CHAPTER 428

An Act to revise, rearrange, amend and recodify the general corporation
laws of Virginia; to that end to repeal Title 18 of the Code of Virginia,
which includes Chapters 1 through 15 and Sections 18-1 through
18-292 of the Code of Virginia, as amended, which Title relates to
corporations and securities generally; to amend the Code of Virginia
by adding thereto, in lieu of such Title, Chapters and Sections of the
Code repealed by this Act, a new Title numbered 18.1 which Title
includes five Articles numbered 1 through 5 and new Sections num-
bered Sections 13.1-1 through 13.1-527, relating to corporations and
securities generally.

[S 11]
Approved March 30, 1956

Be it enacted by the General Assembly of Virginia: .

1. That Title 13 of the Code of Virginia which includes Chapters 1
through 15 and Sections 13-1 through 13-292 of the Code of Virginia, as
amended, is repealed.

2. That the Code of Virginia is amended by adding thereto, in lieu of
the Title, Chapters and Sections of the Code of Virginia herein repealed,
a new Title numbered 13.1 which is divided into five Articles numbered 1
through 5 and new Sections numbered 13.1-1 through 13.1-527 which new
Title, Articles and Sections are as follows:

TITLE 13.1 CORPORATIONS
ARTICLE 1
STOCK CORPORATIONS

CHAP 1

DEFINITIONS

13.1-1. Short Title—Chapters 1 through 12 of this Article (therein
eal eu Act or the Act) shall be known as the “Virginia Stock Corpora-
on Act”.

§ 13.1-2. Definitions.—As used in this Act, unless the context other-
wise requires, the term:

_. (a) “Commission” means the State Corporation Commission of Vir-
ginia.

(b) “Certificate” means an order of the Commission together with the
articles which it finds to comply with the requirements of law.

(c) “Corporation” or “domestic corporation” means a corporation
authorized by law to issue stock, irrespective of the nature of the business
to be transacted, organized under the Virginia Stock Corporation Act or
existing pursuant to the laws of this State at the time when this Act be-
comes effective, or merged or consolidated with a corporation of this State
in such manner as thereby to become a domestic corporation of this State,
even though also remaining a corporation of other states.

(d) “Foreign corporation” means a corporation authorized by law
to issue stock, organized under laws other than the laws of this State for
& parpone or purposes for which a corporation may be organized under

is Act.

(e) “Articles of incorporation” means all documents constituting,
488 ACTS OF ASSEMBLY [vA., 1956

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 merger (except a certificate of merger
with a wholly owned subsidiary pursuant to this Act), consolidation,
serial designation or reduction. It excludes documents prior in time to
the latest articles of amendment, merger or consolidation which restate
the articles of incorporation.

(f) “Treasury shares” means shares of a corporation which have been
issued, have been subsequently reacquired and belong to the corporation,
and have not been effectively cancelled by the issuance of a certificate of
reduction by the Commission. Treasury shares shall be deemed to be
“issued” shares, but not “outstanding” shares, and shall not be considered
assets.

(g) “Stated capital” means, at any particular time, the sum of (1)
the amount of the consideration received by the corporation for all shares
of the corporation having a par value that have been issued, except that
any excess of such consideration over the par value of shares issued other-
wise than in conversion or exchange shall be excluded, (2) the amount of
the consideration received by the corporation for all shares of the corpo-
ration without par value that have been issued, except such part of the
consideration therefor as may have been allocated to capital surplus in a
manner permitted by law, and (3) such amounts not included in clauses
(1) and (2) of this paragraph as have been transferred to stated capital
of the corporation, whether upon the issuance of shares as a stock
dividend or otherwise, minus all reductions from such sum that have been
effected in a manner permitted by law.

(h) “Surplus” means the excess of the net assets of a corporation
over its stated capital.

(i) “Earned surplus” means the portion of the surplus of a corpora-
tion equal to the balance of its net profits from the date of incorporation,
or from the latest date when a deficit was eliminated by reduction of
its capital surplus or stated capital or otherwise, after deducting sub-
sequent distributions to stockholders and transfers to stated capital and
capital surplus to the extent such distributions and transfers are made out
of earned surplus.

(j) “Capital surplus” means the entire surplus of a corporation
other than its earned surplus.

(k) “Insolvent” means inability of a corporation to pay its debts as
they become due in the usual course of its business.

CHAP 2
SUBSTANTIVE PROVISIONS

§ 13.1-8. General Powers.—Each corporation shall have power:

(a) To have perpetual succession by its corporate name.

(b) To sue and be sued, complain and defend, in its corporate name.

(c) To have a corporate seal which may be altered at pleasure, and to
use the same by causing it, or a facsimile thereof, to be impressed or affixed
or in any other manner reproduced.

(d) To purchase, take by gift, devise or bequest, receive, lease, or
otherwise acquire, own, hold, improve, use and otherwise deal in and with,
real or personal property, or any interest therein, wherever situated.

(e) To sell, convey, mortgage, pledge, lease, exchange, transfer and
otherwise dispose of all or any part of its property and assets.

(f) To lend money to its employees, officers and directors, and
otherwise assist them.

(g) To purchase, take, receive, subscribe for, or otherwise acquire,
own, hold, vote, use, employ, sell, mortgage, lend, pledge, or otherwise
dispose of, and otherwise use and deal in and with, stock, securities or

CH. 428] ACTS OF ASSEMBLY 489

other interests in, or obligations of, other domestic or foreign corporations
organized for any purpose, associations, partnerships or individuals, or
direct or indirect obligations of the United States or of any other govern-
ment, state, territory, governmental district or municipality or of any
instrumentality thereof; and to guarantee the payment of any bonds or
other obligations of any other domestic or foreign corporation organized
for any purpose.

(h) To make contracts and incur liabilities, borrow money at such
rates of interest as the corporation may determine, issue its notes, bonds,
and other obligations, and secure any of its obligations by mortgage or
pledge of all or any of its property, franchises and income.

(i) To lend money for its corporate purposes, invest and reinvest its
funds, and take and hold real and personal property as security for the pay-
ment of funds so loaned or invested.

(j) To conduct its business, carry on its operations, hold property,
hans offices and exercise the powers granted by this Act in any part of the
world.

(k) To elect or appoint officers and agents of the corporation, and
define their duties and fix their compensation.

(1) To make and alter by-laws, not inconsistent with its articles of
incorporation or with the laws of this State, for the administration and
regulation of the affairs of the corporation.

(m) Unless otherwise provided in the articles of incorporation or by
resolution of the stockholders and within any limits so prescribed, to make
by action of its board of directors 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 per centum of net in-
come computed before federal and state taxes on income and without
taking into account any deduction for gifts.

(n) To indemnify any director or officer or former director or officer
of the corporation, or any person who may have served at its request
as a director or officer of another corporation in which it owns shares of
capjtal stock or of which it is a creditor, against expenses actually and
reasonably incurred by him in connection with the defense of any claim,
action, suit or proceeding against him by reason of being or having been
such director or officer, except in relation to matters as to which he shall
be finally adjudged in such action, suit or proceeding to be liable for negli-
gence or misconduct in the performance of duty; and to make any other
or further indemnity to any such persons that may be authorized by the
articles of incorporation or any by-law made by the stockholders or any
resolution adopted, before or after the event, by the stockholders.

(0) To pay pensions and establish pension plans, pension trusts, profit-
sharing plans, stock option plans, stock purchase plans, and other incentive
plans for its directors, officers and employees.

(p) To insure the life of any director, officer, agent or employee and
to continue such insurance after the relationship terminates, and no such
director, officer, agent or employee shall be deemed disqualified by interest
from acting in respect thereof.

(q) To cease its corporate activities and surrender its corporate
franchise.

(r) To have and exercise all powers necessary or convenient to effect
any or all of the purposes for which the corporation is organized.

Each corporation other than a railroad or other public service com-
pany, a banking corporation, an insurance corporation, a building and loan
association, a credit union or an industrial loan association shall have power,
but only where authorized by the articles of incorporation or by the
affirmative vote of the holders of more than two-thirds of the outstanding
490 ACTS OF ASSEMBLY [vA., 1956

shares of each class, whether or not entitled to vote thereon by the pro-
visions of the articles of incorporation, to enter into partnership agree-
ments with other corporations, whether organized under the laws of this
State or otherwise, or with any individual or individuals. ;

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, building and loan
associations, credit unions, industrial loan associations or other special
types of corporations shall not be deemed repealed or amended by any pro-
vision of this Act except where specifically so provided.

§ 18.1-4. Right of Corporation to Acquire and Dispose of Its Own
Stock.—A corporation shall have the right to purchase, take, receive or
otherwise acquire, hold, own, pledge, transfer or otherwise dispose of its
own stock, but, except in the case of open-end investment trusts, purchases
of its own stock, whether direct or indirect, shall be made only to the extent
of earned surplus available therefor or capital surplus. To the extent that
earned surplus or capital surplus is used as the measure of a corporation’s
right to repurchase its own stock, to that extent such surplus shall be re-
stricted so long as such stock is held as treasury shares, but upon the dis-
position or cancellation of any such stock the restriction shall terminate.
Restricted surplus shall not be available for the repurchase of shares or
other distributions on shares. The right to repurchase may be limited
or denied by express provision of the articles of incorporation.

Notwithstanding the foregoing limitations, a corporation may pur-
chase or otherwise acquire its own stock in the course of:

(1) Effecting, subject to the other provisions of this Act, the retire-
ment of its redeemable stock by redemption or by purchase at not to exceed
the redemption price.

(2) Collecting or compromising indebtedness to the corporation.

(3) Paying dissenting stockholders entitled to payment for their
shares under the provisions of this Act.

But in no case shall any purchase of its own stock be made at a time
when the corporation is insolvent or when such purchase would render it
insolvent. :

§ 18.1-5. Ultra Vires.—No act of a corporation and no conveyance or
transfer of real or personal property to or by a corporation shall be invalid
by reason of the fact that the corporation was without capacity or power to
do such act or to make or receive such conveyance or transfer, but such lack
of capacity or power may be asserted:

(a) Ina proceeding by a stockholder against the corporation to enjoin
the doing of any act or acts or the transfer of real or personal property by
or to the corporation. If the unauthorized acts or transfer sought to be
enjoined are being, or are to be, performed or made pursuant to any
contract to which the corporation is a party, the court may, if all of the
parties to the contract are parties to the proceeding and if it deems the
same to be equitable, set aside and enjoin the performance of such contract,
and in so doing may allow to the corporation or to the other parties to the
contract, as the case may be, compensation for the loss or damage sustained
by either of them which may result from the action of the court in setting
aside and enjoining the performance of such contract, but anticipated
profits to be derived from the performance of the contract shall not be
awarded by the court as a loss or damage sustained.

(b) In a proceeding by the corporation, whether acting directly or
through a receiver, trustee, or other legal representative, or through stock-
holders in a representative suit, against the incumbent or former officers or
directors of the corporation.

(c) Ina proceeding against a corporation before the Commission.

§ 18.1-6. Corporate Name.—The corporate name:
CH. 428] ACTS OF ASSEMBLY 491

(a) Shall contain the word “corporation,” “company,” “incorporated”
or “limited,” or shall contain an abbreviation of one of such words.

(b) Shall not contain any word or phrase which is prohibited by law
for such corporation or which indicates or implies that it is organized for
any purpose other than one or more of the purposes contained in its articles
of incorporation.

(c) Shall not be the same as, or confusingly similar to, the name of
any corporation, whether issuing shares or not issuing shares, existing
under the laws of this State or any foreign corporation, whether issuing
shares or not issuing shares, authorized to transact business in this State,
or a name the exclusive right to which is, at the time, reserved in the man-
ner provided in this Act, or the name of a corporation which has in effect a
registration of its corporate name as provided in this Act.

§ 13.1-7. Reserved Name.—tThe exclusive right to the use of a corpo-
rate name may be reserved by any person or corporation, foreign or
domestic, by filing with the Commission an application to reserve a specified
corporate name, executed by the applicant. If the Commission finds that
the name is available for corporate use, it shall reserve it for the exclusive
use of the applicant for a period of four months.

The right to the exclusive use of a specified corporate name so reserved
may be transferred to any other person or corporation by filing in the office
of the Commission a notice of such transfer, executed by the applicant for
whom the name was reserved, and specifying the name and address of
the transferee.

The Commission may, however, revoke any reservation after hearing
if of the opinion that the application therefor or any transfer thereof was
not made in good faith.

§ 13.1-8. Registered Name.—Any foreign corporation may register
its corporate name under this Act, provided its corporate name is not the
same as, or confusingly similar to, the name of any corporation, whether
issuing shares or not issuing shares, existing under the laws of this State,
or the name of any other foreign corporation, whether issuing shares or
not issuing shares, authorized to transact business in this State, or any
corporate name reserved or registered under this Act.

Such registration shall be made by:

(a) Filing with the Commission (1) an application for registration
executed by the corporation by an officer thereof, setting forth the name
of the corporation, the state under the laws of which it is incorporated, the
date of its incorporation, a statement that it is carrying on or doing busi-
ness, and a brief statement of the business in which it is engaged, and (2)
a certificate setting forth that such corporation is in good standing under
the laws of the state wherein it is organized, executed by the official who
has custody of the records pertaining to corporations, and :

(b) Paying to the Commission a registration fee in the amount of
one dollar for each month, or fraction thereof, between the date of filing
such application and December 31st of the calendar year in which such
application is filed.

Such registration shall be effective until the close of the calendar
year in which the application for registration is filed.

A corporation which has in effect a registration of its corporate name
may renew such registration from year to year by annually filing an appli-
cation for renewal setting forth the facts required to be set forth in an
original application for registration and a certificate of good standing as
required for the original registration and by paying a fee of ten dollars.
A renewal application may be filed between the first day of October and
the thirty-first day of December in each year, and shall extend the registra-
tion for the following calendar year.

§ 18.1-9. Registered Office and Registered Agent.—Each corporation
492 ACTS OF ASSEMBLY [vA., 1956

shall have and continuously maintain in this State:

(a) A registered office which may be, but need not be, the same as its
place of business.

) A registered agent, which agent must be an individual resident
in this State whose business office is identical with such registered office,
and who is an officer or director of the corporation or a member of the
Virginia State Bar.

§ 18.1-10. Change of Registered Office or Registered Agent.—A cor-
poration may change its registered office or change its registered agent, or

th, upon filing in the office of the Commission a statement on a form
supplied by the Commission showing:

(a) The name of the corporation.

(b) The address of its then registered office.

(c) If the address of its registered office be changed, the post office
address (including the street and number if any) to which the registered
office is to be changed and the name of the county or city in which it is
to be located.

(d) The name of its then registered agent.

(e) If its registered agent be changed, the name of its successor
registered agent and that he is a resident of Virginia and that he is an
piticer or director of the corporation or a member of the Virginia State

ar.

(f) That the address of its registered office and the address of the
business office of its registered agent, as changed, will be identical.

(g) That such change was authorized by resolution duly adopted by
its board of directors.

The statement shall be verified by the oath of the president or a vice
president of the corporation, and shall become effective when filed with the
Commission. The Commission shall mail to the clerk in whose office deeds
are recorded in the city or county in which the then registered office is
located a notice giving the name of the corporation, the address of the
registered office and the name and address of the registered agent; and,
if the location of the registered office is changed to a different city or
county, the Commission shall mail a similar notice to the proper clerk of
that city or county. But no such notice shall be sent to the clerk of any
court in the city of Richmond or the county of Henrico. The clerk, on re-
ceiving the notice, shall record it in a book for the recordation of charters.
Every statement shall be accompanied by the fees prescribed by law.

A new statement shall forthwith be executed by the corporation when-
ever the registered agent dies, resigns or changes his business office.

§ 13.1-11. Service of Process on Corporation.—The registered agent
of a corporation shall be an agent of such corporation upon whom any
process, notice, order or demand required or permitted by law to be served
upon the corporation may be served.

Whenever a corporation shall fail to appoint or maintain a registered
agent in this State, or whenever its registered agent cannot with reason-
able diligence be found at the registered office, then the clerk of the Com-
mission shall be an agent of the corporation upon whom may be served any
process, notice, order or demand except one issued by the Commission.
Service may be made on the clerk or any of his staff at his office. He shall
forthwith cause it to be sent by registered or certified mail addressed to
the corporation at its registered office and keep a record thereof. Any pro-
cess, notice, order or demand issued by the Commission shall be served by
being mailed by the clerk of the Commission or any of his staff by registered
or certified mail addressed to the corporation at its registered office.

Nothing herein contained shall limit or affect the right to serve any
process, notice or demand required or permitted by law to be served upon
a corporation in any other manner now or hereafter permitted by law.
CH. 428] ACTS OF ASSEMBLY 493

The address of the registered office and the names and addresses of
the officers, directors and registered agents of every corporation as last
filed with the Commission pursuant to the provisions of this Title shall
be conclusive for the purposes of service of process.

§ 13.1-12. Authorized Stock.—Each corporation shall have power to
create and issue the number of shares stated in its articles of incorpo-
ration. Such shares may be divided into one or more classes. Any or all
of such classes may consist of shares with par value or shares without par
value, with such designations, preferences, limitations, and relative rights
as shall be stated in the articles of incorporation, except that shares with-
out par value shall not be issued by banking corporations, building and
loan associations, credit unions or industrial loan associations. The articles
of incorporation may limit or deny the voting rights of the shares of any
class to the extent not inconsistent with the provisions of this Act.

§ 13.1-138. Preferred or Special Classes.—Without limiting the au-
thority hereinabove contained, a corporation, when so provided in its
articles of incorporation, may issue shares of preferred or special classes:

(a) Subject to the right of the corporation to redeem any of such
shares at the prices fixed by the articles of incorporation for the redemp-
tion thereof.

(b) Entitling the holders thereof to cumulative, non-cumulative or
partially cumulative dividends.

(c) Having preference over any other class or classes of shares as to
the payment of dividends.

(d) Having preference in the assets of the corporation over any other
class or classes of shares upon the voluntary or involuntary liquidation of
the corporation.

(e) Convertible into shares of any other class or into shares of any
series of the same or any other class, except a class having prior or superior
rights and preferences as to dividends or distribution of assets upon
liquidation.

(f) Entitled to voting rights or participating rights or any other
special rights that may be specified, including a right that no transaction
of specified nature shall be consummated while any such shares remain
outstanding in any event or except upon the assent of a specified proportion
of such shares.

§ 13.1-14. Issuance in Series.—If the articles of incorporation so
provide, the shares of any preferred or special class may be divided into and
issued in series. If the shares of any such class are to be issued in series,
then each series shall be so designated as to distinguish the shares thereof
from the shares of all other series and classes. Any or all of the series of
any such class and the variations in the relative rights and preferences as
between different series may be fixed and determined by the articles of
incorporation, but all shares of the same class shall be identical except as
to the following relative rights and preferences, as to which there may be
variations between different series:

(a) The rate of dividend, the time of payment and the dates from
euch dividends shall be cumulative, and the extent of participation rights,

any.
(b) Any right to vote with holders of shares of any other series or
class and any right to vote as a class, either generally or as a condition to
specified corporate action.

(c) The price at and the terms and conditions on which shares may
be redeemed.

” (d) The amount payable upon shares in event of involuntary liquida-
on.

(e) The amount payable upon shares in event of voluntary liquidation.

(f) Sinking fund provisions for the redemption or purchase of shares.
(g) The terms and conditions on which shares may be converted, if
the shares of any series are issued with the privilege of conversion.

If the articles of incorporation shall expressly vest authority in the
board of directors, then, to the extent that the articles of incorporation
shall not have established series and fixed and determined the variations
in the relative rights and preferences as between series, the board of
directors shall have authority to divide any or all of such classes into series
and, within the limitations set forth in this section and in the articles of
incorporation, fix and determine the relative rights and preferences of the
shares of any series so established.

In order for the board of directors to establish a series, where au-
thority so to do is contained in the articles of incorporation, the board of
directors shall adopt a resolution setting forth the designation and number
of shares of the series and the relative rights and preferences thereof, to
the extent that variations are permitted by the articles of incorporation.

Prior to the issuance of any shares of a series so established, the
corporation shall file in the office of the Commission articles of serial
designation setting forth: .

(i) The name of the corporation.

(ii) The resolution of the board of directors.

(iii) The date of its adoption. '
(iv) That it was duly adopted by the board of directors.

The articles shall be executed by the corporation by its president or a
vice president and by its secretary or an assistant secretary and verified
by the oath of one of the signing officers and 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 serial designation, which shall be admitted to record in its
office. Upon the completion of such recordation, the Commission shall
forward the certificate for recordation in the office for the recording of
deeds in the city or county in which the registered office of the corporation
is located, except that no such further recordation shall be required in the
city of Richmond or the county of Henrico. Upon the completion of such
further recordation, the certificate shall be returned to the Commission by
registered or certified mail. Upon the issuance of such certificate, it shall
become effective in accordance with its terms.

Unless the articles of incorporation otherwise provide, the board of
directors may redesignate any shares of any series theretofore estab-
lished that have not been issued, or that have been issued and retired, as
shares of some other series or change the designation of outstanding
shares where desired to prevent confusion. Such redesignation or change
of designation shall be set forth in articles of serial designation.

§ 18.1-15. Subscriptions for Stock.—Unless otherwise provided in the
subscription agreement, subscriptions for stock, whether made before or
after the organization of a corporation, shall be paid in full at such time,
or in such installments and at such times, as shall be determined by the
board of directors. Any call made by the board of directors for payment on
subscriptions shall be uniform as to all shares of the same class or as to all
shares of the same series, as the case may be. In case of default in the pay-
ment of any installment or call when such payment is due, the corporation
may proceed to collect the amount due in the same manner as any debt due
the corporation. The by-laws may prescribe other penalties for failure to
pay installments or calls that may become due, but no penalty working a
forfeiture of a subscription, or of the amounts paid thereon, shall be declared
as against any subscriber unless the amount due thereon shall remain
unpaid for a period of twenty days after written demand has been made
therefor. If mailed, such written demand shall be deemed to be made when
deposited in the United States mail in a sealed envelope addressed to the
CH. 428] ACTS OF ASSEMBLY 495

subscriber at his last post office address known to the corporation, with
postage thereon prepaid. In the event of the sale of any shares by reason
of any forfeiture, the excess of proceeds realized over the amount due and
unpaid on such shares shall be paid to the delinquent subscriber or to his
legal representative.

§ 13.1-16. Stock Statement and Bond Statement.—Before making any
issue of stock, or bonds or notes secured by mortgage or trust deed, other
than a sale of treasury shares or bonds, a corporation shall file with the Com-
mission a Stock Statement or Bond Statement, verified by oath of the
president or secretary of the corporation and in such form as may be
prescribed or permitted by the Commission, setting forth fully and ac-
curately the financial plan upon which such stock, bonds or notes are to
be issued; and where such plan includes services or property (other than
money) received or to be received by the corporation, such statement shall
describe, in the manner prescribed or permitted by the Commission, the
services or property and shall contain a copy of a resolution of the board
of directors determining the value in dollars of the services or property.
The Commission shall adjudge and enforce against any corporation re-
fusing or failing to comply with the provisions of this section a fine of not.
exceeding one thousand dollars for each offense. But failure to file such
a statement shall not impair the legality or validity of the issue. The state-
ments shall be made on forms to be supplied by the Commission and shall
contain such additional information as the forms may require.

§ 13.1-17. Consideration for Shares, Bonds and Options and Finality
of Directors’ Determination.—The consideration for the issuance of shares
or bonds may be paid, in whole or in part, in money, in other property,
tangible or intangible, or in labor or services. Future services shall not
constitute payment or part payment for shares or bonds.

Shares, whether with or without par value, may, subject to any
restriction at the time provided in the articles of incorporation or in a
resolution of the stockholders, be issued from time to time by the board
of directors for such consideration expressed in dollars as shall be fixed
by the board of directors.

That part of the surplus of a corporation which is transferred to stated
capital upon the issuance of shares as a stock dividend shall be deemed to
be the consideration for the issuance of such stock.

A determination by the board of directors of the value in dollars of
services or property received or to be received by a corporation as con-
sideration for the issuance of stock or bonds shall, when shown by a Stock
Statement or Bond Statement on file with the Commission, be conclusive
in the absence of fraud participated in by both parties.

Treasury shares and treasury bonds may be disposed of by the corpora-
tion for such consideration as may be fixed from time to time by the board
of directors.

Options for the purchase of shares, whether unissued or treasury
shares, may be granted upon such terms and conditions and for such
consideration as may be approved by the board of directors, but when
offered to officers or employees only in accordance with authorization in
the articles of incorporation or by a resolution of the stockholders. In the
absence of fraud participated in by both parties the judgment of the board
of directors as to such terms and conditions and the sufficiency of such
consideration shall be conclusive when shown by a Stock Statement on file
with the Commission.

§ 13.1-18. Determination of Amount of Stated Capital.—tIn case of
the issuance by a corporation of shares having a par value, the considera-
tion received therefor shall constitute stated capital except that any excess
of such consideration over the par value of such shares shall constitute
capital surplus except as otherwise provided in cases of conversion or
exchange.

In case of the issuance by a corporation of shares without par value,
the entire consideration received therefor shall constitute stated capital
unless the corporation shall determine as provided in this section that only
a part thereof shall be stated capital. The board of directors may allocate
any portion of the consideration received for the issuance of any such
shares to capital surplus to the extent permitted by the contract of sub-
scription, but in the absence of such permission may, within a period of
sixty days after the issuance of any such shares, unless prohibited by the
contract of subscription, allocate up to but not exceeding twenty-five per
centum of the consideration received to capital surplus. No such allocation
shall be made of any portion of the consideration received for shares with-
out par value having a preference in the assets of the corporation in the
event of involuntary liquidation except the amount, if any, of such con-
sideration in excess of such preference. No such allocation shall be made
in any case unless the portion of the consideration to be allocated to
capital surplus shall first be shown on the original or a supplemental Stock
Statement on file with the Commission.

The stated capital of a corporation may be increased from time to
time by resolution of the board of directors directing that all or a part of
the surplus of the corporation be transferred to stated capital. The board
of directors may direct that the amount of the surplus so transferred shall
be deemed to be stated capital in respect of any designated class of shares.

Stated capital shall not be decreased or otherwise affected by the pur-
chase or redemption of stock unless a certificate of reduction be issued by
the Commission and stated capital shall not be increased or otherwise af-
fected by sale of treasury shares.

§ 13.1-19. Conversions and Exchanges.—In the event of a conversion
or exchange, whether voluntary or involuntary, of stock with or without
par value for the same or a different number of shares with or without par
value, whether of the same or a different class or classes, the consideration
for the shares so issued in conversion or exchange, and the amount of
stated capital represented thereby, shall be deemed to be the sum of (1)
the stated capital then represented by the shares converted or exchanged,
(2) that part of surplus, if any, transferred to stated capital upon the issu-
ance of shares in conversion or exchange and (3) any additional considera-
tion paid to the corporation in the conversion or exchange, less any amount
by which stated capital is reduced by a certificate of reduction. It shall
not be necessary for the board of directors to value the consideration
(other than services or property constituting additional consideration) or
the shares converted or exchanged or the assets of the corporation in order
that the shares so issued in conversion or exchange may be fully paid and
non-assessable, but a Stock Statement shall be filed with the Commission
before the conversion or exchange.

When a conversion, exchange, reclassification or change of shares is
effected by amendment, merger or consolidation, and a material difference
in right results, or the par value of the shares is changed or the corporate
name is changed, the action of the stockholders authorizing the amendment,
merger or consolidation may prescribe a time after which the holders of
the old shares shall no longer be entitled to receive dividends or to vote
or to exercise any other rights as stockholders until certificates represent-
ing the old shares are surrendered in exchange for certificates representing
the new shares. But upon such surrender all dividends not paid because
of this provision shall be paid.

§ 18.1-20. Certificates Evidencing Shares and Form of Bonds.—The
shares of a corporation shall be evidenced by certificates signed by the
CH. 428] . ACTS OF ASSEMBLY 497

president or a vice president and the secretary or an assistant secretary
or the treasurer or an assistant treasurer or any other officer authorized
by the by-laws or a resolution of the board of directors, and may (but need
not) be sealed with the seal of the corporation or a facsimile thereof. The
signatures of the officers upon a.certificate may be facsimiles if the certi-
ficate is countersigned by a transfer agent, or registered by a registrar,
other than the corporation itself or an employee of the corporation. .

Every certificate evidencing shares issued by a corporation which
is authorized to issue shares of more than one class shall set forth upon the
face or back of the certificate, or shall state that the corporation will
furnish to any stockholder upon request and without charge, a full or sum-
mary statement of the designations, preferences, limitations, and relative
rights of the shares of each class authorized to be issued and, if the
corporation is authorized to issue any preferred or special class in series,
the variations in the relative rights and preferences between the shares of
each such series so far as the same have been fixed and determined and the
authority of the board of directors to fix and determine the relative rights
and preferences of subsequent series.

Each certificate representing shares shall state upon the face thereof:

(a) That the corporation is organized under the laws of this State.

(b) The name of the person to whom issued.

(c) The number and class of shares, and the designation of the series,
if any, which such certificate represents.

The par value of each share represented by such certificate, or a
statement that the shares are without par value.

(e) Whether or not such shares are fully paid.

On any bond, note or debenture issued by a corporation which is
countersigned or otherwise authenticated by the signature of a trustee,
neeignaniuiea of the officers of the corporation and its seal may be fac-
similes.

In case any officer who has signed or whose facsimile signature has
been placed upon a stock certificate or a bond shall have ceased to be such
officer before such certificate or bond is issued, it may be issued by the
corporation with the same effect as if he were such officer at the date of
its issue.

§ 13.1-21. Issuance of Scrip.—No fractional shares may be issued
but any corporation may, by action of its board of directors, issue in lieu
thereof scrip in registered or bearer form which shall entitle the holder to
receive a certificate for a full share upon the surrender of such scrip ag-
gregating a full share. Scrip shall not entitle the holder to exercise voting
rights and except as otherwise provided therein shall not entitle the holder
to receive dividends thereon or to participate in any of the assets of the
corporation in the event of liquidation. The board of directors may cause
scrip to be issued subject to the condition that it shall become void if not
exchanged for certificates representing full shares before a specified date,
or subject to the condition that the shares for which such scrip is ex-
changeable may be sold by the corporation and the proceeds thereof held
for the holders of such scrip, or subject to any other conditions that the
board of directors may deem advisable.

§13.1-22. Liability of Subscribers and Stockholders.—A holder of or
subscriber to shares of a corporation shall be under no obligation to the
corporation or its creditors with respect to such shares other than the
obligation to pay to the corporation the full consideration called for in the
contract of subscription under which such shares were issued or to be
issued. When the corporation shall have received payment of the full
consideration called for in the contract of subscription under which such
shares were issued or to be issued, such shares shall be fully paid and non-
assessable except that where stock is issued for property or services and
the determination of the value of such consideration by the board of di-
rectors is not shown on a Stock Statement on file with the Commission or
is made by the board of directors through fraud participated in by both
parties, the subscriber shall be liable to the corporation for the difference
between the agreed value of the consideration and the fair market value of
the actual consideration. In the case of stock having a par value, the
agreed value of the consideration shall be deemed to be the par value of
the stock unless a different value is shown in the Stock Statement on file
with the Commission.

Any person becoming an assignee or transferee of shares or of a sub-
scription for shares in good faith and without knowledge or notice that the
full consideration therefor has not been paid shall not be personally liable
to the corporation or its creditors for any unpaid portion of such considera-
tion, but the transferor or assignor shall continue to be liable therefor.

An executor, administrator, conservator, guardian, trustee, assignee
for the benefit of creditors, or receiver shall not be personally liable to the
corporation as a holder of or subscriber to shares of a corporation but the
estate and funds in his hands shall be so liable.

No pledgee or other holder of shares as collateral security shall be
personally liable as a stockholder. ;

Where it cannot be determined that outstanding shares are fully
paid and nonassessable, a determination by the board of directors that
the net assets of the corporation applicable to such shares have a fair
value at least equal to the stated capital represented by such shares, shall,
in the absence of fraud, when shown on a supplemental Stock Statement
on file with the Commission, have the same effect as if such shares had
been issued in consideration of such net assets upon such a determination
made at the time of issuance, except that no such determination shall im-
pair the rights of any then existing creditors.

§ 18.1-28. Stockholders’ Pre-emptive Rights.—The pre-emptive right
of a stockholder to acquire unissued shares of a corporation may be limited
or denied to the extent provided in the articles of incorporation.

No pre-emptive right shall exist as to shares to be issued for services
or property (other than money) or as to shares to be issued to officers or
employees pursuant to a plan approved by the stockholders or as‘to treasury
shares. No holder of stock which is preferred and limited as to dividends
or assets shall be entitled to any pre-emptive right with respect to any
shares of any class. No holder of shares of common stock shall be entitled
to any pre-emptive right with respect to any shares of any class that is
preferred and limited as to dividends or assets. No holder of common stock
without voting power shall have any pre-emptive right with respect to
shares of common stock with voting power. But notwithstanding the pro-
visions of this paragraph, a pre-emptive right shall exist in any case where
expressly conferred in the articles of incorporation.

§ 18.1-24. By-Laws.—The initial by-laws of a corporation shall be
adopted by its board of directors. The power to alter, amend or repeal the
by-laws or adopt new by-laws shall be vested in the board of directors
unless reserved to the stockholders by the articles of incorporation. But
by-laws made by the board of directors may be repealed or changed, and
new by-laws made, by the stockholders and the stockholders may prescribe
that any by-law made by them shall not be altered, amended or repealed
by the directors. The by-laws may contain any provisions for the regula-
tion and management of the affairs of the corporation not inconsistent with
law or the articles of incorporation.

§ 13.1-25. Meetings of Stockholders.—Meetings of stockholders may
be held at such place, either within or without this State, as may be pro-
CH. 428] ACTS OF ASSEMBLY 499

vided in the by-laws or, where not inconsistent with the by-laws, in the
notice of the meeting.

An annual meeting of the stockholders shall be held at such time as
may be provided in the by-laws.

Special meetings of the stockholders may be called by the president,
the board of directors, the holders of not less than one-tenth of all the
shares entitled to vote at the meeting, or such other officers or persons as
may be provided in the articles of incorporation or the by-laws.

§ 13.1-26. Notice of Stockholders’ Meetings.—Written notice stating
the place, day and hour of the meeting and the purpose or purposes for
which the meeting is called, shall be given not less than ten nor more
than fifty days before the date of the meeting (except as a different time
is specified in this Act), either personally or by mail, by or at the direction of
the president, the secretary, or the officer or persons calling the meeting,
to each stockholder of record entitled to vote at such meeting. If mailed,
such notice shall be deemed to be given when deposited in the United
States mail addressed to the stockholder at his address as it appears on
the stock transfer books of the corporation, with postage thereon prepaid.

Notice of a stockholders’ meeting to act on an amendment of the
articles of incorporation or on a plan of merger or consolidation shall be
given, in the manner provided above, not less than twenty-five nor
more than fifty days before the date of the meeting. Any such notice
shall be accompanied by a copy of the proposed articles of amendment or
plan of merger or consolidation.

§ 13.1-27. Waiver of Notice.—Notwithstanding any other provision
of this Act, whenever any notice is required to be given to any stockholder
or director of a corporation of any meeting for any purpose under the pro-
visions of this Act or under the provisions of the articles of incorporation or
by-laws of the corporation, a waiver thereof in writing signed by the per-
son or persons entitled to such notice, whether before or after the time
stated therein, shall be equivalent to the giving of such notice.

A stockholder or director who attends a meeting shall be deemed to
have had timely and proper notice of the meeting, unless he attends
for the express purpose of objecting to the transaction of any business
because the meeting is not lawfully called or convened.

§ 13.1-28. Action by Stockholders Without a Meeting.—Any action
required by this Act to be taken at a meeting of the stockholders of a
corporation, or any action which may be taken at a meeting of the stock-
holders, may be taken without a meeting if a consent in writing, setting
forth the action so taken, shall be signed by all of the stockholders entitled
to vote with respect to the subject matter thereof.

Such consent shall have the same force and effect as a unanimous
vote of stockholders, and may be stated as such in any articles or document
filed with the Commission under this Act.

§ 13.1-29. Closing of Transfer Books and Fixing Record Date.—For
the purpose of determining stockholders entitled to notice of or to vote at
any meeting of stockholders or any adjournment thereof, or entitled to
receive payment of any dividend, or in order to make a determination of
stockholders for any other proper purpose, the board of directors of a
corporation may provide that the stock transfer books shall be closed
for a stated period but not to exceed, in any case, fifty days. In lieu
of closing the stock transfer books, the by-laws, or in the absence of
any applicable by-law the board of directors, may fix in advance a date
as the record date for any such determination of stockholders, such date
in any case to be not more than fifty days prior to the date on which the
particular action, requiring such determination of stockholders, is to be
taken. If the stock transfer books are not closed and no record date is
fixed for the determination of stockholders entitled to notice of or to vote
500 ACTS OF ASSEMBLY [va., 1956

at a meeting of stockholders, or stockholders entitled to receive payment
of a dividend, the date on which notice of the meeting is mailed or the date
on which the resolution of the board of directors declaring such dividend is
adopted, as the case may be, shall be the record date for such determina-
tion of stockholders. When a determination of stockholders entitled to
vote at any meeting of stockholders has been made as provided in this sec-
tion, such determination shall apply to any adjournment thereof.

§ 18.1-30. Voting List.—The officer or agent having charge of the
stock transfer books for shares of a corporation shall make, at least ten
days before each meeting of stockholders, a complete list of the stock-
holders entitled to vote at such meeting or any adjournment thereof,
with the address of and the number of shares held by each. Such list, for
a period of ten days prior to such meeting, shall be kept on file at the
registered office of the corporation or at its principal place of business or at
the office of its transfer agent or registrar and shall be subject to inspection
by any stockholder at any time during usual business hours. Such list shall
also be produced and kept open at the time and place of the meeting and
shall be subject to the inspection of any stockholder during the whole
time of the meeting. The original stock transfer books shall be prima
facie evidence as to who are the stockholders entitled to examine such
list or transfer books or to vote at any meeting of stockholders.

If the requirements of this section have not been substantially com-
plied with, the meeting shall, on the demand of any stockholder in person
or by proxy, be adjourned until the requirements are complied with.

_ § 18.1-81. Quorum of Stockholders.—Unless otherwise provided in
the articles of incorporation, a majority of the shares entitled to vote,
represented in person or by proxy, shall constitute a quorum at a meeting
of stockholders, but in no event shall a quorum consist of less than one-
third of the shares entitled to vote at the meeting. If a quorum is present,
the affirmative vote of the majority of the shares represented at the meet-
ing and entitled to vote on the subject matter shall be the act of the stock-
holders, unless the vote of a greater number or voting by classes is re-
quired by this Act or the articles of incorporation and except that in elec-
tions of directors those receiving the greatest numbers of votes shall be
deemed elected even though not receiving a majority. Less than a quorum
may adjourn.

§ 13.1-32. Voting of Shares.—Each outstanding share, regardless of
class, shall be entitled to one vote on each matter submitted to a vote at
a meeting of stockholders, except to the extent that the voting rights of
the shares of any class or classes are limited or denied by the articles of
incorporation as permitted by this Act and except as the articles of in-
corporation may confer on the holders of shares of any particular class or
series the right to more than one vote per share, either generally or on
particular matters. Where the articles of incorporation confer the right
to more or less than one vote per share, any requirement in this Act for
the affirmative vote of a specified proportion of the shares shall be deemed
to refer to a like proportion of the votes eligible to be cast.

Neither treasury shares, nor shares held by another corporation if a
majority of the shares entitled to vote for the election of directors of such
other corporation is held by the corporation, shall be voted at any meeting
or counted in determining the total number of outstanding shares at any
given time entitled to vote. If a corporation holds shares of its own stock
in a fiduciary capacity, they may, if the corporation is sole fiduciary, be
counted to establish a quorum but may not be voted and if the corporation
is a fiduciary jointly with another, the other may vote the shares.

A stockholder may vote either in person or by proxy executed in writ-
ing by the stockholder or by his duly authorized attorney-in-fact. No
proxy shall be valid after eleven months from its date, unless otherwise
provided in the proxy. No authorization of an attorney-in-fact to execute
a proxy shall be valid after 10 years from its date, but such proxies may
be accepted as valid in the absence of notice to the contrary.

At each election for directors every stockholder entitled to vote at such
election shall have the right to vote, in person or by proxy, the number of
shares owned by him for as many persons as there are directors to be
elected at that time and for whose election he has a right to vote, or, if
cumulative voting is authorized by the articles of incorporation, to cumulate
his votes by giving one candidate as many votes as the number of directors
to be elected at that time multiplied by the number of his votes shall.
produce, or by distributing such votes on the same principle among any
number of such candidates.

Shares standing in the name of another corporation, domestic or
foreign, may be voted by such officer, agent or proxy as the by-laws of such
corporation may prescribe, or, in the absence of such provision, as the
board of directors of such corporation may determine. A proxy apparently
executed in the name of another corporation shall be presumed to be valid
until challenged and the burden of proving invalidity shall rest on the
challenger.

Shares standing in the name of a partnership may be voted by any
partner. A proxy executed in the partnership name shall be presumed to
be valid until challenged and the burden of proving invalidity shall rest on
the challenger.

Shares held by two or more persons as joint tenants or tenants in
common or tenants by the entirety may be voted in person or by proxy
by any of such persons. If more than one of such tenants shall vote such
shares, the vote shall be divided among them in proportion to the number
of such tenants voting in person or by proxy.

Shares held by an administrator, executor, guardian, committee or
curator may be voted by him, either in person or by proxy as provided in
this section without a transfer of such shares into his name. Shares stand-
ing in the name of a trustee may be voted by him, either in person or by
proxy as provided in this section, but no trustee shall be entitled to vote
shares held by him without a transfer of such shares into his name.

Shares standing in the name of a receiver or a trustee in proceed-
ings under the National Bankruptcy Act may be voted by him. Shares
held by or under the control of a receiver or a trustee in proceedings
under the National Bankruptcy Act may be voted by him without the trans-
fer thereof into his name if authority so to do be contained in an order
of the court by which he was appointed.

Where 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 (a) if they be equally divided as to a vote,
the vote of the shares shall be divided equally and (b) if only one of such
fiduciaries shall be personally present at a meeting and no proxy for the
fiduciaries shall have been received, the fiduciary present shall be entitled
to vote all the shares. Any of the fiduciaries referred to in this section
may execute a proxy for the voting of shares provided that it contains an
express direction as to how it shall be voted. But in any case in which
the will, trust agreement, or other instrument under which such per-
sonal representative or fiduciary purports to act contains directions for the
voting of stock in any corporation, or for the execution and delivery of
proxies for the voting thereof, such directions shall be binding upon the
personal representative or fiduciary involved, and upon the corporation if
a copy thereof has been furnished the corporation.

A stockholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee,
502 ACTS OF ASSEMBLY [vA., 1956
a thereafter the pledgee shall be entitled to vote the shares so trans-

Redeemable shares which have been called for redemption shall not
be entitled to vote on any matter and, except as to any right of conversion,
shall not. be deemed outstanding shares on and after the date on which
written notice of redemption has been mailed to stockholders and a sum
sufficient to redeem such shares has been deposited with a bank or trust
company with irrevocable instruction and authority to pay the redemption
price to the holders of the shares upon surrender of certificates therefor.

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 the assent of the holders of two-thirds
in aggregate principal amount.

§ 13.1-33. Greater Voting Requirements.—Whenever, with respect to
any action to be taken by the stockholders of a corporation, the articles of
incorporation require the vote or concurrence of the holders of a greater
proportion of the shares, or of any class or series thereof, than required by
this Act with respect to such action, the provisions of the articles of in-
corporation shall control.

§ 18.1-34. Voting Trust—Any number of stockholders of a corpo-
ration may create a voting trust for the purpose of conferring upon a trus-
tee or trustees the right to vote or otherwise represent their shares by
entering into a written voting trust agreement specifying the terms and
conditions of the voting trust, by depositing the agreement with the corpo-
ration at its registered office and by transferring their shares to such trus-
tee or trustees for the purposes of the agreement, but voting trusts hereafter
created shall not extend for a period longer than ten years. The voting
trust agreement so deposited with the corporation shall be subject to the
same right of examination by a stockholder of the corporation as are
the books and records of the corporation, and shall be subject to examina-
tion by any holder of a beneficial interest in the voting trust at any reason-
able time for any proper purpose.

§ 18.1-35. Board of Directors.—The business and affairs of a corpo-
ration shall be managed by a board of directors subject to any require-
ment of stockholder action made by this Act or the articles of incorporation.
Directors need not be residents of this State or stockholders of the corpora-
tion unless the articles of incorporation so require. The articles of
incorporation may prescribe qualifications for directors. The board of
directors shall have authority to fix the compensation of directors unless
otherwise provided in the articles of incorporation.

§ 13.1-36. Number and Election of Directors.—The number of di-
rectors of a corporation shall be not less than three. Subject to such
limitation, the number of directors shall be fixed by the by-laws, except as
to the number constituting the initial board of directors, which shall be
fixed by the articles of incorporation. The number of directors may be in-
creased or decreased from time to time by amendment to the by-laws,
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.
No decrease in number shall have the effect of shortening the term of any
incumbent director. In the absence of a by-law fixing the number of di-
rectors, the number shall be that stated in the articles of incorporation.
The names and addresses of the members of the initial board of directors
shall be stated in the articles of incorporation. Such persons shall hold
office until the first election of directors. At or before the first annual
meeting of stockholders and at each annual meeting thereafter the stock-
holders shall elect directors to hold office until the next succeeding annual
meeting, except in case of the classification of directors as permitted by
this Act. Each director shall hold office for the term for which he is elected
CH. 428] ACTS OF ASSEMBLY 503

and until his successor shall have been elected.

_ § 18.1-37. Classification of Directors.—In lieu of the whole number of
directors being elected annually the articles of incorporation may provide
that the directors be divided into either two or three classes, each class to
be as nearly equal in number as possible, the term of office of directors of
the first class to expire at the first annual meeting of stockholders after
their election, that of the second class to expire at the second annual meet-
ing after their election, and that of the third class, if any, to expire at the
third annual meeting after their election. At each annual meeting after
such classification the number of directors equal to the number of the class
whose term expires at the time of such meeting shall be elected to hold
office until the second succeeding annual meeting, if there be two classes,
or until the third succeeding annual meeting, if there be three classes. No
such classification of directors shall be effective prior to the first annual
meeting of stockholders. Where a corporation is authorized to issue more
than one class of shares, the articles of incorporation may confer upon the
holders of one or more specified classes of shares the right to elect the di-
rectors as a whole, or any specified number of them, or the directors of any
class or classes established by the articles of incorporation other than a
classification by term of office as provided above. Where a right of cumula-
tive voting exists, any classification of directors shall provide that at least
three directors shall be elected in each year.

§ 18.1-88. Vacancies.—Any vacancy occurring in the board of di-
rectors, including a vacancy resulting from an increase by not more than
two in the number of directors, may be filled by the affirmative vote of a
majority of the remaining directors though less than a quorum of the board
of directors except that if the articles of incorporation provide some differ-
ent manner for filling such vacancy, such provision shall control.

§ 13.1-39. Quorum of Directors.—A majority of the number of di-
rectors fixed by the by-laws, or in the absence of a by-law fixing the num-
ber of directors, then of the number stated in the articles of incorporation,
shall constitute a quorum for the transaction of business. The act of the
majority of the directors present at a meeting at which a quorum is
present shall be the act of the board of directors.

§ 13.1-40. Committees.—If the articles of incorporation or the by-
laws so provide, the board of directors, by resolution adopted by a
majority of the number of directors fixed by the by-laws, or in the absence
of a by-law fixing the number of directors, then of the number stated in
the articles of incorporation, may designate two or more directors to con-
stitute an executive committee, which, to the extent provided in such
resolution or in the articles of incorporation or the by-laws of the corpora-
tion shall have and may exercise all of the authority of the board of
directors except to approve an amendment of the articles of incorporation
or a plan of merger or consolidation.

Other committees with limited authority may be designated by a
resolution adopted by a majority of the directors present at a meeting at
which a quorum is present.

§ 18.1-41. Place and Notice of Directors’ Meetings.—Meetings of the
ae of directors, regular or special, may be held either within or without
this State.

Regular meetings of the board of directors may be held with or with-
out notice as prescribed in the by-laws. Special meetings of the board of
directors shall be held upon such notice as is prescribed in the by-laws or,
where not inconsistent with the by-laws, by resolution of the board of
directors. Neither the business to be transacted at, nor the purpose of,
any regular or special meeting of the board of directors need be specified
the notice or waiver of notice of such meeting unless required by the

y-laws.
§ 18.1-42. Removal of Directors and Judicial Review of Elections.—
At a meeting called expressly for that purpose, any director may be re-
moved, with or without cause, by a vote of stockholders holding a majority
of the shares entitled to vote at an election of directors of the class or
classes by which such directors were elected. No director may be removed,
in case cumulative voting is provided by the articles of incorporation, if
the votes of a sufficient number of shares are cast against his removal
which if then cumulatively voted at an election of the full board or, if
there be classes of directors, at an election of the class of which he is a
part, would be sufficient to elect him. .

Any stockholder of record aggrieved by an election of directors may,
after reasonable notice to the corporation and each director whose election
is contested, apply for relief to the judge of a Virginia court of equity
in the county or city in which the registered office of the corporation, or its
principle place of business in Virginia, is located, whether in term or in
vacation. The judge shall proceed forthwith in a summary way to hear
and decide the issues and thereupon to determine the persons elected or
order a new election or grant such other relief as may be equitable.
Pending decision the judge may require the production of any information
and may by order restrain any person from exercising the powers of a
director if such relief be equitable in all the circumstances.

13.1-43. Dividends.—The board of directors of a corporation may,
from time to time, declare and the corporation may pay dividends on its
shares in cash, property or its own shares, except when the corporation
is insolvent or when the payment thereof would render the corporation
insolvent or when the declaration or payment thereof would be contrary
to any restrictions contained in the articles of incorporation, subject to the
following provisions:

(a) Dividends in cash or property may be declared and paid, except
as otherwise provided in this section, only out of the unreserved and un-
restricted earned surplus of the corporation or out of capital surplus, how-
soever arising, but each dividend paid out of capital surplus shall be identi-
fied as a distribution of capital surplus and the amount per share paid
from such surplus shall be disclosed to the stockholders receiving the same
concurrently with the distribution.

(b) If the articles of incorporation of a corporation engaged in the
business of exploiting natural resources so provide, dividends may be de-
clared and paid in cash out of the depletion reserves, but each such dividend
shall be identified as a distribution of such reserves and the amount per
share paid from such reserves shall be disclosed to the stockholders re-
ceiving the same concurrently with the distribution thereof.

(c) Dividends may be declared and paid in its own shares out of any
treasury shares that have been reacquired out of surplus of the corporation.

(d) Dividends may be declared and paid in its own authorized but un-
issued shares out of any unreserved and unrestricted surplus of the corpo-
ration upon the following conditions:

(1) If a dividend is payable in its own shares having a par value, such
shares shall be issued at the par value thereof and there shall be
transferred to stated capital upon the issuance of such shares an
amount of surplus equal to the aggregate par value of the shares
to be issued as a dividend.

(2) If a dividend is payable in its own shares without par value, such
shares shall be issued at such stated value as shall be fixed by the
(e) No dividend payable in shares of any class shall be paid to the
holders of shares of any other class unless the articles of incorporation so
provide or such payment is authorized by the affirmative vote or the
written consent of the holders of at least a majority of the outstanding
shares of the class in which the payment is to be made.

A split-up of the shares of any class into a greater number of shares
without increasing the stated capital of the corporation shall not be con-
strued to be a share dividend.

§ 13.1-44. Liability of Directors in Certain Cases.—In addition to any
other liabilities imposed by law upon directors of a corporation:

(a) Directors of a corporation who vote for or assent to the declara-
tion of any dividend or other distribution of the assets of a corporation to
its stockholders contrary to the provisions of this Act or contrary to any
restrictions contained in the articles of incorporation shall be jointly and
severally liable to the corporation and its creditors for the amount of such
dividend which is paid or the value of such assets which are distributed
in excess of the amount of such dividend or distribution which could have
been paid or distributed without a violation of the provisions of this Act
or the restrictions in the articles of incorporation.

(b) Directors of a corporation who vote for or assent to the purchase
of its own shares contrary to the provisions of this Act shall be jointly and
severally liable to the corporation and its creditors for the amount of con-
sideration paid for such shares which is in excess of the maximum amount
which could have been paid therefor without a violation of the provisions
of this Act.

(c) Directors of a corporation who vote for or assent to any distribu-
tion of assets of a corporation to its stockholders during the liquidation of
the corporation without the payment and discharge of, or making adequate
provision for, all known debts, obligations, and liabilities of the corpora-
tion shall be jointly and severally liable to the corporation and its creditors
for the value of such assets which are distributed, to the extent that such
debts, obligations and liabilities of the corporation are not paid.

director of a corporation who is present at a meeting of its board of
directors at which action on any corporate matter is taken shall be pre-
sumed to have assented to the action taken unless his dissent shall be
entered in the minutes of the meeting or unless he shall file his written
dissent from such action with the person acting as the secretary of the
meeting before the adjournment thereof or shall forward such dissent by
registered mail to the secretary of the corporation within three days after
the adjournment of the meeting. Such right to dissent shall not apply to
a director who voted in favor of such action.

A director shall not be so liable if he relied and acted in good faith
upon financial statements of the corporation represented to him to be
correct by the president or the officer of such corporation having charge
of its books of account, or stated in a written report by an independent
public or certified public accountant or firm of such accountants fairly to
reflect the financial condition of such corporation, nor shall he be so liable
if in good faith in determining the amount available for any such dividend
or distribution he considered the assets to be of a value equal to their cost.

Any director against whom a claim shall be asserted under or pur-
suant to this section for the payment of a dividend or other distribution of
assets of a corporation and who shall be held liable thereon shall be
entitled to contribution from the stockholders who accepted or received
any such dividend or assets, in proportion to the amounts received by them
respectively.

Any director against whom a claim shall be asserted under or pur-
suant to this section shall be entitled to contribution from the other di-
FOCROr | who voted for or assented to the action upon which the claim is
asserted.

No suit shall be brought against any director for any liability imposed
by this Act except within two years after the right of action shall accrue.

§ 13.1-45. Officers—The officers of a corporation shall consist of a
president, a secretary and a treasurer, each of whom shall be elected by
the board of directors at such time and in such manner as may be prescribed
by the by-laws. The president shall be a director. Such vice presidents
and other officers and assistant officers and agents as may be deemed
necessary may be elected or appointed by the board of directors or chosen
in such other manner as may be prescribed by the by-laws. Any two or
more offices may be held by the same person, except the offices of president
and secretary.

All officers and agents of the corporation, as between themselves and
the corporation, shall have such authority and perform such duties in the
management of the corporation as may be provided in the by-laws, or as
may be determined by resolution of the board of directors not inconsistent
with the by-laws. ,

§ 13.1-46. Removal of Officers.—Any officer or agent may be removed
with or without cause at any time whenever the board of directors in its
absolute discretion shall consider that the best interests of the corpora-
tion would be served thereby. Any officer or agent appointed otherwise
than by the board of directors may be removed with or without cause at
any time by any officer having authority to appoint, except as may be
otherwise provided in the by-laws, whenever such officer in his absolute
discretion shall consider that the best interests of the corporation will be
served thereby. Any such removal shall be without prejudice to the
recovery of damages for breach of the contract rights, if any, of the per-
son removed. Election or appointment of an officer or agent shall not of
itself create contract rights.

§ 13.1-47. Books and Records.—Each corporation shall keep correct
and complete books and records of account and shall keep minutes of the

roceedings of its stockholders and board of directors; and shall keep at
ts registered office or principal place of business, or at the office of its
transfer agent or registrar, a record of its stockholders, giving the names
and addresses of all stockholders and the number. class and series of the
shares held by each.

Any person who shall have been a stockholder of record for at least
six months immediately preceding his demand or who shall be the holder
of record of at least five per centum of all the outstanding shares of a cor-
poration, upon written demand stating the purpose thereof, shall have the
right to examine, in person, or by agent or attorney, at any reasonable
time or times, for any proper purpose, its books and records of account,
minutes and record of stockholders and to make extracts therefrom.

Nothing herein contained shall impair the power of any court of com-
petent jurisdiction, upon proof by a stockholder of proper purpose, ir-
respective of the period of time during which such stockholder shall have
been a stockholder of record, and irrespective of the number of shares
held by him, to compel the production for examination by such stockholder
of the books and records of account, minutes, and record of stockholders of
a corporation.

Upon the written request of any stockholder of a corporation, the cor-
poration shall mail to such stockholder its most recent published financial
statements showing in reasonable detail its assets and liabilities and the
results of its operations.
§ 13.1-48. Incorporators.—Three or more e natural persons may act as
incorporators of a corporation by signing, acknowledging and delivering
to the Commission articles of incorporation for such corporation.

§ 18.1-49. Articles of Incorporation.—The articles of incorporation
shall set forth:

(a) The name of the corporation.

(b) The purpose or purposes for which the corporation is organized.

(c) The aggregate number of shares which the corporation shall have
authority to issue; if such shares are to consist of one class only, the par
value of each of such shares, or a statement that all of such shares are
without par value; or, if such shares are to be divided into classes, the
number of shares of each class, and a statement of the par value of the
shares of each such class or that such shares are to be without par value;
and a statement of the voting rights of each share.

(d) If the shares are to be divided into classes, the designation of each
class and a statement of the preferences, limitations and relative rights
in respect of the shares of each class.

(e) If the corporation is to issue the shares of any preferred or special
class in series, then the designation of each series and a statement of the
variations in the relative rights and preferences as between series in so
far as the same are to be fixed in the articles of incorporation, and a state-
ment of any authority to be vested in the board of directors to establish
series and fix and determine the variations in the relative rights and
preferences as between series.

(f) Any provision limiting or denying to stockholders the pre-emptive
right to acquire unissued shares of the corporation.

(g) Any provision, not inconsistent with law, which the incorporators
elect to set forth in the articles of incorporation for the regulation of the
internal affairs of the corporation. Such provisions may require the
affirmative vote of a specified proportion of the stockholders, or of the
stockholders of any class, before the issuance of any bonds secured by lien
or for the issuance of additional shares or for any other specified trans-
action.

(h) 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, if an individual, that he is a resident of Virginia.

(i) 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.

(j) If the duration of the corporation is not to be perpetual, the
period of its duration.

Except as otherwise provided by law or as restricted by its articles
of incorporation, each corporation shall have all of the corporate powers
provided by this Act, whether or not the same be set forth in the articles
of incorporation.

Unless the articles of incorporation provide that a change in the num-
ber of directors shall be made only by amendment to the articles of in-
corporation, the number of directors may be changed by the by-laws. In
all other cases, whenever a provision of the articles of incorporation is
noleeent with the by-laws, the articles of incorporation shall be con-
trollin

§ 8. 1-50. Special Kinds of Business.—If any corporation is to con-
duct 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.

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 pro-
poses to undertake and the corporation shall not have power to conduct
ther business except as may be related to or incidental to the insurance

usiness.

If any corporation is to conduct the business of a building and loan
association, an industrial loan association or a credit union, 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.

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 cor-
poration shall be organized under this Act for the purpose of conducting
in this State more than one kind of public service business except that the
telephone and telegraph businesses may be combined, but this provision
shall not limit the powers of domestic corporations existing when this Act
becomes effective. No corporation organized under this Act to conduct the
business of a public service company shall have general business powers
in this State. Corporations organized under this Act to conduct the
business of a public service company may, however, conduct in this State
other public service business or non-public service business so far as may
be related to or incidental to its stated business as a public service com-
pany and in any other state such business as may be authorized or per-
mitted by the laws thereof. Nothing in this paragraph shall limit the
powers of such corporations in respect of the securities of other corpora-

ions.

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 State for the conveyance of telephone messages
or for the production, transmission, delivery or furnishing of heat, light,
power or 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. For the purposes of
this Act the business of household goods carriers, petroleum tank truck
carriers, bottled gas companies, taxicab companies and community tele-
vision companies shall not be deemed to be the business of a public service
company.

§ 18.1-51. Issuance of Certificate of Incorporation.—The articles of
incorporation 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 incor-
poration, which shall be admitted to record in its office. Upon the issuance
of such certificate, it shall become effective in accordance with its terms.
Upon the completion of such recordation, the Commission shall forward
the certificate for recordation in the office for the recording of deeds in the
city or county in which the registered office of the corporation is located,
except that no such further recordation shall be required in the city of
Richmond or the county of Henrico. Upon the completion of such further
recordation, the certificate shall be returned to the Commission by regis-
tered or certified mail.

§ 13.1-52. Effect of Issuance of Certificate of Incorporation.—Upon
CH. 428] ACTS OF ASSEMBLY 509

the issuance of the certificate of incorporation, the corporate existence shall

begin. The certificate of incorporation shall be conclusive evidence that all

conditions precedent required to be performed by the incorporators have

ag fomplied with and that the corporation has been incorporated under
ct.

§ 13.1-53. Requirement before Commencing Business.—A corpora-
tion shall not transact any business or incur any indebtedness, except such
as shall be incidental to its organization or to obtaining subscriptions to or
payment for its stock, until there shall have been paid in the consideration
for the initial issue of stock as stated in the stock statement filed with the
Commission as required by this Act. ;

§ 13.1-54. Organization Meeting of Directors.—After the issuance of
the certificate of incorporation an organization meeting of the board of
directors named in the articles of incorporation shall be held, either within
or without this State, at the call of a majority of the incorporators, for the
purpose of adopting by-laws, electing officers, accepting subscriptions to
stock and transacting such other business as may come before the meeting.
The incorporators calling the meeting shall give reasonable notice thereof
to each director so named.

CHAP 4

AMENDMENTS AND REDUCTION OF CAPITAL

§ 13.1-55. Right to Amend Articles of Incorporation.—A corporation
may amend its articles of incorporation, from time to time, in any and as
many respects as may be desired, provided that its articles of incorporation
as amended may contain only such provisions as might be lawfully contained
in original articles of incorporation at the time of making such amendment.

In particular, and without limitation upon such general power of
amendment, a corporation may amend its articles of incorporation, from
time to time, so as:

(a) To change its corporate name.

(b) To change its period of duration.

(c) To change, enlarge or diminish its corporate purposes.

(d) To increase or decrease the aggregate number of shares, or shares
of any class or series, which the corporation has authority to issue.

(e) To increase or decrease the par value of the authorized shares of
any class having a par value, whether issued or unissued.

(f) To exchange, classify, reclassify or cancel all or any part of its
shares, whether issued or unissued.

(g) To change the designation of all or any part of its shares, whether
issued or unissued, and to change the preferences, limitations, voting rights
or relative or other rights of any nature in respect of all or any part of its
shares, whether issued or unissued.

(h) To change shares having a par value, whether issued or unissued,
into the same or a different number of shares without par value, and to
change shares without par value, whether issued or unissued, into the
same or a different number of shares having a par value.

(i) To change the shares of any class, whether issued or unissued. and
whether with or without par value, into a different number of shares of the
same class or into the same or a different number of shares, either with
or without par value, of other classes.

(j) To create new classes of shares having rights and preferences
either prior and superior or subordinate and inferior to the shares of any
class then authorized, whether issued or unissued, or increase the rights
and preferences of any class having rights and preferences prior and
superier or subordinate and inferior to the shares of any other class.

(k) To cancel or otherwise affect the right of the holders of the shares
of any class to receive dividends which have accrued but have not been
declared (whenever accrued and whether or not earned).
(1) To divide any preferred or special class of shares, whether issued
or unissued, into series and fix and determine the designations of such
series and the variations in the relative rights and preferences as between
the shares of such series.

(m) To authorize the board of directors to establish, out of authorized
but unissued shares, series of any preferred or special class of shares and
fix and determine, within the limitations prescribed by § 13.1-14, the
relative rights and preferences of the shares of any series so established.

(n) To revoke, diminish or enlarge the authority of the board of di-
rectors to establish series out of authorized but unissued shares of any
preferred or special class and fix and determine, within the limitations pre-
scribed by § 13.1-14, the relative rights and preferences of the shares of
any series so established.

(o) To limit, deny or grant to stockholders of any class the pre-emptive
right to acquire shares of the corporation, whether then or thereafter
authorized.

(p) To restate its articles of incorporation.

§ 13.1-56. Procedure to Amend Articles of Incorporation—Amend-
ments to the articles of incorporation shall be made in the following
manner:

(a) The board of directors shall adopt a resolution setting forth the
proposed amendment, finding that it is in the best interests of the cor-
poration and directing that it be submitted to a vote at a meeting of
stockholders, which may be either an annual or a special meeting.

(b) Notice accompanied by a copy of the proposed amendment shall
be given to each stockholder of record entitled to vote thereon within the
time and in the manner provided in this Act for the giving of notice of
such meetings of stockholders.

(c) At such meeting a vote of the stockholders entitled to vote there-
on shall be taken on the proposed amendment. The proposed amendment
shall be adopted upon receiving the affirmative vote of the holders of more
than two-thirds of the shares entitled to vote thereon, except that if any
class or series of shares is entitled to vote thereon as a class, the proposed
amendment shall be adopted only upon receiving the affirmative vote of the
holders of more than two-thirds of the shares of each class or series of
shares entitled to vote thereon as a class and of the total shares entitled to
vote thereon. The articles of incorporation may require a greater vote
than herein prescribed, either for all amendments or for particular amend-
ments, and any such requirement can itself be changed only by the vote so
prescribed.

Any number of amendments may be submitted to the stockholders,
and voted upon by them at one meeting.

§ 18.1-57. Class Voting on Amendments.—The holders of the out-
standing shares of any class shall be entitled to vote as a class upon a pro-
posed amendment, whether or not entitled to vote thereon by the provisions
of the articles of incorporation, if the amendment would:

(a) Increase or decrease the aggregate number of authorized shares
of such class.

(b) Effect an exchange, reclassification or cancellation of all or part
of the shares of such class.

(c) Effect an exchange, or create a right of exchange, of all or any
part of the shares of another class into the shares of such class.

(d) Change in a way that might be adverse the designations, pre-
ferences, limitations, voting rights or relative or other rights of any nature
of the shares of such class.

(e) Change the shares of such class, whether with or without par
value, into a different number of shares of the same class or into the same
CH. 428] ACTS OF ASSEMBLY - 511

so different number of shares, either with or without par value, of other
classes.

_ (f) Create a new class, or change a class with subordinate and in-
ferior rights into a class, of shares having rights and preferences prior
and superior to the shares of such class, or increase the rights and pre-
ferences of any class having rights and preferences prior or superior to the
shares of such class.

(g) Limit or deny any existing pre-emptive rights of the shares of
such class.

(h) Cancel or otherwise affect dividends on the shares of such class
which have accrued but have not been declared (whenever accrued and
whether or not earned).

(i) In the case of a preferred or special class of shares, divide the
shares of such class into series and fix and determine the designations of
such series and the variations in the relative rights and preferences be-
tween the shares of such series, or authorize the board of directors to
divide the authorized and unissued shares of such class into series and fix
and determine the designations and relative rights and preferences of au-
thorized but unissued shares of such series where such authority was not
conferred at the time the class was created.

(j) Authorize the entry into partnership agreements with other
corporations or individuals.

Whenever any such amendment shall operate in any manner specified
above upon shares of one or more but not all of the series of any preferred
or special class at the time outstanding, the holders of the outstanding
shares of each such series shall for the purposes of this section be deemed
a separate class and entitled to vote as a class on such amendment.

§ 13.1-58. Articles of Amendment.—The articles of amendment shall
be executed by the corporation by its president or a vice president and by
its secretary or an assistant secretary, and verified by the oath of one of
the officers signing such articles, and shall set forth:

(a) The name of the corporation.

(b) The amendment so adopted.

(c) The date of the meeting of the board of directors at which the
amendment was found in the best interests of the corporation and directed
to be submitted to a vote at a meeting of stockholders; the date when
notice was given to each stockholder of record entitled to vote; the fact
that such notice was given in the manner provided in this Act and was ac-
companied by a copy of the proposed articles of amendment; and the date
of the adoption of the amendment by the stockholders.

(d) The number of shares outstanding, and the number of shares
entitled to vote thereon, and if the shares of any class are entitled to vote
thereon as a class, the designation and number of outstanding shares
entitled to vote thereon of each such class.

(e) The number of shares voted for and against such amendment and,
if the shares of any class are entitled to vote thereon as a class, the num-
ber of shares of each such class voted for and against such amendment.

(f) If such amendment effects a change in the amount of stated
capital, then a statement of the manner in which the same is effected and
a statement, expressed in dollars, of the amount of stated capital as
changed by such amendment.

(g) If such amendment effects a restatement of the articles of in-
corporation, then a statement, expressed in dollars, of the amount of stated
capital on the effective date of such amendment.

§ 13.1-59. Issuance of Certificate of Amendment.—The articles of
amendment shall be delivered to the Commission. If the Commission finds
that the articles comply with the requirements of law and that all required
512 ‘ACTS OF ASSEMBLY [vA., 1956

fees have been paid, it shall by order issue a certificate of amendment,
which shall be admitted to record in its office. Upon the completion of such
recordation, the Commission shall forward the certificate for recordation
in the office for the recording of deeds in the city or county in which the
registered office of the corporation is located, except that no such further
recordation shall be required in the city of Richmond or the county of
Henrico. Upon the completion of such further recordation, the certificate
shall be returned to the Commission by registered or certified mail.

§ 13.1-60. Effect of Certificate of Amendment.—Upon the issuance
of the certificate of amendment by the Commission, the amendment shali
become effective and the articles of incorporation shall be deemed to be
amended accordingly.

No amendment shall affect any existing cause of action in favor of or
against such corporation, or any pending suit to which such corporation
shall be a party, or the existing rights of persons other than stockholders;
and, in the event the corporate name shall be changed by amendment, no
suit brought by or against such corporation under its former name shall
abate for that reason.

§ 13.1-61. Amendments, Mergers and Other Changes in Reorganiza-
tion Proceedings.—Whenever a plan of reorganization of a corporation has
been confirmed by decree or order of a court of competent jurisdiction in
proceedings for the reorganization of such corporation pursuant to the
provisions of any applicable statute of the United States relating to re-
organizations of corporations, the articles of incorporation may be amend-
ed, in the manner provided in this section, in as many respects as may be
necessary to put into effect and carry out the plan and the decrees and
orders of the court and judge relative thereto, without any action by
directors or stockholders, so long as the articles of incorporation as amend-
ed contain only such provisions as might be lawfully contained in the
original articles of incorporation at the time of making such amendment.
Such power and authority may be exercised, and such proceedings and acts
may be taken, as may be directed by such decrees or orders in the manner
provided in this section, with like effect as if exercised and taken by
unanimous action of the directors and stockholders.

Without hereby limiting the generality of the foregoing provision,
such amendments or proceedings may:

(A) Change the name, period of duration or purposes of the corpora-
tion;

(B) Amend or repeal the by-laws;

(C) Change the aggregate number of shares, or shares of any class,
which the corporation has authority to issue;

(D) Change the preferences, limitations and relative rights in respect
of all or any part of the shares of the corporation and classify, reclassify
or cancel all or any part of the shares of the corporation, whether issued
or unissued, and make any other change authorized by this Act;

(E) Authorize the issuance of bonds, debentures or other obligations,
whether or not convertible into shares of any class or bearing warrants
or other evidences of optional rights to purchase or subscribe for the shares
of any class, and fix the terms and conditions thereof ;

(F) Constitute or reconstitute and classify or reclassify the board of
directors of the corporation and appoint directors and officers in lieu of or
in addition to all or any of the directors and officers then in office; and

(G) Reduce capital, transfer all or part of its assets, by sale, lease
or other disposition, or merge or consolidate as permitted by this Act,
except however that, notwithstanding any other provision of this Act, no
stockholder shall have any of the rights provided by this Act for dissenting
stockholders to be paid in cash.
CH. 428] ACTS OF ASSEMBLY 513

Articles of amendment, merger, consolidation, reduction or dissolution
pursuant to this section shall be made in the following manner: _ .

(a) Articles of amendment, merger, consolidation, reduction or dis-
solution approved by decree or order of such court shall be executed and
verified by the oath of the trustee or trustees in the reorganization pro-
ceedings or by any other person or persons designated for the purpose by
decree or order of such court and shall show the name of the corporation,
the amendments to the articles of incorporation, the plan of merger or
consolidation or the plan of reduction or dissolution, the title of the court
and the proceedings in which the decree or order was entered, the date of
its entry and a statement that such decree or order was entered by a court
having jurisdiction in proceedings for the reorganization of the corporation
pursuant to the provisions of an applicable statute of the United States for
the reorganization of corporations. . .

(b) The articles of amendment, merger, consolidation, reduction or dis-
solution 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, merger,
consolidation, reduction or dissolution, which, except in the case of a
certificate of dissolution, shall be admitted to record in its office. Upon the
completion of such recordation, the Commission shall forward the certifi-
cate for recordation in the office for the recording of deeds in the city or
county in which the registered office of the corporation is located, except
that no such further recordation shall be required in the city of Richmond
or the county of Henrico. Upon the completion of such further recorda-
tion, the certificate shall be returned to the Commission by registered
or certified mail.

Upon the issuance of the certificate of amendment, merger, consolida-
tion, reduction or dissolution by the Commission, the amendment, merger,
consolidation, reduction or dissolution shall become effective and, in case
of an amendment, the articles of incorporation shall be deemed to be
amended accordingly, without any action thereon by the directors or stock-
holders of the corporation and with the same effect as if adopted by
unanimous action of the directors and stockholders of the corporation.

The provisions of this section shall cease to apply to such corporation
upon the entry of a final decree in the reorganization proceedings closing
the case and discharging the trustee or trustees, if any.

If the properties and franchises of any corporation are sold under
any deed of trust or mortgage or by virtue of the judgment or decree of
any court to an individual or individuals, the purchasers may organize a
corporation for continuing the operation and management of such proper-
ties which shall thereupon have the same rights, privileges and franchises
as were held by the first corporation and be subject to all the requirements
imposed upon corporations of that kind by any law of this State. Articles
of incorporation for this purpose shall be signed and verified by the oath of
the purchasers or a majority thereof and shall, in addition to satisfying
the other requirements of this Act for articles of incorporation, show the
title and date of the deed of trust or mortgage, the amount secured thereby
and the circumstances of the default, or the title of the court and the pro-
ceedings and the date of the judgment or decree under which the sale was
made and shall also state the date, place and terms of the sale. Upon
delivery of the articles of incorporation to the Commission, the Commission
shall proceed as in other cases to the issuance of a certificate of incorpora-
tion and upon the issuance of such certificate, it shall become effective in
accordance with its terms.

§ 13.1-62. Restriction on Redemption or Purchase of Redeemable
Shares.—No redemption or purchase of redeemable shares shall be made
by a corporation when it is insolvent or when such redemption or purchase
would render it insolvent, or which would reduce the net assets below the
aggregate amount payable to the holders of shares having prior or equal
rights to the assets of the corporation upon involuntary dissolution, or
below the aggregate amount of its liabilities.

§ 13.1-68. Cancellation of Reacquired Shares and Reduction of Capi-
tal.—A corporation may at any time, by resolution of its board of directors,
provide for the cancellation of all or any part of the shares of the corpora-
tion, of any class, that have been redeemed or purchased or otherwise
reacquired and (except in the case of shares surrendered in conversion
into shares of another class or series) the reduction of stated capital in
an amount equal to the amount of stated capital represented by the shares
so cancelled.

Thereupon articles of reduction shall be executed by the corporation
by its president or a vice president and by its secretary or an assistant
secretary, and verified by the oath of one of the signing officers. They
shall show:

(a) The name of the corporation.

(b) The number of shares to be cancelled, itemized by classes and
series, and the date of the adoption of the resolution of the board of direc-
tors providing for such cancellation.

(c) The aggregate number of issued shares, itemized by classes and
series, after giving effect to such cancellation.

(d) The amount, expressed in dollars, of the stated capital of the
corporation after giving effect to such cancellation and such reduction.

(e) If the articles of incorporation provide that the cancelled shares
shall not be reissued, then the number of shares, itemized by classes and
series, which the corporation will have authority to issue after giving
effect to such cancellation.

Nothing contained in this section shall be construed to forbid a cancel-
lation of shares or a reduction of stated capital in any other manner per-
mitted by this Act.

§ 13.1-64. Reduction of Stated Capital in Other Cases.—A reduction
of the stated capital of a corporation, not provided for by the next preceding
section, may be made in the following manner:

) The board of directors shall adopt a resolution setting forth the
amount of the proposed reduction and the manner in which the reduction
shall be effected, and directing that the question of such reduction be sub-
mitted to a vote at a meeting of stockholders, which may be either an
annual or a special meeting.

(B) Notice, stating that the purpose or one of the purposes of such
meeting is to consider the question of reducing the stated capital of the
corporation in the amount and manner proposed by the board of directors,
shall be given to each stockholder of record entitled to vote thereon within
the time and in the manner provided in this Act for the giving of notice
of meetings of stockholders.

(C) At such meeting a vote of the stockholders entitled to vote there-
on shall be taken on the question of approving the proposed reduction of
stated capital, which shall require for its adoption the affirmative vote of
the holders of more than two-thirds of the shares entitled to vote thereon
except that if the proposed reduction would result in a decrease in the stated
capital of the shares of any particular class or in the aggregate stated
capital of any class subordinate and inferior to any particular class, the
proposed reduction shall require for its adoption the affirmative vote of
the holders of more than two-thirds of the shares of such particular class
(whether or not entitled to vote thereon by the provisions of the articles
of incorporation) and of the total shares entitled to vote thereon.

When a reduction of the stated capital of a corporation has been
approved as provided in this section, articles of reduction shall be executed
CH. 428] ACTS OF ASSEMBLY 515

by the corporation by its president or a vice president and by its secretary
or an assistant secretary, and verified by one of the officers signing such
statement, and shall set forth:

(a) The name of the corporation. .

(b) A copy of the resolution of the stockholders approving such
reduction, and the date of its adoption.

(c) The number of shares outstanding, and the number of shares
entitled to vote thereon, and if the shares of any class are entitled to vote
thereon as a class, the designation and number of outstanding shares
entitled to vote thereon of each such class. .

(d) The number of shares voted for and against such reduction and,
if the shares of any class are entitled to vote thereon as a class, the num-
ber of shares of each such class voted for and against such reduction.

(e) A statement of the manner in which such reduction is to be
effected, and a statement, expressed in dollars, of the amount of stated
capital of the corporation after giving effect to such reduction.

Where a reduction of stated capital is accomplished in steps pursuant
to a continuing plan, any articles of reduction after the first may incor-
porate the plan by reference.

Where a reduction of stated capital is accompanied by an amendment
to the articles of incorporation, both actions may be certified to the Com-
mission in the same articles.

§ 13.1-65. Issuance of Certificate of Reduction—The articles of
reduction executed pursuant to § 13.1-63 or § 13.1-64 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 reduction, which shall be admitted to record
in its office. Upon the completion of such recordation, the Commission
shall forward the certificate for recordation in the office for the recording
of deeds in the city or county in which the registered office of the corpora-
tion is located, except that no such further recordation shall be required
in the city of Richmond or the county of Henrico. Upon the completion
of such further recordation, the certificate shall be returned to the Com-
mission by registered or certified mail.

13.1-66. Effect of Certificate of Reduction——Upon the issuance of
the certificate of reduction by the Commission, the stated capital shall be
reduced in accordance with the articles of reduction. In case of the can-
cellation of shares that have been redeemed or purchased or otherwise
acquired, the cancellation shall thereupon become éffective and the cancelled
shares shall, unless the articles of incorporation provide that they shall
not be reissued, become authorized and unissued shares, undesignated as
to series. If the articles of incorporation provide that such shares shall
not be reissued, the issuance of the certificate of reduction shall reduce the
number of shares of that class which the corporation is authorized to issue
by the number of shares so cancelled.

§ 13.1-67. Special Provisions Relating to Surplus and Reserves.—The
surplus, if any, created by or arising out of a reduction of the stated
capital of a corporation shall be capital surplus.

The capital surplus of a corporation may be increased from time to
time by resolution of the board of directors directing that all or a part of
the earned surplus of the corporation be transferred to capital surplus.

A corporation may, by resolution of its board of directors, apply any
part or all of its capital surplus to the reduction or elimination of any
deficit arising from losses, however incurred, but only after first eliminat-
ing the earned surplus, if any, of the corporation by applying such losses
against earned surplus and only to the extent that such losses exceed the
earned surplus, if any. Each such application of capital surplus shall, to the
extent thereof, effect a reduction of capital surplus.
A corporation may, by resolution of its board of directors, create
a yeserve or reserves out of its earned surplus for any proper purpose or
purposes, and may abolish any such reserve in the same manner.

CHAP 5
MERGER AND CONSOLIDATION

§ 18.1-68. Procedure for Merger.—Any two or more domestic corpora-
tions may merge into one of such corporations pursuant to a plan of merger
approved in the manner provided in this Act, if the articles of incorpora-
tion of each of them could lawfully contain all the corporate powers and
purposes of all of them.

The board of directors of each corporation shall, by resolution adopted
by each such board, approve a plan of merger setting forth:

(a) The names of the corporations proposing to merge, and the name
of the corporation into which they propose to merge, which is hereinafter
designated as the surviving corporation.

(b) The terms and conditions of the proposed merger.

(c) The manner and basis of converting the shares of each corpora-
on into shares or other securities or obligations of the surviving corpora-

on.
(d) A statement of any amendments in the articles of incorporation
of the surviving corporation to be effected by such merger or a restate-
ment of such articles of incorporation.

(e) Such other provisions with respect to the proposed merger as are
deemed necessary or desirable.

§ 18.1-69. Procedure for Consolidation —Any two or more domestic
corporations may consolidate into a new corporation pursuant to a plan of
consolidation ‘approved in the manner provided in this Act, if the articles
of incorporation of each of them could lawfully contain all the corporate
powers and purposes of all of them.

The board of directors of each corporation shall, by a resolution
adopted by each such board, approve a plan of consolidation setting forth:

(a) The names of the corporations proposing to consolidate, and the
name of the new corporation into which they propose to consolidate, which
is hereinafter designated as the new corporation.

(b) The terms and conditions of the proposed consolidation.

(c) The manner and basis of converting the shares of each corpora-
tion into shares or other securities or obligations of the new corporation.

(d) With respect to the new corporation, all of the statements re-
quired to be set forth in articles of incorporation for corporations organized
under this Act.

(e) Such other provisions with respect to the proposed consolidation
as are deemed necessary or desirable.

§ 13.1-70. Approval by Stockholders.—The board of directors of each
corporation, upon approving such plan of merger or plan of consolidation,
shall, by resolution, direct that the plan be submitted to a vote at a meeting
of stockholders, which may be either an annual or a special meeting. Notice
shall be given to each stockholder of record, not less than twenty-five days
before such meeting, in the manner provided in this Act for the giving of
notice of such meetings of stockholders, and shall state the purpose of the
meeting, which may be either an annual or a special meeting. A copy
of the plan of merger or consolidation shall be sent with such notice.

At each such meeting, a vote of the stockholders shall be taken on the
proposed plan of merger or consolidation. The holder of each outstanding
share of each such corporation shall be entitled to vote on the proposed
plan of merger or consolidation, whether or not entitled to vote thereon
by the provisions of the articles of incorporation of such corporation.
The plan of merger or consolidation shall be approved upon receiving
CH. 428] ACTS OF ASSEMBLY 517

the affirmative vote of the holders of more than two-thirds of the out-
standing shares of each such corporation, unless any class of shares of any
such corporation is entitled to vote as a class thereon, in which event, as to
such corporation, the plan of merger or consolidation shall be approved
upon receiving the affirmative vote of the holders of more than two-thirds
of the outstanding shares of each class of shares entitled to vote as a class
thereon and of the total outstanding shares. Any class of shares of any
such corporation shall be entitled to vote as a class if the plan of merger
or consolidation, as the case may be, contains any provision which, if
contained in a proposed amendment to articles of incorporation, would
entitle such class of shares to vote as a class. But if the Securities and
Exchange Commission exercises jurisdiction over the proxy statement for
such meeting submitted to the holders of any class of shares which is
entitled to vote as a class on the plan of merger or consolidation, the plan
of merger or consolidation shall be approved upon receiving the affirmative
vote of the holders of a majority of the outstanding shares of each such
class thereon and of more than two-thirds of the total outstanding shares.

After such approval by a vote of the stockholders of each corporation,
and at any time prior to the issuance of a certificate of merger or consolida-
tion, the merger or consolidation may be abandoned if and to the extent
and in the manner permitted by the plan of merger or consolidation and
upon notice to the Commission.

§ 13.1-71. Merger or Consolidation of Domestic and Foreign Corpora-
tions.—One or more foreign corporations and one or more domestic corpora-
tions may be merged or consolidated if such merger or consolidation is
permitted by the laws of the state under which each such foreign corpora-
tion is organized. Each domestic corporation shall comply with the pro-
visions of this Act with respect to the merger or consolidation, as the case
may be, of domestic corporations and each foreign corporation shall comply
with all applicable provisions of the laws of the state where it is organized
and shall by resolution of its board of directors approve a plan in accordance
with § 13.1-68 or § 13.1-69 as the case may be.

The effect of such merger or consolidation shall be the same as in the
case of the merger or consolidation of domestic corporations, if the sur-
viving or new corporation is to be a domestic corporation of this State,
whether or not it is also to be a domestic corporation of another state. If
the surviving or new corporation is to be a foreign corporation and not a
domestic corporation, the effect of such merger or consolidation shall be
the same as in the case of the merger or consolidation of domestic corpora-
tions except in so far as the laws of such other state provide otherwise.

No corporation that is required by law to be a domestic corporation
may, by merger or consolidation, cease to be a domestic corporation, but
every such corporation, even though a corporation of some other state, the
United States or another country, shall also be a domestic corporation of
this State.

§ 13.1-72. Articles of Merger or Consolidation.—Articles of merger
or articles of consolidation shall be executed by each domestic corporation
by its president or a vice president and by its secretary or an assistant
secretary, and verified by oath of one of the officers of each corporation
signing such articles, and shall set forth:

(a) The plan of merger or consolidation.

(b) As to each domestic corporation, the date of the meeting of the
board of directors at which the plan was approved; the date when notice
was given to each stockholder of record; the fact that such notice was
given in the manner provided in this Act and was accompanied by a copy
of the plan of merger or consolidation; and the date of the adoption of the
plan by the stockholders.

(c) As to each domestic corporation, the number of shares outstand-
518 ACTS OF ASSEMBLY [vA., 1956

ing and the number of shares entitled to vote thereon, and, if the shares of
any class are entitled to vote thereon as a class, the designation and number
of outstanding shares entitled to vote thereon of each such class.

(d) As to each domestic corporation, the number of shares voted for
and against such plan and, if the shares of any class are entitled to vote
thereon as a class, the number of shares of each such class voted for and
against such plan. .

(f) A statement, expressed in dollars, of the amount of stated capital
of the surviving or new corporation on the effective date of the merger or
consolidation. .

If any corporation merging or consolidating is a foreign corporation,
the articles of merger or consolidation shall also be executed and verified
as required above in its behalf and shall recite that such merger or con-
solidation is permitted by the laws of the state under which such foreign
corporation is organized and that all conditions required by the laws of
such state have been satisfied. The articles of merger or consolidation shall
further state whether the surviving or new corporation is to be a domestic
corporation or a foreign corporation or both. If the surviving or new
corporation is not to be a domestic corporation, it shall comply with the
provisions of this Act with respect to foreign corporations if it is to transact
business in this State and the articles of merger or consolidation shall
include:

(1) An agreement that the surviving or new corporation may be
served with process in this State in any proceeding for the enforcement of
any obligation of any domestic corporation which is a party to such merger
or consolidation and in any proceeding for the enforcement of the rights of
a dissenting stockholder of any such domestic corporation against the
surviving or new corporation;

(2) An irrevocable appointment of the clerk of the Commission as
agent to accept service of process in any such proceeding; and

(3) An agreement that the surviving or new corporation will promptly
pay to the dissenting stockholders of any such domestic corporation the
amount, if any, to which they shall be entitled by the provisions of this
Act with respect to the rights of dissenting stockholders.

§ 13.1-78. Issuance of Certificate of Merger or Consolidation.—The
articles of merger or consolidation shall be delivered to the Commission.
If there shall be a delay of more than fourteen days after the expiration
of the period for dissent in presenting articles of merger or consolidation
to the Commission, any stockholder may petition the Commission for an
order to show cause why the articles should not be promptly filed or the
plan abandoned. 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 merger or consolidation, which shall be
admitted to record in its office, but such order shall not be entered earlier
than the fifth day after the articles are delivered to the Commission. Upon
the completion of such recordation, the Commission shall forward the
certificate for recordation in the office for the recording of deeds in the
city or county in which the registered office of each corporation is located,
except that no such further recordation shall be required in the city of
Richmond or the county of Henrico. Upon the completion of such further
recordation, the certificate shall be returned to the Commission by regis-
tered or certified mail.

§ 13.1-74. Effect of Merger or Consolidation.—Upon the issuance of
the certificate of merger or the certificate of consolidation by the Com-
mission, the merger or consolidation shall become effective.

When such merger or consolidation becomes effective:

(a) The several corporations parties to the plan of merger or con-
solidation shall be a single corporation, which, in the case of a merger,
CH. 428] ACTS OF ASSEMBLY 519

shall be that corporation designated in the plan of merger as the surviving
corporation, and, in the case of a consolidation, shall be the new corporation
provided for in the plan of consolidation.

(b) The separate existence of all corporations parties to the plan of
merger or consolidation, except the surviving or new corporation, shall

e.

(c) Unless the articles of merger or consolidation state that the sur-
viving or new corporation is to be a foreign corporation, the surviving or
new corporation shall be a domestic corporation and shall have all the
rights, privileges, immunities and powers of all corporations parties to the
plan of merger or consolidation and of a corporation organized under this
Act and shall be subject to all the duties and liabilities of a corporation
organized under this Act.

(d) Such surviving or new corporation shall thereupon and there-
after possess all the rights, privileges, immunities and franchises, as well
of a public as of a private nature, of each of the merging or consolidating
corporations; and all property, real, personal and mixed, and all debts due
on whatever account, including subscriptions to shares, and all other
choses in action, and all and every other interest, of or belonging to or
due to each of the corporations so merged or consolidated, shall be taken
and deemed to be transferred to and vested in such single corporation with-
out further act or deed; and the title to any real estate, or any interest
therein, vested in any of such corporations shall not revert or be in any way
impaired by reason of such merger or consolidation.

(e) Such surviving or new corporation shall thenceforth be responsi-
ble and liable for all the liabilities and obligations of each of the corpora-
tions so merged or consolidated; and any claim existing or action or
proceeding pending by or against any of such corporations may be pros-
ecuted as if such merger or consolidation had not taken place, or such
surviving or new corporation may be substituted in its place. Neither the
rights of creditors nor any liens upon the property of any such corporation
shall be impaired by such merger or consolidation.

(f) In the case of a merger, the articles of incorporation of the
‘surviving corporation shall be deemed to be amended to the extent, if any,
that amendments in its articles of incorporation are stated in the plan of
merger ; and, in the case of a consolidation, the statements set forth in the
articles of consolidation which are required or permitted to be set forth
in the articles of incorporation of corporations organized under this Act
shall be deemed to be the original articles of incorporation of the new
corporation.

(g) The net surplus of the merging or consolidating corporations
which was available for the payment of dividends immediately prior to
such merger or consolidation, to the extent that such surplus is not trans-
ferred to stated capital by the board of directors upon the issuance of shares
or otherwise, shall continue to be available for the payment of dividends by
such surviving or new corporation.

§ 13.1-75. Rights of Dissenting Stockholders in Mergers or Consolida-
tions.—If a stockholder of record of a corporation of this State which is a
party to a merger or consolidation shall not vote all or a specified number
of the shares registered in his name in favor of a plan of merger or con-
solidation and such stockholder, within fourteen days after the date on
which the vote was taken, shall make written demand on his corporation
or on the surviving or new corporation, domestic or foreign, for payment
of the fair value of such shares as of the day prior to the date on which
the vote was taken approving the merger or consolidation, then, if the
merger or consolidation is effected, the surviving or new corporation shall
pay the amount of such fair value to such stockholder, upon surrender of
his certificate or certificates representing such shares. Such demand shall
520 ACTS OF ASSEMBLY [vA., 1956

state the number and class of the shares owned by such dissenting stock-
holder and covered by such demand. Any stockholder failing to make
demand within the fourteen-day period shall be bound by the terms of
the merger or consolidation. Any stockholder making such demand shall
thereafter be entitled only to payment for his shares as herein provided
and shall not be entitled to vote or exercise any other rights of a stock-
holder except that he shall receive an amount per share equal to all dividends
paid per share and they shall be credited against the payment subsequently
made pursuant to agreement or judgment.

Within fourteen days after the merger or consolidation is effected,
the surviving or new corporation, as the case may be, shall give notice
thereof to each such dissenting stockholder who has made demand as here-
in provided for the payment of the fair value of his shares.

If the value of such shares is agreed upon between such dissenting
stockholder and the surviving or new corporation, payment therefor shall
be made within ninety days after the date on which such merger or con-
solidation was effected, upon the surrender of his certificate or certificates
representing such shares. Upon payment of the agreed value such dis-
senting stockholder shall cease to have any interest in such shares.

If such stockholder and the surviving or new corporation do not 80
agree, then such corporation, on the written demand of any stockholder,
shall, or at its election may, file a bill of complaint in the clerk’s office of
a Virginia court of equity in the county or city in which the registered
office of the corporation, or its principal place of business in Virginia, is
located praying that the fair value of such shares be found and determined.
In the city of Richmond such court shall be the Chancery Court; in the
city of Norfolk, the Court of Law and Chancery; in the city of Alexandria,
the Corporation Court; and in the city of Roanoke, the Court of Law and
Chancery. All dissenting stockholders, wherever residing, shall be made
parties to the proceeding as an action against their shares quasi in rem.
A copy of the bill of complaint shall be served on each dissenting stock-
holder who is a resident of Virginia and shall be served by registered
or certified mail on each non-resident. Service on all non-residents shall
also be made by publication as prescribed by § 8-71 through § 8-73. All
stockholders parties to the proceeding shall be entitled, after a hearing,
without a jury, to judgment against the surviving or new corporation for
the amount of such fair value as of the day prior to the date on which such
vote was taken approving such merger or consolidation. The judge may,
if he so elects, appoint one or more persons as appraisers to receive the
evidence and recommend a decision on the question of value. The judg-
ment shall be payable only upon and simultaneously with the surrender
to the surviving or new corporation of the certificate or certificates repre-
senting such shares. The costs of any such proceeding, including reason-
able fees and expenses of any appraisers, shall be paid by the corporation,
but the fees and expenses’of counsel and experts retained by any party
in interest shall be paid by him. The judgment shall include an allowance
for interest at such rate as the judge may find to be fair and equitable in
all the circumstances upon the fair value of the stock of the stockholders
entitled thereto from the day prior to the date on which the vote was taken
on the plan of merger or consolidation until payment.

The right of a dissenting stockholder to be paid the fair value of his
shares as herein provided shall cease if and when the corporation shall
abandon the merger or consolidation or such dissenting stockholder shall,
at any time before decision of the appraisers or the court, whichever may
first occur, withdraw his dissent and in either such event his rights as a
stockholder shall thereupon revive.

Shares acquired by the surviving or new corporation pursuant to the
payment of the agreed value thereof or to payment of the judgment
entered therefor, as in this section provided, together with any shares of
any constituent corporation held in the treasury of any constituent cor-
poration, shall be converted, pursuant to the plan of merger or consolida-
tion, into shares of the surviving or new corporation and may be held and
disposed of by such corporation as in the case of other treasury shares,
except, in any of the above cases, as the plan of merger or consolidation
may otherwise provide.

§ 13.1-76. Merger of Subsidiary—Any domestic corporation owning
all outstanding shares of each class of another corporation, domestic or
foreign, may merge such wholly owned subsidiary into itself without ap-
proval by the stockholders of either corporation. Its board of directors
shall, by resolution, approve a plan of merger setting forth the name of
the subsidiary and the name of the corporation owning all of its shares,
which shall be the surviving corporation.

Articles of merger shall be executed by the surviving corporation by
its president or a vice president and by its secretary or an assistant secre-
tary, and verified by oath of one of its officers signing such articles, and
shall set forth:

(a) The plan of merger; and

(b) The number of outstanding shares of each class of the subsidiary
and the fact that all of each class are owned by the surviving corporation.

The articles of merger 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
merger, which shall be admitted to record in its office. Upon the com-
pletion of such recordation, the Commission shall forward the certificate
for recordation in the office for the recording of deeds in the city or county
in which the registered office of each corporation is located, except that no
such further recordation shall be required in the city of Richmond or the
county of Henrico. Upon the completion of such further recordation, the
certificate shall be returned to the Commission by registered or certified

mail.

Upon the issuance of the certificate of merger by the Commission,
the merger shall become effective as in the case of other mergers except
that no enlargement or other change in the corporate powers of the
surviving corporation shall result, no change in the relative rights and
preferences of its stockholders shall be made and no shares shall be issued
in conversion of the shares of the subsidiary.

Two or more wholly owned subsidiaries may be merged into the cor-
poration owning all outstanding shares of each class of each subsidiary by
the same articles of merger.

The provisions of § 13.1-75 shall not apply to a merger pursuant to
this section.

CHAP 6
SALE OF ASSETS

§ 13.1-77. Sale, Mortgage or Other Disposition of Assets.—The sale,
lease, exchange, mortgage, pledge or other disposition of all, or sub-
stantially all, the property and assets of a corporation, when made in the
usual and regular course of the business of the corporation, 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 stockholders 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 good will, of a corporation, though not made in the usual and regular
course of its business, may be made to borrow money upon such terms and
conditions as shall be authorized by its board of directors and no authoriza-
tion or consent of stockholders 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 good will, of a corporation, 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:

(a) The board of directors shall adopt a resolution recommending such
sale, lease, exchange, mortgage, pledge or other disposition and directing
the submission thereof to a vote at a meeting of stockholders, which may
be either an annual or a special meeting.

(b) Notice shall be given to each stockholder of record in the manner
provided in this Act for the giving of notice of meetings of stockholders not
less than twenty-five nor more than fifty days before the date of the meet-
ing, and shall state that the purpose, or one of the purposes, of such meet-
ing is to consider the proposed sale, lease, exchange, mortgage, pledge or
other disposition.

(c) At such meeting the stockholders 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 con-
ditions thereof and the consideration to be received by the corporation
therefor. The holder of each outstanding share of the corporation shall be
entitled to vote thereon, whether or not entitled to vote thereon by the
provisions of the articles of incorporation. Such authorization shall require
the affirmative vote of the holders of more than two-thirds of the outstand-
ing shares of the corporation, unless any class of shares is entitled by the
articles of incorporation to vote as a class thereon, in which event such
authorization shall require the affirmative vote of the holders of that
proportion of the outstanding shares of each class of shares entitled to
vote as a class thereon which is specified in the articles of incorporation and
of the holders of more than two-thirds of the total outstanding shares.

(d) After such authorization by a vote of stockholders, the board of
directors nevertheless, in its discretion, may abandon such sale, lease, ex-
change, 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 stockholders.

Notwithstanding any other provision of this section, no corporation
organized to conduct the business of a railroad or other public service or a
banking business or a building and loan association, an industrial loan asso-
ciation or a credit union may sell, lease or exchange its properties for the
conduct of such business in this State except to a corporation of this State
organized for the same purpose or in the case of a banking business, to a
corporation of the United States.

§ 18.1-78. Rights of Dissenting Stockholders Upon Sale or Exchange
of Assets.—In the event that a sale or exchange of all or substantially
all of the property and assets of a corporation otherwise than in the
usual and regular course of its business is authorized by a vote of the
stockholders of the corporation, any stockholder who shall not vote all or
a specified number of the shares registered in his name in favor of such a
sale or exchange may, within fourteen days after the date on which the
vote was taken, make written demand on the corporation for the pay-
ment to him of the fair value of such shares as of the day prior to
the date on which the vote was taken. If the sale or exchange is
effected. the corporation shall pay the amount of such fair value to such
stockholder, upon surrender of his certificate or certificates representing
CH. 428] ACTS OF ASSEMBLY 523

such shares. Such demand shall state the number and class of the shares
owned by such dissenting stockholder and covered by such demand. Any
stockholder failing to make demand within the fourteen-day period shall
be bound by the terms of the sale or exchange. Any stockholder making
such demand shall thereafter be entitled only to payment for his shares
as herein provided and shall not be entitled to vote or exercise any other
rights of stockholders except that he shall receive an amount per share
equal to all dividends paid per share and they shall be credited against
the payment subsequently made pursuant to agreement or judgment.

Within fourteen days after the sale or exchange is effected, the
corporation shall give notice thereof to each dissenting stockholder who
has made demand as herein provided for the payment of the fair value of
his shares.

If the value of such shares is agreed upon between the dissenting
stockholder and the corporation, payment therefor shall be made within
ninety days after the date on which the sale or exchange was effected,
upon the surrender of his certificate or certificates representing such
shares. Upon payment of the agreed value, the dissenting stockholder
shall cease to have any interest in such shares or in the corporation.

If the stockholder and the corporation do not so agree, then such
corporation, on the written demand of any stockholder, shall, or at its
election may, file a bill of complaint in the clerk’s office of a Virginia
court of equity in the county or city in which the registered office of
the corporation, or its principal place of business in Virginia, is located
praying that the fair value of such shares be found and determined.
In the city of Richmond such court shall be the Chancery Court; in
the city of Norfolk, the Court of Law and Chancery; in the city of
Alexandria, the Corporation Court; and in the city of Roanoke, the
Court of Law and Chancery. All dissenting stockholders, wherever re-
siding, shall be made parties to the proceeding as an action against their
shares quasi in rem. A copy of the bill of complaint shall be served on each
dissenting stockholder who is a resident of Virginia and shall be served
by registered or certified mail on each non-resident. Service on all non-
residents shall also be made by publication as prescribed by § 8-71 through

§ 8-73. All stockholders parties to the proceedings shall be entitled,
after a hearing without a jury, to judgment against the corporation for
the amount of such fair value as of the day prior to the date on which such
vote was taken approving such sale or exchange. The judge may, if he so
elects, appoint one or more persons as appraisers to receive the evidence
and recommend a decision on the question of value. The judgment shall
be payable only upon and simultaneously with the surrender to the corpora-
tion of the certificate or certificates representing such shares. The costs
of any such proceeding, including reasonable fees and expenses of any
appraisers, shall be paid by the corporation, but the fees and expenses of
counsel and experts retained by any party in interest shall be paid by him.
The judgment shall include an allowance for interest at such rate as the
judge may find to be fair and equitable in all the circumstances upon the
fair value of the stock of the stockholders entitled thereto from the day
prior to the date on which the vote was taken until payment.

The right of a dissenting stockholder to be paid the fair value of his
shares as herein provided shall cease if and when the corporation shall
abandon the sale or exchange or such dissenting stockholder shall, at any
time before decision of the appraisers or the court, whichever may first
occur, withdraw his dissent and in either such event his rights as a stock-
holder shall thereupon revive, including the right to receive any dividends
not paid because of such dissent.
Shares acquired by the corporation pursuant to the payment of the
agreed value thereof or to payment of the judgment entered therefor, as in
this section provided, may be held and disposed of by the corporation as
in the case of other treasury shares.

CHAP 7

DISSOLUTION .

§ 18.1-79. Voluntary Dissolution by Incorporators.—A corporation
which has not commenced business and which has not issued any stock,
may be voluntarily dissolved by its incorporators at any time after the
date of the issuance of its certificate of incorporation, in the following
manner:

(a) Articles of dissolution shall be executed by a majority of the
incorporators, and verified by them, and shall set forth:

The name of the corporation.

(2) That none of its shares has been issued.

(3) That the corporation has not commenced business.

(4) That the amount, if any, actually paid in on subscriptions for its
shares, less any part thereof properly disbursed, has been returned to
those entitled thereto.

(5) That no debts of the corporation remain unpaid.

(6) That they desire that the corporation be dissolved.

(b) The articles of dissolution shall be delivered to the Commission.
If the Commission finds that they comply with the requirements of law
and that all required fees have been paid, it shall by order issue a certi-
ficate of dissolution. The Commission shall notify the clerk of the court
for the recording of deeds in the city or county in which the registered
office of the corporation is located, except that no such notice shall be re-
quired in the city of Richmond or the county of Henrico. The clerk shall
note the fact of such dissolution in the charter records of his office. Upon
the issuance of such certificate of dissolution, the existence of the corpora-
tion shall cease.

§ 18.1-80. Voluntary Dissolution by Consent of Stockholders.—A
corporation may be voluntarily dissolved by the written consent of all of
its stockholders.

Upon the execution of such written consent, a statement of intent to
dissolve shall be executed by the corporation by its president or a vice
president and by its secretary or an assistant secretary, and verified by one
of the officers signing such statement, which statement shall set forth:

(a) The name of the corporation.

(b) The names and addresses of its officers.

(c) The names and addresses of its directors.

(d) A statement that such written consent has been signed by all
stockholders of the corporation or signed in their names by their at-
torneys thereunto duly authorized, to which shall be attached the original
of the consent or a photocopy thereof.

§ 13.1-81. Voluntary Dissolution by Act of Corporation.—A corpora-
tion may be dissolved by the act of the corporation, when authorized in
the following manner:

(a) The board of directors shall adopt a resolution recommending
that the corporation be dissolved, and directing that the question of such
dissolution be submitted to a vote at a meeting of stockholders.

(b) Notice shall be given to each stockholder of record within the
time and in the manner provided in this Act for the giving of notice of
meetings of stockholders, and shall state that the purpose, or one of the
purposes, of such meeting is to consider the advisability of dissolving the
corporation.
CH. 428] ACTS OF ASSEMBLY 525

(c) At such meeting a vote of stockhojders entitled to vote thereat

be taken on a resolution to dissolve the corporation. The holder of
each outstanding share of the corporation shall be entitled to vote
thereon, whether or not entitled to vote thereon by the provisions of the
articles of incorporation. Such resolution shall be adopted upon receiving
the affirmative vote of the holders of more than two-thirds of the outstand-
ing shares of the corporation.

(d) Upon the adoption of such resolution, a statement of intent to
dissolve shall be executed by the corporation by its president or a vice
president and by its secretary or an assistant secretary, and verified by
the oath of one of the officers signing such statement, which statement
shall set forth:

(1) The name of the corporation.

(2) The names and addresses of its officers.

(3) The names and addresses of its directors. .

(4) A copy of the resolution adopted by the stockholders authorizing
the dissolution of the corporation.

(5) The number of shares outstanding.

(6) The number of shares voted for and against the resolution, re-
spectively.

§ 13.1-82. Filing of Statement of Intent to Dissolve——The state-
ment of intent to dissolve, whether by consent of stockholders or by act
of the corporation, shall be delivered to the Commission. If the Com-
mission finds that such statement complies with the requirements of law,
it shall, when all fees and franchise taxes have been paid as required by
law, file the statement in its office.

If the statement is delivered by a public service corporation, the Com-
mission shall not file it, unless it finds that the corporation is not actually
performing any public service, or should not be required to continue to
perform any public service, or that public convenience and necessity do
not require that it continue to perform any public service.

§ 13.1-83. Effect of Statement of Intent to Dissolve.—Upon the filing
by the Commission of a statement of intent to dissolve, whether by con-
sent of stockholders or by act of the corporation, the corporation shall
cease to carry on its business, except in so far as may be necessary for
the winding up thereof, but such filing shall not of itself operate to mature
any preference upon liquidation or dissolution and its corporate existence
shall continue until a certificate of dissolution has been issued by the
Commission.

§ 13.1-84. Procedure after Filing of Statement of Intent to Dis-
eotee—ttter the filing by the Commission of a statement of intent to dis-
solve:

(a) The corporation shall immediately cause notice thereof to be
mailed to each known creditor of the corporation.

(b) The corporation shall proceed to collect its assets, sell, convey
and dispose of such of its properties as are not to be distributed in kind to
its stockholders, pay, satisfy and discharge its liabilities and obligations
and do all other acts required to liquidate its business and affairs, and,
after paying or adequately providing for the payment of all its obligations,
distribute the remainder of its assets, either in cash or in kind, among its
stockholders according to their respective rights and interests.

(c) The corporation, at any time during the liquidation of its business
and affairs, may make application to a court of competent jurisdiction
within the city or county of this State in which the registered office or
principal place of business of the corporation is situated, to have the
Aouidation continued under the supervision of the court as provided in this
§ 18.1-85. Revocation of Voluntary Dissolution Proceedings by Con-
sent of Stockholders.—By the written consent of all of its stockholders, a
corporation may, at any time prior to the issuance of a certificate of dis-
solution by the Commission, revoke voluntary dissolution proceedings
theretofore taken, in the following manner:

_ Upon the execution of such written consent, a statement of revoca-
tion of voluntary dissolution proceedings shall be executed by the corpo-
ration by its president or a vice president and by its secretary or an as-
sistant secretary, and verified by one of the officers signing such statement,
which statement shall set forth:

(a) The name of the corporation.

(b) The names and addresses of its officers.

(c) The names and addresses of its directors.

(d) That such written consent has been signed by all stockholders of
the corporation or signed in their names by their attorneys thereunto
duly authorized, to which shall be attached the original of the consent or
a photocopy thereof.

§ 13.1-86. Revocation of Voluntary Dissolution Proceedings by Act
of Corporation.—By the act of the corporation, a corporation may, at any
time prior to the issuance of a certificate of dissolution by the Commis-
sion, revoke voluntary dissolution proceedings theretofore taken, in the
following manner:

(a) The board of directors shall adopt a resolution recommending
that the voluntary dissolution proceedings be revoked, and directing that
the question of such revocation be submitted to a vote at a special meeting
of stockholders.

(b) Notice stating that the purpose or one of the purposes of such
meeting is to consider the advisability of revoking the voluntary dissolu-
tion proceeding shall be given to each stockholder of record within the time
and in the manner provided in this Act for the giving of notice of special
meetings of stockholders.

(c) At such meeting a vote of the stockholders shall be taken on a
resolution to revoke the voluntary dissolution proceedings, which shall
require for its adoption the affirmative vote of the holders of more than
two-thirds of the outstanding shares. The holder of each outstanding share
of the corporation shall be entitled to vote thereon, whether or not entitled
to vote thereon by the provisions of the articles of incorporation.

) Upon the adoption of such resolution, a statement of revocation of
voluntary dissolution proceedings shall be executed by the corporation by
its president or a vice president and by its secretary or an assistant secre-
tary, and verified by one of the officers signing such statement, which
statement shall set forth:

(1) The name of the corporation.

(2) The names and addresses of its officers.

(3) The names and addresses of its directors.

(4) A copy of the resolution adopted by the stockholders revoking
the voluntary dissolution proceedings.

(5) The number of shares outstanding.

(6) The number of shares voted for and against the resolution,
respectively.

§ 13.1-87. Filing of Statement of Revocation of Voluntary Dissolu-
tion Proceedings.—The statement of revocation of voluntary dissolution
proceedings, whether by consent of stockholders or by act of the corpora-
tion, shall be delivered to the Commission. If the Commission finds that
such statement complies with the requirements of law and that all required
fees and franchise taxes have been paid it shall, by order, issue a certificate
of reinstatement, which shall be admitted to record in its office.
CH. 428] ACTS OF ASSEMBLY 527

§ 13.1-88. Effect of Statement of Revocation of Voluntary Dissolu-
tion Proceedings.—Upon the issuance by the Commission of a certificate
of reinstatement the dissolution proceedings shall be revoked and the
corporation may again carry on its business. .

§ 13.1-89. Articles of Dissolution.—If voluntary dissolution proceed-
ings have not been revoked, then when all debts, liabilities and obligations
of the corporation have been paid and discharged, or adequate provision
has been made therefor, and all of the remaining property and assets of
the corporation have been distributed to its stockholders, articles of dis-
solution shall be executed by the corporation by its president or a vice
president and by its secretary or an assistant secretary, and verified by
the oath of one of the officers signing such statement. The statement
shall set forth:

(a) The name of the corporation. .

(b) That the Commission has theretofore filed a statement of intent
" | siasotre the corporation, and the date on which such statement was

(c) That all debts, taxes, obligations and liabilities of the corporation
aaa ace paid and discharged or that adequate provision has been made

erefor.

(d) That all the remaining property and assets of the corporation
have been distributed among its stockholders in accordance with their re-
spective rights and interests.

(e) That there are no suits pending against the corporation in any
court, or that adequate provision has been made for the satisfaction of
any judgment, order or decree which may be entered against it in any
pending suit.

The Commission shall not issue a certificate of dissolution until the
corporation shall have paid all fees and taxes imposed by laws administered
by the Commission. With such statement the corporation shall file a
certificate signed by the State Tax Commissioner that the corporation has
filed a return and has paid all State taxes on account of its income to the
time of the certificate. On applying for the certificate of the State Tax
Commissioner, the corporation may file returns and pay taxes before such
returns and taxes would otherwise be due.

_ § 18.1-90. Filing of Articles of Dissolution.—The articles of dissolu-
tion shall be delivered to the Commission. If the Commission finds that
they comply with the requirements of law and that all required fees have
been paid, it shall by order issue a certificate of dissolution. The Com-
mission shall notify the clerk of the court for the recording of deeds in the
city or county in which the registered office of the corporation is located,
except that no such notice shall be required in the city of Richmond or the
county of Henrico. The clerk shall note the fact of such dissolution in the
charter records of his office. Upon the issuance of such certificate of dis-
solution the existence of the corporation shall cease, except for the pur-
pose of suits, other proceedings and appropriate corporate action by stock-
holders, directors and officers as provided in this Act.

§ 13.1-91. Automatic Dissolution—If any domestic corporation shall
fail on two successive annual dates to file the annual report required by
this Act or to pay the annual registration fee or franchise tax required
by law, the Commission shall mail notice to it of impending dissolution.
Whether or not such notice be mailed, if the corporation fails within
ninety days after the second such annual date to file the annual report or to
pay the annual registration fees or franchise taxes, together with a
penalty of five per centum of the registration fees and franchise taxes and
interest at the rate of six per centum per annum on the total amount of any
registration fees and franchise taxes assessed, such corporation shall be
528 ACTS OF ASSEMBLY [va., 1956

thereupon automatically dissolved and its properties and affairs shall pass
automatically to its directors as trustees in dissolution. The Commission
shall publish the fact of such dissolution in a newspaper published in the
city of Richmond.

§ 18.1-92. Reinstatement.—A corporation which has been dissolved
pursuant to § 13.1-91 may apply to the Commission for reinstatement at
any time thereafter and the Commission shall enter an order reinstating
the corporate existence upon receiving an annual report together with pay-
ment of a reinstatement fee of one hundred dollars plus all registration fees,
penalties and franchise taxes that were due before the dissolution and that
would have become due thereafter if dissolution had not occurred. Upon
the entry by the Commission of an order of reinstatement, the corporate
existence shall be deemed to have continued from the date of dissolution
except that reinstatement shall have no effect on any question of personal
liability of the directors, officers or agents in respect of the period between
dissolution and reinstatement. If the name of a corporation that has been
dissolved has been assumed or reserved or registered by any other person
or corporation, the reinstated corporation shall not engage in business until
it has amended its articles of incorporation to change its name.

§ 13.1-93. Involuntary Dissolution—A corporation may be dissolved
involuntarily by order of the Commission when it finds that the corporation
has continued to exceed or abuse the authority conferred upon it by law;
or has failed to maintain a registered office or a registered agent in this
State as required by law.

Before entering any such order the Commission shall issue a rule
against the corporation giving it an opportunity to be heard and show
cause why such an order should not be entered. The Commission may is-
sue the rule on its own motion or on motion of the Attorney General.

§ 18.1-94. Jurisdiction of Court to Liquidate Assets and Business of
Corporation.—Any court of record, with general equity jurisdiction in the
city or county where the registered office or principal office of a corpora-
tion is located, shall have full power to liquidate the assets and business of
the corporation:

(a) In an action by a stockholder when it is established:

(1) That the directors are deadlocked in the management of the
corporate affairs and the stockholders are unable to break the deadlock,
and that irreparable injury to the corporation is being suffered or is
threatened by reason thereof; or

(2) That the acts of the directors or those in control of the corpo-
ration are illegal, oppressive or fraudulent; or

(8) That as shown by the proceedings at any meeting of the stock-
holders the stockholders are deadlocked in voting power and that irrepar-
able injury to the corporation is being suffered or is threatened by reason
thereof; or

(4) That the corporate assets are being misapplied or wasted.

(b) In an action by a creditor:

(1) When the claim of the creditor has been reduced to judgment and
an execution thereon returned unsatisfied and it is established that the
corporation is insolvent; or

(2) When the corporation has admitted in writing that the claim of
the creditor is due and owing and it is established that the corporation is
insolvent.

(c) Upon application by a corporation which has filed a statement of
intent to dissolve, as provided in this Act, to have its liquidation continued
under the supervision of the court.

(d) Upon application by the board of directors when it is established
that circumstances make it impossible to obtain a representative vote by
CH. 428] ACTS OF ASSEMBLY 529

stockholders on the question of dissolution and that the continuation of the
business of the corporation is not in the interest of the stockholders but it
is desirable in their interest that the assets and business be liquidated.

(e) When the Commission has instituted a proceeding for the involun-
tary dissolution of a corporation and entered an order finding that the
corporation should be dissolved but that liquidation of its business and af-
fairs should precede the entry of an order of dissolution.

(f) After dissolution, upon the application of any person, for good
cause, with regard to any assets or business that may remain and the
jurisdiction conferred by this clause may also be exercised by any such
court in any city or county where any property may be situated whether
of a domestic or of a foreign corporation that has been dissolved.

It shall not be necessary to make directors or stockholders parties to
ay Sach action or proceeding unless relief is sought against them per-
sonally.

§ 13.1-95. Procedure in Liquidation of Corporation by Court.—In
proceedings to liquidate the assets and business of a corporation the court
shall have power to issue injunctions, to appoint a receiver or receivers
pendente lite, with such powers and duties as the court, from time to time,
may direct, and to take such other proceedings as may be requisite to pre-
serve the corporate assets wherever situated, and carry on the business of
the corporation until a full hearing can be had.

After a hearing had upon such notice as the court may direct to be
given to all parties to the proceedings and to any other parties in interest
designated by the court, the court may appoint a liquidating receiver or
receivers with authority to collect the assets of the corporation, including
all amounts owing to the corporation by stockholders on account of any
unpaid portion of the consideration for the issuance of shares. Such
liquidating receiver or receivers shall have authority, subject to the order
of the court, to sell, convey and dispose of all or any part of the assets of
the corporation wherever situated, either at public or private sale. The as-
sets of the corporation or the proceeds resulting from a sale, conveyance or
other disposition thereof shall be applied to the expenses of such liquidation
and to the payment of the liabilities and obligations of the corporation,
and any remaining assets or proceeds shall be distributed among its stock-
holders according to their respective rights and interests. The order ap-
pointing such liquidating receiver or receivers shall state their powers and
duties. Such powers and duties may be increased or diminished at any
time during the proceedings.

The court shall have power to allow, from time to time, as expenses of
the liquidation, compensation to the receiver or receivers and to attorneys in
the proceeding, and to direct the payment thereof out of the assets of the
corporation or the proceeds of any sale or disposition of such assets.

A receiver of a corporation appointed under the provisions of this sec-
tion shall have authority to sue and defend in all courts in his own name as
receiver of such corporation. The court appointing such receiver shall have
exclusive jurisdiction of the corporation and its property, wherever
situated, and may, by order, transfer to the receiver legal title to all or
any of the property of the corporation.

§ 18.1-96. Qualifications of Receivers.—A receiver shall in all cases
be a citizen of the United States or a corporation authorized to act as re-
ceiver. Such corporation may be a domestic corporation or a foreign corpo-
ration authorized to transact such business in this State, and shall in all
cases give such bond as the court may direct with such sureties as the court
may require.

§ 18.1-97. Filing of Claims in Liquidation Proceedings.—In proceed-
ings to liquidate the assets and business of a corporation the court may
require all creditors of the corporation to file with the clerk of the court or
with the receiver, in such form as the court may prescribe, proofs under
oath of their respective claims. If the court requires the filing of claims it
shall fix a date, which shall be not less than four months from the date of
the order, as the last day for the filing of claims, and shall prescribe the
notice that shall be given to creditors and claimants of the date so fixed.
The court may extend the time for the filing of claims. Creditors and
claimants failing to file proofs of claim on or before the date fixed may be
barred, by order of court, from participating in the distribution of the
assets of the corporation. .

§ 18.1-98. Discontinuance of Liquidation Proceedings.—The liquida-
tion of the assets and business of a corporation may be discontinued at any
time during the liquidation proceedings when it is established that cause
for liquidation no longer exists. In such event the court shall dismiss the
proceedings and direct the receiver to redeliver to the corporation all its
remaining property and assets.

13.1-99. Decree of Involuntary Dissolution—In proceedings to
liquidate the assets and business of a corporation, when the costs and ex-
penses of such proceedings and all debts, obligations and liabilities of the
corporation shall have been paid and discharged and all of its remaining
property and assets distributed to its stockholders, or in case its property
and assets are not sufficient to satisfy and discharge such costs, expenses,
debts and obligations, all the property and assets have been applied so far as
they will go to their payment, the court shall enter a decree finding these
facts and adjudging that the continuation of the corporate existence is no
longer desirable in the public interest or for the protection of investors.

§ 18.1-100. Filing of Decree of Dissolution.—In case the court shall
enter a decree adjudging that the continuation of the corporate existence
is no longer desirable in the public interest or for the protection of investors,
it shall direct a certified copy thereof to be transmitted to the Commission
and upon receipt thereof the Commission shall enter an order of involuntary
dissolution. The corporate existence shall thereupon come to an end. The
Commission shall notify the clerk of the court for the recording of deeds
in the city or county in which the registered office of the corporation is
located, except that no such notice shall be required in the city of Rich-
mond or the county of Henrico. The clerk shall note the fact of such dis-
solution in the charter records of his office.

§ 18.1-101. Survival of Remedy after Dissolution.—The dissolution
or expiration of a corporation shall not take away or impair any remedy
available to or against such corporation, its directors, officers or stock-
holders, for any right or claim existing or any liability incurred, prior to
such dissolution. Any such action or proceeding by or against the corpo-
ration may be prosecuted or defended by the corporation in its corporate
name. The stockholders, directors and officers shall have power to take
such corporate or other action as shall be appropriate to protect such
remedy, right or claim.

CHAP 8
FOREIGN CORPORATIONS

§ 18.1-102. Admission of Foreign Corporation.—No foreign corpora-
tion shall transact business in this State until it shall have procured a certifi-
cate of authority so to do from the Commission. A foreign corpora-
tion shall not be denied a certificate of authority by reason of the fact that
the laws of the state or country under which such corporation is organized
governing its organization and internal affairs differ from the laws of this
State. and nothing in this Act contained shall be construed to authorize
this State to regulate the organization or the internal affairs of such
corporation.
CH. 428] ACTS OF ASSEMBLY 531

§ 18.1-108. Powers of Foreign Corporation—A foreign corporation
holding a certificate of authority shall have no greater rights and privi-
leges than a domestic corporation; and the certificate of authority shall
not be deemed to authorize it to exercise any of its corporate powers or
porposes that a foreign corporation is forbidden by law to exercise in this

§ 13.1-104. Corporate Name of Foreign Corporation.—No certificate
of authority shall be issued to a foreign corporation unless the corporate
name of such corporation:

(a) Shall contain the word “corporation,” “company,” “incorporated,”
or “limited,” or shall contain an abbreviation of one of such words, or such
corporation shall, for use in this State, add at the end of its name one of
such words or an abbreviation thereof.

(b) Shall not be the same as, or confusingly similar to, the name of
any domestic corporation, whether or not authorized to issue shares, exist-
ing under the laws of this State or any foreign corporation, whether or
not authorized to issue shares, authorized to transact business in this State,
or a name the exclusive right to which is, at the time, reserved in the
manner provided in this Act, or the name of a corporation which has in
effect a registration of its name as provided in this Act.

§ 18.1-105. Change of Name by Foreign Corporation—Whenever a
foreign corporation which is authorized to transact business in this State
shall change its name to one under which a certificate of authority would
not be granted to it on application therefor, the certificate of authority of
such corporation shall be suspended and it shall not thereafter transact any
business in this State until it has changed its name to a name which is
available to it under the laws of this State.

§ 18.1-106. Application for Certificate of Authority.—A foreign cor-
poration, in order to procure a certificate of authority to transact business
in this State, shall make application therefor to the Commission. The ap-
plication shall set forth:

(a) The name of the corporation and the state or country under the
laws of which it is incorporated.

If the name of the corporation does not contain the word “cor-
poration,” “company,” “incorporated,” or “limited,” or does not contain an
abbreviation of one of such words, then the name of the corporation with
the word or abbreviation which it elects to add thereto for use in this State.

al The date of incorporation and the period of duration of the cor-
poration.

(d) The address of the principal office of the corporation in the state or
country under the laws of which it is incorporated.

(e) The address of the proposed registered office of the corporation in
this State (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 proposed registered agent in this State at
such address and that he is a resident of Virginia and that he is an officer
or director of the corporation or a member of the Virginia State Bar.

(f) The names and addresses of the directors and officers of the
corporation.

(g) A statement of the aggregate number of shares which the cor-
poration has authority to issue, itemized by classes, par value of shares,
shares without par value, and series, if any, within a class.

(h) A statement of the aggregate number of issued shares itemized by
classes, par value of shares, shares without par value, and series, if any,
within a class.

(i) A statement, expressed in dollars, of the amount of stated capital
of the corporation. as defined in this Act.

(j) Such additional information as may be necessary or appropriate
532 ACTS OF ASSEMBLY [vA., 1956

in order to enable the Commission to determine whether such corporation
is entitled to a certificate of authority to transact business in this State
and to determine and assess the fees and taxes payable as required by law.

_ ,k) An irrevocable consent that any process, notice, order or demand
arising out of or relating to the transaction of business in this State,
whether or not the corporation withdraws from this State, may be served
on the clerk of the Commission or, in the case of any process, notice, order
or demand issued by the Commission, by being mailed by the clerk of the
Commission or any of his staff by registered or certified mail addressed
to the corporation at its registered office or, in case of withdrawal from
this State, at the address shown in the statement of withdrawal.

Such application shall be made on forms prescribed and furnished by
the Commission and shall be executed by the corporation by its president
or a vice president and by its secretary or an assistant secretary, and
verified by one of the officers signing such application.

§ 18.1-107. Filing of Application for Certificate of Authority.—The
application of the corporation for a certificate of authority shall be delivered
to the Commission, together with a copy of its articles of incorporation and
all amendments thereto, duly authenticated by the proper officer of the
state or country under the laws of which it is incorporated.

If the Commission finds that such application complies with the re-
quirements of law, it shall, when all fees have been paid as required by
ay file it and issue a certificate of authority to transact business in this

tate.

§ 18.1-108. Effect of Certificate of Authority —Upon the issuance of
a certificate of authority by the Commission, the corporation shall be au-
thorized to transact business in this State, subject, however, to the right
of this State to suspend or to revoke such authority as provided in this Act.

§ 13.1-109. Registered Office and Registered Agent of Foreign
Corporation.—Each foreign corporation authorized to transact business in
this State shall have and continuously maintain in this State:

(a) A registered office which may be, but need not be, the same as
its place of business in this State.

(b) A registered agent, which agent must be an individual resident
in this State whose business office is identical with such registered office,
and who is an officer or director of the corporation or a member of the
Virginia State Bar.

§ 13.1-110. Change of Registered Office or Registered Agent of
Foreign Corporation.—A foreign corporation authorized to transact busi-
ness in this State may change its registered office or change its registered
agent, or both, upon filing in the office of the Commission a statement
setting forth:

(a) The name of the corporation.

(b) The address of its then registered office.

(c) If the address of its registered office be changed, the address to
which the registered office is to be changed (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).

(d) The name of its then registered agent.

(e) If its registered agent be changed, the name of its successor
registered agent and that he is a resident of Virginia and that he is an
officer or director of the corporation or a member of the Virginia State

Bar.

(f) That the address of its registered office and the address of the
business office of its registered agent, as changed, will be identical.

(g) That such change was authorized by resolution duly adopted by
its board of directors.

The statement shall be verified by the oath of the president or a vice
CH. 428] ACTS OF ASSEMBLY 533

president of the corporation. and shall become effective when filed with
the Commission.

A new statement shall forthwith be executed by the corporation when-

ever its registered agent dies, resigns or changes his business office.
; § 13.1-111. Service of Process on Foreign Corporation.—The reg-
istered agent of a foreign corporation authorized to transact business in
this State shall be an agent of such corporation upon whom any process,
notice or demand required or permitted by law to be served upon the
corporation may be served. But the clerk of the Commission shall also
be an agent of the corporation upon whom may be served any process,
notice, order or demand except one issued by the Commission. Service
may be made on the clerk or any of his staff at his office. He shall forth-
with cause it to be sent by registered or certified mail addressed to the
corporation at its registered office and keep a record thereof. Any process,
notice, order or demand issued by the Commission shall be served by being
mailed by the clerk of the Commission or any of his staff by registered or
certified mail addressed to the corporation at its registered office. In
case of withdrawal from this State, the mailing shall be to the address
shown in the statement of withdrawal.

Nothing herein contained shall limit or affect the right to serve any
process, notice or demand, required or permitted by law to be served upon
a corporation in any other manner now or hereafter permitted by law.

§ 18.1-112. Amendment to Articles of Incorporation of Foreign
Corporation.—Whenever the articles of incorporation of a foreign corpo-
ration authorized to transact business in this State are amended, such
foreign corporation shall, within thirty days after such amendment be-
comes effective, file in the office of the Commission a copy of such amend-
ment duly authenticated by the proper officer of the state or country under
the laws of which it is incorporated.

§ 13.1-118. Merger of Foreign Corporation Authorized to Transact
Business in This State—Whenever a foreign corporation authorized to
transact business in this State shall be a party to a merger per-
mitted by the laws of the state or country under the laws of which it is in-
corporated, and such corporation shall be the surviving corporation, it
shall, within thirty days after such merger becomes effective, file with the
Commission a copy of the articles of merger duly authenticated by the
proper officer of the state or country under the laws of which such merger
was effected.

Whenever a foreign corporation authorized to transact business in this
State shall be a party to a merger permitted by the laws of the state or coun-
try under the laws of which it is incorporated, and such corporation shall not
be the surviving corporation, or whenever such corporation shall be a party
to a consolidation so permitted, the surviving or resulting corporation shall,
if not continuing to transact business in this State, within thirty days after
such merger or consolidation becomes effective, deliver to the Commission
a duly authenticated copy of the instrument of merger or consolidation and
comply in behalf of the predecessor corporation with the provisions of
§ 18.1-115 and the Commission shall thereupon revoke the certificate of
authority to conduct affairs in this State, or, if continuing to transact
business in this State, within such thirty days, deliver to the Commission
an application for a certificate of authority to transact business in this
State, together with a duly authenticated copy of the instrument of merger
or consolidation and also, in case of a merger, a copy of its articles of in-
corporation and all amendments thereto, duly authenticated by the proper
officer of the state or country under the laws of which it is incorporated.

Upon the merger or consolidation of two or more foreign corporations
any one of which owns property in this State, all such property shall pass
534 ACTS OF ASSEMBLY [vA., 1956

to the surviving or consolidated corporation except as otherwise provided
by the laws of the state by which it is governed, but only from and after
thé time when a duly authenticated copy of the instrument of merger
or consolidation is filed by the Commission.

§ 13.1-114. Amended Certificate of Authority—A foreign corpora-
tion authorized to transact business in this State shall procure an amended
certificate of authority in the event it changes its corporate name.

§ 18.1-115. Withdrawal or Dissolution of Foreign Corporation.—A
foreign corporation authorized to transact business in this State may with-
draw from this State upon paying all taxes and charges and delivering to
the Commission a statement of withdrawal, which shall set forth:

(a) The name of the corporation and the state or country under the
laws of which it is incorporated.

(b) That the corporation is not transacting business in this State.

(c) That the corporation surrenders its authority to transact busi-
ness in this State.

(d) That the corporation revokes the authority of its registered agent
in this State to accept service of process and consents that service of
process in any action, suit or proceeding based upon any cause of action
arising in this State during the time the corporation was authorized to
transact business in this State may thereafter be made on such corpora-
tion by service thereof on the clerk of the Commission.

(e) A post office address to which the clerk may mail a copy of any
process against the corporation that may be served on him.

If the Commission finds that such statement complies with the re-
quirements of this Act, it shall notify such corporation that its authority
to transact business in this State is terminated.

When any foreign corporation authorized to transact business in this
State shall dissolve, it shall file with the Commission an application for
withdrawal. Whether or not such application is filed, the dissolution of
such foreign corporation shall not take away or impair any remedy avail-
able against such corporation for any right or claim existing or any liability
incurred prior to such dissolution. Any such action or proceeding against
such foreign corporation may be defended by such corporation in its cor-
porate name. The stockholders, directors and officers shall have power to
take such corporate or other action as shall be appropriate to protect such
remedy, right or claim. The right of a foreign corporation that has been
dissolved to institute and maintain in its corporate name actions, suits or
proceedings in the courts of this State shall be governed by the law of the
state of its incorporation.

§ 18.1-116. Income Taxes to be Paid before Withdrawal.—The Com-
mission shall not allow any foreign corporation to withdraw from the State
unless such corporation shall file with the Commission a certificate of the
State Tax Commissioner that it has filed a return and paid or made pro-
vision for the payment of all State taxes or other charges on account of
its income from sources within this State during the part of the taxable
year and any previous period when the corporation may have had income
from sources within this State; and in such case the corporation may
file returns and pay taxes before they would otherwise be due.

§ 18.1-117. Automatic Revocation of Certificate of Authority.—If
any foreign corporation shall fail on two successive annual dates to file the
annual report required by this Act or to pay the annual registration fee
required by law, the Commission shall mail notice to it of impending rev-
ocation of its certificate of authority to do business in this State. Whether
or not such notice be mailed, if the corporation fails within ninety days
after the second such annual date to file the annual report or to pay the
annual registration fees, together with a penalty of five per centum
of the registration fees and interest at the rate of six per centum per an-
num on the total amount of any registration fees assessed, such foreign
corporation shall thereupon automatically cease to be authorized to do
business in this State and its certificate of authority shall be automatically
revoked. The Commission shall publish the fact of such revocation in a
newspaper published in the city of Richmond.

§ 18.1-118. Revocation of Certificate of Authority by Commission.—
The certificate of authority to do business in this State of any foreign
corporation may be revoked by order of the Commission when it finds that
the corporation:

(a) has continued to exceed the authority conferred upon it by law;

(b) has failed to maintain a registered office or a registered agent in
this State as required by law; or

(c) has failed to file any document required by this Act to be filed
with the Commission.

Before entering any such order the Commission shall issue a rule
against the corporation giving it an opportunity to be heard and show
cause why such an order should not be entered. The Commission may
issue the rule on its own motion or on motion of the Attorney General.

§ 13.1-119. Transacting Business Without Certificate of Authority.—
No foreign corporation transacting business in this State without a certifi-
cate of authority shall be permitted to maintain any action, suit or proceed-
ing in any court of this State, until such corporation shall have obtained a
certificate of authority. No foreign corporation which is in default under
the requirement that amendments to its articles of incorporation or in-
struments of merger or consolidation shall within thirty days be filed in
the office of the Commission shall be permitted to maintain any action,
suit or proceeding in any court of this State until such corporation shall
have filed in the office of the Commission a copy of such amendments or
instruments of merger or consolidation authenticated as aforesaid.

The failure of a foreign corporation to obtain a certificate of authority
to transact business in this State shall not impair the validity of any con-
tract or act of such corporation, and shall not prevent such corporation
from defending any action, suit or proceeding in any court of this State.

If a foreign corporation transacts business in this State without a
certificate of authority, its directors, officers and agents doing such busi-
ness shall be jointly and severally liable for any contracts made or to be
performed in this State and any torts committed in this State between the
time when it began to transact business in this State and the date when it
obtains a certificate of authority. Suits, actions and proceedings may be
begun against it by serving process on any such director, officer or agent
of the corporation, or, if none can be found, on the clerk of the Commission.
If any foreign corporation shall transact business in this State without a
certificate of authority, it shall by transacting such business be deemed to
have thereby appointed the clerk of the Commission its attorney for service
of process. Service shall be made by leaving two copies of the process,
notice, order or demand, together with the fee required by law, in the office
of the clerk of the Commission, together with an affidavit giving the latest
known post office address of the defendant and such service shall be
sufficient if notice of such service and a copy of the process, notice, order
or demand are forthwith sent by registered mail, with return receipt re-
quested, by the clerk of the Commission or one of his staff to the defendant
at the specified address. An affidavit by the clerk of the Commission
showing compliance herewith shall be filed with the papers in the suit,
action or proceeding.

If a foreign corporation transacts business in this State without a
certificate of authority, each officer, director and agent who does any of
such business in this State shall be liable to a penalty of not less than one
hundred dollars or more than one thousand dollars to be imposed by the
§ 13.1-120. Annual Report of Domestic and Foreign Corporations.—
Each domestic corporation, and each foreign corporation authorized to
transact business in this State, shall file, within the time prescribed by this
Act, an annual report setting forth:

(a) The name of the corporation and the state or country under the
laws of which it is incorporated.

(b) The address of the registered office of the corporation in this
State (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 registered agent in this State at such address, and, in the
case of a foreign corporation, the address of its principal office in the state
or country under the laws of which it is incorporated.

(c) The names and post office addresses of the directors and principal
officers of the corporation.

(d) A statement of the aggregate number of shares which the corpo-
ration has authority to issue, itemized by classes, par value of shares,
shares without par value, and series, if any, within a class.

(e) A statement of the aggregate number of issued shares, separated
into outstanding shares and treasury shares and itemized by classes, par
value of shares, shares without par value, and series, if any, within a class.

(f) A statement, expressed in dollars, of the amount of stated capital
of the corporation, as defined in this Act.

The report shall be made on forms furnished by the Commission, shall
supply the information as of the date of the report and shall be verified by
the oath of the president or a vice president or the secretary or an assistant
secretary of the corporation.

§ 18.1-121. Filing of Annual Report.—The annual report of a domestic
or foreign corporation shall be delivered to the Commission between the
first day of January and the first day of March of each year after the
calendar year in which it was incorporated or authorized to transact
business in this State. If the report is incomplete or inaccurate, the Com-
mission shall return it for correction. Otherwise the Commission shall file
it in the clerk’s office.

CHAP 10
FEES, TAXES AND CHARGES
§ 18.1-122. Fees, Taxes and Charges to be Collected by Commis-
sion.—The Commission shall assess the registration fees and franchise
taxes and shall charge and collect the charter fees and entrance fees im-
posed by law.
§ 13.1-123. Fees for Filing Documents or Issuing Certificates.—The
Commission shall charge and collect the following fees:
(a) For filing any one of the following, the fee shall be five dollars:
(1) Articles of incorporation.
(2) Articles of amendment.
(3) Articles of merger or consolidation.
(4) An application to reserve a corporate name.
(5) A notice of transfer of a reserved corporate name.
(6) Articles of serial designation.
(7) Articles of reduction of stated capital.
(8) A statement of intent to dissolve.
(9) A statement of revocation of voluntary dissolution proceedings.
(10) Articles of dissolution.
CH. 428] ACTS OF ASSEMBLY 537

; (11) An application of a foreign corporation for certificate of author-
ity to transact business in this State.

(12) A copy of an amendment to the articles of incorporation of a
foreign corporation holding a certificate of authority to transact business
in this State.

_ (18) A copy of articles of merger or consolidation of a foreign corpora-
tion holding a certificate of authority to transact business in this State.

(14) A statement of withdrawal of a foreign corporation. |
deli (b) For issuing a certificate of change of name the fee shall be three

ollars.

’ (e) For filing a statement of change of address of registered office or
change of registered agent or both the fee shall be one dollar. Except in
the case of the city of Richmond or the county of Henrico, the Commission,
in respect of domestic corporations, shall collect and remit to the clerk of
the court for the recording of deeds in the city or county in which the
registered office is located an additional fee of one dollar and if the location
of the registered office is changed from one city or county to another the
Commission shall collect and remit fees of one dollar for each of the clerks
to which it is required to give notice.

- Whenever the Commission is required to admit any document to record
in its office, it shall collect a sum equal to double the amount of the fee
provided by law for the recordation of deeds in any clerk’s office of this
State, and, whenever any such document must also be recorded in the
office of any clerk, the Commission shall collect and transmit to such clerk
a further fee in the amount provided by law plus one dollar for the certi-
fication fee.

§ 13.1-124. Miscellaneous Charges.—The Commission shall, except
where some greater fee is provided by law, charge and collect for furnishing
a certified copy of any document, instrument or paper relating to a cor-
poration, thirty cents per hundred words if the copy is made by typing
and fifty cents per page if it is made by photostating and one dollar and
fifty cents for the certificate and affixing the seal thereto.

The clerk of the Commission shall charge and collect at the time of
any service of process on him as agent of a corporation, five dollars, which
amount may be recovered as taxable costs by the party to the suit or action
causing such service to be made if such party prevails in the suit or action.

CHAP 11
FINALITY OF ORDERS AND APPEALS

§ 13.1-125. Rehearing and Finality of Commission Action.—The Com-
mission shall have no power to grant a rehearing of any order issuing a
certificate of amendment or certificate of merger or consolidation except
on a petition by a stockholder filed with the Commission and the corporation
within ten days after the date of entry of any such order, in which the
stockholder 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 stockholder, the Commission
shall determine the issues and revoke or refuse to revoke its order
accordingly.

No court within or without Virginia shall have jurisdiction to enjoin
or delay the holding of any meeting of directors or stockholders for the
purpose of authorizing or consummating any such amendment, merger or
consolidation, or the execution or delivery to the Commission of any papers
for such purpose, except for fraud, and no court within or without Virginia
(except the Supreme Court of Appeals 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.

CHAP 12

MISCELLANEOUS

§ 13.1-126. Recording.—Whenever the Commission is directed to
admit any instrument to record in its office, it shall cause it to be spread
upon its record books or to be reproduced in microfilm or in any other
manner the Commission may deem suitable.

§ 13.1-127. Property Title Records——Whenever by merger, consolida-
tion or amendment to the articles of incorporation the name of any corpora-
tion, domestic or foreign, is changed or another corporation succeeds to
the ownership of its property, a certificate reciting such change or succes-
sion shall be issued by the clerk of the Commission upon request and such
certificate, or if such corporation is not a domestic corporation or a foreign
corporation authorized to do business in this State, a similar certificate by
any competent authority of the state of incorporation, may be admitted to
record in any recording office within the jurisdiction of which any property
of the corporation is located in order to maintain the continuity of title
records upon paying the fee of the clerk of the court, but no tax shall be
due thereon.

§ 18.1-128. Application to Existing Corporations.—The provisions of
this Act shall apply to all corporations existing at the time this Act takes
effect, whether domestic or foreign, and their stockholders. The pro-
visions of this Act shall be a part of the charter of every corporation hereto-
fore or hereafter organized in this State. In the case of foreign corpora-
tions, the certificate of authority to transact business in this State issued
by the Commission under any prior act of this State shall continue in effect
subject to the provisions hereof.

Prior to July 1, 1958, each such corporation, domestic or foreign, shall
establish the registered office and appoint the registered agent required
by § 13.1-9 or by § 13.1-109, by filing in duplicate in the office of the Com-
mission a statement on a form supplied by the Commission showing:

(a) The name of the corporation.

(b) The address of its then principal office in this State.

(c) The address of its registered office in this State (including (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), which must initially be
“ De city or county in which its then principal office in this State is
located.

(d) The name of its registered agent and that he is a resident of
Virginia and that he is an officer or director of the corporation or a
member of the Virginia State Bar.

(e) That the address of its registered office and the address of the
business office of its registered agent are identical.

f) That the establishment of the registered office and the appoint-
ment of the registered agent were authorized by resolution duly adopted
by its board of directors.

(g) In the case of a foreign corporation, an irrevocable consent that
any process, notice, order or demand arising out of or relating to the trans-
action of business in this State, whether or not the corporation withdraws
from this State, may be served on the clerk of the Commission or, in the
case of any process, notice, order or demand issued by the Commission, by
being mailed by the clerk of the Commission or any of his staff by registered
or certified mail addressed to the corporation at its registered office or, in
case of withdrawal from this State, at the address shown in the statement
of withdrawal.
CH. 428] ACTS OF ASSEMBLY 539

The statement shall be verified by the oath of the president or a vice
president and shall become effective when filed with the Commission. The
Commission, in the case of domestic corporations, shall mail one copy of the
statement to the clerk in whose office deeds are recorded in the city or
county in which the then principal office is located, and he shall record it in
a book for the recordation of charters. Every statement shall be accom-
panied by fees of one dollar payable to the Commission and of one dollar
payable to such clerk, and no other recording fee shall be payable.

Until the statement has been filed, the statutes relating to the prin-
cipal office in effect on the day before the effective date of this Act shall,
notwithstanding their repeal by this Act, continue, by virtue of this para-
graph, to apply to the corporation, and the provisions of this Act referring
to the registered office shall be deemed to refer to the principal office of
the corporation.

If the statement of a domestic corporation is filed after June 80, 1958,
and before January 1, 1959, it shall be accompanied by an additional fee of
fifty dollars payable to the Commission. If the statement of a domestic
corporation is filed after December 31, 1958, and before July 1, 1959, it
shall be accompanied by an additional fee of one hundred dollars payable
to the Commission. If the statement of a domestic corporation is not filed
by July 1, 1959, the corporate existence of the corporation shall auto-
matically cease on July 1, 1959.

If the statement of a foreign corporation is not filed by July 1, 1958,
its certificate of authority to transact business in this State shall be auto-
matically revoked.

Upon the filing of such a statement by a foreign corporation, the
power of attorney previously filed by it appointing the Secretary of the
Commonwealth as its agent for service of protess shall be deemed to have
been revoked, but thereafter service of process on the Secretary of the
Commonwealth on or before July 1, 1958, shall be as effective as service on
the clerk of the Commission in accordance with § 13.1-111; and the Secre-
tary of the Commonwealth shall forthwith deliver such process to the
clerk of the Commission for disposition in accordance with the provisions
of § 13.1-111. In the event that a foreign corporation shall not have estab-
lished a registered office and appointed a registered agent as required
herein and service of process on such corporation is made on the clerk
of the Commission as permitted by § 18.1-111, such service of process shall
be valid but the clerk of the Commission shall deliver such process to the
Secretary of the Commonwealth for disposition in accordance with § 13-216.
Notwithstanding anything elsewhere herein contained, the provisions of
§ 13-216 and § 13-217 shall remain effective until July 1, 1958, and there-
after as to causes of action arising prior to July 1, 1958, as to each foreign
corporation whose certificate of authority is revoked by the provisions here-
of aaa of failure to establish a registered office and appoint a registered
agent.

The Commission shall mail notice of the provisions of this section
to all corporations, domestic and foreign, listed in its records promptly
after the effective date of this Act and, promptly after January 1, 1958,
shall mail a further notice to all such corporations that have not then
complied with the provisions of this section.

§ 13.1-129. Reservation of Power.—The General Assembly of Vir-
ginia shall at all times have power to prescribe such regulations, provisions
and limitations as it may deem advisable, which shall be binding upon any
and all corporations subject to the provisions of this Act, and the General
Assembly of Virginia shall have power to amend, repeal or modify this
Act at pleasure.

§ 18.1-180. Effect of Enactment and Repeal.—The enactment of this
540 ACTS OF ASSEMBLY [vA., 1956

Act and the repeal of prior acts thereby shall not impair any right of
creditors existing at its effective date.

§ 18.1-181. Effect of Invalidity of Part of This Act.—If a court of
competent jurisdiction shall adjudge to be invalid or unconstitutional any
clause, sentence, paragraph, section or part of this Act, or shall adjudge any
provision to be inoperative in particular circumstances because of the
exertion of federal power, such judgment or decree shall not affect, im-
pair, invalidate or nullify the remainder of this Act, or the operation of
such provision in other circumstances but the effect thereof shall be con-
fined to the clause, sentence, paragraph, section or part of this Act so
adjudged to be invalid or unconstitutional or the particular circumstances
so in issue.

§ 13.1-182. The provisions of this Title shall be construed as they
appear herein, provided that reference to the Journals of the House and
Senate and to the report of the Code Commission may be had in case of
doubt or conflict.

ARTICLE 2

NON-STOCK CORPORATIONS
CHAP 1
DEFINITIONS

§ 18.1-201. Short Title—Chapters 1 through 11 of this Article
(therein called this Act or the Act) shall be known as the “Virginia Non-
Stock Corporation Act.”

§ 13.1-202. Definitions —As used in this Act, unless the context
otherwise requires, the term:

_ , (a) “Commission” means the State Corporation Commission of Vir-

(b) ‘Certificate’ means an order of the Commission together with
the articles which it finds to comply with the requirements of law.

(c) “Corporation” or “domestic corporation” means a corporation not
issuing shares of stock, organized under the Virginia Non-Stock Corpora-
tion Act or existing pursuant to the laws of this State at the time when
this Act becomes effective.

(d) “Foreign corporation’? means a corporation not issuing shares
organized under laws other than the laws of this State.

(e) “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 merger or consolidation. It ex-
cludes documents prior in time to the latest articles of amendment, merger
or consolidation which restate the articles of incorporation.

f) “By-laws” means the code or codes of rules adopted for the regu-
lation or management of the affairs of the corporation irrespective of the
name or names by which such rules are designated.

(g) “Member” means one having membership rights in a corporation
in accordance with the provisions of its articles of incorporation or by-laws.

(h) “Board of directors’’ means the group of persons vested with the
management of the affairs of the corporation irrespective of the name by
which such group is designated and “director” means a member of the
board of directors.

(i) “Insolvent” means inability of a corporation to pay its debts as they
become due in the usual course of its affairs.
CSI SCALN ALY Se Bae Aas Ste]

§ 13.1-203. Applicability-—The provisions of this Act relating to
domestic corporations shall apply to:

(a) All corporations organized hereunder; and

(b) All corporations existing at the time this Act becomes effective,
subject, however, to the provisions of § 13.1-290.

The provisions of this Act relating to foreign corporations shall apply
to all foreign corporations not issuing shares conducting affairs in this
State for a purpose or purposes for which a corporation might be organized
under this Act, subject, however, as to corporations conducting such af-
fairs at the time this Act becomes effective, to the provisions of § 13.1-290.

13.1-204. Purposes.— Corporations may be organized under this
Act for any lawful purpose or purposes.

§ 13.1-205. General Powers.—Each corporation shall have power:

(a) To have perpetual succession by its corporate name.

(b) To sue and be sued, complain and defend, in its corporate name.

(c) To have a corporate seal which may be altered at pleasure, and to
use the same by causing it, or a facsimile thereof, to be impressed or
affixed or in any other manner reproduced.

(d) To purchase, take, receive, lease, take by gift, devise or bequest,
or otherwise acquire, own, hold, improve, use and otherwise deal in and
with, real or personal property, or any interest therein, wherever situated.

(e) To sell, convey, mortgage, pledge, lease, exchange, transfer and
otherwise dispose of all or any part of its property and assets.

(f{) To lend money to its employees, officers and directors, and other-
wise assist them.

(g) To purchase, take, receive, subscribe for, or otherwise acquire,
own, hold, vote, use, employ, sell, mortgage, lend, pledge, or otherwise dis-
pose of, and otherwise use and deal in and with, stock or other interests in,
or obligations of, other domestic or foreign corporations organized for any
purpose whether or not authorized to issue shares of stock, associations,
partnerships or individuals, or direct or indirect obligations of the United
States, or of any other government, state, territory, governmental district
or municipality or of any instrumentality thereof; and to guarantee the
payment of any bonds or other obligations of any other corporation or-
ganized for any purpose.

(h) To make contracts and incur liabilities, borrow money at such
rates of interest as the corporation may determine, issue its notes, bonds,
and other obligations, and secure any of its obligations by mortgage or
pledge of all or any of its property, franchises and income.

(i) To lend money for its corporate purposes, invest and reinvest its
funds, and take and hold real and personal property as security for the
payment of funds so loaned or invested.

(j) To conduct its affairs, carry on its operations, hold property, have
orice and exercise the powers granted by this Act in any part of the
world.

(k) To elect or appoint officers and agents of the corporation, and
define their duties and fix their compensation.

(1) To make and alter by-laws, not inconsistent with its articles of
incorporation or with the laws of this State, for the administration and
regulation of the affairs of the corporation.

(m) Unless otherwise provided in the articles of incorporation or by
resolution of the members and within anv limits so prescribed. to make
donations for the public welfare or for religious, charitable, scientific, liter-
arv or educational purposes.

(n) To indemnify any director or officer or former director or officer
of the corporation, or any person who may have served at its request as
542 ACTS OF ASSEMBLY [vA., 1956

a director or officer of another corporation in which it owns shares of
capital stock or of which it is a creditor, against expenses actually and
reasonably incurred by him in connection with the defense of any claim,
action, suit or proceeding against him by reason of being or having been
such director or officer, except in relation to matters as to which he shall
be finally adjudged in such action, suit or proceeding to be liable for
negligence or misconduct in the performance of duty; and to make any
other or further indemnity to any such persons that may be authorized by
the articles of incorporation or any resolution adopted, before or after the
event, by the members.

(0) To cease its corporate activities and surrender its corporate
franchise. a

(p) To have and exercise all powers necessary or convenient to effect
any or all of the purposes for which the corporation is organized.

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, building 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 Act except where specifically so provided.

§ 18.1-206. Ultra Vires.—No act of a corporation and no conveyance
or transfer of real or personal property to or by a corporation shall be
invalid by reason of the fact that the corporation was without capacity or
power to do such act or to make or receive such conveyance or transfer,
but such lack of capacity or power may be asserted:

(a) In a proceeding by a member or a director against the corporation
to enjoin the doing or continuation of unauthorized acts, or the transfer of
real or personal property by or to the corporation. If the unauthorized acts
or transfer sought to be enjoined are being, or are to be, performed pur-
suant to any contract to which the corporation is a party, the court may,
if all of the parties to the contract are parties to the proceeding and if it
deems the same to be equitable, set aside and enjoin the performance of
such contract, and in so doing may allow to the corporation or the other
parties to the contract, as the case may be, compensation for the loss or
damage sustained by either of them which may result from the action of
the court in setting asidé and enjoining the performance of such contract,
but anticipated profits to be derived from the performance of the contract
shall not be awarded by the court as a loss or damage sustained.

(b) In a proceeding by the corporation, whether acting directly or
through a receiver, trustee, or other legal representative, or through mem-
bers in a representative suit, against the officers or directors of the corpora-
tion for exceeding their authority.

(c) In a proceeding against a corporation before the Commission.

§ 13.1-207. Corporate Name.—The corporate name:

(a) Shall not contain any word or phrase which indicates or implies
that it is organized for any purpose other than one or more of the purposes
contained in its articles of incorporation.

(b) Shall not be the same as, or confusingly similar to, the name of
any corporation, whether issuing shares or not issuing shares, existing
under any act of this State, or any foreign corporation, whether issuing
shares or not issuing shares, authorized to transact business or conduct
affairs in this State. or a corporate name reserved or registered as per-
mitted by the laws of this State.

§ 18.1-208. Registered Office and Registered Agent.—Each corpora-
tion shall have and continuously maintain in this State:

(a) A registered office which may be, but need not be. the same as
its principal office. The registered office shall be so described that mail
addressed there should reach the corporation.
CH. 428] ACTS OF ASSEMBLY 543

(b) A registered agent, which agent must be an individual resi-
dent in this State whose business office is identical with such registered
office and who is an officer or director of the corporation or a member of
the Virginia State Bar.

§ 13.1-209. Change of Registered Office or Registered Agent.—A cor-
poration may change its registered office or change its registered agent, or
both, upon filing in the office of the Commission a statement on a form
supplied by the Commission showing:

(a) The name of the corporation.

(b) The address of its then registered office.

(c) If the address of its registered office be changed, the post office
address (including the street and number, if any) to which the registered
rao to be changed and the name of the county or city in which it is
located.

(d) The name of its then registered agent.

(e) If its registered agent be changed, the name of its successor
registered agent and, if an individual, that he is a resident of Virginia.

(f) That the address of its registered office and the address of the
office of its registered agent, as changed, will be identical.

(g) That such change was authorized by resolution duly adopted by
its board of directors.

The statement shall be verified by the oath of the president or a vice
president of the corporation and shall become effective when filed with the
Commission. The Commission shall mail to the clerk in whose office deeds
are recorded in the city or county in which the then registered office is
located a notice giving the name of the corporation, the address of the
registered office and the name and address of the registered agent; and,
if the location of the registered office is changed to a different city or
county, the Commission shall mail a similar notice to the proper clerk of
that city or county. But no such notice shall be sent to the clerk of any
court in the city of Richmond or the county of Henrico. The clerk, on
receiving the notice, shall record it in a book for the recordation of charters.
Every statement shall be accompanied by the fees prescribed by law.

A new statement shall forthwith be executed by the corporation when-
ever its resident agent dies, resigns or changes his business office.

§ 18.1-210. Service of Process on Corporation.—The registered agent
of a corporation shall be an agent of such corporation upon whom any
process, notice, order or demand required or permitted by law to be served
upon the corporation may be served.

Whenever a corporation shall fail to appoint or maintain a registered
agent in this State, or whenever its registered agent cannot with reason-
able diligence be found at the registered office, the clerk of the Commission
shall be an agent of the corporation upon whom may be served any process,
notice, order or demand. Service may be made on the clerk or any of his
staff at his office. He shall forthwith cause it to be sent by registered
or certified mail addressed to the corporation at its registered office and
keep a record thereof. Any process, notice, order or demand issued by the
Commission shall be served by being mailed by the clerk of the Commission
or any of his staff by registered or certified mail addressed to the corpora-
tion at its registered office.

Nothing herein contained shall limit or affect the right to serve any
process, notice or demand required or permitted by law to be served upon
a corporation in any other manner now or hereafter permitted by law.

The address of the registered office and the names and addresses of
the officers, directors and registered agents of every corporation as last
filed with the Commission pursuant to the provisions of this Title shall be
conclusive for the purnoses of service of process.

§ 13.1-211. Members.—A corporation may have one or more classes
544 ACTS OF ASSEMBLY [vA., 1956

of members or may have no members. If the corporation has one or more
classes of members, the designation of such class or classes and the quali-
fications and rights of the members of each class shall be set forth in the
articles of incorporation. A corporation may issue certificates evidencing
membership therein. Memberships shall not be transferable and members
shall not have voting or other rights except as provided in the articles of
incorporation. But members of any corporation existing on the effective
date of this Act shall continue to have the same voting and other rights
as before the effective date of this Act until changed by amendment of
the articles of incorporation.

§ 13.1-212. By-Laws.—The initial by-laws of a corporation shall be
adopted by its board of directors. The power to alter, amend or repeal the
by-laws or adopt new by-laws shall be vested in the board of directors
unless otherwise provided in the articles of incorporation or the by-laws.
The by-laws may contain any provisions for the regulation and manage-
ment of the affairs of a corporation not inconsistent with law or the articles
of incorporation.

§ 18.1-213. Meetings of Members.—Meetings of members may be held
at such place either within or without this State, as may be provided in
the by-laws or, where not inconsistent with the by-laws, in the notice of
the meeting.

An annual meeting of the members shall be held at such time as may
be provided in the by-laws.

Meetings of the members may be called by the president or by the
board of directors. Meetings of the members may also be called by such
other officers or persons or number or proportion of members as may be
provided in the articles of incorporation or the by-laws. In the absence of
a provision fixing the number or proportion of members entitled to call a
meeting, a special meeting of members may be called by members having
one-twentieth of the votes entitled to be cast at such meeting.

§ 13.1-214. Notice of Members’ Meetings.—Written notice stating
the place, day and hour of the meeting and, in case of a special meeting, the
purpose or purposes for which the meeting is called, shall be delivered not
less than ten nor more than fifty days before the date of the meeting (ex-
cept as a different time is specified below), either personally or by mail, by
or at the direction of the president, or the secretary, or the officers or per-
sons calling the meeting, to each member entitled to vote at such meeting.
If mailed, such notice shall be deemed to be delivered when deposited in
the United States mail addressed to the member at his address as it appears
on the records of the corporation, with postage thereon prepaid. In lieu
of delivering notice as above, the corporation may publish such notice at
least once a week for two successive calendar weeks in some daily news-
paper published in the city or county in which the registered office is
located, or having a general circulation therein, the first publication to be
not more than fifty days, and the second not less than ten days, before the
date of the meeting.

Notice of a members’ meeting to act on an amendment of the articles
of incorporation or on a plan of merger or consolidation shall be delivered
or published in the manner provided above, not less than twenty-five nor
more than fifty days before the date of the meeting. Any such notice
that is mailed shall be accompanied by a copy of the proposed articles of
amendment or plan of merger or consolidation or a summary thereof and
any such notice that is published shall state that copies of the proposed
articles of amendment or plan of merger or consolidation will be supplied
to members on request.

§ 13.1-215. Waiver of Notice.—Notwithstanding any other provision
of this Act, whenever any notice is required to be given to any member
or director of a corporation of any meeting for any purpose under the pro-
visions of this Act or under the provisions of the articles of incorporation or
CH. 428) ACTS OF ASSEMBLY 545

by-laws of the corporation, a waiver thereof in writing signed by the person
or persons entitled to such notice, whether before or after the time stated
therein, shall be equivalent to the giving of such notice.

A member or director who attends a meeting shall be deemed to have
had timely and proper notice of the meeting, unless he attends for the
express purpose of objecting because the meeting is not lawfully called or
convened.

§ 13.1-216. Action Without a Meeting.—Any action required by this
Act to be taken at a meeting of the members or directors of a corpora-
tion, or any action which may be taken at a meeting of the members
or directors or of a committee of directors, may be taken without a
meeting if a consent in writing, setting forth the action so taken, shall
be signed by all of the members entitled to vote with respect to the subject
matter thereof, or all of the directors, or all of the members of the com-
mittee of directors, as the case may be.

Such consent shall have the same force and effect as a unanimous vote,
and may be stated as such in any articles or document filed with the Com-
mission under this Act.

§ 13.1-217. Voting.—Members shall not be entitled to vote except as
the right to vote shall be conferred by the articles of incorporation.

A member entitled to vote may vote in person or, unless the articles
of incorporation or the by-laws otherwise provide, may vote by proxy
executed in writing by the member or by his duly authorized attorney-in-
fact. No proxy shall be valid after eleven months from its date unless
otherwise provided in the proxy. When directors or officers are to be
elected by members, the by-laws may provide that such elections may be
conducted by mail.

The articles of incorporation may provide that in all elections for
directors every member entitled to vote shall have the right to cumulate
his vote and to give one candidate a number of votes equal to his vote
multiplied by the number of directors to be elected, or by distributing
such votes on the same principle among any number of such candidates.

If a corporation has no members or its members have no right to
vote, the directors shall have the sole voting power and shall take the action
required in any case on the part of members.

§ 13.1-218. Greater Voting Requirements.—Whenever, with respect
to any action to be taken by the members or directors of a corporation, the
articles of incorporation reauire the vote or concurrence of a greater pro-
portion of the members or directors. as the case may be, than required by
this Act with respect to such action, the provisions of the articles of
incorporation shall control.

§ 13.1-219. Quorum.—The by-laws may provide the number or per-
centage of members entitled to vote represented in person or by proxy, or
the number or percentage of votes represented in person or by proxy, which
shall constitute a quorum at a meeting of members. In the absence of any
such provision, members holding one-tenth of the votes entitled to be cast
represented in person or by proxv shall constitute a quorum. The vote
of a majoritv of the votes entitled to be cast by the members present or
represented by proxy at a meeting at which a quorum is present shall be
necessary for the adoption of any matter voted upon by the members, unless
a greater proportion is required by this Act or the articles of incorporation.

§ 13.1-220. Board of Directors.—The affairs of a corporation shall be
managed by a board of directors. Directors need not be residents of this
State or members of the corporation unless the articles of incorporation
so require. The articles of incorporation may prescribe other qualifications
for directors.

The number of directors of a corporation shall be not less than three.
Subject to such limitation, the number of directors shall be fixed by the
546 ACTS OF ASSEMBLY [vA., 1956

by-laws, 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 to the by-laws,
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.
No decrease in number shall have the effect of shortening the term of
any incumbent director. In the absence of a by-law fixing the number of
directors, the number shall be the same as that stated in the articles of
incorporation. ;

§ 13.1-221. Election and Removal of Directors and Statute of Limi-
tations of Directors.—The directors constituting the first board of directors
shall be named in the articles of incorporation and shall hold office until
the first annual election of directors or for such other period as may be
specified in the articles of incorporation. Thereafter, directors shall be
elected or appointed in the manner and for the terms provided in the articles
of incorporation. In the absence of a provision fixing the term of office,
the term of office of a director shall be one year.

Directors may be divided into classes and the terms of office of the
several classes need not be uniform. Each director shall hold office for
the term for which he is elected or appointed and until his successor shall
have been elected or appointed, except in the case of ex officio directors.

No suit shall be brought against any director for any liability imposed
by this Act except within two years after the right of action shall accrue.

A director may be removed from office pursuant to any procedure
therefor provided in the articles of incorporation and if none be provided
may be removed at a meeting called expressly for that purpose, with or
without cause, by such vote as would suffice for his election.

Any member or director aggrieved by an election of directors may, after
reasonable notice to the corporation and each director whose election is
contested, apply for relief to the judge of a Virginia court of equity in the
county or city in which the registered office of the corporation, or its
principal place of business in Virginia, is located, whether in term or in
vacation. The judge shall proceed forthwith in a summary way to hear
and decide the issues and thereupon to determine the persons elected or
order a new election or grant such other relief as may be equitable. Pend-
ing decision the judge may require the production of any information and
may by order restrain any person from exercising the powers of a director
if such relief be equitable in all the circumstances.

§ 13.1-222. Vacancies.—Any vacancy occurring in the board of di-
rectors, including a vacancy resulting from an increase by not more than
two in the number of directors, may be filled by the affirmative vote of a
majority of the remaining directors though less than a quorum of the
board of directors except that if the articles of incorporation provide some
different manner for filling such vacancy, such provision shall control.

§ 13.1-223. Quorum of Directors.—A majority of the number of di-
rectors fixed by the by-laws, or in the absence of a by-law fixing the number
of directors, then of the number stated in the articles of incorporation. shall
constitute a quorum for the transaction of business, unless otherwise pro-
vided in the articles of incorporation or the by-laws; but in no event shall
a quorum consist of less than one-third of the number of directors so fixed
or stated. The act of the majority of the directors present at a meeting
at which a quorum is present shall be the act of the board of directors.

§ 13.1-224. Committees.—If the articles of incorporation or the by-
laws so provide, the board of directors, by resolution adopted bv a majority
of the directors in office, may designate one or more committees each of
which shall consist of two or more directors, which committees, to the
extent provided in such resolution, in the articles of incorporation or in the
by-laws of the corporation, shall have and exercise the authority of the
CH. 428] ACTS OF ASSEMBLY 547

board of directors except to approve an amendment of the articles of in-
corporation or a plan of merger or consolidation. Other committees with
limited authority may be designated by a resolution adopted by a majority
of the directors present at a meeting at-which a quorum is present.

§ 13.1-225. Place and Notice of Directors’ Meetings.—Meetings of
the board of directors, regular or special, may be held either within or with-
out this State, and upon such notice as the by-laws may prescribe or, where
not inconsistent with the by-laws, as a resolution of the board of directors
may prescribe. Attendance of a director at any meeting shall constitute
a waiver of notice of such meeting except where a director attends a meet-
ing for the express purpose of objecting to the transaction of any business
because the meeting is not lawfully called or convened. Neither the busi-
ness to be transacted at, nor the purpose of, any regular or special meeting
of the board of directors need be specified in the notice or waiver of notice
of such meeting.

§ 13.1-226. Officers.—The officers of a corporation shall consist of a
president, a secretary and a treasurer, and may include one or more vice
presidents and such other officers and assistant officers as may be deemed
necessary. Each officer shall be elected or appointed at such time and in
such manner and for such term not exceeding three years as may be pre-
scribed in the articles of incorporation or the by-laws. In the absence of
any such provision, all officers shall be elected or appointed annually by the
board of directors. Any two or more offices may be held by the same person,
except the offices of president and secretary. The president shall be a
director.

The articles of incorporation or the by-laws may provide that any one
or more officers of the corporation shall be ex officio members of the board
of directors.

The officers of a corporation may be designated by such additional
titles as may be provided in the articles of incorporation or the by-laws.

§ 13.1-227. Removal of Officers.—Any officer elected or appointed
may be removed by the persons authorized to elect or appoint such officer
whenever in their judgment the best interests of the corporation will be
served thereby. Any such removal shall be without prejudice to the re-
covery of damages for breach of the contract rights, if any, of the person
so removed. Election or appointment of an officer or agent shall not of itself
create contract rights.

§ 13.1-228. Books and Records.—Each corporation shall keep correct
and complete books and records of account and shall keep minutes of the
proceedings of its members, board of directors and committees having any
of the authority of the board of directors; and shall keep at its registered
office or principal office in this State a record of the names and addresses
of its members entitled to vote. All books and records of a corporation may
be inspected by any member, or his agent or attorney, for any proper
purpose at any reasonable time. The record of the names of members
entitled to vote shall be prima facie evidence of the right to vote.

§ 13.1-229. Shares of Stock and Dividends Prohibited.—A corpora-
tion shall not issue shares of stock. No dividend shall be paid and
no part of the income of a corporation shall be distributed to its members,
directors or officers. A corporation may pay compensation in a reasonable
amount to its members, directors or officers for services rendered, including
pensions, may confer benefits upon its members in conformity with its pur-
poses, and may make distributions to its members or others as permitted
by this Act upon dissolution or final liquidation and no such payment,
pee or distribution shall be deemed to be a dividend or a distribution
of income.
JARLZAA ZEA AN VR WUVSOR VERE SAVIN

§ 13.1-230. Incorporators.—Three or more natural persons may act
as incorporators of a corporation by signing, acknowledging and delivering
to the Commission articles of incorporation for such corporation.

§ 13.1-231. Articles of Incorporation.—The articles of incorporation
shall set forth:

(a) The name of the corporation.

(b) The purpose or purposes for which the corporation is organized.

o {e) If the corporation is to have no members, a statement to that
effect.
(d) If the corporation is to have one or more classes of members, any
provision which the incorporators elect to set forth in the articles of in-
corporation designating the class or classes of members, stating the quali-
fications and rights of the members of each class and conferring, limiting
or denying the right to vote.

If the directors or any of them are not to be elected or ap-
pointed by one or more classes of members, a statement of the manner in
which such directors shall be elected or appointed; and a designation of
ex officio directors, if any.

(f) Any provisions, not inconsistent with law, which the incorporators
elect to set forth in the articles of incorporation for the regulation of the
internal affairs of the corporation, including any provision for distribution
of assets on dissolution or final liquidation. Such provisions may require
the affirmative vote of a specified proportion of those entitled to vote be-
fore the issuance of any bonds secured by lien or any other specified
transaction.

(g) 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 city or county in which it is located), and the name of its initial regis-
vine agent at such address and, if an individual, that he is a resident of

irginia.

a h) 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.

(i) If the duration of the corporation is not to be perpetual, the
period of its duration.

It shall not be necessary to set forth in the articles of incorporation
any of the corporate powers enumerated in this Act.

Unless the articles of incorporation provide that a change in the num-
ber of directors shall be made only by amendment to the articles of in-
corporation, the number of directors may be changed by the by-laws. In
all other cases, whenever a provision of the articles of incorporation
is inconsistent with a by-law, the provision of the articles of incorporation
shall be controlling.

§ 18.1-232. Issuance of Certificate of Incorporation.—The articles of
incorporation shall be delivered to the Commission. If the Commission
finds that the articles comply with the requirements of law and that all re-
quired fees have been paid, it shall by order issue a certificate of incorpo-
ration, which shall be admitted to record in its office. Upon the issuance
of such certificate, it shall become effective in accordance with its terms.
Upon the completion of such recordation, the Commission shall forward
the certificate for recordation in the office for the recording of deeds in the
city or county in which the registered office of the corporation is located,
except that no such further recordation shall be required in the city of
Richmond or the county of Henrico. Upon the completion of such further
recordation, the certificate shall be returned to the Commission by regis-
tered or certified mail.
CH. 428] ACTS OF ASSEMBLY 549

§ 18.1-238. Effect of Issuance of Certificate of Incorporation.—Upon
the issuance of the certificate of incorporation, the corporate existence shall
begin. The certificate of incorporation shall be conclusive evidence that all
conditions precedent required to be performed by the incorporators have
pea onalies with and that the corporation has been incorporated under

is Act.

§ 18.1-234. Organization Meetings.—After the issuance of the certi-
ficate of incorporation an organization meeting of the board of directors
named in the articles of incorporation shall be held, either within or with-
out this State, at the call of a majority of the incorporators, for the pur-
pose of adopting by-laws, electing officers and transacting such other
business as may come before the meeting. The incorporators calling the
meeting shall give reasonable notice thereof to each director so named.

CHAP 4
AMENDMENTS

§ 13.1-235. Right to Amend Articles of Incorporation.—A corpora-
tion may amend its articles of incorporation, from time to time, in any and
as many respects as may be desired, so long as its articles of incorporation
as amended contain only such provisions as are lawful under this Act.

§ 13.1-236. Procedure to Amend Articles of Incorporation. —Amend-
ments to the articles of incorporation shall be made in the following
manner:

(a) Where there are members having voting rights, the board of di-
rectors shall adopt a resolution setting forth the proposed amendment,
finding that it is in the best interests of the corporation 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. Notice shall be given
to each member entitled to vote at such meeting within the time and in the
manner provided in this Act for the giving of notice of such meetings of
members. The proposed amendment shall be adopted upon receiving more
than two-thirds of the votes entitled to be cast by members present or
represented by proxy at such meeting.

(b) Where there are no members, or no members having voting rights,
an amendment shall be adopted at a meeting of the board of directors upon
receiving the vote of a majority of the directors in office.

Any number of amendments may be submitted and voted upon at any
one meeting.

§ 18.1-237. Articles of Amendment.—The articles of amendment
shall be executed by the corporation by its president or a vice president
and by its secretary or an assistant secretary, and verified by one of the
officers signing such articles, and shall set forth:

(a) The name of the corporation.

(b) The amendment so adopted.

(c) Where there are members having voting rights, (1) a statement
setting forth the date of the meeting of the board of directors at which the
amendment was found in the best interests of the corporation and directed
to be submitted to a vote at a meeting of members; the date or dates when
notice was given to each member entitled to vote; that such notice was
given in a specified manner as provided in this Act; that a quorum was
present at such meeting; and that such amendment received more than two-
thirds of the votes entitled to be cast by members present or represented
by proxy at such meeting; or (2) a statement that such amendment was
adopted by a consent in writing signed by all members entitled to vote with
respect thereto.

(d) Where there are no members, or no members having voting rights,
a statement of such fact, the date of the meeting of the board of directors
at which the amendment was adopted, and a statement of the fact that
such amendment received the vote of a majority of the directors in office.

§ 18.1-238: Issuance of Certificate of Amendment.—The articles of
amendment 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 completion of such
recordation, the Commission shall forward the certificate for recordation in
the office for the recording of deeds in the city or county in which the
registered office of the corporation is located, except that no such further
recordation shall be required in the city of Richmond or the county of
Henrico. Upon the completion of such further recordation, the certificate
shall be returned to the Commission by registered or certified mail.

§ 18.1-239. Effect of Certificate of Amendment.—Upon the issuance
of the certificate of amendment by the Commission, the amendment shall
become effective and the articles of incorporation shall be deemed to be
amended accordingly.

No amendment shall affect any existing cause of action in favor of
or against such corporation, or any pending action to which such corpora-
tion shall be a party; and, in the event the corporate name shall be changed
by amendment, no action brought by or against such corporation under its
former name shall abate for that reason.

CHAP 5
MERGER, CONSOLIDATION, MORTGAGE AND SALE OF ASSETS

§ 18.1-240. Procedure for Merger.—Any two or more domestic corpo-
rations may merge into one of such corporations pursuant to a plan of
merger approved in the manner provided in this Act.

Each corporation shall adopt a plan of merger setting forth:

(a) The names of the corporations proposing to merge, and the name
of the corporation into which they propose to merge, which is hereinafter
designated as the surviving corporation.

(b) The terms and conditions of the proposed merger.

(c) A statement of any amendments in the articles of incorporation
of the surviving corporation to be effected by such merger.

(d) Such other provisions with respect to the proposed merger as are
deemed necessary or desirable.

§ 13.1-241. Procedure for Consolidation —Any two or more domestic
corporations may consolidate into a new corporation pursuant to a plan of
consolidation approved in the manner provided in this Act.

Each corporation shall adopt a plan of consolidation setting forth:

(a) The names of the corporations proposing to consolidate, and the
name of the new corporation into which they propose to consolidate, which
is hereinafter designated as the new corporation.

(b) The terms and conditions of the proposed consolidation.

(c) With respect to the new corporation, all of the statements re-
quired to be set forth in articles of incorporation for corporations organized
under this Act.

(d) Such other provisions with respect to the proposed consolidation
as are deemed necessary or desirable.

§ 13.1-242. Approval of Merger or Consolidation.—A plan of merger
or consolidation shall be adopted in the following manner:

(a) Where the members of any merging or consolidating corporation
have voting rights, the board of directors of such corporation shall adopt
a resolution approving the proposed plan 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. Notice shall be given to each member
entitled to vote at such meeting within the time and in the manner pro-
vided in this Act for the giving of notice of such meetings of members.
CH. 428] ACTS OF ASSEMBLY 551

The proposed plan shall be adopted upon receiving more than two-thirds
of the votes entitled to be cast by members present or represented by
proxy at each such meeting.

(b) Where any merging or consolidating corporation has no members,
or no members having voting rights, a plan of merger or consolidation shal]
be adopted at a meeting of the board of directors of such corporation upon
receiving the vote of a majority of the directors in office.

After such approval, and at any time prior to the issuance of a cer-
tificate of merger or consolidation, the merger or consolidation may be
abandoned if and to the extent and in the manner permitted by the plan
of merger or consolidation upon notice to the Commission.

§ 13.1-248. Articles of Merger or Consolidation—Upon such ap-
proval, articles of merger or articles of consolidation shall be executed by
each corporation by its president or a vice president and by its secretary
or an assistant secretary, and verified by oath of one of the officers of
each corporation signing such articles, and shall set forth:

(a) The plan of merger or consolidation.

(b) Where the members of any merging or consolidating corporation
have voting rights, then as to each such corporation (1) a statement set-
ting forth the date of the meeting of members at which the plan was
adopted, that a quorum was present at such meeting, and that such plan
received more than two-thirds of the votes entitled to be cast by members
present or represented by proxy at such meeting, or (2) a statement that
such plan was adopted by a consent in writing signed by all members
entitled to vote with respect thereto.

(c) Where any merging or consolidating corporation has no members,
or no members having voting rights, then as to each such corporation a
statement of such fact, the date of the meeting of the board of directors at
which the plan was adopted and a statement of the fact that such plan re-
ceived the vote of a majority of the directors in office.

§ 13.1-244. Issuance of Certificate of Merger or Consolidation.—The
articles of merger or consolidation 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 merger or consolidation, which shall be admitted to record in
its office. Upon the completion of such recordation, the Commission shall
forward the certificate for recordation in the office for the recording of
deeds in the city or county in which the registered office of each corporation
is located, except that no such further recordation shall be required in the
city of Richmond or the county of Henrico. Upon the completion of such
further recordation, the certificate shall be returned to the Commission by
registered or certified mail.

18.1-245. Effect of Merger or Consolidation——Upon the issuance
of the certificate of merger or the certificate of consolidation by the Com-
mission, the merger or consolidation shall become effective. When such
merger or consolidation becomes effective:

(a) The several corporations parties to the plan of merger or con-
solidation shall be a single corporation, which, in the case of a merger,
shall be that corporation designated in the plan of merger as the surviving
corporation, and, in the case of a consolidation, shall be the new corpora-
tion provided for in the plan of consolidation.

(b) The separate existence of all corporations parties to the plan of
merger or consolidation, except the surviving or new corporation, shall
cease.
(c) Such surviving or new corporation shall have all the rights,
privileges, immunities and powers of all corporations parties to the plan
of merger or consolidation and of a corporation organized under this Act,
552 ACTS OF ASSEMBLY [VA., 1956

and shall be subject to all the duties and liabilities of a corporation or-
ganized under this Act.

(d) Such surviving or new corporation shall thereupon and thereafter
possess all the rights, privileges, immunities and franchises, as well of a
public as of a private nature, of each of the merging or consolidating
corporations; and all property, real, personal and mixed, and all debts due
on whatever account, and all other choses in action, and all and every other
interest, of or belonging to or due to each of the corporations so merged or
consolidated, shall be taken and deemed to be transferred to and vested in
such single corporation without further act or deed; and the title to any
real estate, or any interest therein, vested in any of such corporations shall
not revert or be in any way impaired by reason of such merger or con-
solidation. ; ‘i

(e) Such surviving or new corporation shall thenceforth be responsi-
ble and liable for all the liabilities and obligations of each of the corpora-
tions so merged or consolidated; and any claim existing or action or pro-
ceeding pending by or against any of such corporations may be prosecuted
as if such merger or consolidation had not taken place, or such surviving or
new corporation may be substituted in its place. Neither the rights of
creditors nor any liens upon the property of any such corporation shall be
impaired by such merger or consolidation.

(f) In the case of a merger, the articles of incorporation of the sur-
viving corporation shall be deemed to be amended to the extent, if any.
that amendments in its articles of incorporation are stated in the plan of
merger; and, in the case of a consolidation, the statements set forth in
the articles of consolidation and which are required or permitted to be set
forth in the articles of incorporation of corporations organized under this
Act shall be deemed to be the articles of incorporation of the new corpora-

tion.

§ 13.1-246. Sale, or Other Disposition of Assets.—A sale, lease, ex-
change, mortgage, pledge or other disposition of all, or substantially all, the
property and assets of a corporation 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 corpo-
ration for profit, domestic or foreign, as may be authorized in the following
manner:

(a) Where there are members having voting rights, the board of di-
rectors 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. 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 corporation shall be given to each mem-
ber entitled to vote at such meeting, in the manner provided by this Act
for the giving of notice of meetings of members not less than twenty-five
nor more than fifty days before the date of the meeting and shall state
that the purpose, or one of the purposes, of such meeting is to consider the
proposed sale, lease, exchange, mortgage, pledge, or other disposition. At
such meeting the members may authorize such sale, lease, exchange, mort-
gage, 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 con-
sideration to be received by the corporation therefor. Such authorization
shall require the vote of more than 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, neverthe-
less, in its discretion, may abandon such sale, lease, exchange, mortgage,
pledge or other disposition, subject to the rights of third parties under any
contracts relating thereto, without further action or approval by members.

(b) Where there are no members, or no members having voting rights,
a sale, lease, exchange, mortgage, pledge or other disposition of all, or
substantially all, the property and assets of a corporation shall be au-
thorized upon receiving the vote of a majority of the directors in office.

§ 13.1-247. Bond Statement.—Before making any issue of bonds or
notes secured by mortgage or trust deed, other than a sale of treasury
bonds, a corporation shall file with the Commission a Bond Statement, veri-
fied by the president or secretary of the corporation and in such form as
may be prescribed or permitted by the Commission, setting forth fully and
accurately the financial plan upon which such bonds are to be issued; and
where such plan includes services or property (other than money) received
or to be received by the corporation, such statement shall describe, in the
manner prescribed or permitted by the Commission, the services or prop-
erty and shall contain a copy of the resolution of the board of directors
determining the value of the services or property. Such determination,
shown by a Bond Statement on file with the Commission, shall be con-
clusive in the absence of fraud participated in by both parties. The Com-
mission shall adjudge and enforce against any corporation refusing or
failing to comply with provisions of this section a fine of not exceeding
$1,000 for each offense. But failure to file such a statement shall not
impair the legality or validity of the issue. The statement shall be made
on a form to be supplied by the Commission and shall contain such addi-
tional information as the form may require.

CHAP 6
DISSOLUTION

§ 13.1-248. Voluntary Dissolution.—A corporation may dissolve and
wind up its affairs in the following manner:

(a) Where there are members having voting rights, the board of di-
rectors shall adopt a resolution recommending that the corporation be dis-
solved, and directing that the question of such dissolution be submitted to
a vote at a meeting of members having voting rights, which may be either
an annual or a special meeting. Notice stating that the purpose, or one of
the purposes, of such meeting is to consider the advisability of dissolving
the corporation, shall be given to each member entitled to vote at such
meeting, within the time and in the manner provided in this Act for the
giving of notice of meetings of members. A resolution to dissolve the cor-
poration shall be adopted upon receiving more than two-thirds of the votes
entitled to be cast by members present or represented by proxy.

(b) Where there are no members, or no members having voting rights,
the dissolution of the corporation shall be authorized at a meeting of the
board of directors upon the adoption of a resolution to dissolve by the vote
of a majority of the directors in office.

Upon the adoption of such resolution by the members, or by the board
of directors where there are no members or no members having voting
rights, the corporation shall cease to conduct its affairs except in so far as
may be necessary for the winding up thereof. shall immediately cause a
notice of the proposed dissolution to be mailed to each known creditor of
the corporation and to the Commission, and shall proceed to collect its
assets and apply and distribute them as provided in this Act.

§ 18.1-249. Distribution of Assets.—The assets of a corporation in
the process of dissolution shall be applied and distributed as follows:

(a) All liabilities and obligations of the corporation shall be paid,
satisfied and discharged. or adequate provision shall be made therefor:

(b) Assets held by the corporation upon condition requiring return,
transfer or conveyance, which condition occurs by reason of the dissolution.
shall be returned, transferred or conveyed in accordance with such re-
quirements;
(c) Assets received and held by the corporation subject to limitations
permitting their use only for charitable, religious, eleemosynary, benevolent,
educational or similar purposes, but not held upon a condition requiring re-
turn, transfer or conveyance by reason of the dissolution, shall be trans-
ferred or conveyed to one or more domestic or foreign corporations, societies
or organizations engaged in activities substantially similar to those of
the dissolving corporation, pursuant to a plan of distribution adopted as
provided in this Act or as a court may direct; .

(d) Other assets, if any, shall be distributed in accordance with the
provisions of the articles of incorporation or the by-laws to the extent that
the articles of incorporation or by-laws determine the distributive rights of
jnere pers, or any class or classes of members, or provide for distribution

o others;

(e) Any remaining assets may be distributed to such persons, societies,
organizations or domestic or foreign corporations, whether issuing shares
or not, as may be specified in a plan of distribution adopted as provided
in this Act or as a court may direct. .

§ 18.1-250. Plan of Distribution —A plan providing for the distribu-
tion of assets, not inconsistent with the provisions of this Act, may be
adopted by a corporation in the process of dissolution and shall be adopted
by a corporation for the purpose of authorizing any transfer or conveyance
of assets for which this Act requires a plan of distribution, in the following
manner: ;

(a) Where there are members having voting rights, the board of di-
rectors shall adopt a resolution recommending a plan of distribution and di-
recting the submission thereof to a vote at a meeting of members having
voting rights, which may be either an annual or a special meeting. Notice
accompanied by a copy of the proposed plan of distribution shall be given
to each member entitled to vote at such meeting, within the time and in
the manner provided in this Act for the giving of notice of meetings of
members. Such plan of distribution shall be adopted upon receiving more
than two-thirds of the votes entitled to be cast by members present or
represented by proxy at such meeting.

(b) Where there are no members, or no members having voting rights,
a plan of distribution shall be adopted at a meeting of the board of directors
upon receiving the vote of a majority of the directors in office.

§ 13.1-251. Revocation of Voluntary Dissolution Proceedings.—A cor-
poration may, at any time prior to the issuance of a certificate of dissolution
by the Commission, revoke the action theretofore taken to dissolve the cor-
poration, in the following manner:

(a) Where there are members having voting rights, the board of
directors shall adopt a resolution recommending that the voluntary dissolu-
tion proceedings be revoked, and directing that the question of such revoca-
tion be submitted to a vote at a meeting of members having voting rights,
which may be either an annual or a special meeting. Notice stating that
the purpose, or one of the purposes, of such meeting is to consider the
advisability of revoking the voluntary dissolution proceedings, shall be
given to each member entitled to vote at such meeting, within the time and
in the manner provided in this Act for the giving of notice of meetings of
members. A resolution to revoke the voluntary dissolution proceedings
shall be adopted upon receiving more than two-thirds of the votes entitled to
be cast by members present or represented by proxy at such meeting.

(b) Where there are no members, or nd members having voting rights,
a resolution to revoke the voluntary dissolution proceedings shall be adopted
at a meeting of the board of directors upon receiving the vote of a majority
of the directors in office.

Upon the adoption of such resolution by the members, or by the board
of directors where there are no members or no members having voting
CH. 428] ACTS OF ASSEMBLY 555

rights, the corporation may thereupon again conduct its affairs and notice
of such revocation shall be mailed to the Commission.

_ __§ 18.1-252. Articles of Dissolution.—If voluntary dissolution proceed-
ings have not been revoked, then when all debts, liabilities and obligations of
the corporation shall have been paid and discharged, or adequate provision
shall have been made therefor, and all of the remaining property and assets
of the corporation shall have been transferred, conveyed or distributed in
accordance with the provisions of this Act, articles of dissolution shall be
executed by the corporation by its president or a vice president, and by its
secretary or an assistant secretary, and verified by one of the officers sign-
ing such statement. The statement shall set forth:

(a) The name of the corporation.

(b) Where there are members having voting rights, (1) a statement
setting forth the date of the meeting of members at which the resolution to
dissolve was adopted, that a quorum was present at such meeting, and that
such resolution received more than two-thirds of the votes entitled to be cast
by members present or represented by proxy at such meeting, or (2) a
statement that such resolution was adopted by a consent in writing signed
by all members entitled to vote with respect thereto.

(c) Where there are no members, or no members having voting rights,
a statement of such fact, the date of the meeting of the board of directors
at which the resolution to dissolve was adopted and a statement of the
pant tat such resolution received the vote of a majority of the directors
in office.

(d) That all debts, obligations and liabilities of the corporation have
Peete pe and discharged or that adequate provision has been made

erefor.

(e) That all the remaining property and assets of the corporation
have been transferred, conveyed or distributed in accordance with the
provisions of this Act.

(f) That there are no suits pending against the corporation in any
court, or that adequate provision has been made for the satisfaction of any
judgment, order or decree which may be entered against it in any pending
suit.

§ 13.1-258. Filing of Articles of Dissolution.—The articles of dissolu-
tion 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 dissolution. The Com-
mission shall notify the clerk of the court for the recording of deeds in the
city or county in which the registered office of the corporation is located,
except that no such notice shall be required in the city of Richmond or the
county of Henrico.

Upon the issuance of such certificate of dissolution the existence of
the corporation shall cease, except for the purpose of suits, other proceed-
ings and appropriate corporate action by members, directors and officers as
provided in this Act.

§ 18.1-254. Automatic Dissolution.—If any domestic corporation shall
fail on two successive annual dates to file the annual report required by
this Act or to pay the annual registration fee required by law. the Com-
mission shall mail notice to it of impending dissolution. Whether or not
such notice be mailed, if the corporation fails within ninety days after the
second such annual date to file the annual report or to pay the annual
registration fees, together with a penalty of five per centum and interest
at the rate of six per centum per annum on the total amount of any regis-
tration fees assessed, such corporation shall be thereupon automatically
dissolved and its properties and affairs shall pass automatically to its
directors as trustees in dissolution. The Commission shall publish the fact
of such dissolution in a newspaper published in the city of Richmond.
§ 13.1-255. Reinstatement.—A corporation which has been dissolved
pursuant to § 13.1-254 may apply to the Commission for reinstatement
at any time thereafter and the Commission shall enter an order reinstating
the corporate existence upon receiving an annual report together with pay-
ment of a reinstatement fee of ten dollars plus all registration fees and
penalties that were due before the dissolution or revocation or that would
have become due thereafter if it had not occurred. Upon the entry by the
Commission of an order of reinstatement, the corporate existence shall be
deemed to have continued from the date of the dissolution or revocation
except that reinstatement shall have no effect on any question of personal
liability of the directors, officers or agents in respect of the period between
dissolution or revocation and reinstatement. If the name of a corporation
that has been dissolved has been assumed or reserved or registered by any
other person or corporation, the reinstated corporation shall not resume the
conduct of affairs until after it has obtained an amendment of its articles
of incorporation changing its name. ;

§ 18.1-256. Involuntary Dissolution—A corporation may be dis-
solved involuntarily by order of the Commission when it finds that the
corporation has continued to exceed or abuse the authority conferred upon
it by law; or has failed to maintain a registered office or a registered agent
in this State as required by law.

Before entering any such order the Commission shall issue a rule
against the corporation giving it an opportunity to be heard and show
cause why such an order should not be entered. The Commission may issue
the rule on its own motion or on motion of the Attorney General.

§ 18.1-257. Jurisdiction of Court to Liquidate Assets and Affairs of
Corporation.—Any court of record with general equity jurisdiction in the
city or county where the registered office or principal office of a corpora-
tion is located shall have full power to liquidate the assets and affairs of a
corporation:

(a) In an action by a member or director when it is made to appear:

(1) That the directors are deadlocked in the management of the
corporate affairs and that irreparable injury to the corporation is being suf-
fered or is threatened by reason thereof, and either that the members are
nnn to break the deadlock or there are no members having voting
rights; or

(2) That the acts of the directors or those in control of the corpo-
ration are illegal, oppressive or fraudulent; or

(8) That the corporate assets are being misapplied or wasted; or

(4) That the corporation is unable to carry out its purposes.

(b) In an action by a creditor:

(1) When the claim of the creditor has been reduced to judgment and
an execution thereon has been returned unsatisfied and it is established
that the corporation is insolvent; or

(2) When the corporation has admitted in writing that the claim of
the creditor is due and owing and it is established that the corporation is
insolvent.

(c) Upon application by a corporation to have its liquidation con-
tinued under the supervision of the court.

(d) When the Commission has instituted a proceeding for the in-
voluntary dissolution of a corporation and entered an order finding that the
corporation should be dissolved but that liquidation of its affairs should
precede the entry of an order of dissolution. .

(e) After dissolution, upon the application of any person, for good
cause, with regard to any assets or business that may remain and the
jurisdiction conferred by this clause may also be exercised by any such
court in any city or county where any property may be situated whether
of a domestic or of a foreign corporation that has been dissolved.
CH. 428] ACTS OF ASSEMBLY 557

It shall not be necessary to make directors or members parties to any
such action or proceedings unless relief is sought against them personally.

§ 18.1-258. Procedure in Liquidation of Corporation by Court.—In
proceedings to liquidate the assets and affairs of a corporation the court
shall have power to issue injunctions, to appoint a receiver or receivers
pendente lite, with such powers and duties as the court, from time to time,
may direct, and to take such other proceedings as may be requisite to pre-
serve the corporate assets wherever situated, and carry on the affairs of
the corporation until a full hearing can be had.

After a hearing had upon such notice as the court may direct to be
given to all parties to the proceedings and to any other parties in interest
designated by the court, the court may appoint a liquidating receiver or
receivers with authority to collect the assets of the corporation. Such
liquidating receiver or receivers shall have authority, subject to the order
of the court, to sell, convey and dispose of all or any part of the assets of the
corporation wherever situated, either at public or private sale. The order
appointing such liquidating receiver or receivers shall state their powers
and duties. Such powers and duties may be increased or diminished at any
time during the proceedings.

The assets of the corporation or the proceeds resulting from a sale,
aoa or other disposition thereof shall be applied and distributed as

ollows:

(a) All costs and expenses of the court proceedings and all liabilities
and obligations of the corporation shall be paid, satisfied and discharged,
or adequate provision shall be made therefor;

(b) Assets held by the corporation upon condition requiring return,
transfer or conveyance, which condition occurs by reason of the dissolution
or liquidation, shall be returned, transferred or conveyed in accordance
with such requirements;

(c) Assets received and held by the corporation subject to limitations
permitting their use only for charitable, religious, eleemosynary, benevo-
lent, educational or similar purposes, but not held upon a condition re-
quiring return, transfer or conveyance by reason of the dissolution or liqui-
dation, shall be transferred or conveyed to one or more domestic or foreign
corporations, societies or organizations engaged in activities substantially
similar to those of the dissolving or liquidating corporation, as the court
may direct, giving such weight as it may deem proper to a plan of distri-
bution adopted as provided in this Act;

(d) Other assets, if any, shall be distributed in accordance with the
provisions of the articles of incorporation or the by-laws to the extent that
the articles of incorporation or by-laws determine the distributive rights of
rene or any class or classes of members, or provide for distribution to
others;

(e) Any remaining assets may be distributed to such persons, s0-
cieties, organizations or domestic or foreign corporations, whether or not
issuing shares, as the court may direct, giving such weight as it may deem
proper to a plan of distribution adopted as provided in this Act.

The court shall have power to allow, from time to time, as expenses of
the liquidation compensation to the receiver or receivers and to attorneys
in the proceeding, and to direct the payment thereof out of the assets of
the corporation or the proceeds of any sale or disposition of such assets.

A receiver of a corporation appointed under the provisions of this sec-
tion shall have authority to sue and defend in all courts in his own name
as receiver of such corporation. The court appointing such receiver shall
have exclusive jurisdiction of the corporation and its property, wherever
situated, and may, by order, transfer to the receiver legal title to all or any
of the property of the corporation.

§ 18.1-259. Qualification of Receivers.—A receiver shall in all cases
558 ACTS OF ASSEMBLY [vA., 1956

be a citizen of the United States or a corporation issuing shares authorized
to act as receiver. Such corporation may be a domestic corporation or &
foreign corporation authorized to transact such business in this State, and
shall in all cases give such bond as the court may direct with such sureties
as the court may require.

§ 18.1-260. Filing of Claims in Liquidation Proceedings.—In proceed-
ings to liquidate the assets and affairs of a corporation the court may re-
quire all creditors of the corporation to file with the clerk of the court or
with the receiver, in such form as the court may prescribe, proofs under
oath of their respective claims. If the court requires the filing of claims
it shall fix a date, which shall be not less than four months from the date
of the order, as the last day for the filing of claims, and shall prescribe the
notice that shall be given to creditors and claimants of the date so fixed.
The court may extend the time for the filing of claims. Creditors and
claimants failing to file proofs of claim on or before the date fixed may be
barred, by order of court, from participating in the distribution of the
assets of the corporation.

§ 18.1-261. Discontinuance of Liquidation Proceedings.—The liquida-
tion of the assets and affairs of a corporation may be discontinued at any
time during the liquidation proceedings when it is established that cause
for liquidation no longer exists. In such event the court shall dismiss the
proceedings and direct the receiver to redeliver to the corporation all its
remaining property and assets.

§ 13.1-262. Decree for Involuntary Dissolution——In proceedings to
liquidate the assets and affairs of a corporation, when the costs and ex-
penses of such proceedings and all debts, obligations and liabilities of the
corporation shall have been paid and discharged and all of its remaining
property and assets distributed in accordance with the provisions of this
Act, or in case its property and assets are not sufficient to satisfy and dis-
charge such costs, expenses, debts and obligations, and all the property and
assets have been applied so far as they will go to their payment, the court
shall enter a decree finding these facts and adjudging that the continua-
tion of the corporate existence is no longer desirable in the public interest
or for the protection of members.

§ 18.1-263. Order of Involuntary Dissolution.—In case the court shall
enter a decree adjudging that the continuation of the corporate existence is
no longer desirable in the public interest or for the protection of members,
it shall direct a certified copy thereof to be transmitted to the Commission
and upon receipt thereof the Commission shall enter an order of involuntary
dissolution. The corporate existence shall thereupon come to an end. The
Commission shall notify the office for the recording of deeds in the city or
county in which the registered office of the corporation is located, except
that no such notice shall be required in the city of Richmond or the county
of Henrico. The clerk shall note the fact of such dissolution in the charter
records of his office.

§ 13.1-264. Survival of Remedy after Dissolution.—The dissolution
or expiration of a corporation shall not take away or impair any remedy
available to or against such corporation, its directors, officers or mem-
bers, for any right or claim existing, or any liability incurred, prior to such
dissolution. Any such action or proceeding by or against the corporation
may be prosecuted or defended by the corporation in its corporate name.
The members, directors and officers shall have power to take such corpo-
rate iF outer action as shall be appropriate to protect such remedy, right
or c
PUVSUIAUTAN WEE Vata 2 BUI

§ 18.1-265. Admission of Foreign Corporation.—No foreign corpo-
ration shall have the right to conduct affairs in this State until it shall have
procured a certificate of authority so to do from the Commission. A foreign
corporation shall not be denied a certificate of authority by reason of the
fact that the laws of the state or country under which such corporation is
organized governing its organization and internal affairs differ from the
laws of this State, and nothing in this Act contained shall be construed to
authorize this State to regulate the organization or the internal affairs of
such corporation.

§ 13.1-266. Powers of Foreign Corporation.—A foreign corporation
holding a certificate of authority shall have no greater rights and privi-
leges than a domestic corporation; and the certificate of authority shall
not be deemed to authorize it to exercise any of its corporate powers or
parposes that a foreign corporation is forbidden by law to exercise in this
§ 13.1-267. Corporate Name of Foreign Corporation.—No certificate
of authority shall be issued to a foreign corporation unless the corporate
name of such corporation:

(a) Shall not contain any word or phrase which indicates or implies
that it is organized for any purpose other than one or more of the purposes
contained in its articles of incorporation.

(b) Shall not be the same as, or confusingly similar to, the name of
any corporation, whether or not authorized by law to issue shares, existing
under any Act of this State, or any foreign corporation, whether or not
authorized by law to issue shares, authorized to transact business or con-
duct affairs in this State, or a corporate name reserved or registered as
permitted by the laws of this State.

§ 18.1-268. Change of Name by Foreign Corporation—Whenever a
foreign corporation which is authorized to conduct affairs in this State
shall change its name to one under which a certificate of authority would
not be granted to it on application therefor, the certificate of authority of
such corporation shall be suspended and it shall not thereafter conduct any
affairs in this State until it has changed its name to a name which is avail-
able to it under the laws of this State.

§ 13.1-269. Application for Certificate of Authority—A foreign
corporation, in order to procure a certificate of authority to conduct affairs
in this State, shall make application therefor to the Commission. The
application shall set forth:

(a) The name of the corporation and the state or country under the
laws of which it is incorporated.

(b) The date of incorporation and the period of duration of the
corporation.

(c) The address of the principal office of the corporation in the state
or country under the laws of which it is incorporated.

(d) The address of the proposed registered office of the corporation in
this State (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 proposed registered agent in this State at
such address and, if an individual, that he is a resident of Virginia.

(e) The names and addresses of the directors and officers of the
corporation.

(f) An irrevocable consent that any process, notice, order or demand
arising out of or relating to the conduct of affairs in this State, whether or
not the corporation withdraws from this State, may be served on the clerk
of the Commission or, in the case of any process, notice, order or demand
560 ACTS OF ASSEMBLY [vA., 1956

issued by the Commission, by being mailed by the clerk of the Commission
or any of his staff by registered or certified mail addressed to the corpora-
tion at its registered office or, in case of withdrawal from this State, at
the address shown in the statement of withdrawal.

Such application shall be made on forms prescribed and furnished by
the Commission and shall be executed by the corporation by its president
or a vice president and by its secretary or an assistant secretary, and veri-
fied by one of the officers signing such application.

§ 13.1-270. Filing of Application for Certificate of Authority.—The
application of the corporation for a certificate of authority shall be de-
livered to the Commission, together with a copy of its articles of incorpora-
tion and all amendments thereto, duly authenticated by the proper officer
of the state or country under the ‘laws of which it is incorporated.

If the Commission finds that such application complies with the re-
quirements of law, it shall, when all fees have been paid as required by law,
file it and issue a certificate of authority to conduct affairs in this State.

§ 18.1-271. Effect of Certificate of Authority.—Upon the issuance of
a certificate of authority by the Commission, the corporation shall be
authorized to conduct affairs in this State, subject, however, to the right of
this State to suspend or to revoke such authority as provided in this Act.

§ 18.1-272. Registered Office and Registered Agent of Foreign
Corporation.—Each foreign corporation authorized to conduct affairs in
this State shall have and continuously maintain in this State:

(a) A registered office which may be, but need not be, the same as
its principal office.

(b) A registered agent, which agent may be either an individual
resident in this State whose business office is identical with such registered
office, or a domestic corporation, or a foreign corporation authorized to
transact business in this State, having an office identical with such regis-
tered office.

§ 13.1-278. Change of Registered Office or Registered Agent of
Foreign Corporation.—A foreign corporation authorized to conduct affairs
in this State may change its registered office or change its registered agent,
ial upon filing in the office of the Commission a statement setting

orth:

(a) The name of the corporation.

(b) The address of its then registered office.

(c) If the address of its registered office be changed, the address to
which the registered office is to be changed (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).

(d) The name of its then registered agent.

(e) If its registered agent be changed, the name of its successor
registered agent and, if an individual, that he is a resident of Virginia.

) That the address of its registered office and the address of the
office of its registered agent, as changed, will be identical.

(g) That such change was authorized by resolution duly adopted by
its board of directors.

The statement shall be verified by the oath of a president or a vice
president of the corporation and shall become effective when filed with the
Commission.

A new statement shall forthwith be executed by the corporation when-
ever its registered agent dies, resigns or changes his business office.

§ 18.1-274. Service of Process on Foreign Corporation.—The reg-
istered agent of a foreign corporation authorized to conduct affairs in this
State shall be an agent of such corporation upon whom any process, notice
or demand required or permitted by law to be served upon the corporation
may be served. But the clerk of the Commission shall also be an agent
of the corporation upon whom may be served any process, notice, order
or demand except one issued by the Commission. Service may be made
on the clerk or any of his staff at his office. He shall forthwith cause it
to be sent by registered or certified mail addressed to the corporation at
its registered office and keep a record thereof. Any process, notice, order
or demand issued by the Commission shall be served by being mailed by
the clerk of the Commission or any of his staff by registered or certified
mail addressed to the corporation at its registered office. In case of with-
drawal from this State, the mailing shall be to the address shown in the
statement of withdrawal.

Nothing herein contained shall limit or affect the right to serve any
process, notice or demand, required or permitted by law to be served upon
a corporation in any other manner now or hereafter permitted by law.

§ 13.1-275. Amendment to Articles of Incorporation of Foreign
Corporation.—Whenever the articles of incorporation of a foreign corpo-
ration authorized to conduct affairs in this State are amended, such foreign
corporation shall, within thirty days after such amendment becomes effec-
tive, file in the office of the Commission a copy of such amendment duly
authenticated by the proper officer of the state or country under the laws
of which it is incorporated.

§ 13.1-276. Merger of Foreign Corporation Authorized to Conduct
Affairs in this State—Whenever a foreign corporation authorized to con-
duct affairs in this State shall be a party to a merger permitted by the laws
of the state or country under the laws of which it is incorporated, and such
corporation shall be the surviving corporation, it shall, within thirty days
after such merger becomes effective, file with the Commission a copy of
the articles of merger duly authenticated by the proper officer of the state
or country under the laws of which such merger was effected. Whenever
a foreign corporation authorized to conduct affairs in this State shall be
a party to a merger permitted by the laws of the state or country under
the laws of which it is incorporated, and such corporation shall not be the
surviving corporation, or whenever such corporation shall be a party to a
consolidation so permitted, the surviving or resulting corporation shall,
if not continuing to conduct affairs in this State, within thirty days after
such merger or consolidation becomes effective, notify the Commission
thereof and deliver to the Commission a duly authenticated copy of the
instrument of merger or consolidation and the Commission shall thereupon
revoke the certificate of authority to conduct affairs in this State, or, if
continuing to conduct affairs in this State, within such thirty days, deliver
to the Commission an application for a certificate of authority to conduct
affairs in this State, together with a duly authenticated copy of the instru-
ment of merger or consolidation and also, in case of a merger, a copy of
its articles of incorporation and all amendments thereto, duly authenticated
by the proper officer of the state or country under the laws of which it
is incorporated.

Upon the merger or consolidation of two or more foreign corpora-
tions any one of which owns property in this State, all such property shall
pass to the surviving or consolidated corporation except as otherwise pro-
vided in the laws of the state by which it is governed, but only from and
after the time when a duly authenticated copy of the instrument of merger
or consolidation is filed by the Commission.

§ 13.1-277. Amended Certificate of Authority —A foreign corpora-
tion authorized to conduct affairs in this State shall procure an amended
certificate of authority in the event it changes its corporate name.

§ 13.1-278. Withdrawal of Foreign Corporation.—A foreign corpo-
ration authorized to conduct affairs in this State may withdraw from this
State upon paying all taxes and charges and delivering to the Commission a
562 ACTS OF ASSEMBLY [vaA., 1956

statement of withdrawal, which shall set forth:

(a) The name of the corporation and the state or country under the
laws of which it is incorporated.

(b) That the corporation is not conducting affairs in this State.

(c) That the corporation surrenders its authority to conduct affairs
in this State.

(d)_ That the corporation revokes the authority of its registered agent
in this State to accept service of process and consents that service of
process in any action, suit or proceeding based upon any cause of action
arising in this State during the time the corporation was authorized to
conduct affairs in this State may thereafter be made on such corporation
by service thereof on the clerk of the Commission.

(e) A post office address to which the clerk may mail a copy of any
process against the corporation that may be served on him.

The application for withdrawal shall be made on forms prescribed and
furnished by the Commission and shall be executed by the corporation by
its president or a vice president and by its secretary or an assistant secre-
tary or by its trustee in bankruptcy or its receiver, and verified by one of
the officers signing the application, or, if the corporation is in the hands
of a receiver or trustee, shall be executed on behalf of the corporation by
such receiver or trustee and verified by him.

If the Commission finds that such statement complies with the re-
quirements of this Act, it shall notify such corporation that its authority to
conduct affairs in this State is terminated.

When any foreign corporation authorized to conduct affairs in this
State shall dissolve, it shall file with the Commission a statement of with-
drawal. Whether or not such application is filed, the dissolution of such
foreign corporation shall not take away or impair any remedy available
against such corporation for any right or claim existing or any liability
incurred prior to such dissolution. Any such action or proceeding against
such foreign corporation may be defended by such corporation in its cor-
porate name. The stockholders, directors and officers shall have power
to take such corporate or other action as shall be appropriate to protect
such remedy, right or claim. The right of a foreign corporation that has
been dissolved to institute and maintain in its corporate name actions,
suits or proceedings in the courts of this State shall be governed by the
law of the state of its incorporation.

§ 18.1-279. Automatic Revocation of Certificate of Authority.—If
any foreign corporation shall fail on two successive annual dates to file
the annual report required by this Act or to pay the annual registration
fee required by law, the Commission shall mail notice to it of impending
revocation of its certificate of authority to conduct affairs in this State.
Whether or not such notice be mailed, if the corporation fails within ninety
days after the second such annual date to file the annual report or to pay the
annual registration fees, together with a penalty of five per centum of the
registration fees and interest at the rate of six per centum per annum
on the total amount of any registration fees assessed, such foreign corpora-
tion shall thereupon automatically cease to be authorized to conduct affairs
in this State and its certificate of authority shall be automatically revoked.
The Commission shall publish the fact of such revocation in a newspaper
published in the city of Richmond.

§ 13.1-280. Revocation of Certificate of Authority by Commission.—
The certificate of authority to conduct affairs in this State of any foreign
corporation may be revoked by order of the Commission when it finds that
the corporation:

(a) has continued to exceed the authority conferred upon it by law;

(b) has failed to maintain a registered office or a registered agent
in this State as required by law; or
CH. 428] ACTS OF ASSEMBLY 563
(c) has failed to file any document required by this Act to be filed

with the Commission.

Before entering any such order the Commission shall issue a rule
against the corporation giving it an opportunity to be heard and show
cause why such an order should not be entered. The Commission may
issue the rule on its own motion or on motion of the Attorney General.

§ 18.1-281. Conducting Affairs Without Certificate of Authority.—
No foreign corporation which is conducting affairs in this State without
a certificate of authority shall be permitted to maintain any action, suit
or proceeding in any court of this State until such corporation shall have
obtained a certificate of authority. No foreign corporation which is in
default under the requirement that amendments to its articles of incorpora-
tion or instruments of merger or consolidation shall within thirty days be
filed in the office of the Commission shall be permitted to maintain any
action, suit or proceeding in any court of this State until such corporation
shall have filed in the office of the Commission a copy of such amendments
or instruments of merger or consolidation authenticated as aforesaid.

The failure of a foreign corporation to obtain a certificate of authority
to conduct affairs in this State shall not impair the validity of any contract
or act of such corporation, and shall not prevent such corporation from
defending any action, suit or proceeding in any court of this State.

If a foreign corporation conducts affairs in this State without a cer-
tificate of authority, its directors, officers and agents conducting such affairs
shall be jointly and severally liable for any contracts made or to be per-
formed in this State and any torts committed in this State between the
time when it began to conduct affairs in this State and the date when it
obtains a certificate of authority. Suits, actions and proceedings may be
begun against it by serving process on any such director, officer or agent
of the corporation, or, if none can be found, on the clerk of the Commission.
If any foreign corporation shall conduct affairs in this State without a cer-
tificate of authority, it shall by conducting such affairs be deemed to have
thereby appointed the clerk of the Commission its attorney for service of
process. Service shall be made by leaving two copies of the process, notice,
order or demand, together with the fee required by law, in the office of the
clerk of the Commission, together with an affidavit giving the latest known
post office address of the defendant and such service shall be sufficient
if notice of such service and a copy of the process, notice, order or demand
are forthwith sent by registered mail, with return receipt requested, by
the clerk of the Commission or one of his staff to the defendant at the
specified address. An affidavit by the clerk of the Commission showing
compliance herewith shall be filed with the papers in the suit, action or
proceeding.

If a foreign corporation conducts affairs in this State without a certi-
ficate of authority, each officer, director and agent who conducts any of
such affairs in this State shall be liable to a penalty of not less than one
hundred dollars or more than one thousand dollars to be imposed by the
Commission after notice and opportunity to be heard, both to the corpo-
ration and to the individual.

CHAP 8
ANNUAL REPORTS.

§ 18.1-282. Annual Report of Domestic and Foreign Corporations.—
Each domestic corporation, and each foreign corporation authorized to con-
duct affairs in this State, shall file, within the time prescribed by this Act,
an annual report setting forth:

(a) The name of the corporation and the state or country under the
laws of which it is incorporated.

(b) The address of the registered office of the corporation in this
564 ACTS OF ASSEMBLY [vA., 1956

State (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 registered agent in this State at such address, and, in
the case of a foreign corporation, the address of its principal office in the
state or country under the laws of which it is incorporated. .

(c) The names and addresses of the directors and principal officers
of the corporation.

The report shall be made on forms furnished by the Commission, shall
supply the information as of the date of the report and shall be verified
by the oath of the president or a vice president or the secretary or an
assistant secretary of the corporation.

§ 18.1-283. Filing of Annual Report.—The annual report of a do-
mestic or foreign corporation shall be delivered to the Commission between
the first day of January and the first day of March of each year after the
calendar year in which it was incorporated or authorized to conduct affairs
in this State. If the report is incomplete or inaccurate, the Commission
shall return it for correction. Otherwise the Commission shall file it in
the clerk’s office.

CHAP 9

FEES AND CHARGES

§ 13.1-284. Fees and Charges to be Collected by Commission.—The
Commission shall assess the registration fees and shall charge and collect
the charter fees and entrance fees imposed by law.

§ 13.1-285. Fees for Filing Documents or Issuing Certificates —The
Commission shall charge and collect the following fees:

(a) For filing any one of the following the fee shall be five dollars:

(1) Articles of incorporation.

(2) Articles of amendment.

(3) Articles of merger or consolidation.

(4) Articles of dissolution.

(5) An application of a foreign corporation for a certificate of au-
thority to conduct affairs in this State.

(6) A copy of an amendment to the articles of incorporation of a
rai ra pomnoration holding a certificate of authority to conduct affairs in

is e. :

(7) A copy of articles of merger or consolidation of a foreign corpora-
tion holding a certificate of authority to conduct affairs in this State.

(8) A statement of withdrawal of a foreign corporation.
dct (b) For issuing a certificate of change of name the fee shall be three

ollars.

(c) For filing a statement of change of address of registered office or
change of registered agent or both the fee shall be one dollar. Except in
the case of the city of Richmond or the county of Henrico, the Commission.
in respect of domestic corporations, shall collect and remit to the clerk of
the court for the recording of deeds in the city or county in which the
registered office is located an additional fee of one dollar and if the location
of the registered office is changed from one city or county to another the
Commission shall collect and remit fees of one dollar for each of the clerks
to which it is required to give notice.

Whenever the Commission is required to admit any document to
record in its office, it shall collect a sum equal to double the amount of
the fee provided by law for the recordation of deeds in any clerk’s office
of this State and whenever any such document must also be recorded in the
office of any clerk, the Commission shall collect and transmit to such clerk
a ee fee in the amount provided by law plus one dollar for the certifi-
cation fee.
§ 13.1-286. Miscellaneous Charges.—The Commission shall charge
and collect for furnishing a certified copy of any document, instrument or
paper relating to a corporation, thirty cents per hundred words if the copy
is made by typing and fifty cents per page if it is made by photostating and
one dollar and fifty cents for the certificate and affixing the seal thereto.

The clerk of the Commission shall charge and collect for any service
of process on him as agent of a corporation, five dollars, which amount
may be recovered as taxable costs by the party to the suit or action
causing such service to be made if such party prevails in the suit or action.

CHAP 10
FINALITY OF ORDERS AND APPEALS

§ 13.1-287. Rehearing and Finality of Commission Action.—The Com-
mission shall have no power to grant a rehearing of any order issuing a cer-
tificate of amendment or certificate of merger or consolidation except on a
petition by a member or director, filed with the Commission and the cor-
poration within ten days after the date of entry of any such order, in which
the member or director 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 member or
director, the Commission shall determine the issues and revoke or refuse
to revoke its order accordingly.

No court within or without Virginia shall have jurisdiction to enjoin
or delay the holding of any meeting of directors or members for the pur-
pose of authorizing or consummating any such amendment, merger or con-
solidation, or the execution or delivery to the Commission of any papers
for such purpose, except for fraud, and no court within or without Vir-
ginia (except the Supreme Court of Appeals 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.

CHAP 11

MISCELLANEOUS

§ 18.1-288. Recording——Whenever the Commission is directed to
admit any instrument to record in its office, it shall cause it to be spread
upon its record books or to be reproduced in microfilm or in any other man-
ner the Commission may deem suitable.

-§ 18.1-289. Property Title Records——Whenever by merger, con-
solidation or amendment to the articles of incorporation the name of any
corporation, domestic or foreign, is changed or another corporation succeeds
to the ownership of its property, a certificate reciting such change or
succession shall be issued by the clerk of the Commission upon request and
such certificate, or if such corporation is not a domestic corporation or a
foreign corporation authorized to conduct affairs in this State, a similar
certificate by any competent authority of the state of incorporation, may
be admitted to record in any recording office of this State within the
jurisdiction of which any property of the corporation is located in order to
maintain the continuity of title records upon paying the fee of the clerk of
the court, but no tax shall be due thereon.

§ 13.1-290. Application to Existing Corporations.—The provisions of
this Act shall apply to all corporations existing at the time this Act takes
effect, whether domestic or foreign, and their members. The provisions
of this Act shall be a part of the charter of every corporation heretofore
or hereafter organized in this State. In the case of foreign corporations,
566 ACTS OF ASSEMBLY [vA., 1956

the certificate of authority to transact business in this State issued by
the Commission under any prior act of this State shall continue in effect
subject to the provisions hereof. .

Prior to July 1, 1958, each such corporation, domestic or foreign,
shall establish the registered office and appoint the registered agent re-
quired by § 13.1-208, by filing in duplicate in the office of the Commission a
statement on a form supplied by the Commission showing:

(a) The name of the corporation.

(b) The address of its then principal office in this State. .

(c) The address of its registered office in this State (including (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), which must initially be in
the city or county in which its then principal office in this State is located.

(d) The name of its registered agent and that he is a resident of
Virginia and that he is an officer or director of the corporation or a mem-
ber of the Virginia State Bar.

(e) That the address of its registered office and the address of the
business office of its registered agent are identical.

(f) That the establishment of the registered office and the appoint-
ment of the registered agent were authorized by resolution duly adopted
by its board of directors.

(g) In the case of a foreign corporation, an irrevocable consent that
any process, notice, order or demand arising out of or relating to the trans-
action of business in this State, whether or not the corporation withdraws
from this State, may be served on the clerk of the Commission or, in the
case of any process, notice, order or demand issued by the Commission, by
being mailed by the clerk of the Commission or any of his staff by regis-
tered or certified mail addressed to the corporation at its registered office
or, in case of withdrawal from this State, at the address shown in the state-
ment of withdrawal.

The statement shall be verified by the oath of the president or a vice
president and shall become effective when filed with the Commission.
The Commission, in the case of domestic corporations, shall mail one copy
of the statement to the clerk in whose office deeds are recorded in the city
or county in which the then principal office is located, and he shall record
it in a book for the recordation of charters. Every statement shall be
accompanied by fees of one dollar payable to the Commission and of one
dollar payable to such clerk, and no other recording fee shall be payable.

Until the statement has been filed, the statutes relating to the prin-
cipal office in effect on the day before the effective date of this Act shall,
notwithstanding their repeal by this Act, continue, by virtue of this para-
graph, to apply to the corporation, and the provisions of this Act referring
to the registered office shall be deemed to refer to the principal office of
the corporation.

If the statement of a domestic corporation is filed after June 30, 1958,
and before January 1, 1959, it shall be accompanied by an additional fee of
fifty dollars payable to the Commission. If the statement of a domestic
corporation is filed after December 31, 1958, and before July 1, 1959, it
shall be accompanied by an additional fee of one hundred dollars payable
to the Commission. If the statement of a domestic corporation is not filed
by July 1, 1959, the corporate existence of the corporation shall auto-
matically cease on July 1, 1959.

If the statement of a foreign corporation is not filed by July 1, 1958,
its certificate of authority to transact business in this State shall be auto-
matically revoked.

Upon the filing of such a statement by a foreign corporation, the
power of attorney previously filed by it appointing the Secretary of the
CH. 428] ACTS OF ASSEMBLY 567

Commonwealth as its agent for service of process shall be deemed to have
been revoked, but thereafter service of process on the Secretary of the
Commonwealth on or before July 1, 1958, shall be as effective as service
on the clerk of the Commission in accordance with § 18.1-274; and the
Secretary of the Commonwealth shall forthwith deliver such process to
the clerk of the Commission for disposition in accordance with the pro-
visions of § 13.1-274. In the event that a foreign corporation shall not
have established a registered office and appointed a registered agent as
required herein and service of process on such corporation is made on the
clerk of the Commission as permitted by § 13.1-274, such service of process
shall be valid but the clerk of the Commission shall deliver such process
to the Secretary of the Commonwealth for disposition in accordance with
§ 18-216. Notwithstanding anything elsewhere herein contained, the pro-
visions of § 13-216 and § 13-217 shall remain effective until July 1, 1958,
and thereafter as to causes of action arising prior to July 1, 1958, as to
each foreign corporation whose certificate of authority is revoked by the
provisions hereof because of failure to establish a registered office and
appoint a registered agent.

The Commission shall mail notice of the provisions of this section to
all corporations, domestic and foreign, listed in its records promptly after
the effective date of this Act and, promptly after January 1, 1958, shall
mail a further notice to all such corporations that have not then complied
with the provisions of this section.

13.1-291. Reservation of Power.—The General Assembly of Vir-
ginia shall at all times have power to prescribe such regulations, provisions
and limitations as it may deem advisable, which shall be binding upon any
and all corporations subject to the provisions of this Act, and the General
Assembly of Virginia shall have power to amend, repeal or modify this Act
at pleasure.

§ 13.1-292. Effect of Enactment and Repeal.—The enactment of this
Act and the repeal of prior acts thereby shall not impair any right of
creditors existing at its effective date.

§ 13.1-293. Effect of Invalidity of Part of This Act.—If a court of
competent jurisdiction shall adjudge to be invalid or unconstitutional any
clause, sentence, paragraph, section or part of this Act, or shall adjudge
any provision to be inoperative in particular circumstances because of the
exertion of Federal power, such judgment or decree shall not affect,
impair, invalidate or nullify the remainder of this Act, or the operation of
such provision in other circumstances, but the effect thereof shall be con-
fined to the clause, sentence, paragraph, section or part of this Act so
adjudged to be invalid or unconstitutional or the particular circum-

stances so in issue.
ARTICLE 3
CO-OPERATIVE ASSOCIATIONS

CHAP 1
CO-OPERATIVE ASSOCIATIONS GENERALLY

§ 18.1-301. Organization of Co-operative Associations; Purposes;
Name; Par Value Stock Required.—Any number of persons not less than
five may, under the provisions of Chapter 3 of Article 1 of this title, as-
sociate themselves together as a co-operative association, society, company
or exchange, for the purpose of conducting any agricultural, fishing, dairy,
mercantile, merchandise, brokerage, manufacturing or mechanical busi-
ness on the co-operative plan; provided that the word “‘co-operative” shall
be included as a part of the name.

The provisions of Article 1 of Title 18.1 shall apply to co-operative
associations created under this section, except so far as the same are in
conflict with the following sections of this chapter which shall be ap-
plicable only to such co-operative associations, and except that no such
association shall issue stock without nominal or par value.

§ 18.1-802. Limitation of Individual Stockholding.—No holder of com-
mon stock in any such association shall own shares of a greater par value
than one thousand dollars, except as hereinafter provided, or be entitled to
more than one vote. .

§ 13.1-303. Investment in Other Stock.—At any regular meeting or
any regularly called special meeting 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 co-operative association; provided that it shall not so invest
a total amount in excess of twenty-five per centum of the amount of its
capital stock.

§ 13.1-304. Purchase of Business by Issue of Shares of Stock.—
Whenever any such association shall purchase the business of another as-
sociation, 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 one thousand dollars the directors of the association are
authorized to hold the shares in excess of one thousand dollars 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
pe pees thereof as currently received to the former owners of such

usiness.

§ 18.1-305. Rights of Subscribers Before Full Payment.—Certificates
of stock of such an association shall not be issued to any subscriber until
fully paid, but the by-laws of the association may allow subscribers to vote
as stockholders provided part of the stock subscribed for has been paid in

§ 18.1-306. 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 by-laws prescribe the terms and
conditions, rules and regulations under and by which the stockholders or
employees, or co-operating non-stockholders may participate in the earn-
ings 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 exceed-
ing 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 co-operation; 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 co-operating non-stockholders unless otherwise pro-
vided by the by-laws 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 co-operating non-stockholders only upon the
amount of their purchases and not upon the purchases made by the associa-
tion. 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 pro-
vided to co-operating non-stockholders who furnish such products upon the
amounts of such products so furnished and not upon sales by the association.

_ _§ 13.1-307. Permissible Limitation of Stock Ownership or Voting
Rights.—Any such association may, either in its charter or by by-laws,
provide and require that no share of its stock shall be issued to or owned
by any person not a member of a non-stock corporation or non-stock cor-
porations named or designated in such charter or by-laws, or may in like
manner provide that shares of its stock may be issued to or owned by per-
sons not members of such designated non-stock corporation or non-stock
corporations, but that when so owned such stock shall have no voting
power.

§ 13.1-308. Limitation of Use of “Co-operative” in Corporate Name.—
No corporation or association organized or doing business for profit in this
State shall be entitled to use the term “co-operative” as part of its cor-
porate or other business name or title, unless it has complied with the pro-
visions of this chapter or of Chapter 2 of Article 3 of this title or Chap 9
or Chapter 16 of Title 56 or of any other statute providing for co-operative
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 stock-
holder or member of any corporation or association legally organized under
any law giving it the right to use the word co-operative as a part of its
corporate or business name.

§ 13.1-309. Other Co-operatives May Come Under Chapter.—Any co-
operative marketing association or corporation incorporated under Chapter
2 of Article 3 of this title, or under the general corporation laws of this
State, may be brought under the provisions of this chapter, 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 Chapter 2 of Article 3 of this title, 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
Chapter 4 of Article 1 of this title; but when such amendment is had in
the case of a corporation or association existing under the provisions of
Chapter 2 of Article 3 of this title, all special privileges under such chapter
shall be thereby surrendered.

§ 13.1-310. Co-operative Associations May Give Certain Liens on
Rotating Stocks.—Any co-operative association or corporation organized
under the laws of this State, or under the laws of the United States, or
qualifying as a co-operative association under the laws of the United States,
may give as security for any loan or loans obtained from any bank for
co-operatives 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 co-operative
association unless such stock has been fully paid for and is owned by the
association without incumbrance at the time it is so pledged.

§ 18.1-311. Taxation.—Every co-operative association, society, com-
pany and exchange created under the provisions of this chapter and every
570 ACTS OF ASSEMBLY [vA., 1956

co-operative marketing association or corporation and every general cor-
poration that may be brought under the provisions of this chapter, whether
such association, society, company, exchange or corporation be organized or
brought under this chapter prior or subsequent to the date of the approval
of this section and whether chartered under the laws of this State or other-
wise chartered and doing business in this State, and conducting a mer-
cantile, merchandise or brokerage business on the co-operative plan shall be
taxable as a merchant by the State, and by the city or town within which
such business, is done. Nothing in this chapter shall exempt any such
organization from any State or local merchant’s license tax.

CHAP 2
AGRICULTURAL CO-OPERATIVE ASSOCIATIONS

§ 18.1-812. Declaration of Policy.—It is the declared policy of this
State, as one means of improving the economic position of agriculture, to
encourage the organization of producers of agricultural products into effec-
tive non-profit co-operative associations under the control of such producers,
and to that end this Act should be liberally construed.

§ 18.1-313. Definitions —As used in this Act, unless the context or
subject matter requires otherwise:

(a) “Agricultural products” include livestock and livestock products,
dairy products, poultry and poultry products, seeds, nuts, ground stock,
horticultural, floricultural, viticultural, forestry, bee and any and all kinds
of farm products. :

(b) “Supplies” include any and all types of supplies, machinery and
equipment used by farmers as producers or used by farmers as consumers.

(c) “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 State, organized under any general or special act as
a co-op2rative association for the mutual benefit of its members and other
patrons as farmers, and which confines its operations to purposes authorized

y this Act and restricts the return on the stock or membership capital
and the amount of its business with non-members to the limits placed there-
on by this Act for associations organized hereunder and which qualifies to
do business in this State under this Act.

Associations shall be classified as and deemed to be non-profit corpora-
tions, 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 co-
operative non-profit basis.

(d) “This Act” means this chapter, which may be cited as the “Agri-
cultural Co-operative Association Act.”

(e) “Member” includes the holder of a membership in an association
without capital stock ard the holder of voting stock in an association or-
ganized with capital stock.

(f) “Person” includes an individual, a partnership, a corporation and
an association.

(gz) “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.

(h) “Board” means the board of directors of an association.

(i) “Commission” means the State Corporation Commission of
Virginia.

§ 18.1-814. 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.

§ 18.1-815. Purposes.—Such association mav be organized for the
purpose of engaging in any co-operative activity for producers of agricul-
tural products in connection with: ;

(a) Producing, assembling, marketing, buying or selling agricultural
products, or harvesting, preserving, drying, processing, manufacturing,
blending, canning, packing, ginning, grading, storing, warehousing, hand-
ling, transporting, shipping or utilizing such products, or manufacturing or
marketing the by-products thereof;

(b) Manufacturing, processing, storing, transporting, delivering, hand-
ling, buying for or furnishing supplies to its members and other patrons.

(c) Performing or furnishing business or educational or other serv-
ices, including the services of buildings, machinery and equipment, on a
co-operative basis.

(d) Financing any of the above enumerated activities for its members.

§ 18.1-316. 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 secre-
tary of each such association, before an officer authorized to take acknowl-
edgments, and shall state:

(a) The name of the association which shall not be the same as,
or confusingly similar to, the name of any association or corporation doing
business in the State;

(b) Name of the county, city or town, (and the post office address
therein) where its principal office in this State is to be located ;

(c) Its purposes;

(d) Whether organized with or without capital stock; and if organized
with capital stock the maximum and minimum authorized number of par
value shares and the par value of each share, and, if more than one class
of stock is authorized, a description of the classes of shares, the number
of shares in each class and series of each class, if any, the relative rights,
preferences and restrictions granted to or imposed upon the shares of
each class and series of each class, if any, and the dividends to which each
class shall be entitled;

(e) 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; -

(f) The maximum number of directors, not less than five, who are to
manage the affairs of the association;

(g) The names and residences of the officers and directors, who,
unless sooner changed for the first year or until the first annual meeting,
are to manage the affairs of the association;

(h) If the duration of a corporation is not to be perpetual, the period
of its duration; .

(i) 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 dele-
gates, for voting by proxy or mail ballot and the issuance, retirement and
transfer of membership certificates and stock.

§ 13.1-317. Filing and Recording Articles of Incorporation.— (a)
Triplicate originals of the articles of incorporation, duly signed and ac-
knowledged 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 counter-
part of the articles of incorporation, together with the certificate of
572 ACTS OF ASSEMBLY [va., 1956

incorporation issued by the Commission, shall be certified by the Commis-
sion to the Commissioner of Agriculture and Immigration for filing and
another counterpart shall be certified to the Director of the State Agri-
cultural Extension Division for filing.

(b) For filing and recording the certificate of incorporation, an amend-
ment to the certificate of incorporation, or a certificate of adoption, the
association shall pay such fees as conform to the laws governing corpora-
tions 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.

§ 13.1-818. Amendments to the Articles of Incorporation.—An as-
sociation 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 amend-
ment 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 amend-
ment affecting the priority or preferential rights of any outstanding non-
voting stock shall be adopted until the written consent of two-thirds of
the holders of such outstanding non-voting stock has been obtained. Tripli-
cate 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 Com-
mission, shall be certified by the Commission to the Commissioner of Agri-
culture and Immigration for filing and another counterpart shall be certified
to the Director of the State Agricultural Extension Division for filing.

§ 18.1-319. By-Laws.—The board of directors or members of the as-
sociation, before commencing business, shall adopt by-laws not inconsistent
with law or its articles of incorporation, and they may alter, amend and
revise the same from time to time. The by-laws 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 pro-
posed by-law or by-law amendments or revisions shall have been de-
livered 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 by-laws
made by the board of directors may be repealed or changed and new by-laws
made by the members, and the members may prescribe that any by-law
made by them shall not be altered, amended or repealed by the directors.
The by-laws may also provide for any or all of the following matters:

(a) 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;

(b) 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;

(c) Subject to any provision thereon in the articles of incorporation
and in this Act, the number, qualifications, compensation, duties and terms
CH. 428] ACTS OF ASSEMBLY 573

of office of directors and officers; the time of their election and the mode
and manner of giving notice thereof ;

(d) The time, place and manner for calling and holding meetings of
the directors and executive committee, and the number that shall consti-
tute a quorum;

(e) 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;

(f) Penalties for violations of the by-laws.

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

§ 13.1-320. Powers. (a) 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 pur-
poses as set forth in its articles of incorporation and which are not re-
pugnant to law.

(b) Without limiting or enlarging the grant of authority contained
in paragraph (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 mem-
bers 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 by-laws.

(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; or engaged in producing, ware-
housing or marketing any of the products handled by the association; or
engaged in financing its activities or of its members, and while the owner
Pisren!, 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 State 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 association.

(7) To acquire, hold, sell, dispose of, pledge or mortgage any prop-
erty which its purposes may require, subject to any limitation prescribed
by law or its articles of incorporation. oo,

(8) To borrow money and to give its notes, bonds or other obligations

pheeetaT and secure the payment thereof in any manner consistent with

Ww.

(9) To deal in products of, and handle machinery, equipment, supplies
and perform services for, non-members to an amount not greater in annual
value than such as are dealt in, handled or performed for or on behalf of
its members, but the value of the annual purchases made for persons who
are neither members nor producers shall not exceed fifteen per centum
of the value of all its purchases.

(10) To have a corporate seal and to alter the same at pleasure.

(11) To continue as a corporation for the time limited in its articles of
incorporation, or if no time limit is specified, then perpetually.

(12) To sue and to be sued in its corporate name.

(13) To conduct business in this State and elsewhere.

(14) To dissolve and wind up.

§ 18.1-821. Members. (a) An association may admit as members
only bona fide producers of agricultural products, including tenants and
landlords receiving a share of the crop, and co-operative associations of
such producers.

(b) The articles of incorporation may limit the amount of voting
stock which a member may own.

(c) Under the terms and conditions prescribed in the by-laws a mem-
ber 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.

No member shall be personally liable for any debt or liability of
the association.

(e) No member shall have more than one vote.

§ 13.1-322. Membership or Voting Stock Certificates, Transfers,
Dividends, Non-Voting Stock. (a) 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.

(b) Certificates of membership of a non-stock association shall not
be transferred without the consent of the association’s board of directors.

(c) Voting stock in capital stock associations shall not be transferable
to persons not eligible to membership in the association and such restric-
tions must be set forth in the by-laws of each capital stock association and
vrinted on every stock certificate subject thereto.

(d) Dividends in excess of six per centum per annum on the actual
cash value of the consideration received by the association shall not be
paid on stock or membership capital, but dividends may be cumulative if
so provided in the certificate of incorporation.

(e) 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
CH. 428] ACTS OF ASSEMBLY 575

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 non-members. The by-laws may provide that any
distribution to a non-member, eligible for membership may be credited to
such non-member, until the amount thereof equals the value of a mem-
bership certificate or a share of the association’s voting stock.

(f) 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.

(g) An association may issue non-voting stock to members and non-
members. Non-voting stock may be redeemed or retired by the association
on such terms and conditions as may be provided in the articles of incorpo-
ration or by-laws and printed on the stock certificates. Payment for non-
voting 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.

(h) 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 by-laws. The determination
of book value by the board of directors shall be incontestable except for

raud.

(i) 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
tae terms and conditions as shall be provided in the by-laws and printed
thereon.

(j) Any association organized with capital stock under this Act 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 by-laws 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 pay-
ment so made.

§ 18.1-8323. 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
by-laws. Not less than ten days’ written notice thereof shall be given to
each member. An association may provide in its by-laws 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 per centum 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 State. Notice of all meetings, except as otherwise
provided by law or the articles of incorporation or by-laws, shall be mailed
to each member at least ten days prior to the meeting, and in case of
special meetings the notice shall state the purposes for which it is called,
but the by-laws may provide that all notices, except of proposed amend-
ments to the certificate of incorporation, 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
conabinett circulation is general in the territory in which the association
operates.

§ 18.1-324. Directors.—(a) 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 by-laws 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 mem-
bers 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.

(b) The names of the first directors shall be stated in the articles of
incorporation. Their successors shall be elected by the members at the
lay meeting of the members held after the incorporation of the associa-

ion.

(c) 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 by-laws.

(1) Except as otherwise prescribed in the by-laws, a director shall be
elected or appointed for a term of one year.

(2) Except as otherwise prescribed in the by-laws, vacancies in the
board, other than by expiration of term, shall be filled by the remaining
members of the board, unless the by-laws provide for the election of direc-
tors 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 man-
ner as the original appointment was made.

(d) The by-laws may provide that the territory in which the as-
sociation 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 by-
laws 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 by-laws 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 con-
sidered as a final election.

(e) The by-laws may provide for an executive committee to be elected
by the board of directors from their number and may allot to such com-
mittee all the functions and powers of the board subject to its general
direction and control.
§ 18.1-325. 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 meet-
ing 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 by-laws 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.

13.1-326. Officers.—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 by-laws. 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.

§ 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.

§ 13.1-328. Referendum.—The articles of incorporation or by-laws
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 ques-
tion 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.

§ 13.1-329. Marketing Contract; Enforcement; Spreading False Re-
ports.—(a) An association and its members may make and execute mar-
keting 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 facili-
ties to be created by the association. The contract may provide that the as-
sociation 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,
578 ACTS OF ASSEMBLY [va., 1956

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. _

(b) The by-laws 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 con-
tract 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 State.

(c) 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.

(d) Any person who knowingly induces any member or stockholder
of an association or corporation organized hereunder to breach his market-
ing contract with the association or corporation shall be liable to the asso-
ciation 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 asso-
ciation 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 five hundred
dollars for each such act, which may be recovered in the same action.

(e) Any person, firm or corporation conducting a public tobacco ware-
house within this State 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 one hundred nor more than five hundred dollars 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
deltvered 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 State 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.

§ 18.1-330. Recordation of Marketing Contracts.—(a) Whenever any
CH. 428] ACTS OF ASSEMBLY 579.

body of agricultural producers, co-operative corporation composed of agri-
cultural producers or co-operative marketing association incorporated under
the laws of this State, or under the laws of any other state of the United
States and licensed to do business in this State, which is engaged in mar-
keting agricultural products, other than leguminous food products, for its
members shall prepare and deliver to the clerk of any court in this State
in the office of whom deeds are admitted to record, a book to be called
“the contract book Of ...........ssccssssssssscsssesssenees ” (naming the body, corpora-
tion 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.

(b) 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 agree-
ments be in the same words and figures as any other contracts or agree-
ments 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 agree-
ments, 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.

(c) When the provisions of the two preceding sections 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 subse-
quent 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 agree-
ment; 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 ware-
house, 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.

(d) 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 record-

ing a sworn list of names when furnished as above provided, two cents

ae oul person. No tax shall be charged on the recordations authorized
ereby.

§ 13.1-331. Associations Are Not in Restraint of Trade. (a) No as-
sociation complying with the terms hereof shall be deemed to be a con-
spiracy, or a combination in restraint of trade, or an illegal monopoly;
or be deemed to have been formed for the purpose of lessening com-
petition 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.

(b) An association may acquire, exchange, interpret and disseminate
to its members, to other co-operative 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.

(c) An association may advise its members in respect to the adjust-
ment of their current and prospective production of agricultural com-
modities 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 en-
hancement of prices or the accumulation of any undue surplus.

§ 13.1-332. Voluntary Dissolution.—(a) (1) The members of an as-
sociation 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 meet-
ing having been given as prescribed in the by-laws, by two-thirds of the
voting power voting thereon, discontinue the operations of the associa-
tion 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 by-laws. 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 satis-
fied that the requirements of law have been complied with, shall issue a
certificate of dissolution, and thereupon the association shall stand dis-
solved 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 dissolu-
tion 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 Com-
mission, it shall certify one copy of the certificate to the Commissioner of
Agriculture and Immigration 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.
CH. 428] ACTS OF ASSEMBLY 581

(5) Any vacancies in the trusteeship may be filled by the remaining
trustees.

(b) 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 per-
sons 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 associa-
tion 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
sna 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 associa-
tion and the distribution or division of such property or its proceeds among
the members or persons entitled thereto;

(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.

§ 13.1-333. Annual Reports.—Each association subject to this Act
within six months after the close of its fiscal year shall file with the Com-
missioner of Agriculture and Immigration an annual report containing the
name of the association, its place of business and 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 membership fees received, if a non-.
stock association ; an income statement; and its balance sheet. Any associa-
tion audited by a certified public accountant may comply with this section
by filing a copy of such audit with the Commissioner of Agriculture and
Immigration. If such report or audit be not so filed, upon complaint of the
Commissioner of Agriculture and Immigration, the Attorney General shall
thereupon institute appropriate proceedings against any such association
if in his opinion such proceedings are justified. The information contained
in such report or audit shall be submitted to the members at their annual
meeting, or mailed to each member of the association, or printed in an
official publication of the association.

§ 138.1-834. Application to Existing Associations.—(a) This Act
shall be applicable to any existing association formed under or which has
adopted the provisions of the Agricultural Co-operative Association Act,
Chapter 15, Title 13. Code of Virginia, 1950, 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 require-
ments of this Act to the same extent and effect as though organized
hereunder.

_ (b) Any agricultural co-operative marketing or purchasing associa-
tion organized as a corporation under the laws of this State 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
State 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 Immigration for filing and another
counterpart shall be certified to the Director of the State Agriculture Ex-
tension Division for filing.

§ 138.1-335. Saving Clause—This Act shall not impair or affect any
act done, offense committed or right accruing, accrued or acquired, or
liahility, penalty, forfeiture or punishment incurred prior to the time this
Act takes effect, but the same may be enjoyed, asserted, enforced, prose-
cuted 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.

§ 18.1-386. Limitations of the Use of the Word “Co-operative.”—No
person, firm, corporation or association. domestic or foreign, hereafter com-
mencing business in this State shall use the word “co-operative” 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
State relating to co-operative associations. A foreign association organized
under and complying with the co-operative law of the state of such associa-
tion’s creation shall be entitled to use of term “‘co-operative” in this State if
it has obtained the privilege of doing business in this State under any
co-operative statute of this State. Any person violating the provisions of
this section shall be deemed guilty of a misdemeanor and shall be subject to
a fine not exceeding fiftv dollars. For the purpose of this section, each day’s
violation may be considered a separate offense.

§ 13.1-337. Foreign Associations.—A foreign corporation that
can qualify as an association, as defined in § 18.1-313 of this Act, may be
authorized to do business in this State under the provisions of this Act by
complying with the laws relating to foreign corporations doing business in
the State and filing with the Commissioner of Agriculture and Immigra-
tion 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.

§ 18.1-338. 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 ex-
changing 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.

§ 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 cor-
porations in so far 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 member-
ship 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.

§ 13.1-340. Sale, Mortgage or Other Disposition of Assets.—The sale.
lease, exchange, mortgage, pledge or other disposition of all, or substan-
tially 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 anv 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
good will, 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 substantiallv all, the property and assets, with
or without the good will, 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 corpora-
tion, 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 meet-
ing is to consider the sale, lease, exchange, mortgage, pledge or other
disposition of all, or substantially all, the property and assets of the associa-
tion 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 author-
ize 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 repre-
sented by proxy at such meeting. After such authorization by a vote of
members, the board of directors, nevertheless, in its discretion, may aban-
don 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.

§ 13.1-341. Taxes.—Nothing in this chapter 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 chapter as non-profit shall not be construed as exempting it from
State income taxation, notwithstanding any other provision of law. For
the privilege of storing and/or marketing farmers’ crops or products in-
cluding dairy products, fruit or live stock, 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 and/or marketing of farmers’ crops or products.

§ 18.1-342. Constitutionality.—If any provision of this Act or the
application thereof to any person or circumstances is held invalid, such
invalidity shall not affect other provisions or applications of the Act which
can be given effect without the invalid provision or application, and to this
end the provisions of this Act are declared to be severable.

§ 13.1-348. Application of General Corporation Laws.—The provisions
of the Virginia Stock Corporation Act and of the Virginia Non-Stock Cor-
poration Act shall, to the extent that they are not in conflict with or in-
consistent 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.

§ 13.1-344. Existing Associations Continued.—All associations organ-
ized under or that have adopted the provisions of Chapter 15, Title 13,
Code of Virginia, 1950, 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.

ARTICLE 4

UNIFORM STOCK TRANSFER ACT

§ 13.1-401. How titles to certificates and shares transferred.—Title
to = certificate and to the shares represented thereby can be transferred
only:

(a) By delivery of the certificate endorsed either in blank or to a
specified person by the person appearing by the certificate to be the owner
of the shares represented thereby; or

(b) By delivery of the certificate and a separate document containing
a written assignment of the certificate or a power of attorney to sell, assign
or transfer the same or the shares represented thereby, signed by the per-
son appearing by the certificate to be the owner of the shares represented
thereby. Such assignment or power of attorney may be either in blank or
to a specified person.

The provisions of this section shall be applicable although the charter
or articles of incorporation or code of regulations or by-laws of the corpora-
tion issuing the certificate and the certificate itself provide that the shares
represented thereby shall be transferable only on the books of the corpora-
tion or shall be registered by a registrar or transfered by a transfer agent.

§ 13.1-402. Powers of those lacking full legal capacity and of fi-
duciaries not enlarged.—Nothing in this article shall be construed as en-
larging the powers of an infant or other person lacking full legal capacity,
or of a trustee, executor or administrator, or other fiduciary, to make a valid
endorsement, assignment or power of attorney. But if a fiduciary in whose
name are registered any shares of stock, bonds or other securities of any
corporation, public or private, or company or other association, or of any
CH. 428] ACTS OF ASSEMBLY 585

trust, transfers the same, such corporation or company or other association
or any of the managers of the trust, or its or their transfer agent, is
not bound to inquire whether the fiduciary is committing a breach of his
obligations as fiduciary in making the transfer, or to see to the performance
of the fiduciary obligation, and is liable for registering such transfer only
when registration of the transfer is made with actual knowledge that the
fiduciary is committing a breach of his obligation as fiduciary in making
the transfer, or with knowledge of such facts that the action in registering
the transfer amounts to bad faith.

§ 13.1-403. Corporation not forbidden to treat registered holder as
owner othing in this article shall be construed as forbidding a corpora-

jon:

(a) To recognize the exclusive right of a person registered on its books
as the owner of shares to receive dividends, and to vote as such owner; or

(b) To hold liable for calls and assessments a person registered on its
books as the owner of shares.

§ 13.1-404. Title derived from certificate extinguishes title derived
from a separate document.—The title of a transferee of a certificate under
a power of attorney or assignment not written upon the certificate and the
title of any person claiming under such transferee, shall cease and deter-
mine if, at any time prior to the surrender of the certificate to the corpora-
tion issuing it, another person, for value in good faith, and without notice
of the prior transfer, shall purchase and obtain delivery of such certificate
with the endorsement ‘of the person appearing by the certificate to be
the owner thereof, or shall purchase and obtain delivery of such certificate
and the written assignment or power of attorney of such person though
contained in a separate document.

§ 13.1-405. Who may deliver a certificate—The delivery of a cer-
tificate to transfer title in accordance with the provisions of § 13.1-349 is
effectual, except as provided in § 13.1-355, though made by one having no
right of possession and having no authority from the owner of the certifi-
cate or from the person purporting to transfer the title.

§ 13.1-406. Endorsement effectual in spite of fraud, duress, mistake,
revocation, death, incapacity, or lack of consideration or authority.—The
endorsement of a certificate by the person appearing by the certificate to
be the owner of the shares represented thereby is effectual, except as pro-
vided in § 13.1-356, though the endorser or transferor:

(a) Was induced by fraud, duress or mistake to make the endorsement
or delivery ; or

(b) Has revoked the delivery of the certificate, or the authority given
by the endorsement or delivery of the certificate; or

(c) Has died or become legally incapacitated after the endorsement
whether before or after the delivery of the certificate; or

(d) Has received no consideration.

§ 13.1-407. Rescission of transfer.—If the endorsement or delivery
of a certificate:

(a) Was procured by fraud or duress; or

(b) Was made under such mistake as to make the endorsement or
delivery inequitable; or

If the delivery of a certificate was made:

(c) Without authority from the owner, or

(d) After the owner’s death or legal incapacity,

The possession of the certificate may be reclaimed and the transfer
thereof rescinded, unless:

(1) The certificate has been transferred to a purchaser for value in
good faith without notice of any facts making the transfer wrongful, or

(2) The iniured person has elected to waive the injury, or has been
guilty of laches in endeavoring to enforce his rights.
_ ._ Any court of appropriate jurisdiction may enforce specifically such
right to reclaim the possession of the certificate or to rescind the transfer
thereof and, pending litigation, may enjoin the further transfer of the cer-
tificate or impound it.

§ 13.1-408. Effect of rescission of transfer of certificate —Although
the transfer of a certificate or of shares represented thereby has been
rescinded or set aside, nevertheless, if the transferee has possession of the
certificate or of a new certificate representing part, or the whole of the same
shares of stock, a subsequent transfer of such certificate by the transferee,
mediately or immediately, to a purchaser for value in good faith, without
notice of any facts making the transfer wrongful, shall give such pur-
pumer an indefeasible right to the certificate and the shares represented

ereby.

§ 13.1-409. Delivery of unendorsed certificate imposes obligation to
endorse.—The delivery of a certificate by the person appearing by the cer-
tificate to be the owner thereof without the endorsement requisite for the
transfer of the certificate and the shares represented thereby, but with
intent to transfer such certificate or shares, shall impose an obligation, in
the absence of an agreement to the contrary, upon the person so delivering,
to complete the transfer by making the necessary endorsement. The trans-
fer shall take effect as of the time when the endorsement is actually made.
This obligation may be specifically enforced.

§ 13.1-410. Ineffectual attempt to transfer amounts to a promise to
transfer.—An attempted transfer of title to a certificate or to the shares
represented thereby without delivery of the certificate shall have the effect
of a promise to transfer and the obligation, if any, imposed by such promise
shall be determined by the law governing the formation and performance of
contracts.

§ 18.1-411. Warranties on sale of certificate.—A person who for value
transfers a certificate, including one who assigns for value a claim secured
by a certificate, unless a contrary intention appears, warrants:

(a) That the certificate is genuine;

(b) That he has a legal right to transfer it; and . .

(c) That he has no knowledge of any fact which would impair the
validity of the certificate.

In the case of an assignment of a claim secured by a certificate, the
id of the assignor upon such warranty shall not exceed the amount of
the claim.

§ 13.1-412. No warranty implied from accepting payment of a debt.—
A mortgagee, pledgee or other holder for security of a certificate who in
good faith demands or receives payment of the debt for which such certifi-
cate is security, whether from a party to a draft drawn for such debt, or
from any other person, shall not by so doing be deemed to represent or to
warrant the genuineness of such certificate, or the value of the shares
represented thereby.

§ 18.1-418. No attachment or levy upon shares unless certificate sur-
rendered or transfer enjoined.—No attachment or levy upon shares of stock
for which a certificate is outstanding shall be valid until such certificate be
actually seized by the officer making the attachment or levy, or be sur-
rendered to the corporation which issued it, or its transfer by the holder be
enjoined. Except where a certificate is lost or destroyed, such corporation
shall not be compelled to issue a new certificate for the stock until the old
certificate is surrendered to it.

§ 13.1-414. Creditor’s remedies to reach certificate —A creditor whose
debtor is the owner of a certificate shall be entitled to such aid from courts
of appropriate jurisdiction, by injunction and otherwise, in attaching such
certificate or in satisfying the claim by means thereof, as is allowed at law
or in equity in regard to property which cannot readily be attached or
levied upon by ordinary legal process.

§ 13.1-415. No lien restriction unless indicated on certificate.—There
shall be no lien in favor of a corporation upon the shares represented by a
certificate issued by such corporation and there shall be no restriction upon
the transfer of shares so represented by virtue of any by-laws of such cor-
poration, or otherwise, unless the right of the corporation to such lien or
the restriction is stated upon the certificate.

§ 13.1-416. Alteration of certificate does not divest title to shares.—
The alteration of a certificate, whether fraudulent or not and by whom-
soever made, shall not deprive the owner of his title to the certificate and
the shares originally represented thereby, and the transfer of such certifi-
cate shall convey to the transferee a good title to such certificate and to the
shares originally represented thereby.

§ 18.1-417. Lost or destroyed certificate——Where a certificate has
been lost or destroyed, a court of competent jurisdiction may order the
issue of a new certificate therefor on service of process upon the corpora-
tion and on reasonable notice by publication, and in any other way which
the court may direct, to all persons interested, and upon satisfactory proof
of such loss or destruction and upon the giving of a bond with sufficient
surety to be approved by the court to protect the corporation or any per-
son injured by the issue of the new certificate from any liability or ex-
pense which it or they may incur by reason of the original certificate re-
maining outstanding. The court may also in its discretion order the pay-
ment of the corporation’s reasonable costs and counsel fees.

The board of directors of a corporation may issue a new certificate
in the place of a certificate alleged to have been lost or destroyed without
any such court proceeding and either with or without the giving of a bond
as aforesaid.

The issue of a new certificate as provided in this section shall not re-
lieve the corporation from liability in damages to a person to whom the
original certificate has been or shall be transferred for value without notice
of the proceedings or of the issuance of the new certificate except that no
corporation which has issued a certificate pursuant to an order of court
under this section shall be liable in an amount in excess of the amount
specified in such bond.

§ 18.1-418. Cases not provided for by this article—lIn any case not
provided for by this article, the rules of law and equity, including the law
merchant, and in particular the rules relating to the law of principal and
agent, executors, administrators and trustees, and to the effect of fraud,
misrepresentation, duress or coercion, mistake, bankruptcy, or other in-
validating cause, shall govern.

§ 13.1-419. Interpretation shall give effect to purpose of uniform-
ity.—This article shall be so interpreted and construed as to effectuate its
general purpose to make uniform the law of this State with that of other
states which enact a law to the same effect.

§ 13.1-420. Definition of endorsement.—A certificate is endorsed when
an assignment or a power of attorney to sell, assign, or transfer the certifi-
erate or the shares represented thereby is written on the certificate and
signed by the person appearing by the certificate to be the owner of the
shares represented thereby, or when the signature of such person is written
without more upon the back of the certificate. In any of such cases a cer-
tificate is endorsed though it has not been delivered.

§ 13.1-421. Definition of person appearing to be the owner of certifi-
cate.—The person to whom a certificate was originally issued is the per-
son appearing by the certificate to be the owner thereof, and of the shares
represented thereby, until and unless he endorses the certificate to another
specified person, and thereupon such other specified person is the person
appearing by the certificate to be the owner thereof until and unless he
also endorses the certificate to another specified person. Subsequent special
endorsements may be made with like effect.

§ 18.1-422. Other definitions. —(1) In this article, unless the context
or subject matter otherwise requires:

“Certificate” means a certificate of stock in a corporation organized
under the laws of this State or of another state whose laws are consistent
with this article.

ia means voluntary transfer of possession from one person to
another

“Person” includes a corporation or partnership or two or more pees
having a joint or common interest.

“Purchase” includes taking as mortgagee or as pledgee.

“Purchaser” includes mortgagee and pledgee.

“Shares” means a share or shares of stock in a corporation organized
under the laws of this State or of another state whose laws are consistent
with this article.

“State” includes state, territory, district and insular possession of the
United States.

“Transfer” means transfer of legal title.

“Title” means legal title and does not include a merely equitable or
beneficial ownership or interest.

“Value” is any consideration sufficient to support a simple contract.
An antecedent or pre-existing obligation, whether for money or not, con-
stitutes value where a certificate is taken either in satisfaction thereof or
as security therefor.

(2) A thing is done “in good faith” within the meaning of this article,
when it is, in fact, done honestly, whether it be done negligently or not.

§ 13.1-423. Name of article—This article may be cited as the
Uniform Stock Transfer Act.

ARTICLE 5
SECURITIES ACT

CHAP 1
DEFINITIONS

§ 18.1-501. Definitions.—When used in this Article, unless the context
otherwise requires: .

_ , (a) “Commission” means the State Corporation Commission of Vir-
ginia.

(b) “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 an issuer offering a security exempted by clause (1), (2), (3), (7), (10)
or (11) of § 138.1-514(a).

(c) “Broker-dealer” means any person engaged in the business of sell-
ing securities for the account of others or for his own account otherwise
than with or through a broker-dealer or agent, but does not include a bank,
an issuer or an agent or a person who effects not more than 15 transactions
in this State with persons other than corporations during any period of 12
consecutive calendar months.

(d) “Guaranteed” means guaranteed as to payment of principal, in-
terest or dividends.

(e) “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 di-
rectors (or persons performing similar functions) or of the fixed, re-
stricted 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 isto 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 fractional
interests therein for the purpose of offering to more than five persons.

(f) “Nonissuer distribution” means any transaction not directly or in-
directly for the benefit of the issuer. .

. (g) “Person” means an individual, a partnership, a corporation, an un-
incorporated association, a government, a subdivision of a government or
a trust in which the interests of the beneficiaries are evidenced by securities.

(h) (1) The term “sale” or “sell” includes every contract of sale of,
ai to sell, or disposition of, a security or interest in a security for
value.

(2) The term “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.

(3) For the purposes of Chapter 4 of this Article 5 the terms defined
in this subsection 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.

(4) 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 - the subject of such purchase and to have been offered and sold

or value.

(5) 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 such security into another security of the
same issuer or of another person, shall be deemed to include an offer of
such other security.

(i) “Securities Act of 1933” “Securities Exchange Act of 1934” and
“Investment Company Act of 1940” mean the federal statutes of those
names as now or hereafter amended.

(j) “Security” means any note; stock; treasury stock; bond; deben-
ture; evidence of indebtedness; certificate of interest or participation in any
profit sharing agreement; collateral trust certificate; preorganization cer-
tificate of subscription; transferable share; investment contract; voting-
trust certificate; certificate of deposit for a security; oil, gas or other min-
eral 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, receipt
for, guarantee of, or warrant or right to subscribe to or purchase, any of
the foregoing.

(k) “State” means any state, territory or possession of the United
States, including the District of Columbia and Puerto Rico.

CHAP 2

UNLAWFUL PRACTICES

§ 18.1-502. 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
590 ACTS OF ASSEMBLY [va., 1956

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.

§ 18.1-503. Unlawful Advice.—(a) It shall be unlawful for any person
who receives 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, or .

(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. _

(b) Any contract pursuant to which advice concerning investments is
given in consideration of compensation on the basis of a share of capital
gains upon or capital appreciation of the funds or any portion of the funds
of the person to whom the advice is given shall be unlawful and void; but
this section shall not prohibit a contract providing 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.

CHAP 8
BROKER-DEALERS AND AGENTS

§ 18.1-504. Registration.—(a) It shall be unlawful for any person to
transact business in this State as a broker-dealer or as an agent, except in
transactions exempted by § 18.1-514 (b), unless he is so registered under
this Article.

(b) The registration of an agent shall be deemed effective only so long
as he is connected with a specified broker-dealer registered under this article
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 connec-
tion from one broker-dealer or issuer to another shall not be required to file
a new application for registration. It shall be unlawful for any broker-
dealer or issuer to employ an unregistered agent. More than one broker-
dealer or issuer may employ the same agent. z

§ 13.1-505. Procedure for Registration—(a) A broker-dealer or agen
may be registered after filing with the Commission an application con-
taining such relevant information as the Commission may require. He shall
be registered if the Commission finds that he (and, in the case of a corpora-
tion or partnership, the officers, directors or partners) is a person of good
character and reputation, that he has a regular place of business in this
State, that his knowledge of the securities business and his financial re-
sponsibility are such that he is a suitable person to engage in the business,
that he has supplied all information required by the Commission and that
he has paid the necessary fee.

(b) The Commission may require as a condition of registration or
renewal of registration the filing by a broker-dealer of a reasonable surety
bond conditioned as the Commission may require for the protection of in-
vestors 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 exceeds $25,000.

(c) The Commisison may require as a condition of registration the
passing of a written examination as evidence of knowledge of the securities

usiness.

(d) All registrations and renewals thereof shall expire at midnight on
the following thirtieth day of April.

(e) 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.
CH. 428] ACTS OF ASSEMBLY 591

(f) Each application for a registration or renewal of a registration as
a broker-dealer shall be accompanied by a fee of twenty-five dollars, payable
to the Treasurer of Virginia. If the registration or renewal is not granted
the application fee shall not be returnable. . .

(g) Each application for a registration or renewal of a registration as
an agent shall be accompanied by a fee of ten dollars, payable to the Treas-
urer of Virginia. If the registration or renewal is not granted the applica-
tion fee shall not be returnable. .

(h) For the purposes of registration as a broker-dealer, 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. . as

(i) The Commission shall either grant or deny each application for
registration within thirty days after it is filed but this period may be ex-
tended if additional time is required for formal hearing on the application.

(j) A renewal of registration shall be granted as 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.

§ 18.1-506. 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 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 or any partner, officer or di-
rector of such broker-dealer (or any person occupying a simliar status or
performing similar functions), or any person directly or indirectly controll-
ing or controlled by such broker-dealer or that such agent

(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) has been adjudicated mentally incompetent or is a person for whom
a committee or guardian has been appointed and is acting;

(4) has been convicted, within or without this State, of any misde-
meaner involving a security or any aspect of the securities business or any

eiony ; .
(5) has failed to furnish information requested by the Commission
concerning his conduct of the securities business; or

(6) has no regular place of business in this State.

CHAP 4
REGISTRATION OF SECURITIES

§ 18.1-507. Registration Requirement.—It shall be unlawful for any
person to offer or sell any security unless the security is registered under
this Article or the security or transaction is exempted by this Article.

18.1-508. Registration by Notification.—(a) The following securities
may registered by notification:

(1) any security whose issuer (which, for the purposes of this sub-
section, shall include any predecessor by merger, consolidation or acquisi-
tion 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
f 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
yeing registered does not have a fixed maturity or a fixed interest or
lividend provision) (A) the issuer is a corporation which has assets of at
east $500,000 after deduction of depreciation and other reserves, which
592 ACTS OF ASSEMBLY [vA., 1956

has a net worth of at least $10,000, which is incorporated under the laws
of this State and which conducts a substantial portion of its business in this
State, 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 per cent of the amount of such outstanding securities as measured
by their maximum public offering price or their market price on a day
within thirty days of the date of filing the registration statement, which-
ever is higher, or their book value on a day within ninety 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 per cent 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 ac-
cepted 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 secur-
ity of the same class has ever been registered or (ii) the security being
registered was originally issued pursuant to an exemption in this Article 5.

(b) A registration statement under this section shall state the facts
showing eligibility of the securities for registration by notification and the
amount and maximum offering price of the securities proposed to be offered
in this State. It shall be accompanied by a fee of one-twentieth of one per
cent of the maximum offering price of the securities proposed to be offered
in this State; provided that the fee shall not be less than ten dollars nor
more than seventy-five dollars.

(c) 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 3 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 deter-
mine by order, letter or telegram.

§ 18.1-509. Registration by Coordination. — (a) 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 state-
ment and no proceeding looking toward such an order is pending.

(b) A registration statement under this section shall consist of the
prospectus filed under the Securities Act of 1933 together with all amend-
ments or supplements thereto and a statement of the amount and maximum
offering price of the securities proposed to be offered in this State. The
Commission may require that it also include the articles of incorporation
and by-laws, any agreements with underwriters, any indenture or other
instrument governing the issuance of the security to be registered, a
specimen of the security and any other information or documents filed
under the Securities Acts of 1933. The registration statement shall be
accompanied by a fee of one-twentieth of one per cent of the maximum
aggregate offering price of the securities proposed to be offered in this
State; provided that the fee shall not be less than ten dollars nor more than
seventy-five dollars.

(c) 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
CH. 428] ACTS OF ASSEMBLY _ 593

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 for at least three full business days. Unless the
definitive information concerning price and other matters dependent there-
on has been so on file with the Commission, the registrant shall promptly
notify the Commission by telephone or telegram 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 fill 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 ground for the entry of a stop
order retroactively denying effectiveness to the registration statement,
without notice or hearing, if the Commission promptly notifies the regis-
trant by telephone or telegram (and promptly confirms by letter or telegram
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 or telegram,
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.

§ 13.1-510. Registration by Qualification —(a) Any security may be
registered by qualification.

A registration statement under this section shall contain the
following information:

(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 in-
tention 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 clause (2): 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 per cent or more of the outstanding shares of any class of
~quity security of the issuer: the information specified in clause (2) other
shan his occupation;

(5) with respect to every promoter if the issuer was organized within
he past three years: the information specified in clause (2), any amount
yaid to him within such period or intended to be paid to him and the con-
ideration 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 ma-
terial 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 (A) a descrip-
tion of each class of security outstanding or being registered or otherwise
offered, and (B) 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 ibs serunitice 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 finders’ 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 under-
writer 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 ex-
pense 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 clause (2), (4), (5), (6) or (8) and by any person who holds
or will hold ten per cent 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, ad-
vertisement or other sales literature intended as of the effective date to be
used in connection with the offering; :

_ (18) a specimen of the security being registered ; a copy of the issuer’s
articles of incorporation and by-laws (or their substantial equivalents) as
currently in effect; and a copy of any indenture or other instrument cover-
ing 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 predecessors’ 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.

(c) A registration statement shall state the amount of securities to be
offered in this State and shall be accompanied by a filing fee of one-tenth
of one per cent of the maximum aggregate offering price at which the se-
curities are proposed to be offered in this State; provided that the fee shall
not be less than $25.00 nor more than $250.00. If registration is denied by
the Commission or the registration statement is withdrawn before it be-
comes effective, any part of the fee paid in excess of $100.00 shall be
refunded.

(d) A registration statement under this section shall become effective
when the Commission so orders.

(e) It shall be unlawful to sell any security registered under this sec-
tion that constitutes the whole or a part of an unsold allotment or sub-
scription 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.

(f) 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 shall so require 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.

(g) The Commission may accept a registration statement that omits
part of the information required by subsection (b) if it determines that the
omitted part is unnecessary for the protection of investors.

(h) If any prospectus, document or exhibit filed as provided in this
section shall disclose that any of the securities sought to be registered
by qualification, or as much as 25% of any class of the securities of the
issuer to be outstanding, shall have been or shall be intended to be issued
for any patent right, copyright, trade mark, process, formula, good will 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, pro-
vided that the owners of such securities shall not be entitled to sell or
transfer such securities or to withdraw such securities from escrow until all
other stockholders who have paid for their stock in cash shall have been
596 ACTS OF ASSEMBLY [vA., 1956

paid a dividend or dividends aggregating not less than 5% of the initial
offering price shown to the satisfaction of the Commission to have been
actually earned on the investment in any common stock so held. 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 Com-
mission may require that the proceeds from the sale of such securities be
delivered in escrow to some satisfactory depository until at least 75%
of the total securities originally proposed to be offered and sold shall have
been sold and paid for.

§ 13.1-511. Effectiveness and Reports.— A registration statement
filed under this Chapter 4 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 non-
issuer 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 and the Commission may require such information
to be included in the prospectus.

§ 18.1-512. Certain Investment Company Securities.—A registration
statement relating to a security issued by a face-amount certificate com-
pany or a redeemable security issued by an open-end management company
or unit investment trust, as those terms are defined in the Investment
Company Act of 1940, may be amended after its effective date so as to
increase the securities specified therein as proposed to be offered. At the
time of filing such amendment there shall be paid to the Commission a fee

§ 18.1-513. Stop Orders.—(a) 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 con-
nection with the offering, any provision of this Article or of any other law
applicable to the offering, or any rule, order or condition lawfully imposed
under this Article;

(3) any person specified in clause (2) has failed to furnish any in-
formation lawfully requested by the Commission;

(4) the right to sell the securities which are the subject of the regis-
tration statement has been denied or revoked or is suspended under any
federal act applicable to the offering (and such denial, revocation or sus-
pension is still in effect) ;
CH. 428] ACTS OF ASSEMBLY 597

(5) thei issuer is insolvent, either in the sense that its liabilities exceed
its assets or in the sense that it cannot meet its obligaions 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 registraton.

(b) No stop order shall be entered without reasonable notice to the
applicant or registrant.

(c) 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.

CHAP 5
EXEMPTIONS, PROCEDURE AND PENALTIES

§ 13.1-514. Exemptions.—(a) The following securities are exempted
from the securities registration requirements of this Article:

(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 fore-
going; 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 main-
tains 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 De-
velopment, or any national bank, or any bank or trust company organized
under the laws of any state and supervised by the banking commissioner or
similar official of that state or this State;

(4) any security issued by and representing an interest in or a debt
of, or guaranteed by, any federal building and loan association, or by any
building and loan association which is organized under the laws of this
State and is supervised and examined by the Commission;

(5) any security issued or guaranteed by an insurance company li-
censed to transact insurance business in this State, or the sale of whose
stock has been licensed pursuant to § 38.1-123 of the Code of Virginia;

(6) any security issued or guaranteed by any credit union or industrial
loan association which is organized under the laws of this State 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, the American Stock Ex-
change or the Midwest Stock Exchange, or which is listed on the Richmond
Stock Exchange; 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 security issued by any person organized and operated not for
private profit but exclusively for religious, educational, benevolent, chari-
table, fraternal, social, athletic or reformatory purposes, or as a chamber of
commerce or trade or professional association;

(10) any commercial paper which arises out of a current transaction
or the proceeds of which have been or are to be used for current trans-
actions, and which evidences an obligation to pay cash within nine months
after the date of issuance, exclusive of days of grace, or any renewal there-
of which is likewise limited, or any guaranty of such paper or of any such
renewal ;

(11) any security issued in connection with an employees’ stock pur-
chase, savings, pension, profit-sharing or similar benefit plan;

(12) any security issued by a cooperative association organized as a
corporation under the laws of this State;

(b) The following transactions are exempted from the securities regis-
tration and the broker-dealer registration requirements of this Article ex-
cept as in this subsection expressly provided:

(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 non-issuer distribtuion by a registered broker-dealer of a
security if information regarding the issuer of such security is included in
one or more of the standard securities manuals in general use;

(8) any non-issuer distribution by a registered broker-dealer 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 per cent of
its current market price;

(4) any transaction by a registered broker-dealer pursuant to an un-
solicited order or offer to buy;

(5) any transaction in a bond or other evidence of indebtedness se-
cured 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;

; (6) any transaction in his official capacity by a receiver, trustee in
bankruptcy or other judicially appointed officer selling securities pursuant
to court orders;

(7) any offer or sale to a corporation, investment company or pension
or profit-sharing trust or to a broker-dealer;

(8) sales by an issuer of its securities to not more than thirty persons,
if all the buyers represent in writing that they are purchasing for invest-
ment and the seller reasonably accepts their representations as true; but
any resale by any such buyer within one year from the date of pur-
chase shall be prima facie evidence of a violation of this Article;

(9) 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 ninety days of their issuance, if
either (A) no commission or other remuneration (other than a standby
commission) is paid or given directly or indirectly for soliciting any security
holder in this State, or (B) 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;

(10) any offer (but not a sale) of a security for which registration
statements have been filed under both this Article 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;
CH. 428] ACTS OF ASSEMBLY 599

(11) the issuance of not more than three shares of common stock to
one Or sine of the incorporators of a corporation and the initial transfer

ereof.

(c) The following transactions are exempted from all the provisions
of this Article:

_ (1) the issuance of any stock dividend, whether the corporation dis-
tributing the dividend is the issuer of the stock 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 stock;

_ (2) 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 or sale
of assets.

(d) In any proceeding under this Article, the burden of proving an
exemption shall be upon the person claiming it.

§ 18.1-515. Advertising —The Commission may require, in any par-
ticular case, any person who has published or circulated any advertisement
or sales literature regarding a security to file copies thereof with the
Commission.

§ 18.1-516. Misleading Filings.—It shall be unlawful for any person
willfully to make or cause to be made, in any document filed with the Com-
mission or in any proceeding under this Article, 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.

§ 13.1-517. Consent to Service of Process.—Every nonresident regis-
tered as a broker-dealer 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 except one issued by the Commission. Service may be
made on the clerk or any of his staff at his office. He shall forthwith
cause it to be sent by registered or certified mail addressed to the nonresi-
dent at his latest address on file and keep a record thereof. Any process,
notice, order or demand issued by the Commission shall be served by being
mailed by the clerk of the Commission or any of his staff by registered or
certified mail addressed to the nonresident at his latest address on file. A
foreign corporation that has complied with § 13.1-111 need not comply with
this section.

§ 18.1-518. Investigations—The Commission may make such investi-
gations within or outside of this State as it deems necessary to determine
whether any person has violated or is about to violate the provisions of this
Article or any order or injunction of the Commission, and may require any
broker- dealer, issuer or agent subject to the investigation to pay the actual
costs of the investigation including twenty dollars per day for 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 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.

§ 13.1-519. Injunctions.—The Commission shall have all the power
and authority of a court of record as provided in § 156 (c) of the Con-
stitution to issue temporary and permanent injunctions against violations
or attempted violations of this Article or any order issued pursuant to this
Article. For the violation of any injunction or order issued under this
Article it shall have the same power to punish for contempt as a court
of equity, and the procedure therein shall be as set forth in § 12-21.
§ 18.1-520. Crimes.—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 Article or exhibit any false
paper to the Commission or who shall commit any act declared unlawful by
this Article shall be guilty of a misdemeanor, and, on conviction, be pun-
ished by a fine of not less than one hundred nor more than five thousand
dollars, or by confinement in jail for not less than thirty days nor more
than one year, or by both such fine and imprisonment. Prosecutions under
this secion shall be instituted by indictments in the courts of record having
jurisdiction of felonies within two years from the date of the offense. __

§ 13.1-521. Offenses Punishable by the Commission.—The Commis-
sion may, by judgment entered after a hearing on notice duly served on the
defendant not less than thirty days before the date of the hearing, 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
Article or any order of the Commission issued pursuant to this Article,
impose a penalty not exceeding five thousand dollars, which shall be col-
lectible by the process of the Commission as provided by law.

In addition to imposing such penalty, 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.

Each sale of a security in violation of the provisions of this Article
shall constitute a separate offense. The Commission may request the
seller to rescind any such sale and to make restitution to the purchaser, and
if the seller complies with the request no penalty shall be imposed on him
on account of that illegal sale.

§ 18.1-522. Civil Liabilities —(a) Any person who

(1) sells a security in violation of § 18.1-502, § 13.1-504(a), § 13.1-507,

§ 13.1-510 (e) or § 13.1-510 (f), or

(2) sells a security by means of any 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 un-
truth 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 rate of six per cent per
annum, 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.

(b) Every person who materially participates or aids in a sale made by
any person liable under subsection (a), or who directly or indirectly con-
trols any person so liable, shall also be liable jointly and severally with and
to the same extent as the person so liable, unless the person who so par-
ticipates, aids or controls sustains 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.

(c) Any tender specified in this section may be made at any time
before entry of judgment.

(d) 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) or (b) makes a written offer, before suit is brought, to refund the
CH. 428] ACTS OF ASSEMBLY 601

consideration paid, together with interest thereon at the rate of six per cent
per annum, less the amount of any income received on the security, or to
pay damages if the purchaser no longer owns the security, no purchaser
shall maintain a suit under this section who shall have refused or failed to
accept such offer within thirty days of its receipt. ;

(e) Any condition, stipulation or provision binding any person acquir-
ing any security to waive compliance with any provision of this Article or
of any rule or order thereunder shall be void. ;

(f) The rights and remedies provided by this Article shall be in
addition to any and all other rights and remedies that may exist at law
or in equity.

§ 13.1-528. Rules and Forms.—(a) The Commission shall have au-
thority from time to time to make, amend and rescind such rules and forms
as may be necesary to carry out the provisions of this Article, including
rules and forms governing registration statements, applications and re-
ports, and defining accounting, technical and trade terms used in this
Article insofar as such definitions are not inconsistent with the provisions
of this Article. Among other things, the Commission shall have authority,
for the purposes of this Article, to prescribe the content and form of
financial statements and to direct whether they should be certified by in-
dependent 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.

(b) All such rules and forms shall be printed or mimeographed avail-
able for distribution at the office of the Commission.

(c) No provision of this Article 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.

§ 13.1-524. Publicity—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.

§ 13.1-525. Official Interpretations.— The Commission shall have
jurisdiction, upon written application, payment of a filing fee of $25.00 and
submission of such data as may be necessary for the purpose, to determine
whether or not a particular security or transaction is exempt from the
registration requirements of this Article or whether or not the offer or sale
of a particular security would be lawful. 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 adjudica-
tion, whether in a civil or a criminal case.

§ 13.1-526. Transition.—Registrations of dealers and agents under
prior law shall continue as registrations as broker-dealers and agents under
this Article until the thirtieth day of April following the effective date of
this Article. Licenses issued under § 13-128 shall continue in effect until
the thirtieth day of April following the effective date of this Article. The
exemption provided for regularly established dealers by § 18-118 (11),
whenever the requirements of §§ 13-116 to 13-121 inclusive have been com-
plied with prior to the effective date of this Article, shall continue in effect
until the thirtieth day of April following the effective date of this Article
and all securities for which a registration is in effect pursuant to that
2xemption on the effective date of the repeal of § 13-113 (11) shall be
Jeemed to have been registered by notification under this Article. But such
602 ACTS OF ASSEMBLY [vA., 1956

registrations, licenses and exemptions may be terminated by the Commis-
sion for causes justifying termination of registrations under this Article.
§ 18.1-527. Short Title—This Article may be cited as the Securities

3. ° That the provisions hereof shall become effective January one, nine-
teen hundred fifty-seven except where another date is set forth herein as
to any act, requirement or application.