to be used. The notice shall include the record date for determining the shareholders entitled to vote at the meeting, if such date is different from the record date for determining shareholders entitled to notice of the meeting. Unless this chapter or the articles of incorporation require otherwise, the corporation is required to give notice only to shareholders entitled to vote at the meeting as of the record date for determining the shareholders entitled to notice of the meeting.
2. Unless the articles of incorporation or this chapter requires otherwise, notice of an annual meeting of shareholders need not state the purpose or purposes for which the meeting is called.
3. Notice of a special meeting of shareholders shall state the purpose or purposes for which the meeting is called.
4. If not otherwise fixed under § 13.1-656 or 13.1-660 , the record date for determining shareholders entitled to notice of and to vote at an annual or special shareholders' meeting is the day before the first notice is delivered to shareholders.
5. Unless the bylaws require otherwise, if an annual or special shareholders' meeting is adjourned to a different date, time, or place, notice need not be given of the new date, time, or place if the new date, time, or place, if any, is announced at the meeting before adjournment. If a new record date for the adjourned meeting is or shall be fixed under § 13.1-660 , however, notice of the adjourned meeting shall be given not fewer than 10 days before the meeting date to shareholders entitled to vote at such adjourned meeting as of the record date fixed for notice of such adjourned meeting. (Code 1950, § 13.1-26; 1956, c. 428; 1958, c. 564; 1975, c. 500; 1984, c. 301; 1985, c. 522; 1999, c. 102; 2001, c. 545; 2002, cc. 1, 285; 2005, c. 765; 2010, c. 782; 2015, c. 611; 2017, c. 646; 2019, c. 734; 2021, Sp. Sess. I, c. 487.)

Editor's note. - Acts 2019, c. 734, cl. 4, as amended by Acts 2020, c. 1226, cl. 5 provides: "That until July 1, 2021, the term 'conversion,' when used in any provision of the first enactment of this act, shall be construed to mean 'entity conversion.'"

Acts 2021, Sp. Sess. I, c. 487, cl. 4 provides: "That the provisions of this act (i) shall be applied prospectively only; (ii) shall not affect the validity of any filing made, or other action taken, prior to July 1, 2021, with respect to the name of a stock corporation, nonstock corporation, limited liability company, business trust, or limited partnership; and (iii) shall not be construed to require any such stock corporation, nonstock corporation, limited liability company, business trust, or limited partnership that was in compliance with applicable laws regarding the distinguishability of its name prior to July 1, 2021, to change its name or take other action to comply with the requirements of this act."

The 1999 amendment added subsection G.

The 2001 amendments. - The 2001 amendment by c. 545, effective February 1, 2002, deleted "or" following "a plan of merger" and inserted "domestication or entity conversion" in subsection A. See Editor's note.

The 2002 amendments. - The 2002 amendment by c. 285 repealed subsection G, which formerly read: "A corporation having 300 or more record shareholders may notify shareholders of annual and special shareholders' meetings under this section by electronic transmission upon receipt by the secretary of the corporation of (i) a writing signed by the shareholder or (ii) a transmission of a telegram, cablegram or other means of electronic transmission from the shareholder, provided that any such telegram, cablegram or other means of electronic transmission must either set forth or be submitted with information from which the secretary can determine the telegram, cablegram or other means of electronic transmission was authorized by the shareholder, authorizing delivery of such notices by electronic transmission."

The 2005 amendments. - The 2005 amendment by c. 765, in subsection B, substituted "the articles of incorporation or this chapter requires" for "this chapter or the articles of incorporation require"; in subsection D, deleted "the close of business on" following "meeting is"; in subsection F, substituted "the shareholder's" for "his"; and made minor stylistic changes throughout the section.

The 2010 amendments. - The 2010 amendment by c. 782, in subsection A, added the third sentence and inserted "as of the record date for determining the shareholders entitled to notice of the meeting" in the last sentence; and substituted "shareholders entitled to vote at such adjourned meeting as of the record date fixed for notice of such adjourned meeting" for "persons who are shareholders as of the new record date" in subsection E.

The 2015 amendments. - The 2015 amendment by c. 611 inserted "not less than 10 days before the meeting date" in subsection E and substituted "shareholders"' for "shareholder's" in subsection F.

The 2017 amendments. - The 2017 amendment by c. 646 inserted "if any" in the first sentence of subsections A and D.

The 2019 amendments. - The 2019 amendment by c. 734, in subsection A, inserted "Except as otherwise provided in subsection F" at the beginning, substituted "meeting no fewer than" for "meeting. Such notice shall be given no less than," deleted "entity" preceding "conversion," substituted "fewer" for "less" preceding "than 25," and inserted the second sentence; in subsections B and C, inserted "of shareholders" following "meeting"; in subsection D, inserted "shareholders"' preceding "meeting," and substituted "the first notice is delivered to" for "the effective date of the notice to"; in subsection E, inserted "shareholders"' preceding "meeting is," inserted "of the new date, time, or place" following "be given," deleted "not less than 10 days before the meeting date" preceding "notice of," and substituted "not fewer than 10 days before the meeting date" for "under this section"; and made stylistic changes.

The 2021 Sp. Sess. I amendments. - The 2021 amendment by Sp. Sess. I, c. 487, effective July 1, 2021, deleted subsection F, which read: "Notwithstanding the foregoing, no notice of a shareholders' meeting need be given to a shareholder if (i) an annual report and proxy statements for two consecutive annual meetings of shareholders or (ii) all, and at least two, checks in payment of dividends or interest on securities during a 12-month period, have been sent by first-class United States mail, addressed to the shareholder at the shareholder's address as it appears on the share transfer books of the corporation, and returned undeliverable. The obligation of the corporation to give notice of shareholders' meetings to any such shareholder shall be reinstated once the corporation has received a new address for such shareholder for entry on its share transfer books." For applicability clause, see Editor's note.

Law review. - For 2002 survey of Virginia technology law, see 37 U. Rich. L. Rev. 341 (2002).

§ 13.1-659. Waiver of notice.

1. A shareholder may waive any notice required by this chapter, the articles of incorporation, or bylaws before or after the date and time stated in the notice. The waiver shall be in writing, be signed by the shareholder entitled to the notice, and be delivered to the corporation's secretary for filing by the corporation with the minutes or corporate records.
2. A shareholder's attendance at a meeting:
   1. Waives objection to lack of notice or defective notice of the meeting, unless the shareholder at the beginning of the meeting objects to holding the meeting or transacting business at the meeting; and
   2. Waives objection to consideration of a particular matter at the meeting that is not within the purpose or purposes described in the meeting notice, unless the shareholder objects to considering the matter when it is presented.

      (Code 1950, § 13.1-27; 1956, c. 428; 1985, c. 522; 2019, c. 734.)

The 2019 amendments. - The 2019 amendment by c. 734, in subsection A, substituted "stated in the" for "of the meeting that is the subject of such," and substituted "the corporation's secretary for filing by the corporation with the minutes or corporate" for "the secretary of the corporation for inclusion in the minutes or filing with the corporate."

§ 13.1-660. Record date for meeting.

1. The bylaws may fix or provide the manner of fixing in advance the record date or dates for one or more voting groups to determine the shareholders entitled to notice of a shareholders' meeting, to demand a special meeting, to vote or take action by written consent, or to take any other action. If the bylaws do not fix or provide the manner of fixing a record date, the board of directors may fix in advance the record date or dates.
2. A record date fixed under this section may not be more than 70 days before the meeting or action requiring a determination of shareholders.
3. A determination of shareholders entitled to notice of or to vote at a shareholders' meeting is effective for any adjournment of the meeting unless the board of directors fixes a new record date or dates, which it shall do if the meeting is adjourned to a date more than 120 days after the date fixed for the original meeting.
4. If a court orders a meeting adjourned to a date more than 120 days after the date fixed for the original meeting, it may provide that the original record date or dates continue in effect or it may fix a new record date or dates.
5. The record dates for a shareholders' meeting fixed by or in the manner provided in the bylaws or by the board of directors shall be the record date for determining shareholders entitled both to notice of and to vote at the shareholders' meeting, unless in the case of a record date fixed by the board of directors and to the extent not prohibited by the bylaws, the board of directors, at the time it fixes the record date for shareholders entitled to notice of the meeting, fixes a later record date on or before the date of the meeting to determine the shareholders entitled to vote at the meeting.

   (Code 1950, §§ 13-192, 13.1-29; 1952, c. 88; 1956, c. 428; 1985, c. 522; 2005, c. 765; 2010, c. 782; 2019, c. 734.)

The 2005 amendments. - The 2005 amendment by c. 765 deleted "a future date" following "may fix" and added "the date on which it takes such action or a future date" in the second sentence of subsection A; and substituted "70 days" for "seventy days" in subsection B.

The 2010 amendments. - The 2010 amendment by c. 782 inserted "or dates" in subsections A and C; substituted "or dates continue" for "continues" in subsection D; and added subsection E.

The 2019 amendments. - The 2019 amendment by c. 734 rewrote subsection A, which read: "The bylaws may fix or provide the manner of fixing in advance the record date or dates for one or more voting groups in order to make a determination of shareholders for any purpose. If the bylaws do not fix or provide for fixing a record date, the board of directors of the corporation may fix as the record date the date on which it takes such action or a future date"; in subsection E, inserted "of directors" following "the board"; and made a stylistic change.

§ 13.1-660.1. Conduct of the meeting.

1. At each meeting of shareholders, a chairman shall preside. The chairman shall be appointed as provided in the articles of incorporation, bylaws, or, in the absence of such provision, by the board of directors.
2. Unless the articles of incorporation or bylaws provide otherwise, the chairman shall determine the order of business and shall have the authority to establish rules for the conduct of the meeting.
3. The chairman of the meeting shall announce at the meeting when the polls open and close for each matter voted upon. If no announcement is made, the polls shall be deemed to have opened at the beginning of the meeting and closed upon the final adjournment of the meeting.

   (2005, c. 765; 2019, c. 734.)

The 2019 amendments. - The 2019 amendment by c. 734 substituted "bylaws, or, in the absence of such provision" for "bylaws or, in the absence of such a provision" in subsection A.

§ 13.1-660.2. Remote participation in shareholders' meetings.

1. Shareholders of any class or series of shares may participate in any meeting of shareholders by means of remote communication to the extent the board of directors authorizes such participation for such class or series. Participation as a shareholder by means of remote communication shall be subject to such guidelines and procedures as the board of directors adopts.
2. Shareholders participating in a shareholders' meeting by means of remote communication shall be deemed present and may vote at such a meeting if the corporation has implemented reasonable measures to:
   1. Verify that each person participating remotely as a shareholder is a shareholder or a shareholder's proxy; and
   2. Provide such shareholders a reasonable opportunity to participate in the meeting and to vote on matters submitted to the shareholders, including an opportunity to read or hear the proceedings of the meeting, substantially concurrently with such proceedings.
3. Unless the articles of incorporation or bylaws require the meeting of shareholders to be held at a place, the board of directors may determine that any meeting of shareholders shall not be held at any place and shall instead be held solely by means of remote communication in conformity with subsection B.

   (2010, c. 782; 2017, c. 646; 2019, c. 734.)

The 2017 amendments. - The 2017 amendment by c. 646 inserted "or a shareholder's proxy" in subdivision B 1; deleted "to communicate, and" preceding "to read" in subdivision B 2; and added subsection C.

The 2019 amendments. - The 2019 amendment by c. 734, in subsection A, inserted "of shares" following "any class or series" inserted "as a shareholder" following "Participation" and deleted "and shall be in conformity with subsection B" at the end; in subdivision B 1, inserted "as a shareholder"; and made stylistic changes.

Law review. - For survey article, "Corporate and Business Law," see 48 U. Rich. L. Rev. 39 (2013).

§ 13.1-661. Shareholders' list for meeting.

1. After fixing a record date for a meeting, a corporation shall prepare an alphabetical list of the names of all its shareholders who are entitled to notice of a shareholders' meeting. If the board of directors fixes a different record date under subsection E of § 13.1-660 to determine the shareholders entitled to vote at the meeting, a corporation also shall prepare an alphabetical list of the names of all its shareholders who are entitled to vote at the meeting. A list shall be arranged by voting group, and within each voting group by class or series of shares, and show the address of and number of shares held by each shareholder. Nothing contained in this subsection shall require the corporation to include on such list the electronic mail address or other electronic contact information of a shareholder.
2. The shareholders' list for notice shall be available for inspection by any shareholder, beginning two business days after notice of the meeting is given for which the list was prepared and continuing through the meeting, (i) at the corporation's principal office or at a place identified in the meeting notice in the county or city where the meeting will be held or (ii) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting. In the event that the corporation determines to make the list available on an electronic network, the corporation may take reasonable steps to ensure that such information is available only to shareholders of the corporation. A shareholders' list for voting shall be similarly available for inspection promptly after the record date for voting. The original share transfer books shall be prima facie evidence as to who are the shareholders entitled to examine such list or to vote at any meeting of shareholders. A shareholder, or the shareholder's agent or attorney, is entitled on written demand to inspect and, subject to the requirements of subsection D of § 13.1-771 , to copy a list, during regular business hours and at the shareholder's expense, during the period it is available for inspection.
3. If the meeting is to be held at a place, the corporation shall make the list of shareholders entitled to vote available at the meeting, and any shareholder, or the shareholder's agent or attorney, is entitled to inspect the list at any time during the meeting or any adjournment. If the meeting is to be held solely by means of remote communication, then such list shall also be open to such inspection during the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of the meeting.
4. If the corporation refuses to allow a shareholder or the shareholder's agent or attorney to inspect a shareholders' list before or at the meeting, or to copy a list as permitted by subsection B, the circuit court of the county or city where the corporation's principal office, or if none in the Commonwealth its registered office, is located, on application of the shareholder, may summarily order the inspection or copying at the corporation's expense and may postpone the meeting for which the list was prepared until the inspection or copying is complete.
5. Refusal or failure to prepare or make available the shareholders' list does not affect the validity of action taken at the meeting.

   (Code 1950, § 13.1-30; 1956, c. 428; 1964, c. 418; 1975, c. 500; 1985, c. 522; 2010, c. 782; 2012, c. 706; 2017, c. 646; 2019, c. 734; 2021, Sp. Sess. I, c. 487.)

Editor's note. - Acts 2021, Sp. Sess. I, c. 487, cl. 4 provides: "That the provisions of this act (i) shall be applied prospectively only; (ii) shall not affect the validity of any filing made, or other action taken, prior to July 1, 2021, with respect to the name of a stock corporation, nonstock corporation, limited liability company, business trust, or limited partnership; and (iii) shall not be construed to require any such stock corporation, nonstock corporation, limited liability company, business trust, or limited partnership that was in compliance with applicable laws regarding the distinguishability of its name prior to July 1, 2021, to change its name or take other action to comply with the requirements of this act."

The 2010 amendments. - The 2010 amendment by c. 782 rewrote the section.

The 2012 amendments. - The 2012 amendment by c. 706 inserted the third sentence of subsection B.

The 2017 amendments. - The 2017 amendment by c. 646 substituted "If the meeting is to be held at a place, the" for "The" in subsection C; and inserted "as provided in subsections B and C" in subsection D.

The 2019 amendments. - The 2019 amendment by c. 734, in subsection A, inserted "voting" preceding "group by," and added the last sentence; in subsection B, substituted "of" for "set forth in"; in subsection C, deleted "If the meeting is to be held at a place" at the beginning; in subsection D, deleted "the shareholder's" preceding "attorney," and deleted "as provided in subsections B and C" preceding "or to copy"; and made stylistic changes.

The 2021 Sp. Sess. I amendments. - The 2021 amendment by Sp. Sess. I, c. 487, effective July 1, 2021, added "or (ii) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting. In the event that the corporation determines to make the list available on an electronic network, the corporation may take reasonable steps to ensure that such information is available only to shareholders of the corporation" in subsection B; in subsection C, inserted "If the meeting is to be held at a place" in the first sentence and added the second sentence; and made stylistic changes. For applicability clause, see Editor's note.

§ 13.1-662. Voting entitlement of shares.

1. Except as provided in subsections B, C, D, and E or unless the articles of incorporation provide otherwise, each outstanding share, regardless of class or series, is entitled to one vote on each matter voted on at a shareholders' meeting. Only shares are entitled to vote.
2. Unless the articles of incorporation provide otherwise, in the election of directors each outstanding share, regardless of class or series, is entitled to one vote for as many persons as there are directors to be elected at that time and for whose election the shareholder has a right to vote.
3. Redeemable shares are not entitled to vote after delivery of written notice of redemption is effective and a sum sufficient to redeem the shares has been deposited with a bank, trust company, or other financial institution under an irrevocable obligation to pay the holders the redemption price on surrender of the shares.
4. Shares of a corporation are not entitled to vote if they are owned directly or indirectly through an entity of which a majority of the voting power is held directly or indirectly by the corporation or that is otherwise controlled by the corporation.
5. If a corporation holds in a fiduciary capacity its own shares directly, or indirectly through an entity of which a majority of the voting power is held directly or indirectly by the corporation or that is otherwise controlled by the corporation, such shares shall not be deemed to be outstanding and entitled to vote unless:
   1. The corporation has authority to vote the shares only in accordance with directions of the principal or beneficiary; or
   2. A co-fiduciary exists, pursuant to § 6.2-1011 or otherwise, in which event the co-fiduciary may vote the shares.
6. Shares standing in the name of another corporation, domestic or foreign, may be voted by such officers, agent, or proxy as the bylaws of such corporation may prescribe, or, in the absence of such provision, as the board of directors of such corporation may determine.
7. Shares standing in the name of a partnership may be voted by any partner. Shares standing in the name of a limited liability company may be voted as the articles of organization or an operating agreement may prescribe, or in the absence of any such provision as the managers, or if there are no managers, the members of the limited liability company may determine.
8. Shares held by three or fewer persons as joint tenants or tenants in common or tenants by the entirety may be voted by any of such persons. If more than one of such tenants votes such shares, the vote shall be divided among them in proportion to the number of such tenants voting.
9. Shares held by an administrator, executor, guardian, conservator, committee, or curator representing the shareholder may be voted by such person without a transfer of such shares into such person's name. Shares standing in the name of a trustee may be voted by the trustee, but no trustee is entitled to vote shares held by the trustee without a transfer of such shares into the trustee's name.
10. Shares standing in the name of a receiver or a trustee in proceedings under the federal Bankruptcy Reform Act of 1978 may be voted by such person. Shares held by or under the control of a receiver or a trustee in proceedings under the federal Bankruptcy Reform Act of 1978 may be voted by such person without the transfer thereof into such person's name if authority to do so is contained in an order of the court by which such person was appointed.
11. Nothing herein contained shall prevent trustees or other fiduciaries holding shares registered in the name of a nominee pursuant to § 6.2-1010 from causing such shares to be voted by such nominee as the trustee or other fiduciary may direct. Such nominee may vote shares as directed by a trustee or other fiduciary without the necessity of transferring the shares to the name of the trustee or other fiduciary.
12. A shareholder whose shares are pledged is entitled to vote such shares until the shares have been transferred into the name of the pledgee, and thereafter the pledgee is entitled to vote the shares so transferred.
13. The articles of incorporation may provide that the holders of bonds or debentures shall be entitled to vote on specified matters and such right shall not be terminated except upon consent of the holders of two-thirds in aggregate principal amount.
14. Subject to the provisions of § 13.1-665 , when shares are held by more than one of the fiduciaries referred to in this section, the shares shall be voted as determined by a majority of such fiduciaries, except that (i) if they are equally divided as to a vote, the vote of the shares is divided equally and (ii) if only one of such fiduciaries is present in person or by proxy at a meeting, the fiduciary shall be entitled to vote all the shares. A proxy apparently executed by one of several of such fiduciaries shall be presumed to be valid until challenged and the burden of proving invalidity shall rest on the challenger. (Code 1950, §§ 13-192 to 13-198, 13-203, 13.1-32; 1956, c. 428; 1958, c. 564; 1975, c. 500; 1984, c. 366; 1985, c. 522; 1990, c. 267; 1997, c. 801; 2005, c. 765; 2019, c. 734.)

Editor's note. - The Bankruptcy Reform Act of 1978, referred to above, is codified, generally, as 11 USCS § 1101 et seq.

Acts 1997, c. 801, cl. 2, provides: "That the provisions of this act shall become effective on January 1, 1998. The powers granted and duties imposed pursuant to this act shall apply prospectively to guardians and conservators appointed by court order entered on or after that date, or modified on or after that date if the court so directs, without regard to when the petition was filed. The procedures specified in this act governing proceedings for appointment of a guardian or conservator or termination or other modification of a guardianship shall apply on and after that date without regard to when the petition therefor was filed or the guardianship or conservatorship created."

Effective October 1, 2010, " § 6.2-1011 " was substituted for " § 6.1-31.2" and " § 6.2-1010 " for " § 6.1-31," to conform to the recodification of Title 6.1 by Acts 2010, c. 794.

Acts 2019, c. 734, cl. 4, as amended by Acts 2020, c. 1226, cl. 5 provides: "That until July 1, 2021, the term 'conversion,' when used in any provision of the first enactment of this act, shall be construed to mean 'entity conversion.'"

The 1997 amendment, effective January 1, 1998, inserted "conservator" preceding "committee or curator" in subsection I.

The 2005 amendments. - The 2005 amendment by c. 765, in subsection C, deleted "Redeemable," preceding, and inserted "that have been called for redemption" following "Shares" in the first sentence, and substituted "a specified period, not less than two" for "five" in the second sentence; added the last sentence of subsection G; in subsection I, substituted "such person" for "him" following "voted by," "such person's" for "his" following "shares into" in the first sentence and "the trustee" for "him" twice and "the trustee's" for "his" in the second sentence; in subsection J, substituted "such person" for "him" in the first sentence; and substituted "when shares" for "where shares" near the beginning of subsection N.

The 2019 amendments. - The 2019 amendment by c. 734, in subsections A and B, inserted "or series" following "class"; in subsection A, added the second sentence; rewrote subsections C through E; in subsection H, substituted "three or fewer" for "two or more"; in subsection J, inserted "federal" preceding "Bankruptcy" twice; and made stylistic changes.

Law review. - For article, "The Status of the At-Will Employment Doctrine in Virginia after Bowman v. State Bank of Keysville," see 20 U. Rich. L. Rev. 267 (1986).

§ 13.1-663. Proxies.

1. A shareholder may vote the shareholder's shares in person or by proxy.
2. A shareholder, or the shareholder's agent or attorney-in-fact, may appoint a proxy to vote or otherwise act for the shareholder by signing an appointment form or by an electronic transmission. An electronic transmission shall contain or be accompanied by information from which the recipient can determine the date of the transmission and that the transmission was authorized by the sender or the sender's agent or attorney-in-fact.
3. An appointment of a proxy is effective when a signed appointment form or an electronic transmission of the appointment is received by the inspectors of election or the officer or agent of the corporation authorized to count votes. An appointment is valid for the term provided in the appointment form and, if no term is provided, is valid for 11 months unless the appointment is irrevocable under subsection D.
4. An appointment of a proxy is revocable unless the appointment form or electronic transmission states that it is irrevocable and the appointment is coupled with an interest. Appointments coupled with an interest include the appointment of:
   1. A pledgee;
   2. A person who purchased or agreed to purchase the shares;
   3. A creditor of the corporation who extended it credit under terms requiring the appointment;
   4. An employee of the corporation whose employment contract requires the appointment; or
   5. A party to a voting agreement created under § 13.1-671 .
5. The death or incapacity of the shareholder appointing a proxy does not affect the right of the corporation to accept the proxy's authority unless notice of the death or incapacity is received by the corporation's secretary or other officer or agent authorized to count votes before the proxy exercises authority under the appointment.
6. An appointment made irrevocable under subsection D is revoked when the interest with which it is coupled is extinguished.
7. Unless it otherwise provides, an appointment made irrevocable under subsection D continues in effect after a transfer of the shares and a transferee takes subject to the appointment, except that a transferee for value of shares subject to an irrevocable appointment may revoke the appointment if the transferee did not know of its existence when acquiring the shares and the existence of the irrevocable appointment was not noted conspicuously on the certificate representing the shares or on the information statement for shares without certificates.
8. Subject to § 13.1-665 and to any express limitation on the proxy's authority stated in the appointment form or electronic transmission, a corporation is entitled to accept the proxy's vote or other action as that of the shareholder making the appointment. (Code 1950, §§ 13-193 to 13-198, 13-203, 13.1-32; 1956, c. 428; 1958, c. 564; 1975, c. 500; 1984, c. 366; 1985, c. 522; 1991, c. 405; 2005, c. 765; 2010, c. 782; 2019, c. 734.)

The 2005 amendments. - The 2005 amendment by c. 765 rewrote the section.

The 2010 amendments. - The 2010 amendment by c. 782 deleted the former second sentence of subsection B, which read: "An electronic transmission shall contain or be accompanied by information from which one can determine that the shareholder, the shareholder's agent or the shareholder's attorney-in-fact authorized the transmission."

The 2019 amendments. - The 2019 amendment by c. 734 rewrote subsection B regarding electronic transmission; in subsections C and E, substituted "count" for "tabulate"; in subsection C, substituted "the term" for "11 months unless a longer period is expressly," and added "and, if no term is provided, is valid for 11 months unless the appointment is irrevocable under subsection D" at the end; in subsection E, inserted "corporation's" preceding "secretary," and deleted "his" preceding "authority"; in subsection G, inserted "Unless it otherwise provides, an appointment made irrevocable under subsection D continues in effect after a transfer of the shares and a transferee takes subject to the appointment, except that" at the beginning, and substituted "acquiring" for "the transferee acquired"; and deleted former subsection I, which read: "Any fiduciary who is entitled to vote any shares may vote such shares by proxy"; and made stylistic changes.

Law review. - For 1991 survey of business and corporate law, see 25 U. Rich. L. Rev. 627 (1991).

§ 13.1-664. Shares held by intermediaries and nominees.

1. A corporation's board of directors may establish a procedure under which a person on whose behalf shares are registered in the name of an intermediary or nominee may elect to be treated by the corporation as the record shareholder by filing with the corporation's secretary a beneficial ownership certificate. The terms, conditions, and limitations of this treatment shall be specified in the procedure. To the extent such person is treated under such procedure as having rights or privileges that the record shareholder otherwise would have, the record shareholder shall not have those rights or privileges.
2. The procedure shall specify:
   1. The types of intermediaries or nominees to which it applies;
   2. The rights or privileges that the corporation recognizes in a person with respect to whom a beneficial ownership certificate is filed;
   3. The manner in which the procedure is selected, which shall include that the beneficial ownership certificate be signed or assented to by or on behalf of the record shareholder and the person on whose behalf the shares are held;
   4. The information that must be provided when the procedure is selected;
   5. The period for which selection of the procedure is effective;
   6. Requirements for notice to the corporation with respect to the arrangement; and
   7. The form and contents of the beneficial ownership certificate.
3. The procedure may specify any other aspects of the rights and duties that may be included in a beneficial ownership certificate.

   (1985, c. 522; 2019, c. 734.)

The 2019 amendments. - The 2019 amendment by c. 734 rewrote the section.

§ 13.1-664.1. Inspectors of election.

1. A public corporation shall, and any other corporation may, appoint one or more inspectors to act at a shareholders' meeting in connection with determining voting results. Each inspector shall verify in writing that the inspector will faithfully execute the duties of inspector with strict impartiality and according to the best of the inspector's ability. An inspector may be an officer or employee of the corporation. An inspector may appoint or retain other persons to assist the inspector in the performance of the inspector's duties under subsection B, and may rely on information provided by such persons and other persons, including those appointed to count votes, unless the inspectors believe reliance is unwarranted.
2. The inspectors shall:
   1. Ascertain the number of shares outstanding and the voting power of each;
   2. Determine the shares represented at a meeting;
   3. Determine the validity of proxy appointments and ballots;
   4. Count all votes; and
   5. Make a written report of the results.
3. No ballots, proxies, or votes, nor any revocations thereof or changes thereto, may be accepted after the closing of the polls unless the circuit court of the city or county where the corporation's principal office is located or, if none in the Commonwealth, where its registered office is located, upon application by a shareholder, shall determine otherwise.
4. In performing their duties, the inspectors may examine (i) the proxy appointment forms or electronic transmissions and any other information provided in accordance with subsection B of § 13.1-663 , (ii) any envelope or related writing submitted with those appointment forms, (iii) any ballots, (iv) any evidence or other information specified in § 13.1-665 , and (v) the relevant books and records of the corporation relating to its shareholders and their entitlement to vote, including any securities position list provided by a depository clearing agency.
5. The inspectors also may consider other information that they believe is relevant and reliable for the purpose of performing any of the duties assigned to them pursuant to subsection B, including for the purpose of evaluating inconsistent, incomplete, or erroneous information and reconciling information submitted by or on behalf of banks, brokers, their nominees, or similar persons that indicates more votes being cast than a proxy authorized by the record shareholder is entitled to cast. If the inspectors consider other information allowed by this subsection, they shall in their report under subsection B specify the information considered by them, including the purpose or purposes for which the information was considered, the person or persons from whom they obtained the information, when the information was obtained, the means by which the information was obtained, and the basis for the inspectors' belief that such information is relevant and reliable.
6. Determinations of law by the inspectors are subject to de novo review by a court in a proceeding under § 13.1-669.1 or other judicial proceeding. (1991, c. 405; 2002, c. 285; 2005, c. 765; 2010, c. 782; 2015, c. 611; 2019, c. 734.)

The 2002 amendments. - The 2002 amendment by c. 285 added present subsection E, redesignated former subsection E as present subsection F, and in that subsection inserted "subsection A through D of" preceding "this subsection."

The 2005 amendments. - The 2005 amendment by c. 765, in the first sentence of subsection A, substituted "A public" for "The" and "and any other corporation may" for "in advance of any meeting of shareholders," and "of the inspector's determinations" for "thereof"; in subsection B substituted "inspectors" for "inspector," and deleted "and ballots" following "count all votes"; deleted the first sentence in subsection C; in subsection D, deleted "and counting" following "the validity," inserted "and in counting the votes," substituted "that represent" for "which represent," "clause (v)" for "subdivision B" and "subsection B" for "this section"; and deleted former subsection F.

The 2010 amendments. - The 2010 amendment by c. 782 added the last sentence in subsection B; and substituted "subsection B of § 13.1-663 " for " § 13.1-663 B" in subsection D.

The 2015 amendments. - The 2015 amendment by c. 611 rewrote the section.

The 2019 amendments. - The 2019 amendment by c. 734, in subsection A, substituted "inspector shall verify" for "inspector, before entering upon the discharge of his duties, shall certify," substituted "the inspector's" for "his," and added the third and fourth sentences; rewrote subsection B; in subsection C, deleted "by the inspectors" following "be accepted"; in subsection D, inserted "or electronic transmissions" preceding "and any other"; in subsection E, inserted "by or" following "submitted," deleted "the record shareholder to cast or more votes being cast than" preceding "the record"; deleted former subsection G, which read: "If authorized by the board of directors, any shareholder vote to be taken by written ballot may be satisfied by a ballot submitted by electronic transmission by the shareholder or the shareholder's proxy, provided that any such electronic transmission shall either set forth or be submitted with information from which it can be determined that the electronic transmission was authorized by the shareholder or the shareholder's proxy. A share that is voted by a ballot submitted by electronic transmission is deemed present at the meeting of shareholders"; and made stylistic changes.

Law review. - For 1991 survey of business and corporate law, see 25 U. Rich. L. Rev. 627 (1991).

For 2002 survey of Virginia technology law, see 37 U. Rich. L. Rev. 341 (2002).

§ 13.1-665. Corporation's acceptance of votes.

1. If the name signed on a vote, ballot, consent, waiver, or proxy appointment corresponds to the name of a shareholder, the corporation, if acting in good faith, is entitled to accept the vote, ballot, consent, waiver, or proxy appointment and give it effect as the act of the shareholder.
2. If the name signed on a vote, ballot, consent, waiver, or proxy appointment does not correspond to the name of the shareholder, the corporation, if acting in good faith, is nevertheless entitled to accept the vote, ballot, consent, waiver, or proxy appointment and give it effect as the act of the shareholder if:
   1. The shareholder is an entity and the name signed purports to be that of an officer or agent of the entity;
   2. The name signed purports to be that of an administrator, executor, guardian, conservator, committee, or curator representing the shareholder and, if the corporation requests, evidence of fiduciary status acceptable to the corporation has been presented with respect to the vote, ballot, consent, waiver, or proxy appointment;
   3. The name signed purports to be that of a receiver or trustee in bankruptcy of the shareholder and, if the corporation requests, evidence of this status acceptable to the corporation has been presented with respect to the vote, ballot, consent, waiver, or proxy appointment;
   4. The name signed purports to be that of a pledgee, beneficial owner, or attorney-in-fact of the shareholder and, if the corporation requests, evidence acceptable to the corporation of the signatory's authority to sign for the shareholder has been presented with respect to the vote, ballot, consent, waiver, or proxy appointment; or
   5. Three or fewer persons are the shareholder as co-tenants or fiduciaries and the name signed purports to be the name of at least one of the co-owners and the person signing appears to be acting on behalf of all the co-owners.
3. Notwithstanding the provisions of subdivisions B 2 and B 5, in any case in which the will, trust agreement, or other instrument under which a fiduciary purports to act contains directions for the voting of shares in any corporation, or for the execution and delivery of proxies for the voting thereof, such directions shall be binding upon the fiduciary and upon the corporation if a copy thereof has been furnished to the corporation.
4. The corporation is entitled to reject a vote, ballot, consent, waiver, or proxy appointment if the person authorized to accept or reject such instrument or count votes, acting in good faith, has reasonable basis for doubt about the validity of the signature on it or about the signatory's authority to sign for the shareholder.
5. Neither the corporation nor the person authorized to count votes, including an inspector of election under § 13.1-664.1 , that accepts or rejects a vote, ballot, consent, waiver, or proxy appointment in good faith and in accordance with the standards of this section or subsection B of § 13.1-663 is liable in damages to the shareholder for the consequences of the acceptance or rejection.
6. Corporate action based on the acceptance or rejection of a vote, ballot, consent, waiver, or proxy appointment under this section is valid unless a court of competent jurisdiction determines otherwise.
7. If an inspector of election has been appointed under § 13.1-664.1 , the inspector of election also has the authority to request information and make determinations under subsections A, B, C, and D.
8. If authorized by the board of directors, any shareholder vote to be taken at a shareholders' meeting may be voted upon by a ballot submitted by electronic transmission by the shareholder or the shareholder's proxy, provided that any such electronic transmission shall either set forth or be submitted with information from which it can be determined that the electronic transmission was authorized by the shareholder or the shareholder's proxy. A share that is voted by a ballot submitted by electronic transmission as permitted by this subsection is deemed present at the shareholders' meeting.

   (Code 1950, §§ 13-193 to 13-198, 13-203, 13.1-32; 1956, c. 428; 1958, c. 564; 1975, c. 500; 1984, c. 366; 1985, c. 522; 2005, c. 765; 2015, c. 611; 2019, c. 734.)

The 2005 amendments. - The 2005 amendment by c. 765 substituted "such person" for "he" in subdivision B 3; substituted "subdivisions B 2 and B 5" for "subdivisions 2 and 5 of subsection B of this section" in subsection C; and inserted "or subsection B of § 13.1-663 " in subsection E.

The 2015 amendments. - The 2015 amendment by c. 611 inserted "ballot" preceding "consent, waiver" throughout the section; substituted "count" for "tabulate" in subsection D; and in subsection E, substituted "Neither the corporation nor the person authorized to count votes, including an inspector under § 13.1-664.1 " for "The corporation and its officer or agent" and "is" for "are not" preceding "liable."

The 2019 amendments. - The 2019 amendment by c. 734, in subdivision B 1, deleted "partner" following "officer"; in subdivision B 2, inserted "committee, or curator" following "conservator"; in subdivision B 3, inserted "of this status" following "evidence," and deleted "that such receiver or trustee has been authorized to vote the shares in an order of the court by which such person was appointed" following "the corporation"; in subdivision B 5, substituted "Three or fewer" for "Two or more," inserted "co-tenants or" following "shareholder as," and substituted "co-owners" for "fiduciaries" twice; in subsection D, substituted "person authorized to accept or reject such instrument or count" for "secretary or other officer or agent authorized to count"; in subsection E, inserted "of election" following "an inspector"; added subsections G and H; and made stylistic changes.

§ 13.1-666. Quorum and voting requirements for voting groups.

1. Shares entitled to vote as a separate voting group may take action at a meeting only if a quorum of those shares exists for the meeting. Unless the articles of incorporation or this chapter provides otherwise, shares representing a majority of the votes entitled to be cast at the meeting by the voting group constitutes a quorum of that voting group for the meeting. Whenever this chapter requires a particular quorum for a specified action, the articles of incorporation may not provide for a lower quorum. Less than a quorum may adjourn a meeting.
2. Once a share is represented for any purpose at a meeting, it is deemed present for quorum purposes for the remainder of the meeting and for any adjournment of that meeting unless a new record date is or shall be set for that adjourned meeting.
3. If a quorum exists, action on a matter, other than the election of directors, by a voting group is approved if the votes cast within the voting group favoring the action exceed the votes cast opposing the action, unless the articles of incorporation or this chapter requires a greater number of affirmative votes. An abstention or an election by a shareholder not to vote on the action because of the failure to receive voting instructions from the beneficial owner of the shares shall not be considered a vote cast.
4. An amendment of the articles of incorporation adding, changing, or deleting a quorum or voting requirement for a voting group greater than specified in subsection A or C is governed by section § 13.1-668 .
5. The election of directors is governed by § 13.1-669 .
6. Whenever a provision of this chapter provides for voting of classes or series of shares as separate voting groups, the rules provided in subsection C of § 13.1-708 for amendments of the articles of incorporation apply to that provision. (Code 1950, § 13.1-31; 1956, c. 428; 1985, c. 522; 2007, c. 165; 2019, c. 734.)

The 2007 amendments. - The 2007 amendment by c. 165 added the last sentence of subsection C.

The 2019 amendments. - The 2019 amendment by c. 734, in subsection A, deleted "on a matter" following "take action," substituted "for the meeting" for "with respect to that matter," inserted "shares representing" preceding "a majority," substituted "cast at the meeting" for "cast on the matter," substituted "the meeting" for "action on that matter," and added the last two sentences; rewrote subsection D, which read: "Less than a quorum may adjourn a meeting"; added subsection F; and made stylistic changes.

Applied in Hager v. Gibson, 188 Bankr. 194 (E.D. Va. 1995).

§ 13.1-667. Action by single and multiple voting groups.

1. If the articles of incorporation or this chapter provides for voting by a single voting group on a matter, action on that matter is taken when voted upon by that voting group as provided in § 13.1-666 .
2. If the articles of incorporation or this chapter provides for voting by two or more voting groups on a matter, action on that matter is taken only when voted upon by each of those voting groups counted separately as provided in § 13.1-666 . Action may be taken by different voting groups on a matter at different times. (1985, c. 522; 2019, c. 734.)

The 2019 amendments. - The 2019 amendment by c. 734, in subsection A, substituted "13.1-666" for "13.1-665"; and in subsection B, substituted "different voting groups on a matter at different times" for "one voting group on a matter even though no action is taken by another voting group entitled to vote on the matter."

§ 13.1-668. Modifying quorum or voting requirements.

1. The articles of incorporation may provide for (i) a lesser or greater quorum requirement for shareholders or voting groups of shareholders, but in each case not less than one third of the shares eligible to vote or (ii) a greater voting requirement for shareholders, or voting groups of shareholders, than is provided by this chapter.
2. An amendment of the articles of incorporation that adds, changes, or deletes a quorum or voting requirement shall meet the same quorum requirement and be adopted by the same vote and voting groups required to take action under the quorum and voting requirements then in effect.

   (Code 1950, § 13.1-33; 1956, c. 428; 1985, c. 522; 1986, c. 321; 2019, c. 734.)

The 2019 amendments. - The 2019 amendment by c. 734, in subsection A, substituted "shareholders or voting groups of shareholders, but in each case not" for "shareholders, but not," and deleted "or voting groups of shareholders" following "to vote"; in subsection B, inserted "same" preceding both "quorum" and "vote"; and made stylistic changes.

§ 13.1-669. Voting for directors; cumulative voting.

1. Unless otherwise provided in the articles of incorporation or the bylaws, directors are elected by a plurality of the votes cast by the shares entitled to vote in the election at a meeting at which a quorum is present.
2. Shareholders do not have a right to cumulate their votes for directors unless the articles of incorporation so provide.
3. A statement included in the articles of incorporation that "[all] or [a designated voting group of] shareholders are entitled to cumulate their votes for directors," or words of similar import, means that the shareholders designated are entitled to multiply the number of votes they are entitled to cast by the number of directors for whom they are entitled to vote and cast the product for a single candidate or distribute the product among two or more candidates.
4. Shares otherwise entitled to vote cumulatively may not be voted cumulatively at a particular meeting unless the meeting notice or proxy statement accompanying the notice states conspicuously that cumulative voting is authorized.
5. If a corporation's articles of incorporation authorize shareholders to cumulate their votes when electing directors, directors may not be elected by written consent pursuant to § 13.1-657 unless it is unanimous. (Code 1950, §§ 13-193 to 13-198, 13-203, 13.1-32; 1956, c. 428; 1958, c. 564; 1975, c. 500; 1984, c. 366; 1985, c. 522; 2005, c. 765; 2007, c. 165; 2019, c. 734.)

The 2005 amendments. - The 2005 amendment by c. 765, in subdivision D 2, substituted "the shareholder's" for "his" and "gives such a" for "gives his," and made a minor stylistic change.

The 2007 amendments. - The 2007 amendment by c. 165 inserted "or the bylaws" in subsection A; and added subsection E.

The 2019 amendments. - The 2019 amendment by c. 734, in subsection C, substituted "[all] or [a designated voting group of]" for "all of a designated voting group of"; deleted the designation for subdivision D 1; deleted subdivision D 2, which read: "A shareholder who has the right to cumulate his votes gives notice to the secretary of the corporation not less than 48 hours before the time set for the meeting of the shareholder's intent to cumulate his votes during the meeting. If one shareholder gives such a notice all other shareholders in the same voting group participating in the election are entitled to cumulate their votes without giving further notice"; and made stylistic changes.

Law review. - For 2007 annual survey article, "Corporate and Business Law," see 42 U. Rich. L. Rev. 273 (2007).

§ 13.1-669.1. Judicial determination of corporate offices and review of elections and shareholder votes.

1. Upon application of, or in a proceeding commenced by, a person specified in subsection B, the circuit court in the county or city in which the principal office of the corporation is located, or, if none in the Commonwealth, in the county or city in which its registered office is located may determine:
   1. The result or validity of the election, appointment, removal, or resignation of a director or officer of the corporation;
   2. The right of an individual to hold the office of director or officer of the corporation;
   3. The result or validity of any vote by the shareholders of the corporation;
   4. The right of a director to membership on a committee of the board of directors; and
   5. The right of a person to nominate, or an individual to be nominated as, a candidate for election or appointment as a director of the corporation, and any right under a bylaw adopted pursuant to subsection C of § 13.1-624 or any comparable right under any provision of the articles of incorporation, a contract, or applicable law.
2. Any application or proceeding pursuant to subsection A may be filed or commenced by any of the following persons:
   1. The corporation;
   2. A record shareholder, beneficial shareholder or unrestricted voting trust beneficial owner of the corporation;
   3. A director of the corporation, an individual claiming the office of director, or a director whose membership on a committee of the board of directors is contested, who, in each case, is seeking a determination of the individual's right to such office or membership;
   4. An officer of the corporation or an individual claiming to be an officer of the corporation, in each case who is seeking a determination of the individual's right to such office; or
   5. A person claiming a right covered by subdivision A 5 and who is seeking a determination of such right.
3. In connection with any application or proceeding under subsection A, the following shall be named as defendants, unless such person made the application or commenced the proceeding:
   1. The corporation;
   2. An individual whose right to office or membership on a committee of the board of directors is contested;
   3. Any individual claiming the office or membership at issue; and
   4. Any person claiming a right covered by subdivision A 5 that is at issue.
4. In connection with any application or proceeding under subsection A, service of process may be made upon each of the persons specified in subsection C either by:
   1. Serving on the corporation process addressed to such person in any manner provided by statute of the Commonwealth or by rule of the applicable court for service of process on the corporation; or
   2. Serving on such person process in any manner provided by statute of the Commonwealth or by rule of the applicable court.
5. When service of process is made upon a person other than the corporation by service upon the corporation pursuant to subdivision D 1, the plaintiff and the corporation promptly shall provide written notice of such service, together with copies of all process and the application or complaint, to such person at the person's last known residence or business address, or as permitted by statute of the Commonwealth, or by rule of the applicable court.
6. In connection with any application or proceeding under subsection A, the court shall dispose of the application or proceeding on an expedited basis and also may:
   1. Order such additional or further notice as the court deems proper under the circumstances;
   2. Order that additional persons be joined as parties to the proceeding if the court determines that such joinder is necessary for a just adjudication of matters before the court;
   3. Order an election or meeting be held in accordance with the provisions of § 13.1-656 or otherwise;
   4. Appoint a master to conduct an election or meeting;
   5. Enter temporary, preliminary, or permanent injunctive relief;
   6. Resolve solely for the purpose of the proceeding any legal or factual issues necessary for the resolution of any of the matters specified in subsection A, including the right and power of persons claiming to own shares to vote at any meeting of the shareholders; and
   7. Order such relief as the court determines is equitable, just, and proper.
7. It shall not be necessary to make shareholders parties to a proceeding or application pursuant to this section unless the shareholder is a required defendant under subdivision C 4, relief is sought against the shareholder individually, or the court orders joinder pursuant to subdivision F 2.
8. Nothing in this section limits, restricts, or abolishes the subject matter jurisdiction or powers of the court. An application or proceeding pursuant to this section is not the exclusive remedy or proceeding available with respect to the matters specified in subsection A.

   (2010, c. 782; 2015, c. 611; 2019, c. 734.)

The 2015 amendments. - The 2015 amendment by c. 611 rewrote the section.

The 2019 amendments. - The 2019 amendment by c. 734, in subdivision A 1, inserted "result or" preceding "validity"; in subdivision A 3, substituted "any" for "an election or"; rewrote subdivision B 2, which read: "A shareholder of the corporation"; in subdivisions B 3 and 4, substituted "the individual's" for "his"; in subsection C, substituted "under" for "pursuant to"; in subsection E, added "or by rule of the applicable court" at the end; in subsection H, deleted "as existed prior to July 1, 2015" preceding "An application"; and made stylistic changes.

§ 13.1-670. Voting trusts.

1. One or more shareholders may create a voting trust, conferring on a trustee the right to vote or otherwise act for them, by signing an agreement setting out the provisions of the trust, which may include anything consistent with its purpose, and transferring their shares to the trustee. When a voting trust agreement is signed, the trustee shall prepare a list of the names and addresses of all voting trust beneficial owners, together with the number and class or series of shares each transferred to the trust, and deliver copies of the list and agreement to the corporation at its principal office.
2. A voting trust becomes effective on the date the first shares subject to the trust are registered in the trustee's name.
3. Limits, if any, on the duration of a voting trust shall be as set forth in the voting trust, except that a voting trust that became effective prior to July 1, 2015, is valid for not more than 10 years after its effective date unless some or all of the parties to the voting trust extend it by signing a written consent to the extension.
4. Any consent to an extension signed by less than all of the parties to the voting trust binds only the parties signing it.

   The voting trustee shall deliver copies of any consent to extension and the list of beneficial owners to the corporation's secretary at the corporation's principal office.

   (Code 1950, § 13.1-34; 1956, c. 428; 1975, c. 500; 1985, c. 522; 2005, c. 765; 2015, c. 611; 2019, c. 734.)

The 2005 amendments. - The 2005 amendment by c. 765, in subsection B, substituted "10 years" for "ten years" and deleted "of this section" following "subsection C"; in subdivision C 1, substituted "10 years" for "ten years" and substituted "a" for "an extension agreement and obtaining the voting trustee's" in the first sentence, and substituted "not more than 10" for "ten" and "such a consent" for "the extension agreement" in the second sentence; in subdivision C 2, substituted "consent to extension" for "extension agreement" in both sentences, and substituted "A" for "And" at the beginning of the second sentence.

The 2015 amendments. - The 2015 amendment by c. 611 rewrote the section.

The 2019 amendments. - The 2019 amendment by c. 734, in subsection A, deleted "or trustees" following "trustee" twice, substituted "all voting trust beneficial owners, together" for "all owners of beneficial interests in the trust, together," and substituted "corporation at its" for "corporation's"; in subsection C, inserted "Limits, if any, on" at the beginning; redesignated former subsection E as the second paragraph of subsection D; in subsection D, in the first paragraph, deleted "pursuant to subsection C" preceding "signed by," and in the second paragraph, inserted "corporation's" preceding "secretary"; and made stylistic changes.

§ 13.1-671. Voting agreements.

1. Two or more shareholders may provide for the manner in which they will vote their shares by signing an agreement for that purpose. A voting agreement created under this section is not subject to the provisions of § 13.1-670 .
2. A voting agreement created under this section is specifically enforceable.

   (Code 1950, § 13.1-34; 1956, c. 428; 1975, c. 500; 1985, c. 522.)

§ 13.1-671.1. Shareholder agreements.

1. An agreement among the shareholders of a corporation that complies with this section is effective among the shareholders and the corporation, even though it is inconsistent with one or more other provisions of this chapter in that it:
   1. Eliminates the board of directors or, subject to the requirements of subsection D of § 13.1-647 and subsection A of § 13.1-693 , one or more officers or restricts the discretion or powers of the board of directors;
   2. Governs the authorization or making of distributions, regardless of whether they are in proportion to ownership of shares, subject to the limitations in § 13.1-653 ;
   3. Establishes who shall be directors or officers of the corporation, or their terms of office or manner of selection or removal;
   4. Governs, in general or in regard to specific matters, the exercise or division of voting power by or between the shareholders and directors or by or among any of them, including use of weighted voting rights or director proxies;
   5. Establishes the terms and conditions of any agreement for the transfer or use of property or the provision of services between the corporation and any shareholder, director, officer or employee of the corporation or among any of them;
   6. Transfers to one or more shareholders or other persons all or part of the authority to exercise the corporate powers or to manage the business and affairs of the corporation, including the resolution of any issue about which there exists a deadlock among directors or shareholders;
   7. Requires dissolution of the corporation at the request of one or more of the shareholders or upon the occurrence of a specified event or contingency; or
   8. Otherwise governs the exercise of the corporate powers or the management of the business and affairs of the corporation or the relationship among the shareholders, the directors and the corporation, or among any of them, and is not contrary to public policy.
2. An agreement authorized by this section shall be:
   1. As set forth (i) in the articles of incorporation or bylaws and approved by all persons who are shareholders at the time of the agreement or (ii) in a written agreement that is signed by all persons who are shareholders at the time of the agreement and is made known to the corporation; and
   2. Subject to amendment only by all persons who are shareholders at the time of the amendment, unless the agreement provides otherwise.
3. The existence of an agreement authorized by this section shall be noted conspicuously on the front or back of each certificate for outstanding shares or on the information statement required by subsection B of § 13.1-648 . If at the time of the agreement the corporation has shares outstanding represented by certificates, the corporation shall recall the outstanding certificates and issue substitute certificates that comply with this subsection. The failure to note the existence of the agreement on the certificate or information statement shall not affect the validity of the agreement or any action taken pursuant to it. Any purchaser of shares who, at the time of purchase, did not have knowledge of the existence of the agreement shall be entitled to rescission of the purchase. A purchaser shall be deemed to have knowledge of the existence of the agreement if its existence is noted on the certificate or information statement for the shares in compliance with this subsection and, if the shares are not represented by a certificate, the information statement is delivered to the purchaser at or before the time of purchase of the shares. An action to enforce the right of rescission authorized by this subsection must be commenced within the earlier of 90 days after discovery of the existence of the agreement or two years after the time of purchase of the shares.
4. An agreement authorized by this section shall cease to be effective when the corporation becomes a public corporation. If the agreement ceases to be effective for any reason, the board of directors may, if the agreement is contained or referred to in the corporation's articles of incorporation or bylaws, adopt an amendment of the articles of incorporation or bylaws, without shareholder action, to delete the agreement and any references to it.
5. An agreement authorized by this section that limits the discretion or powers of the board of directors shall relieve the directors of, and impose upon the person or persons in whom such discretion or powers are vested, liability for acts or omissions imposed by law on directors to the extent that the discretion or powers of the directors are limited by the agreement.
6. The existence or performance of an agreement authorized by this section shall not be a ground for imposing personal liability on any shareholder for the acts or debts of the corporation even if the agreement or its performance treats the corporation as if it were a partnership or results in failure to observe the corporate formalities otherwise applicable to the matters governed by the agreement.
7. Incorporators or subscribers for shares may act as shareholders with respect to an agreement authorized by this section if no shares have been issued when the agreement is made.
8. No action taken pursuant to this section shall change any requirement to file articles or other documents with the Commission or affect the rights of any creditors or other third parties.
9. Limits, if any, on the duration of an agreement authorized by this section shall be as set forth in the agreement, except that the duration of an agreement that became effective prior to July 1, 2015, remains 10 years unless the agreement provided otherwise or is subsequently amended to provide otherwise.
10. An agreement among shareholders of a corporation that is consistent with the other provisions of this chapter that does not comply with the provisions of this section shall nonetheless be effective among the shareholders and the corporation.

    (1990, c. 337; 1997, c. 226; 2005, c. 765; 2015, c. 611; 2019, c. 734.)

The 2005 amendments. - The 2005 amendment by c. 765, in subdivision A 1, inserted "subject to the requirements of subsection D of § 13.1-647 and subsection A of § 13.1-693 , one or more officers or" and added "or one or more officers" at the end; substituted "10 years" for "ten years" in subdivision B 3; substituted "90 days" for "ninety days" in the last sentence of subsection C; and substituted "becomes a public corporation" for "has more than 300 shareholders of record" in the first sentence of subsection D.

The 2015 amendments. - The 2015 amendment by c. 611 deleted former subdivision B 3, which read "Valid for 10 years, unless the agreement provides otherwise"; added subsections I and J; and made related changes.

The 2019 amendments. - The 2019 amendment by c. 734, in subdivision A 1, deleted "or one or more officers" at the end; in subdivision A 2, substituted "regardless of whether they are" for "regardless of whether or not"; in subdivision B 1, inserted "and is made known to the corporation" following "the agreement"; in subsection G, substituted "have been issued when the agreement is" for "were issued when the agreement was"; in subsection I, inserted "Limits, if any, on" at the beginning; and made stylistic changes.

Law review. - For 1991 survey of business and corporate law, see 25 U. Rich. L. Rev. 627 (1991).

For 2007 annual survey article, "Corporate and Business Law," see 42 U. Rich. L. Rev. 273 (2007).

For annual survey article, "Corporate and Business Law," see 46 U. Rich. L. Rev. 41 (2011).

§ 13.1-672.

Repealed by Acts 1992, c. 802.

Cross references. - For present provisions relating to derivative proceedings, see § 13.1-672.1 et seq.

Editor's note. - Former § 13.1-672 , relating to procedure in derivative proceedings, was enacted by Acts 1985, c. 522.

§ 13.1-672.1. Standing; condition precedent; stay of proceedings.

1. A shareholder shall not commence or maintain a derivative proceeding unless the shareholder:
   1. Was a shareholder of the corporation at the time of the act or omission complained of, became a shareholder through transfer by operation of law from one who was a shareholder at that time, or became a shareholder before public disclosure and without knowledge of the act or omission complained of;
   2. Was a shareholder at the time the shareholder made the written demand required by subdivision B 1; and
   3. Fairly and adequately represents the interests of the corporation in enforcing the right of the corporation.
2. No shareholder may commence a derivative proceeding until:
   1. A written demand has been made on the corporation to take suitable action; and
   2. Ninety days have expired from the date delivery of the written demand was made on the corporation unless (i) the shareholder has earlier been notified that the demand has been rejected by the corporation or (ii) irreparable injury to the corporation would result by waiting for the expiration of the 90-day period.
3. If the corporation commences an inquiry into the allegations made in the demand or complaint, the court may stay any derivative proceeding for such period as the court deems appropriate.

   (1992, c. 802; 2007, c. 165; 2010, c. 782; 2019, c. 734.)

The 2007 amendments. - The 2007 amendment by c. 165 added "and Other Shareholder Actions" to the Article 8.1 heading, substituted "shall not" for "may not" in the introductory language of subsection A, and substituted "90 days" for "ninety days" and "90-day" for "ninety-day" in subdivision B 2.

The 2010 amendments. - The 2010 amendment by c. 782 inserted "delivery of the" in subdivision B 2.

The 2019 amendments. - The 2019 amendment by c. 734 deleted the designations for former subdivisions A 2 and 3; inserted subdivision A 2; redesignated former subdivision A 4 as 3; rewrote subdivision B 2, which read: "Ninety days have expired from the date delivery of the demand was made unless (i) the shareholder has been notified before the expiration of 90 days that the demand has been rejected by the corporation or (ii) irreparable injury to the corporation would result by waiting until the end of the 90-day period"; and in subsection C, substituted "an inquiry into" for "a review and evaluation"; and made stylistic changes.

Law review. - For article surveying major developments between 1991 and 1992 that affect business and corporate law in Virginia, see "Business and Corporate Law," 26 U. Rich. L. Rev. 653 (1992).

For an article, "Corporate and Business Law," see 32 U. Rich. L. Rev. 1067 (1998).

For annual survey essay, "Partnership Derivative Suits: Jennings, v. Kay Jennings Family Ltd. Partnership ," see 44 U. Rich. L. Rev. 167 (2009).

For article, "Corporate Governance in the Courtroom: An Empirical Analysis," see 51 Wm. and Mary L. Rev. 1749 (2010).

For annual survey of Virginia law article, "Civil Practice and Procedure," see 47 U. Rich. L. Rev. 113 (2012).

For comment, "Private Ordering in the Old Dominion: A Solution to Frivolous Litigation or the Elimination of a Fundamental Shareholder Right?" see 53 U. Rich. L. Rev. 297 (2018).

Michie's Jurisprudence. - For related discussion, see 12A M.J. Limited Liability Companies, § 42.

§ 13.1-672.2. Discontinuance or settlement.

1. A derivative proceeding may not be settled or discontinued without the court's approval. If the court determines that a proposed discontinuance or settlement will substantially and adversely affect the interests of the corporation's shareholders or a class or series of the corporation's shareholders, the court shall direct that notice be given to the shareholders affected.
2. Notice required by subsection A shall be given in such manner as the court shall determine, and the costs of such notice shall be borne in such manner as the court shall direct.

   (1992, c. 802; 2019, c. 734.)

The 2019 amendments. - The 2019 amendment by c. 734, in subsection A, substituted "may not be settled" for "shall not be settled" and "a proposed" for "the," inserted "and adversely" and "or series" following "a class"; and in subsection B, substituted "by subsection A" for "under this section."

§ 13.1-672.3. Foreign corporations.

Notwithstanding the provisions of §§ 13.1-672.1 and 13.1-672.4 , in any derivative proceeding in the right of a foreign corporation, subject to the court's determination of whether the courts of the Commonwealth are a convenient forum for such a proceeding, the matters covered by this article shall be governed by the laws of the jurisdiction of formation of the foreign corporation except for matters covered by subsection C of § 13.1-672.1 and §§ 13.1-672.2 and 13.1-672.5 .

(1992, c. 802; 2005, c. 765; 2019, c. 734.)

The 2005 amendments. - The 2005 amendment by c. 765 substituted "the Commonwealth" for "this state."

The 2019 amendments. - The 2019 amendment by c. 734 rewrote this Code section, which read: "Notwithstanding the provisions of §§ 13.1-672.1 and 13.1-672.4 , in any derivative proceeding in the right of a foreign corporation, subject to the court's determination of whether the courts of the Commonwealth are a convenient forum for such a proceeding, determinations of (i) standing and satisfaction of conditions precedent to commencing and maintaining derivative proceedings and (ii) grounds for dismissal of derivative proceedings, shall be governed by the laws of the foreign corporation's state of incorporation."

CIRCUIT COURT OPINIONS

Delaware law governed shareholders' derivative claims. - Since the corporation was incorporated under the laws of Delaware, Delaware law governed shareholders' derivative claims alleging conspiracy to deprive the shareholders of their investment value through default on a loan to a debtor entity that stockholders owned and controlled for purposes of the stockholders' demurrer and pleas of statute of limitations. Parsch v. Massey, 72 Va. Cir. 121, 2006 Va. Cir. LEXIS 304 (Charlottesville 2006).

§ 13.1-672.4. Dismissal.

1. A derivative proceeding shall be dismissed by the court on motion by the corporation if one of the groups specified in subsection B or E has:
   1. Conducted a review and evaluation, adequately informed in the circumstances, of the allegations made in the demand or complaint;
   2. Determined in good faith on the basis of that review and evaluation that the maintenance of the derivative proceeding is not in the best interests of the corporation; and
   3. Submitted in support of the motion a short and concise statement of the reasons for its determination.
2. Unless a panel is appointed pursuant to subsection E, the determination in subsection A shall be made by:
   1. A majority vote of disinterested directors present at a meeting of the board of directors if the disinterested directors constitute a quorum; or
   2. A majority vote of a committee consisting of two or more disinterested directors appointed by a majority vote of disinterested directors present at a meeting of the board of directors, regardless of whether such disinterested directors constituted a quorum.
3. If a derivative proceeding is commenced after a determination has been made rejecting a demand by a shareholder, the complaint shall allege with particularity facts establishing that the requirements of subsection A or B have not been met. With respect to any allegation that the requirements of subsection A or B have not been met, the plaintiff shall be entitled to discovery if, and only with respect to, facts that are alleged in the complaint with particularity.
4. The plaintiff shall have the burden of proving that the requirements of subsection A or B have not been met, except that the corporation shall have the burden with respect to the issue of disinterestedness under subsection B if the complaint alleges with particularity facts raising a substantial question as to such disinterestedness.
5. Upon motion by the corporation, the court may appoint a panel of disinterested persons to make a determination whether the maintenance of the derivative proceeding is in the best interests of the corporation.

   (1992, c. 802; 1993, c. 233; 2005, c. 765; 2019, c. 734.)

The 2005 amendments. - The 2005 amendment by c. 765 substituted "subsection E" for "subsection F" in subsections A and B; substituted "disinterested" for "independent" twice in subdivision B 1 and three times in subdivision B 2; deleted former subsection C; redesignated former subsections D through F as present subsections C through E; and added "The" at the beginning of the last sentence in present subsection C.

The 2019 amendments. - The 2019 amendment by c. 734, in subdivision B 2, substituted "regardless of whether such" for "whether or not such"; in subsections C and D, inserted "or B" in the first sentence; in subsection C, inserted "With respect to any allegation that the requirements of subsection A or B have not been met" and "if, and only" and substituted "facts that are alleged in the complaint" for "the issues presented by the motion only if and to the extent that the complaint alleges such, facts"; in subsection D, substituted "disinterestedness" for "independent" twice; in subsection E, inserted "Upon motion by the corporation" and substituted "disinterested persons" for "independent persons upon motion by the corporation."

§ 13.1-672.5. Payment of and security for expenses.

On termination of a derivative proceeding, the court may:

1. Order the corporation to pay the plaintiff's expenses incurred in the proceeding if it finds that the proceeding has resulted in a substantial benefit to the corporation; or
2. Order the plaintiff or the plaintiff's attorney to pay the corporation's or any defendant's expenses incurred in defending the proceeding if it finds that the proceeding was commenced or maintained arbitrarily, vexatiously, or not in good faith.

   (1992, c. 802; 1993, c. 233; 2019, c. 734.)

The 2019 amendments. - The 2019 amendment by c. 734 substituted "may" for "shall" in the introductory paragraph; substituted "expenses" for "reasonable expenses (including counsel fees)" throughout; in subdivision 2, inserted "the corporation's or" following "to pay."

§ 13.1-672.6. Shareholder action to appoint a custodian or receiver for a public corporation.

1. The circuit court in any city or county where a public corporation's principal office is or was last located, or, if none in the Commonwealth, where its registered office is or was last located may appoint one or more persons to be custodians, or, if the corporation is insolvent, to be receivers, of and for a public corporation in a proceeding by a shareholder where it is established that:
   1. The directors are deadlocked in the management of the corporate affairs, the shareholders are unable to break the deadlock, and irreparable injury to the corporation is threatened or being suffered; or
   2. The directors or those in control of the corporation are acting fraudulently and irreparable injury to the corporation is threatened or being suffered.
2. The court:
   1. May issue injunctions, appoint a temporary custodian or temporary receiver with all the powers and duties the court directs, take other action to preserve the corporate assets wherever located, and carry on the business of the corporation until a full hearing is held;
   2. Shall hold a hearing, after notifying all parties to the proceeding and any interested persons designated by the court, before appointing a custodian or receiver; and
   3. Has jurisdiction over the corporation and all of its property, wherever located.
3. The court may appoint an individual or domestic or foreign corporation, authorized to transact business in the Commonwealth, as a custodian or receiver and may require the custodian or receiver to post bond, with or without sureties, in an amount the court directs.
4. The court shall describe the powers and duties of the custodian or receiver in its appointing order, which may be amended from time to time. Among other powers:
   1. A custodian may exercise all of the powers of the corporation, through or in place of its board of directors, to the extent necessary to manage the business and affairs of the corporation; and
   2. A receiver (i) may dispose of all or any part of the assets of the corporation wherever located, at a public or private sale, if authorized by the court, and (ii) may sue and defend in the receiver's own name as receiver in all courts of the Commonwealth.
5. The court during a custodianship may redesignate the custodian a receiver, and during a receivership may redesignate the receiver a custodian, if doing so is in the best interests of the corporation.
6. The court from time to time during the custodianship or receivership may order compensation paid and expense disbursements or reimbursements made to the custodian or receiver from the assets of the corporation or proceeds from the sale of its assets.

   (2007, c. 165; 2019, c. 734.)

The 2019 amendments. - The 2019 amendment by c. 734, in subsection E, substituted "redesignate" for "designate"; and made stylistic changes.

Law review. - For 2007 annual survey article, "Corporate and Business Law," see 42 U. Rich. L. Rev. 273 (2007).

§ 13.1-672.7. Shareholder defined.

As used in this article, "shareholder" means a record shareholder, a beneficial shareholder, and a voting trust beneficial owner whose entitlement to bring the proceeding under this article is not inconsistent with the voting trust agreement.

(2019, c. 734.)

§ 13.1-673. Requirement for and duties of board of directors.

1. Except as provided in an agreement authorized by § 13.1-671.1 , each corporation shall have a board of directors.
2. All corporate powers shall be exercised by or under the authority of the board of directors, and the business and affairs of the corporation managed under the direction, and subject to the oversight, of the board of directors, subject to any limitation set forth in the articles of incorporation permitted by subdivision B 3 of § 13.1-619 or in an agreement authorized under § 13.1-671.1 . (Code 1950, § 13.1-35; 1956, c. 428; 1985, c. 522; 1990, c. 337; 2005, c. 765; 2019, c. 734.)

The 2005 amendments. - The 2005 amendment by c. 765 inserted "an agreement authorized by" in subsection A; and in subsection B, substituted "bylaws" for "bylaw" in the first sentence, and "30" for "thirty" twice in the second sentence.

Law review. - For article, "The New Virginia Stock Corporation Act: A Primer," see 20 U. Rich. L. Rev. 67 (1985).

For an article, "Misunderstanding Director Duties: The Strange Case of Virginia," see 56 Wash. & Lee L. Rev. 1127 (1999).

Michie's Jurisprudence. - For related discussion, see 4B M.J. Corporations, § 157.

§ 13.1-674. Qualifications for directors or for nominees for director.

1. The articles of incorporation or bylaws may prescribe qualifications for directors or for nominees for director.
2. A requirement that is based on a past, current, or prospective action, or on an expression of an opinion, by a nominee or director that (i) relates to the discharge of a director's duties and (ii) could limit the ability of the nominee or director to discharge his duties as a director is not a permissible qualification for a nominee or director under this section. Permissible qualifications for a nominee or director under this section include the person's not being or having been subject to specified criminal, civil, or regulatory sanctions or not having been removed as a director by judicial action or for cause.
3. A director need not be a resident of the Commonwealth or a shareholder of the corporation unless the articles of incorporation or bylaws so prescribe.
4. A qualification for nomination for director that is prescribed before a person's nomination shall apply to the person at the time of his nomination. A qualification for nomination for director that is prescribed after a person's nomination shall not apply to that person with respect to such nomination.
5. A qualification for directors that is prescribed before a person's nomination for director may provide that it applies (i) only at the start of the director's term or (ii) during that person's term as director. A qualification for directors prescribed during a director's term shall not apply to that director prior to the end of that director's term.

   (Code 1950, § 13.1-35; 1956, c. 428; 1985, c. 522; 2012, c. 706; 2015, c. 611; 2019, c. 734.)

The 2012 amendments. - The 2012 amendment by c. 706 substituted "qualifications to be directors or to be nominated as directors" for "qualifications for directors" at the end of the first sentence.

The 2015 amendments. - The 2015 amendment by c. 611 inserted the subsection A and C designators and added subsections B, D and E.

The 2019 amendments. - The 2019 amendment by c. 734, in subsection A, substituted "for nominees for director" for "to be nominated as directors"; and made stylistic changes.

§ 13.1-675. Number and election of directors.

1. A board of directors shall consist of one or more individuals, with the number specified in or fixed in accordance with the articles of incorporation or bylaws. The number of directors may be increased or decreased from time to time by amendment of, or in the manner provided in, the articles of incorporation or bylaws.
2. The articles of incorporation or bylaws may establish a variable range for the size of the board of directors by fixing a minimum and maximum number of directors. If a variable range is established, the number of directors may be fixed or changed from time to time, within the minimum and maximum, by the shareholders or by the board of directors.
3. Directors are elected at the first annual shareholders' meeting and at each annual meeting thereafter unless elected by written consent in lieu of an annual meeting as permitted by § 13.1-657 or unless their terms are staggered under § 13.1-678 .
4. No individual shall be named or elected as a director without his prior consent.

   (Code 1950, § 13.1-36; 1956, c. 428; 1968, c. 87; 1973, c. 50; 1974, c. 662; 1977, c. 123; 1982, c. 104; 1985, c. 522; 1991, c. 112; 2005, c. 765; 2006, c. 330; 2010, c. 782; 2019, c. 734.)

The 2005 amendments. - The 2005 amendment by c. 765, in subsection B, substituted "bylaw" for "bylaws" and substituted "30" for "thirty" twice.

The 2006 amendments. - The 2006 amendment by c. 330 added the last sentence in subsection B.

The 2010 amendments. - The 2010 amendment by c. 782 deleted the former last two sentences of subsection B, which read: "If a bylaw states a fixed number of directors and the board of directors has the right to amend the bylaw, it may by amendment to the bylaw increase or decrease by 30 percent or less the number of directors last elected by the shareholders, or, if the directors' terms are staggered pursuant to § 13.1-678 , the number of directors of all classes immediately following the most recent election of directors by the shareholders, but only the shareholders may increase or decrease the number by more than 30 percent. The restrictions on the increase or decrease in the number of directors set forth in this subsection shall not apply to a corporation registered as an open-end management investment company registered under the Investment Company Act of 1940."

The 2019 amendments. - The 2019 amendment by c. 734 rewrote the section.

Law review. - For 2007 annual survey article, "Corporate and Business Law," see 42 U. Rich. L. Rev. 273 (2007).

Michie's Jurisprudence. - For related discussion, see 4B M.J. Corporations, § 149.

Editor's note. - The cases below were decided under prior law.

§ 13.1-676. Election of directors by certain classes or series of shares.

If the articles of incorporation authorize dividing the shares into classes or series, the articles of incorporation may also authorize the election of all or a specified number of directors by the holders of one or more authorized classes or series of shares. A class or series, or multiple classes or series, of shares entitled to elect one or more directors is a separate voting group for purposes of the election of directors.

(Code 1950, § 13.1-37; 1956, c. 428; 1985, c. 522; 2019, c. 734.)

The 2019 amendments. - The 2019 amendment by c. 734 inserted "or series" following "classes" throughout and made related changes; inserted "of incorporation" following "the articles"; substituted "A class or series, or multiple classes or series" for "Each class, or classes."

§ 13.1-677. Terms of directors generally.

1. The terms of the initial directors of a corporation expire at the first shareholders' meeting at which directors are elected, unless their terms are staggered pursuant to § 13.1-678 , in which case the term shall expire at the applicable second or third annual shareholders' meeting.
2. The terms of all other directors expire at the next, or if the terms are staggered pursuant to § 13.1-678 , at the applicable second or third annual shareholders' meeting following their election, except to the extent a shorter term is specified in the articles of incorporation in the event of a director nominee failing to receive a specified vote for election.
3. A decrease in the number of directors does not shorten an incumbent director's term.
4. The term of a director elected by the board of directors to fill a vacancy expires at the next shareholders' meeting at which directors are elected.
5. Except to the extent otherwise provided in the articles of incorporation, despite the expiration of a director's term, the director continues to serve until the director's successor is elected and qualifies or until there is a decrease in the number of directors.
6. Notwithstanding the foregoing provisions, the terms of the directors of a corporation registered under the federal Investment Company Act of 1940 shall expire according to, and otherwise be governed by, the provisions of the federal Investment Company Act of 1940.

   (Code 1950, § 13.1-36; 1956, c. 428; 1968, c. 87; 1973, c. 50; 1974, c. 662; 1977, c. 123; 1982, c. 104; 1985, c. 522; 1990, c. 228; 2005, c. 765; 2007, c. 165; 2019, c. 734.)

Editor's note. - For the Investment Company Act of 1940, referred to above, see 15 U.S.C.S. § 80a-1 et seq.

The 2005 amendments. - The 2005 amendment by c. 765 added "if any" to the end of subsection E.

The 2007 amendments. - The 2007 amendment by c. 165 added "unless their terms are staggered ... shareholders' meeting" at the end of subsection A, inserted "or if the terms ... the applicable second or third" and deleted "unless their terms are staggered under § 13.1-678 " following "their election" in subsection B, and substituted "the director" for "he" and "the director's" for "his" in subsection E.

The 2019 amendments. - The 2019 amendment by c. 734 rewrote subsection B, which read: "The terms of all other directors expire at the next, or if the terms are staggered in accordance with § 13.1-678 , at the applicable second or third, annual shareholders' meeting following their election"; in subsection E, inserted "Except to the extent otherwise provided in the articles of incorporation" at the beginning, and deleted "if any" at the end; in subsection F, inserted "federal" preceding "Investment Company" twice; and made stylistic changes.

Michie's Jurisprudence. - For related discussion, see 4B M.J. Corporations, § 154.

§ 13.1-678. Staggered terms for directors.

The articles of incorporation may provide for staggering the terms of directors by dividing the total number of directors into two or three groups, with each group containing one-half or one-third of the total, as near as may be practicable. In that event, the terms of directors in the first group expire at the first annual shareholders' meeting after their election, the terms of the second group expire at the second annual shareholders' meeting after their election, and the terms of the third group, if any, expire at the third annual shareholders' meeting after their election. At each annual shareholders' meeting held thereafter, directors shall be elected for a term of two years or three years, as the case may be, to succeed those whose terms expire.

(Code 1950, § 13.1-37; 1956, c. 428; 1985, c. 522; 2019, c. 734.)

The 2019 amendments. - The 2019 amendment by c. 734 deleted the designation for subsection A; inserted "practicable" following "may be"; substituted "elected" for "chosen"; and deleted former subsection B, which read: "If the articles of incorporation permit cumulative voting, any provision establishing staggered terms of directors shall provide that at least three directors shall be elected at each annual shareholders' meeting."

Law review. - For survey on business and corporate law in Virginia for 1989, see 23 U. Rich. L. Rev. 491 (1989).

§ 13.1-679. Resignation of directors.

1. A director may resign at any time by delivering a written notice of resignation to the board of directors or its chairman, or to the secretary of the corporation.
2. A resignation is effective as provided in subdivision A 9 of § 13.1-610 unless the resignation provides for a delayed effectiveness including effectiveness determined upon a future event or events. If a resignation provides for a delayed effectiveness, the board of directors may fill the pending vacancy before the effectiveness of the resignation if the board of directors provides that the successor does not take office until the effectiveness of the resignation. A resignation that is conditioned upon failing to receive a specified vote for election as a director may provide that it is irrevocable.
3. Any person whose name is of record in the office of the clerk of the Commission as a director of a corporation, and who has resigned or whose name is incorrectly of record, may file a statement to that effect with the Commission.
4. Upon the resignation of a director, the corporation may file an amended annual report with the Commission indicating the resignation of the director and the successor in office, if any.

   (1985, c. 522; 1991, c. 124; 2005, c. 765; 2007, c. 165; 2019, c. 734; 2020, c. 1226.)

Editor's note. - Acts 2020, c. 1226, cl. 3 provides: "That the provisions of the first and second enactments of this act shall become effective July 1, 2021."

The 2005 amendments. - The 2005 amendment by c. 765 added "if any" to the end of subsection D.

The 2007 amendments. - The 2007 amendment by c. 165 substituted "delivering a written resignation" for "delivering written notice" and "directors or its chairman, or to the secretary of the corporation" for "directors, its chairman, the president, or the secretary" in subsection A; and in subsection B, substituted "resignation" for "notice" twice and added "or an effective date ... or more events" in the first sentence, and added the third sentence.

The 2019 amendments. - The 2019 amendment by c. 734 rewrote the section.

The 2020 amendments. - The 2020 amendment by c. 1226, effective July 1, 2021, substituted "subdivision A 9" for "subdivision 9" in the first sentence of subsection B.

§ 13.1-680. Removal of directors by shareholders.

1. The shareholders may remove one or more directors with or without cause, unless the articles of incorporation provide that directors may be removed only for cause.
2. If a director is elected by a voting group of shareholders, only the shareholders of that voting group may participate in the vote to remove the director.
3. If cumulative voting in the election of directors is authorized by the articles of incorporation, a director may not be removed if, in the case of a shareholders' meeting, the number of votes sufficient to elect him under cumulative voting is voted against his removal and, if action is taken by less than unanimous consent, voting shares entitled to the number of votes sufficient to elect the director under cumulative voting do not consent to the removal. If cumulative voting in the election of directors is not authorized by the articles of incorporation, unless the articles of incorporation or bylaws require a greater vote, a director may be removed if the number of votes cast to remove the director constitutes a majority of the votes entitled to be cast at an election of directors of the voting group or voting groups by which the director was elected.
4. A director may be removed by the shareholders at a shareholders' meeting if the meeting is called for the purpose of removing the director. The meeting notice shall state that the purpose, or one of the purposes of the meeting, is removal of the director.
5. Upon the removal of a director, the corporation may file an amended annual report with the Commission indicating the removal of the director and the successor in office, if any.

   (Code 1950, §§ 13-205, 13.1-42; 1956, c. 428; 1985, c. 522; 1991, c. 124; 2005, c. 765; 2019, c. 734.)

The 2005 amendments. - The 2005 amendment by c. 765 substituted "the director" for "him" at the end of subsection B and at the end of the first sentence in subsection D; and added "if any" at the end of subsection E.

The 2019 amendments. - The 2019 amendment by c. 734 rewrote subsection C, which read: "If cumulative voting is authorized, a director may not be removed if the number of votes sufficient to elect him under cumulative voting is voted against his removal. If cumulative voting is not authorized, unless the articles of incorporation require a greater vote, a director may be removed if the number of votes cast to remove him constitutes a majority of the votes entitled to be cast at an election of directors of the voting group or voting groups by which the director was elected"; and in subsection D, substituted "shareholders at a shareholders' meeting if the meeting is called" for "shareholders only at a meeting called"; and made stylistic changes.

Michie's Jurisprudence. - For related discussion, see 4B M.J. Corporations, § 156.

Editor's note. - The case below was decided under prior law.

§ 13.1-681.

Repealed by Acts 2010, c. 782, cl. 2.

Editor's note. - Former § 13.1-681 , relating to judicial review of elections, was derived from Code 1950, §§ 13-205, 13.1-42; 1956, c. 428; 1985, c. 522.

§ 13.1-681.1. Removal of directors by judicial proceeding.

1. The circuit court in the county or city in which the principal office of the corporation is located, or, if none in the Commonwealth, in the county or city in which its registered office is located, may remove a director from office, and may bar the director from reelection for a period prescribed by the court, in a proceeding commenced by or in the right of the corporation if the court finds that (i) the director engaged in fraudulent conduct with respect to the corporation or its shareholders, grossly abused the position of director, or intentionally inflicted harm on the corporation and (ii) considering the director's course of conduct and the inadequacy of other available remedies, removal would be in the best interest of the corporation.
2. A shareholder proceeding on behalf of the corporation under subsection A shall comply with all of the requirements of Article 8.1 (§ 13.1-672.1 et seq.) except for those set forth in subdivisions A 1 and 2 of § 13.1-672.1 . (2019, c. 734.)

§ 13.1-682. Vacancy on board of directors.

1. Unless the articles of incorporation provide otherwise, if a vacancy occurs on the board of directors, including a vacancy resulting from an increase in the number of directors:
   1. The shareholders may fill the vacancy;
   2. The board of directors may fill the vacancy; or
   3. If the directors remaining in office are less than a quorum of the board of directors, they may fill the vacancy by the affirmative vote of a majority of the directors remaining in office.
2. Unless the articles of incorporation provide otherwise, if the vacant office was held by a director elected by a voting group of shareholders, only the shareholders of that voting group are entitled to vote to fill the vacancy if it is filled by the shareholders and only the remaining directors elected by that voting group, even if less than a quorum of the board of directors, are entitled to fill the vacancy if it is filled by the remaining directors.
3. A vacancy that will occur at a specific later date, by reason of a resignation effective at a later date under subsection B of § 13.1-679 or otherwise, may be filled before the vacancy occurs but the new director may not take office until the vacancy occurs.
4. The corporation may file an amended annual report with the Commission indicating the filling of a vacancy.

   (Code 1950, § 13.1-38; 1956, c. 428; 1985, c. 522; 1991, c. 124; 2007, c. 165; 2019, c. 734.)

The 2007 amendments. - The 2007 amendment by c. 165 substituted "only the shareholders" for "only the holders" and added "and only the directors ... board of directors" in subsection B.

The 2019 amendments. - The 2019 amendment by c. 734, in subdivision A 3, substituted "are less" for "constitute fewer," and inserted "of directors" following "board"; in subsection B, inserted "remaining" preceding "directors" twice, and inserted "even if less than a quorum of the board of directors" following "voting group"; and made stylistic changes.

§ 13.1-683. Compensation of directors.

Unless the articles of incorporation or bylaws provide otherwise, the board of directors may fix the compensation of directors.

(Code 1950, § 13.1-35; 1956, c. 428; 1985, c. 522.)

CIRCUIT COURT OPINIONS

Improper compensation. - When a part owner of a corporation unilaterally paid herself a salary, after locking out the owner of the remainder of the corporation, without authorization by the corporation's articles of incorporation or bylaws, or authorization of the board of directors, she breached her duty to the corporation. Coffee Break Cafe, Inc. v. Mattison,, 2001 Va. Cir. LEXIS 502 (Newport News May 10, 2001).

§ 13.1-684. Meetings of the board of directors.

1. The board of directors may hold regular or special meetings in or out of this Commonwealth.
2. Unless the articles of incorporation or bylaws provide otherwise, the board of directors may permit any or all directors to participate in a regular or special meeting by, or conduct the meeting through the use of, any means of communication by which all directors participating may simultaneously hear each other during the meeting. A director participating in a meeting by this means is deemed to be present in person at the meeting.

   (Code 1950, § 13.1-41; 1956, c. 428; 1975, c. 500; 1985, c. 522.)

§ 13.1-685. Action without meeting of board of directors.

1. Except to the extent that the articles of incorporation or bylaws require that action by the board of directors be taken at a meeting, action required or permitted by this chapter to be taken by the board of directors may be taken without a meeting if each director signs a consent describing the action to be taken and delivers it to the corporation's secretary.
2. Action taken under this section is effective as the act of the board of directors when the last director signs the consent unless the consent specifies a different effective date, in which event the action taken is effective as of the date specified therein, provided that if such date precedes the date when the last director signs the consent states the date of execution by each director.
3. A director's consent may be withdrawn by a revocation signed by the director and delivered to the corporation's secretary before delivery to the corporation's secretary of unrevoked written consents signed by all the directors.
4. Any person, whether or not then a director, may provide that a consent to action as a director shall be effective at a future time, including the time when an event occurs, but such future time shall not be more than 60 days after such provision is made. Any such consent shall be deemed to have been made for purposes of this section at the future time so specified for the consent to be effective, provided that (i) the person is a director at such future time and (ii) the person did not revoke the consent prior to such future time. Any such consent may be revoked, in the manner provided in subsection C, prior to its becoming effective.
5. For purposes of this section, a written consent or revocation and the signing thereof may be accomplished by one or more electronic transmissions.
6. A consent signed under this section has the effect of action taken at a meeting of the board of directors and may be described as such in any document.

   (Code 1950, § 13.1-41.1; 1964, c. 419; 1975, c. 500; 1985, c. 522; 2005, c. 765; 2015, c. 611; 2019, c. 734.)

The 2005 amendments. - The 2005 amendment by c. 765 rewrote subsection A; divided former subsection B into present subsections B and E; added present subsections C and D; and inserted "action taken at" and substituted "of the board of directors" for "vote" in subsection E.

The 2015 amendments. - The 2015 amendment by c. 611 added subsection D and redesignated former subsections D and E as subsections E and F.

The 2019 amendments. - The 2019 amendment by c. 734 substituted "corporation's secretary" for "corporation" throughout; in subsection B, inserted "as the act of the board of directors" and "that if such date precedes the date when the last director signs"; in subsection E, inserted "or revocation" following "written consent"; and made a stylistic change.

Law review. - For survey of Virginia law on business associations for the year 1974-1975, see 61 Va. L. Rev. 1650 (1975).

For 2007 annual survey article, "Corporate and Business Law," see 42 U. Rich. L. Rev. 273 (2007).

CIRCUIT COURT OPINIONS

Stock purchase agreement that one shareholder did not sign held void. - Stock purchase agreement (SPA) was void for failing to comply with subdivision B 1 b of § 13.1-671.1 , since it was not signed by all the stockholders. That a majority shareholder signed, as an individual, a consent containing a resolution authorizing him as president of the corporation to sign agreements necessary to sell its stock of the company did not make his signature as president on the SPA his de facto individual signature. Booker v. Humphreys, 73 Va. Cir. 543, 2007 Va. Cir. LEXIS 12 (Lancaster County 2007).

§ 13.1-686. Notice of board of directors' meetings.

1. Unless the articles of incorporation or bylaws provide otherwise, regular meetings of the board of directors may be held without notice of the date, time, place or purpose of the meeting.
2. Special meetings of the board of directors shall be held upon such notice as is prescribed in the articles of incorporation or bylaws, or when not inconsistent with the articles of incorporation or bylaws, by resolution of the board of directors. The notice need not describe the purpose of the special meeting unless required by the articles of incorporation or bylaws.

   (Code 1950, § 13.1-41; 1956, c. 428; 1975, c. 500; 1985, c. 522; 2002, c. 285; 2005, c. 765; 2010, c. 782.)

The 2002 amendments. - The 2002 amendment by c. 285 added subsection C.

The 2005 amendments. - The 2005 amendment by c. 765 deleted "provided" following "for the giving of notice" in the second sentence of subsection C.

The 2010 amendments. - The 2010 amendment by c. 782 deleted subsection C, concerning electronic notice of the date, time, place or purpose of a regular or special meeting of the board of directors.

Law review. - For article reviewing changes in Virginia corporate and business law from June 2001 through May 2002, see 37 U. Rich. L. Rev. 1 (2002).

For 2002 survey of Virginia technology law, see 37 U. Rich. L. Rev. 341 (2002).

§ 13.1-687. Waiver of notice by director.

1. A director may waive any notice required by this chapter, the articles of incorporation, or bylaws before or after the date and time stated in the notice, and such waiver shall be equivalent to the giving of such notice. Except as provided in subsection B, the waiver shall be in writing, signed by the director entitled to the notice, and delivered to the corporation's secretary for filing by the corporation with the minutes of the meeting or corporate records.
2. A director's attendance at or participation in a meeting waives any required notice to the director of the meeting unless the director at the beginning of the meeting or promptly upon the director's arrival objects to holding the meeting or transacting business at the meeting and does not after objecting vote for or assent to action taken at the meeting.

   (Code 1950, § 13.1-27; 1956, c. 428; 1985, c. 522; 2019, c. 734.)

The 2019 amendments. - The 2019 amendment by c. 734, in subsection A, substituted "chapter" for "Act" and substituted "delivered to the corporation's secretary for filing by the corporation with the minutes of the meeting" for "filed with the minutes"; in subsection B, substituted "the director" for "him" and "after objecting" for "thereafter"; and made stylistic changes.

§ 13.1-688. Quorum and voting by directors.

1. Unless the articles of incorporation or bylaws require a greater or lesser number for the transaction of all business or any particular business, or unless otherwise specifically provided in this chapter, a quorum of the board of directors consists of:
   1. A majority of the fixed number of directors if the corporation has a fixed board size; or
   2. A majority of the number of directors prescribed, or if no number is prescribed the number in office immediately before the meeting begins, if the corporation has a variable-range size board.
2. The articles of incorporation or bylaws may authorize a quorum of a board of directors to consist of no fewer than one-third of the specified or fixed number of directors determined under subsection A.
3. If a quorum is present when a vote is taken, the affirmative vote of a majority of directors present is the act of the board of directors unless the articles of incorporation or bylaws require the vote of a greater number of directors or unless otherwise expressly provided in this chapter.
4. A director who is present at a meeting of the board of directors or a committee of the board of directors when corporate action is taken is deemed to have assented to the action taken unless:
   1. The director objects at the beginning of the meeting, or promptly upon the director's arrival, to holding it or transacting specified business at the meeting;
   2. The director's dissent or abstention from the action taken is entered in the minutes of the meeting; or
   3. The director delivers written notice of the director's dissent or abstention to the presiding officer of the meeting before its adjournment or to the secretary of the corporation or meeting immediately after adjournment of the meeting. The right of dissent or abstention is not available to a director who votes in favor of the action taken.
5. Except as may be provided in an agreement authorized by § 13.1-671.1 , a director shall not vote by proxy.
6. Whenever this chapter requires the board of directors to take any action or to recommend or approve any proposed corporate act, such action, recommendation, or approval shall not be required if the proposed action or corporate act is adopted by the unanimous consent of shareholders.

   (Code 1950, §§ 13-206, 13-207, 13.1-39, 13.1-44; 1956, c. 428; 1966, c. 131; 1985, c. 522; 1992, c. 471; 2005, c. 765; 2019, c. 734.)

The 2005 amendments. - The 2005 amendment by c. 765 added "or unless otherwise specifically provided in this chapter" in subsection A; deleted "of this section" at the end of subsection B; substituted "The director" for "He" at the beginning of subdivisions D 1 and D 2; redesignated former subsection E as present subsection F; and added present subsection E.

The 2019 amendments. - The 2019 amendment by c. 734, in subsection A, inserted "or lesser" following "greater"; in subsection B, substituted "specified or fixed" for "fixed or prescribed"; in subsection C, added "or unless otherwise expressly provided in this chapter" at the end; in subdivision D 1, substituted "the director's" for "his"; rewrote subdivision D 2, which read: "The director votes against, or abstains from, the action taken"; added subdivision D 3; in subsection E, substituted "may be provided in an agreement authorized by" for "provided in"; and made stylistic changes.

Michie's Jurisprudence. - For related discussion, see 3A M.J. Banks and Banking, § 93.

§ 13.1-689. Committees.

1. Unless the articles of incorporation or bylaws provide otherwise, a board of directors may establish one or more committees of the board of directors to perform functions of the board of directors and appoint two or more directors of the board of directors to serve on each committee. While non-board members may also be appointed to a committee, they may not vote on any matter for which the committee is performing a function of the board of directors. Each committee member serves at the pleasure of the board of directors.
2. Unless the articles of incorporation or bylaws provide otherwise, the establishment of a committee and appointment of members to it shall be approved by the greater number of (i) a majority of all the directors in office when the action is taken or (ii) the number of directors required by the articles of incorporation or bylaws to take action under § 13.1-688 .
3. Sections 13.1-684 through 13.1-688 , which govern meetings, action without meetings, notice and waiver of notice, and quorum and voting requirements of the board of directors, apply to committees and their members as well.
4. To the extent specified by the board of directors or in the articles of incorporation or bylaws, each committee may exercise the authority of the board of directors under § 13.1-673 , except that a committee may not:
   1. Approve or propose to shareholders action that this chapter requires to be approved by shareholders;
   2. Fill vacancies on the board of directors or, subject to subsection E, on any committee;
   3. Amend the articles of incorporation pursuant to § 13.1-706 ;
   4. Adopt, amend, or repeal the bylaws;
   5. Approve a plan of merger not requiring shareholder approval;
   6. Authorize or approve a distribution, except according to a formula or method, or within limits, prescribed by the board of directors; or
   7. Authorize or approve the issuance or sale or contract for sale of shares, or determine the designation and rights, preferences, and limitations of a class or series of shares, except that the board of directors may (i) authorize a committee to do so subject to such limits, if any, as may be prescribed by the board of directors, and (ii) authorize a senior executive officer of the corporation to do so subject to such limits, if any, as may be prescribed by the board of directors or by subsection C of § 13.1-646 .
5. The board of directors may appoint one or more directors as alternate members of any committee to replace any absent or disqualified member during the member's absence or disqualification. Unless the articles of incorporation or the bylaws or the resolutions of the board of directors establishing the committee provide otherwise, in the event of the absence or disqualification of a member of a committee and there are no alternate members appointed by the board of directors, the member or members of the committee present at any meeting and not disqualified from voting may by unanimous action appoint another director to act in place of the absent or disqualified member during that member's absence or disqualification.

   (Code 1950, § 13.1-40; 1956, c. 428; 1975, c. 500; 1980, c. 341; 1985, c. 522; 2005, c. 765; 2010, c. 782; 2019, c. 734.)

The 2005 amendments. - The 2005 amendment by c. 765 substituted "shall" for "may" in the second sentence of subsection A; substituted "chapter" for "Act" in subdivision D 1; in subdivision D 7, deleted "relative" preceding "rights," and substituted "to do so subject to such limits if any, as may be prescribed by the board of directors" for "to do so within limits specifically prescribed by the board of directors"; and added subsection F.

The 2010 amendments. - The 2010 amendment by c. 782, in subdivision D 7, added the clause (i) designator; deleted "or a senior executive officer of the corporation" following "authorize a committee," and added clause (ii).

The 2019 amendments. - The 2019 amendment by c. 734 rewrote subsection A, which read: "Unless the articles of incorporation or bylaws provide otherwise, a board of directors may create one or more committees and appoint members of the board of directors to serve on them. Each committee shall have two or more members, who serve at the pleasure of the board of directors"; in subsection B, substituted "Unless the articles of incorporation or bylaws provide otherwise, the establishment" for "The creation"; in subdivision D 1, substituted "propose" for "recommend"; rewrote subdivision D 2, which read: "Fill vacancies on the board on any of its committees"; in subdivision D 6, deleted "general" preceding "formula," and inserted "or within limits" following "method"; deleted former subsection E, which read: "The creation of, delegation of authority to, or action by a committee does not alone constitute compliance by a director with the standards of conduct described in § 13.1-690 "; redesignated former subsection F as E; and rewrote subsection E, which read: "The board of directors may appoint one or more directors as alternate members of any committee to replace any absent or disqualified member during the member's absence or disqualification. Unless the articles of incorporation or the bylaws or the resolution creating the committee provide otherwise, in the event of the absence or disqualification of a member of a committee, the member or members present at any meeting and not disqualified from voting, unanimously may appoint another director to act in place of the absent or disqualified member"; and made stylistic changes.

§ 13.1-690. General standards of conduct for director.

1. A director shall discharge his duties as a director, including his duties as a member of a committee, in accordance with his good faith business judgment of the best interests of the corporation.
2. Unless a director has knowledge or information concerning the matter in question that makes reliance unwarranted, the director is entitled to rely on information, opinions, reports, or statements, including financial statements and other financial data, if prepared or presented by:
   1. One or more officers or employees of the corporation whom the director believes, in good faith, to be reliable and competent in the matters presented;
   2. Legal counsel, public accountants, or other persons as to matters the director believes, in good faith, are within the person's professional or expert competence; or
   3. A committee of the board of directors of which he is not a member if the director believes, in good faith, that the committee merits confidence.
3. A director is not liable for any action taken as a director, or any failure to take any action, if he performed the duties of his office in compliance with this section.
4. A person alleging a violation of this section has the burden of proving the violation.

   (Code 1950, §§ 13-206, 13-207, 13.1-44; 1956, c. 428; 1985, c. 522; 2019, c. 734.)

Cross references. - As to trustee standard of conduct, trustee liability and restrictions on liability limitations in governing instruments under the Virginia Business Trust Act, see § 13.1-1229 .

The 2019 amendments. - The 2019 amendment by c. 734, in subsection B, substituted "a director" for "he"; and made stylistic changes.

Law review. - For note, "The Defensive and Offensive Use of 'Poison Pills' Within the Business Judgment Rule," see 24 U. Rich. L. Rev. 127 (1989).

For 1991 survey of business and corporate law, see 25 U. Rich. L. Rev. 627 (1991).

For an essay, "The Shaping Force of Corporate Law In the New Economic Order," see 31 U. Rich. L. Rev. 1473 (1997).

For an article, "Misunderstanding Director Duties: The Strange Case of Virginia," see 56 Wash. & Lee L. Rev. 1127 (1999).

For article reviewing changes in Virginia corporate and business law from June 2001 through May 2002, see 37 U. Rich. L. Rev. 1 (2002).

For comment, "Private Ordering in the Old Dominion: A Solution to Frivolous Litigation or the Elimination of a Fundamental Shareholder Right?" see 53 U. Rich. L. Rev. 297 (2018).

Michie's Jurisprudence. - For related discussion, see 3A M.J. Banks and Banking, § 93.

§ 13.1-690.1. Director of open-end management investment company deemed disinterested.

A director of a corporation that is an open-end management investment company, as defined by the federal Investment Company Act of 1940, who with respect to the corporation is not an interested person, as defined by the federal Investment Company Act of 1940, shall be deemed to be disinterested when making any determination or taking any action as a director of the corporation.

(2006, c. 330; 2019, c. 734.)

Editor's note. - For the Investment Company Act of 1940, referred to above, see 15 U.S.C.S. § 80a-1 et seq.

The 2019 amendments. - The 2019 amendment by c. 734 inserted "federal" preceding "Investment" twice; deleted "independent and" preceding "disinterested"; and added "of the corporation" at the end.

Law review. - For 2007 annual survey article, "Corporate and Business Law," see 42 U. Rich. L. Rev. 273 (2007).

§ 13.1-691. Director conflict of interests.

1. A conflict of interests transaction is a transaction with the corporation in which a director of the corporation has an interest that precludes the director from being a disinterested director. A conflict of interests transaction is not voidable by the corporation solely because of the director's interest in the transaction if any one of the following is true:
   1. The material facts of the transaction and the director's interest were disclosed or known to the board of directors or a committee of the board of directors and the board of directors or committee authorized, approved, or ratified the transaction;
   2. The material facts of the transaction and the director's interest were disclosed to the shareholders entitled to vote and they authorized, approved, or ratified the transaction; or
   3. The transaction was fair to the corporation.
2. For purposes of subdivision A 1, a conflict of interests transaction is authorized, approved, or ratified if it receives the affirmative vote of a majority of the disinterested directors on the board of directors, or on the committee. A transaction shall not be authorized, approved, or ratified under this section by a single director. If a majority of the disinterested directors vote to authorize, approve or ratify the transaction, a quorum is present for the purpose of taking action under this section. The presence of, or a vote cast by, a director who is not disinterested does not affect the validity of any action taken under subdivision A 1 if the transaction is otherwise authorized, approved or ratified as provided in that subsection.
3. For purposes of subdivision A 2, a conflict of interests transaction is authorized, approved, or ratified if it receives the vote of a majority of the shares entitled to be counted under this subsection. Shares owned by or voted under the control of a director who is not disinterested may not be counted in a vote of shareholders to determine whether to authorize, approve, or ratify a conflict of interests transaction under subdivision A 2. The vote of those shares, however, shall be counted in determining whether the transaction is approved under other sections of this chapter. A majority of the shares, whether or not present, that are entitled to be counted in a vote on the transaction under this subsection constitutes a quorum for the purpose of taking action under this section.

   (Code 1950, § 13.1-39.1; 1975, c. 500; 1980, c. 341; 1985, c. 522; 2005, c. 765.)

Cross references. - As to trustee standard of conduct, trustee liability and restrictions on liability limitations in governing instruments under the Virginia Business Trust Act, see § 13.1-1229 .

The 2005 amendments. - The 2005 amendment by c. 765 substituted "has an interest that precludes the director from being a disinterested director" for "has a direct or indirect personal interest" in the first sentence in subsection A; deleted former subsection B, relating to directors with an indirect personal interest in transactions; and rewrote former subsections C and D and redesignated them as present subsections B and C.

§ 13.1-691.1. Business opportunities.

1. A director's taking advantage, directly or indirectly, of a business opportunity may not be the subject of equitable relief, or give rise to an award of damages or other sanctions against the director, in a proceeding by or in the right of the corporation on the ground that such opportunity should have first been offered to the corporation, if before becoming legally obligated respecting the opportunity the director brings it to the attention of the corporation and:
   1. Directors' action disclaiming the corporation's interest in the opportunity is taken in compliance with the procedures set forth in subdivision A 1 of § 13.1-691 , as if the decision being made concerned a director's conflict of interests transaction; or
   2. Shareholders' action disclaiming the corporation's interest in the opportunity is taken in compliance with the procedures set forth in subdivision A 2 of § 13.1-691 , as if the decision being made concerned a director's conflict of interests transaction.
2. In any proceeding seeking equitable relief or other remedies, based upon an alleged improper taking advantage of a business opportunity by a director, the fact that the director did not employ one of the procedures described in subsection A before taking advantage of the opportunity shall not create an inference that the opportunity should have been first presented to the corporation or alter the burden of proof otherwise applicable to establish that the director breached a duty to the corporation in the circumstances.

   (2005, c. 765.)

§ 13.1-692. Liability for unlawful distributions.

1. A director who votes for or assents to a distribution in excess of what may be authorized and made pursuant to this chapter or the articles of incorporation is personally liable to the corporation and its creditors for the amount of the distribution that exceeds what could have been distributed without violating this chapter or the articles of incorporation if the party asserting liability establishes that when taking the action the director did not comply with § 13.1-690 .
2. A director held liable for an unlawful distribution under subsection A is entitled to:
   1. Contribution from every other director who could be held liable under subsection A for the unlawful distribution; and
   2. Recoupment from the shareholders who received the unlawful distribution in proportion to the amounts of such unlawful distribution received by them respectively.
3. No suit shall be brought against any director for any liability imposed by subsection A except within two years after the right of action shall accrue.
4. Contribution or recoupment under subsection B is barred unless it is commenced within one year after the liability of the claimant has been finally adjudicated under subsection A.

   (Code 1950, §§ 13-206, 13-207, 13.1-44; 1956, c. 428; 1985, c. 522; 2005, c. 765; 2019, c. 734.)

The 2005 amendments. - The 2005 amendment by c. 765, in subsection A, deleted the beginning which read: "Unless he complies with the applicable standards of conduct described in § 13.1 690" and added "if the party asserting liability establishes that when taking the action the director did not comply with § 13.1-690 " to the end; in subsection B, deleted "of this section" preceding "is entitled to" and deleted "contribution" following "is entitled to"; rewrote subdivision B 1; added "Recoupment" to the beginning of subdivision B 2; substituted "subsection A" for "this section" in subsection C; and added subsection D.

The 2019 amendments. - The 2019 amendment by c. 734, in subsection A, substituted "in excess of what may be authorized and made pursuant to" for "made in violation of."

Michie's Jurisprudence. - For related discussion, see 4B M.J. Corporations, § 110.