CHAPTER 44

An Act to amend and reenact §§ 18.1-2, 18.1-18, and 138.1-74 of the Code
of Virginia, relating respectively to definitions, determination of
amount of stated capital, and effect of merger or consolidation, so as
to provide for allocation of surplus to earned surplus in case of
mergers or consolidations of corporations, or of acquisition by cor-
porations of all or substantially all of the outstanding shares or of the
property and assets of other corporations.

[H 120]

Approved February 13, 1962

Be it enacted by the General Assembly of Virginia:

1. That §§ 18.1-2, 18.1-18 and 13.1-74 of the Code of Virginia be
amended and reenacted as follows:

§ 13.1-2. As used in this Act, unless the context otherwise requires,
the term:

(a) “Commission” means the State Corporation Commission of
Virginia.

(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
becomes 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
a purpose or purposes for which a corporation may be organized under

is Act.

(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 (except a certificate of
merger with a wholly owned subsidiary pursuant to this Act), consolida-
tion, 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 corpora-
tion, and have not been effectively cancelled by the issuance of a certifi-
cate of reduction by the Commission. Treasury shares shall be deemed to
be “issued” shares, but not ‘‘outstanding’’ shares, and shall not be con-
sidered 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 divi-
dend 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 subsequent
distributions to stockholders and transfers to stated capital and capital
surplus to the extent such distributions and transfers are made out of
earned surplus. Earned surplus shall also include any portion of surplus
allocated to earned surplus in mergers, consolidations or acquisitions of all
or substantially all of the outstanding shares or of the property and assets
of another corporation, domestic or foreign.

(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.

§ 13.1-18. In case of the issuance by a corporation of shares having
a par value, the consideration 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 State-
ment on file with the Commission.

In cases where shares have been or shall be issued by a corporation
in merger or consolidation or in acquisition of all or substantially all of the
outstanding shares or of the property and assets of another corporation,
whether domestic or foreign, any amount that would otherwise constitute
capital surplus under the foregoing provisions of this section may instead
be aliocated to earned surplus by the board of directors of the issuing cor-
poration except that its aggregate earned surplus shall not exceed the sum
of the earned surpluses as defined in this Act of all corporations, domestic
or foreign, that were merged or consolidated or by or of which the shares
or assets were acquired.

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
affected by sale of treasury shares.

§ 13.1-74. Upon the issuance of the certificate of merger or the cer-
tificate of consolidation by the Commission, 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 corpo-
ration provided for i 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) 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 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 consolidation.

(e) Such surviving or new corporation shall thenceforth be respon-
sible and liable for all the liabilities and obligations of each of the cor-
porations so merged or consolidated; and any claim existing or action or
proceeding pending by or against any of such corporations may be prose-
cuted as if such merger or consolidation had not taken place, or such sur-
viving 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 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.