Chap. 122.—An ACT to amend and re-enact sections 3781 and 3840, as heretofore
amended, of the Code of Virginia, in relation to corporations. [S B 120]

Approved March 8, 1932
1. Be it enacted by the general assembly of Virginia, That sec-
tions thirty-seven hundred and eighty-one and thirty-eight hundred
and forty of the Code of Virginia, in relation to corporations, be
amended and re-enacted so as to read as follows:

Section 3781. Decrease of actually issued and outstanding stock
and/or capital—Whenever in the judgment of the board of directors
it shall be deemed advisable and for the benefit of any corporation,
heretofore or hereafter organized under the laws of this Common-
wealth, that its actually issued and outstanding stock and/or capital
be decreased it may, unless otherwise provided in its charter, certi-
ficate of incorporation, or articles of association, or in any amendment
thereto, with the concurrence of two-thirds in amount of all of its
stockholders having voting power, given as hereinafter provided, de-
crease its actually issued and outstanding stock from time to time
to any amount not less than the minimum fixed in its charter or on
amendment thereof, and/or the amount of its capital represented by
outstanding shares of stock, in the manner following, that is to say:
By retiring or reducing any class of stock or by drawing the neces-
sary number of shares of any class by lot for retirement, or by the
exchange by stockholders of any class of the stock held by them of
such class for a decreased number of shares of stock of said class, or
by reducing the par value of shares of any class when authorized by an
amendment, or by the exchange of shares of stock of any class for
the same or a different number of shares of stock of any other class,
or by the purchase of shares for retirement, either pro rata from all
holders of shares of that class of stock or from time to time by pur-
chase in the open market at not exceeding such price or prices as are
fixed or approved by the stockholders entitled to vote at any such
meeting, or by retiring shares owned by the corporation, and/or by
reducing the amount of capital represented by outstanding shares
of stock. If shares of stock are retired not more than the consider-
ation received therefor by the corporation shall be charged against
or retired out of the capital of the corporation; plus any amounts
transferred to capital in respect thereof pursuant to section thirty-
eight hundred and forty. Such decrease must be sanctioned by a vote,
in person or by proxy by stockholders holding at least two-thirds in
amount of the issued and outstanding stock of the corporation en-
titled to vote at a meeting of such stockholders called by the board of
directors for the purpose. Notice of such meeting shall be given
by publication at least six times a week for two successive weeks
prior to such meeting in some newspaper published in the place where
its principal office is located, or having a general circulation therein,
or notice in writing shall be given to each of the stockholders of rec-
ord, whether having voting power or not, by serving the same on
them personally or by mailing it to their last known post office ad-
dress, as furnished by them to the officers of the corporation, at least
ten days prior to such meeting, and in such notice shall be stated the
time and place of the meeting and its object. If at such meeting
stockholders representing at least two-thirds in amount of the en-
tire issued and outstanding stock having voting power shall vote in
favor of decreasing the actually issued and outstanding stock to an
amount not less than the minimum capital authorized by the charter
of the corporation or an amendment thereof, and/or of decreasing
the amount of its capital represented by outstanding shares of stock,
a certificate stating that the statutory requirements herein presented
have been fully complied with and setting forth the plan to be fol-
lowed in accomplishing the proposed reduction of issued and out-
standing stock and/or capital shall be made by the president, or one
of the vice-presidents, under the seal of the corporation, attested by its
secretary, or an assistant secretary, and acknowledged by them before
an officer authorized by the laws of this State to take acknowledg-
ments of deeds, and when so acknowledged it may be presented to the
State corporation commission, which shall ascertain whether the ap-
plicants have, by complying with the requirements of the law, entitled
themselves to make such decrease of the actually issued and out-
standing stock and/or capital, and shall issue or refuse to issue a cer-
tificate permitting the same accordingly. ,

Whenever an amendment is necessary in connection with the ob-
taining of a certificate of reduction hereunder, or is desired, the ac-
tion on the part of the stockholders authorizing such amendment and
such certificate of reduction may be taken at the same meeting, if
desired, provided that the requirements of section thirty-seven hun-
dred and eighty and the provisions of this section are both complied
with, and any such amendment may be certified and presented in a
combined certificate, or separately, as preferred. Any certificate so
issued by the commission to any corporation organized under chapter
one hundred and forty-eight shall be certified to the clerk of the cir-
cuit court of the county, or circuit, corporation or chancery court of
the city in which the original certificate of incorporation is recorded,
and the clerk of such court shall thereupon record the same in his
office in a book provided and kept for the recordation of charters, and
shall endorse the fact of such recordation upon the said certificate
and return the same to the State corporation commission, to be lodged
and preserved in the office of its clerk. If any such decrease shall
result in the reduction of the capital of the corporation, a statement
in writing setting forth the plan of such reduction shall be published
over the signature of the president, or one of its vice-presidents, and
the secretary or an assistant secretary of the corporation, at least once
a week for three successive weeks, in a newspaper published in the
county or city in which the principal office of the corporation is lo-
cated, or having a general circulation therein, the first publication to
be made within ten days after the filing of such certificate in the
office of the State corporation commission; provided, however, that
no such decrease shall affect the rights of any creditor of any such
corporation existing at the time of such decrease.

Section 3840. Capital defined; dividends; liability of directors
for declaration of dividends——The board of directors of every cor-
poration shall, unless otherwise provided in its charter, certificate of
incOrporation or articles of association, or in any amendment thereto,
have power to declare and pay dividends upon the shares of its capi-
tal stock out of net earnings, or out of its net assets in excess of its
capital as hereinafter defined. The capital of a corporation shall be
the sum of the consideration received by the corporation in pay-
ment for its shares of stock, whether with or without nominal or par
value, plus such amounts as from time to time by resolution of the
board of directors may be transferred to capital and/or less such
amounts as may be transferred from capital by a reduction thereof,
pursuant to the provisions of section thirty-seven hundred and eighty-
one, and shall not include contributed surplus when, under the terms
and conditions of the subscription agreement to any shares of stock,
it 1s provided that in addition to the consideration paid for such
stock, there shall be paid by the subscriber a sum to be contributed
surplus of the corporation. No dividend shall be paid, in whole or
in part, from contributed surplus upon any shares of stock without
written notice being given to stockholders receiving the same, at the
time of payment of any such dividend.

If the board of directors declare and pay a dividend out of any
part of the capital, as hereinbefore defined, all members of the board
who shall be present and know that such dividend is declared in
violation of this section, and shall not dissent therefrom, shall, in
their individual capacity, be jointly and severally liable to the cor-
poration’s creditors for the amount of such dividend so unlawfully
paid and may be proceeded against therefor on a bill in equity filed
on behalf of such creditors and, moreover, each stockholder who
participates in such dividend shall be liable to such creditors to the
extent of such dividend unlawfully paid so received by him.