The Virginia Stock Corporation Act, specifically referencing provisions related to shareholder rights and corporate governance, outlines the procedures and conditions under which a shareholder can demand inspection of corporate records. While shareholders generally have a right to inspect books and records, this right is not absolute and is typically conditioned upon a proper purpose. A proper purpose is defined as a purpose reasonably related to the shareholder’s interest as a shareholder. This includes investigating management’s conduct, assessing the financial health of the corporation, or determining the value of their shares. The statute requires that the demand be made in good faith and for a purpose reasonably related to the shareholder’s interest as a shareholder. The act does not mandate that the shareholder must have held their shares for a specific minimum duration, nor does it require the shareholder to demonstrate a significant percentage of ownership to exercise this right, provided the purpose is legitimate. The absence of a stated proper purpose or a demand made for an improper motive, such as harassment or obtaining trade secrets for a competitor, would be grounds for denying inspection. The statute also contemplates that the corporation may require an affidavit stating the shareholder’s purpose. Therefore, the core requirement is the demonstration of a proper, good-faith purpose related to their shareholder status.

The Virginia Stock Corporation Act, specifically referencing provisions related to shareholder rights and corporate governance, dictates the procedures for calling special meetings. A special meeting of shareholders can be called by the board of directors, or by individuals holding a specified percentage of voting power, as outlined in the articles of incorporation or bylaws. For a Virginia corporation, the Act generally requires that either the board of directors, or persons holding at least one-tenth of the votes entitled to be cast at an annual meeting, can call a special meeting. The question specifies that the call for a special meeting is initiated by shareholders holding 15% of the outstanding shares. Since 15% exceeds the one-tenth (10%) threshold, this action is permissible under the Virginia Stock Corporation Act for calling a special meeting, provided the articles of incorporation or bylaws do not impose a higher threshold. The scenario does not mention any such higher threshold. Therefore, the shareholders’ action is valid.

The Virginia Stock Corporation Act, specifically in relation to the issuance of shares for consideration, outlines the permissible forms of payment. Section 13.1-636 of the Code of Virginia establishes that corporations can receive payment for shares in cash, property, or a combination thereof. Importantly, services rendered to the corporation are also considered valid consideration for the issuance of stock. The Act further specifies that when shares are issued for consideration other than cash, the board of directors must approve the valuation of such consideration. This valuation is conclusive in the absence of fraud. The question probes the understanding of what constitutes valid consideration for stock issuance under Virginia law. Services rendered to the corporation prior to or at the time of share issuance are a recognized form of consideration, provided the board of directors properly values these services. Therefore, if a company issues shares to its founder for the extensive business development work already completed, this is a valid transaction under Virginia corporate law.

The scenario describes a situation where a Virginia corporation, “Chesapeake Innovations Inc.”, is seeking to raise capital through the issuance of new shares. The question probes the procedural requirements under Virginia law for such an issuance, specifically concerning shareholder approval. Virginia Code Section 13.1-720 mandates that a corporation may issue shares for consideration as determined by the board of directors, unless the articles of incorporation require shareholder approval. However, Virginia Code Section 13.1-721 states that if the issuance of shares would result in a significant dilution of voting power for existing shareholders, or if it materially alters the rights of a class of shareholders, then shareholder approval is typically required, often by a majority of the votes entitled to be cast by all shareholders or by a specific class if their rights are disproportionately affected. In this case, Chesapeake Innovations Inc. is issuing shares that would dilute the voting power of its current shareholders by more than 20%. Such a significant dilution triggers the need for shareholder approval as per Virginia corporate law principles aimed at protecting minority shareholder interests and ensuring that fundamental corporate changes are not made without their consent. Therefore, the board of directors must seek and obtain shareholder approval for this share issuance to comply with Virginia’s corporate finance regulations. The correct course of action involves presenting the proposal at a shareholder meeting, providing adequate notice, and achieving the requisite voting threshold.

The Virginia Stock Corporation Act, specifically referencing § 13.1-725, outlines the requirements for the issuance of shares for consideration other than cash. This statute mandates that the board of directors must approve the consideration received for shares, and their determination of the value of the non-cash consideration is conclusive as to the amount paid for the shares, unless the corporation’s articles of incorporation provide otherwise. This provision is crucial for protecting both the corporation and its shareholders by ensuring that the value of assets exchanged for stock is fairly assessed. When a corporation issues shares for property, the board’s valuation is presumed to be accurate and binding. This presumption can only be rebutted by a showing of fraud, illegality, or a clear abuse of discretion by the board. Therefore, in the scenario presented, where the board of directors of a Virginia corporation approves the issuance of shares in exchange for intellectual property, and the board’s valuation of this intellectual property is made in good faith and without fraud, their determination of the value of the consideration received for the shares is legally conclusive. This means that subsequent challenges to the valuation, absent evidence of bad faith or fraud, will not typically succeed in invalidating the share issuance or altering the stated capital. The board’s fiduciary duty requires them to act with due care and in the best interest of the corporation when making such valuations.

The Virginia Stock Corporation Act, specifically Chapter 10, addresses the issuance of stock. Section 13.1-639 details the requirements for a corporation to issue shares. When a corporation has authorized but unissued shares, it can issue them for consideration. The law specifies that shares may be issued for cash, property, or services already performed or to be performed. The board of directors is generally responsible for determining the adequacy of the consideration received for shares. In this scenario, the board of directors of “Appalachian Innovations Inc.” has determined that the intellectual property contributed by its founders constitutes sufficient consideration for the issuance of shares. This determination is a matter of business judgment, and as long as the board acts in good faith and in accordance with their fiduciary duties, their decision is generally binding. The key is that the consideration must be of value to the corporation. Intellectual property, such as patents and proprietary algorithms, is widely recognized as valuable consideration for stock issuance in Virginia. The law does not mandate a specific valuation method for non-cash consideration; rather, it relies on the board’s good faith assessment. Therefore, the issuance of shares for intellectual property is permissible under Virginia law, provided the board properly documents its determination of the consideration’s value and the shares are issued in accordance with the corporation’s articles of incorporation and bylaws.

The Virginia Stock Corporation Act, specifically under Title 13.1 of the Code of Virginia, governs the issuance and redemption of corporate stock. When a corporation redeems its own shares, it is essentially repurchasing them from shareholders. Such repurchases are permissible under Virginia law, provided they do not impair the corporation’s capital or violate any provisions of the Act. The Act requires that a redemption be conducted in accordance with the terms set forth in the articles of incorporation or the bylaws, and often at a specified price. The key constraint is that the corporation must maintain sufficient assets to cover its liabilities and obligations after the redemption. Specifically, Virginia Code § 13.1-627 outlines the conditions under which a corporation may purchase its own shares, emphasizing that such purchases must be made from unrestricted or otherwise available funds. The process typically involves a formal board resolution authorizing the redemption and specifying the terms, followed by the actual purchase and cancellation or holding of the shares as treasury stock. The legal framework aims to protect creditors and other stakeholders by preventing a corporation from depleting its assets through stock repurchases, thereby jeopardizing its solvency.

The Virginia Stock Corporation Act, specifically Chapter 13, addresses the rights of dissenting shareholders in certain corporate transactions, such as mergers or sales of substantially all assets. When a corporation proposes such a fundamental change, shareholders who vote against it and follow prescribed procedures are entitled to demand that the corporation purchase their shares at fair value. The determination of “fair value” is a critical aspect, and Virginia law provides a framework for this. The Act generally presumes that the fair value is the value of the shares immediately before the effectuation of the corporate action. This value is typically determined without regard to any appreciation or depreciation in anticipation of the corporate action, unless such appreciation or depreciation is attributable to factors other than the proposed transaction. The process involves the dissenting shareholder providing written notice of their intent to demand payment, voting against the transaction, and then delivering their share certificates to the corporation. If the corporation and the dissenting shareholder cannot agree on the fair value, Virginia Code § 13.1-737 allows for a judicial appraisal. The court will then appoint an appraiser or conduct the appraisal itself to determine the fair value of the shares. This appraisal process is central to ensuring that dissenting shareholders receive equitable compensation for their investment, upholding the principle of fairness in corporate governance within Virginia.

The Virginia Stock Corporation Act, specifically Virginia Code § 13.1-721, governs the issuance of stock for consideration other than cash. This statute permits a corporation to issue shares for any tangible or intangible benefit to the corporation. This includes services performed for the corporation, promissory notes or other obligations of the purchaser to pay the purchase price, and contracts for future services. The board of directors is responsible for determining the value of such non-cash consideration. In Virginia, the board’s determination of the adequacy and value of non-cash consideration is generally conclusive, provided it is made in good faith. This means that if the board acts honestly and reasonably, their valuation of services rendered or a promissory note as payment for stock will be upheld, even if a third party might later disagree with the valuation. The key is the good faith judgment of the board at the time of issuance. Therefore, if the board of directors of “Chesapeake Innovations Inc.” in Virginia properly authorized and documented the issuance of shares in exchange for the exclusive rights to a proprietary software algorithm developed by its founder, and they acted in good faith in valuing those rights, this issuance would be permissible under Virginia law. The statute does not require the consideration to be equivalent to the par value or market value in a strictly monetary sense, but rather that it represents a benefit to the corporation.

The scenario involves a Virginia corporation, “Dominion Dynamics Inc.,” which is considering a merger with “Appalachian Enterprises LLC.” Dominion Dynamics Inc. is a publicly traded entity, while Appalachian Enterprises LLC is a privately held limited liability company. Under Virginia corporate law, specifically the Virginia Stock Corporation Act (VSCA), mergers involving publicly traded companies often trigger specific disclosure and shareholder approval requirements. When a public corporation merges with a private entity, the VSCA generally mandates that the surviving public corporation must provide its shareholders with information comparable to that required for a merger between two public companies, particularly concerning the valuation of the acquired private entity and the terms of the exchange. This ensures that public shareholders receive adequate disclosure to make informed voting decisions. The question tests the understanding of how Virginia law addresses the disclosure obligations when a public company acquires a private one, focusing on the VSCA’s provisions for shareholder information in such transactions. The correct answer reflects the heightened disclosure standards applied to public entities to protect their diverse shareholder base, even when the counterparty is private.

The question revolves around the concept of statutory appraisal rights in Virginia, specifically as codified in the Virginia Stock Corporation Act (VSCA). When a corporation proposes a merger or consolidation, dissenting shareholders are typically afforded appraisal rights, allowing them to demand payment of the fair value of their shares. The VSCA, under § 13.1-730, outlines the procedures and conditions for exercising these rights. A key element is the requirement for a shareholder to provide written notice of their intent to demand appraisal *before* the vote on the proposed corporate action. Failure to provide this notice in a timely manner generally results in the forfeiture of appraisal rights. The explanation of the calculation is as follows: The scenario describes a shareholder, Mr. Abernathy, who voted against a merger but did not submit the required written notice of intent to demand appraisal *prior* to the shareholder vote. Virginia Code § 13.1-730(a)(1) mandates that a shareholder must deliver to the corporation a written notice of intent to demand payment *before* the vote is taken on the proposed corporate action. Since Mr. Abernathy failed to meet this prerequisite, his right to demand appraisal is extinguished. Therefore, he cannot compel the corporation to purchase his shares at their fair value. The calculation is simply the application of this statutory requirement: Notice submitted before vote = Appraisal Right. Notice submitted after vote (or not submitted) = No Appraisal Right. In this case, Mr. Abernathy’s notice was submitted after the vote, thus negating his appraisal rights. This principle ensures that corporations can rely on the shareholder vote for certainty in corporate transactions, preventing last-minute demands that could disrupt the process. The statutory framework aims to balance the rights of minority shareholders with the need for efficient corporate governance and transaction execution.

The scenario describes a situation involving a Virginia corporation, “Appalachian Innovations Inc.,” that wishes to issue new shares of common stock to raise capital. The core legal consideration here pertains to the preemptive rights of existing shareholders in Virginia. Under the Virginia Stock Corporation Act, specifically Virginia Code § 13.1-642, shareholders generally possess preemptive rights unless the articles of incorporation explicitly deny or limit them. Preemptive rights allow existing shareholders the opportunity to purchase a pro rata share of any new stock issuance before it is offered to the public. This is intended to protect shareholders from dilution of their ownership percentage and voting power. In this case, Appalachian Innovations Inc.’s articles of incorporation are silent on the matter of preemptive rights. When the articles are silent, the statutory presumption under Virginia law is that preemptive rights exist. Therefore, before issuing the new shares to external investors, the corporation must offer these shares to its current shareholders on a pro rata basis, allowing them to maintain their proportionate ownership. Failure to do so would constitute a violation of their statutory preemptive rights. The question tests the understanding of this default rule in Virginia corporate law when the corporate charter is silent.

The Virginia Stock Corporation Act, specifically referencing the provisions concerning director liability for unlawful distributions, dictates that directors who vote for or assent to a distribution that is not permitted under the Act can be held personally liable. Section 13.1-642 of the Code of Virginia outlines the conditions under which distributions are lawful, generally requiring that a corporation not be insolvent after the distribution and that the distribution not exceed the corporation’s retained earnings. If a director acts in accordance with their duties of care and loyalty, including making a good faith effort to ascertain the corporation’s financial condition and the legality of the distribution, they may be protected from liability. However, if a director knowingly or negligently approves a distribution that renders the corporation insolvent or violates the statutory limits, they can be held liable to the corporation for the amount of the distribution that exceeds the amount that could have been lawfully made. This liability is often joint and several among directors who voted for or assented to the unlawful distribution. The Act also provides for contribution among such directors and subrogation to the rights of the corporation against shareholders who received the unlawful distribution. The core principle is that directors must exercise due diligence in ensuring that corporate actions, including distributions, comply with the solvency tests and statutory limits established by Virginia law.

The Virginia Stock Corporation Act, specifically referencing provisions related to shareholder rights and corporate governance, dictates the procedures for actions impacting minority shareholders. When a corporation, such as “Appalachian Minerals Inc.,” proposes a significant corporate action like a merger that could disadvantage minority shareholders, the Act provides remedies. One such remedy is the appraisal right, which allows dissenting shareholders to demand that the corporation purchase their shares at fair value. The determination of fair value is a complex process, often involving expert valuation, and is distinct from market price. The Act outlines the procedural steps for asserting this right, including providing notice of intent to demand appraisal and submitting shares for endorsement. Failure to adhere strictly to these procedural requirements can result in the forfeiture of appraisal rights. In this scenario, the dissenting minority shareholders of Appalachian Minerals Inc. are seeking to exercise their appraisal rights following a merger proposal. The key legal principle here is that the Virginia Stock Corporation Act provides a statutory framework for protecting minority shareholders from potentially oppressive actions by the majority, with appraisal rights being a crucial mechanism. The question hinges on understanding the specific legal avenue available to these shareholders under Virginia law to obtain fair compensation for their shares if they dissent from the merger. The Virginia Stock Corporation Act, § 13.1-730 et seq., governs these appraisal rights. The correct response identifies this statutory appraisal right as the primary legal recourse.

The Virginia Stock Corporation Act, specifically § 13.1-630, addresses the issuance of shares for consideration other than cash. This section permits a corporation to issue shares in exchange for property or for services already performed. The board of directors is responsible for approving the adequacy of the consideration received for shares. In this scenario, the corporation received valuable intellectual property, which is considered “property” under the Act. The board’s resolution to accept the intellectual property as full payment for the shares is the crucial step. The Act does not mandate a specific valuation method for non-cash consideration; rather, it relies on the board’s good faith determination of adequacy. Therefore, the issuance of shares for the intellectual property, as approved by the board, is valid under Virginia law. The key is that the consideration received must be of a nature that the corporation is legally permitted to receive and that the board, acting in good faith, deems sufficient. Intellectual property falls within this permissible category.

The Virginia Stock Corporation Act, specifically § 13.1-722.1, governs the issuance of shares for consideration other than cash. This section states that shares may be issued for any tangible or intangible property or benefit to the corporation. The board of directors is responsible for approving the adequacy of the consideration received for shares. In this scenario, the board of directors of Shenandoah Innovations Inc. approved the issuance of shares in exchange for a patent. The valuation of this patent, which is an intangible asset, is crucial for determining the legality and fairness of the share issuance. The board’s determination that the patent constitutes adequate consideration is binding on the shareholders unless the consideration is demonstrably fraudulent or grossly inadequate. The question tests the understanding of the permissible forms of consideration for stock issuance under Virginia law and the role of the board of directors in approving such transactions. The issuance of shares for a patent is a valid form of consideration as it represents an intangible asset that provides a future benefit to the corporation. The board’s approval, absent fraud, validates this transaction.

The Virginia Stock Corporation Act, specifically Chapter 10, governs the issuance of stock. Section 13.1-638 outlines the requirements for a corporation to issue shares. When a corporation intends to issue shares for consideration other than cash, such as services rendered or property, the board of directors must approve the transaction. This approval must be based on a determination that the value of the consideration received is adequate. The Act does not mandate a formal appraisal by an independent third party for all non-cash considerations, but it does require the board to make a good-faith judgment regarding the value. Therefore, if the board of directors of “Chesapeake Innovations Inc.” properly determined and documented their good-faith assessment of the fair value of the consulting services provided by Ms. Anya Sharma in exchange for the newly issued shares, then the issuance would be valid under Virginia law, even without an independent appraisal. The key is the board’s diligent and documented valuation process, not necessarily an external validation for every transaction.

In Virginia, the ability of a corporation to repurchase its own shares is governed by specific statutory provisions designed to protect creditors and maintain the corporation’s solvency. Virginia Code § 13.1-725 outlines the conditions under which a corporation may acquire its own shares. Specifically, a corporation can purchase its own shares only if it is not insolvent and the purchase would not cause it to become insolvent. Insolvency, for the purposes of this statute, is defined in Virginia Code § 13.1-603 as the inability to pay debts as they become due in the usual course of business, or having assets with a fair salable value less than the sum of its liabilities. The statute further clarifies that a corporation may make the purchase if, after giving effect to the repurchase, the corporation would be able to pay its debts as they become due and would not have assets with a fair salable value less than the amount of its liabilities. This solvency test is a crucial safeguard. Therefore, if a corporation’s financial condition deteriorates such that it cannot meet the solvency requirements, it is prohibited from completing a share repurchase, even if a contract for such a repurchase was previously executed. The contractual obligation to repurchase shares does not override the statutory solvency requirements.

In Virginia, the concept of appraisal rights for dissenting shareholders is governed by the Virginia Stock Corporation Act (VSCA). Specifically, when a corporation proposes a merger or consolidation, shareholders who dissent from the transaction and properly perfect their appraisal rights are entitled to receive the fair value of their shares. The VSCA outlines a specific procedure for determining this fair value. If the corporation and the dissenting shareholder cannot agree on the fair value, the VSCA provides for a judicial appraisal process. In such a case, the corporation must file a petition with the appropriate court, joining all dissenting shareholders whose appraisal rights are at issue. The court then determines the fair value of the shares, which may include appointing one or more persons as appraisers to assist the court. The VSCA specifies that the fair value is to be determined as of the day before the effective date of the corporate action, excluding any appreciation or depreciation in anticipation of the corporate action unless exclusion would be inequitable. The corporation is typically responsible for the costs of the appraisal, including the fees and expenses of any court-appointed appraisers, unless the court orders otherwise. Dissenting shareholders are generally not entitled to interest on the fair value of their shares unless the court orders it, and the corporation must pay the appraised fair value within a specified period after the court’s determination. This process ensures that shareholders who do not consent to a fundamental corporate change are not forced to accept a valuation they deem unfair, and it provides a statutory framework for resolving disputes over share value in such transactions.

The Virginia Stock Corporation Act, specifically under Title 13.1, Chapter 9, governs the issuance of stock. Section 13.1-638 addresses the preemptive rights of shareholders. Preemptive rights are the rights of existing shareholders to purchase a pro-rata share of any new stock issued by a corporation. These rights are not automatic and must be expressly provided for in the articles of incorporation or adopted by the board of directors. If the articles of incorporation are silent on the matter, and the board has not adopted a resolution granting preemptive rights, then shareholders do not possess them. In such a case, the corporation can issue new shares to whomever it chooses, including new investors, without offering them to existing shareholders first. The scenario describes a Virginia corporation whose articles of incorporation are silent on preemptive rights. The board of directors has not adopted any resolution to grant these rights. Therefore, when the corporation decides to issue additional shares of common stock, the existing shareholders do not have a legal entitlement to purchase these new shares before they are offered to the public or other specific investors. This lack of preemptive rights allows the corporation greater flexibility in raising capital and potentially diluting existing ownership if deemed strategically beneficial by the board, provided all other corporate governance and disclosure requirements are met.

The Virginia Stock Corporation Act, specifically in relation to treasury shares, outlines the permissible uses and accounting treatments. Treasury shares are those that a corporation has reacquired from its shareholders. Under Virginia law, these shares are considered issued but not outstanding. The Act permits a corporation to hold, transfer, or cancel treasury shares. When a corporation reacquires its own shares, it can do so out of its surplus or, if the articles of incorporation permit, out of its stated capital. However, reacquisition out of stated capital is generally restricted and often requires specific procedures to protect creditors and remaining shareholders. The most common and legally sound method for accounting for treasury shares is the cost method, where the cost of reacquisition is debited to a contra-equity account, typically named “Treasury Stock.” This account reduces total stockholders’ equity but does not affect stated capital or paid-in capital accounts directly. Alternatively, the par value method can be used, where the treasury stock account is debited for the par value of the shares, and any excess paid is debited to paid-in capital in excess of par, or if that is insufficient, to retained earnings. However, the cost method is more prevalent and generally simpler. The question asks about the impact on stated capital when shares are reacquired for cash. Virginia law generally prohibits the reduction of stated capital through the mere reacquisition of shares unless specific statutory procedures for a reduction of stated capital are followed, which typically involves shareholder approval and filing amended articles of incorporation. Therefore, the stated capital remains unaffected by the reacquisition of treasury shares unless a formal reduction of stated capital is undertaken.

The Virginia Stock Corporation Act, specifically concerning the authority of a corporation to issue stock, requires that a corporation’s articles of incorporation authorize the stock it proposes to issue. If the articles of incorporation do not explicitly grant the board of directors the power to issue stock, or if they are silent on the matter, the board generally cannot unilaterally decide to issue stock without prior shareholder approval or an amendment to the articles. This principle is rooted in the idea that the fundamental capital structure of a corporation, including the issuance of new stock, is a significant decision that typically requires a higher level of authorization than implied board powers. The articles of incorporation serve as the foundational document defining the corporation’s powers and limitations. Therefore, for a Virginia corporation to validly issue shares when its articles are silent on the matter, an amendment to the articles of incorporation is necessary to grant this authority. This amendment process usually involves a board resolution followed by shareholder approval as mandated by the Act for such fundamental changes.

In Virginia, the determination of whether a corporation’s actions constitute a breach of fiduciary duty, particularly the duty of care and loyalty, hinges on a rigorous judicial review. The Virginia Stock Corporation Act, specifically provisions related to director and officer liability, outlines the standards by which their conduct is judged. When a director or officer is alleged to have engaged in self-dealing or acted in a manner that demonstrably prioritizes personal gain over corporate interests, courts will scrutinize the transaction. The business judgment rule, a cornerstone of corporate law, generally shields directors from liability for honest mistakes of judgment, provided they act on an informed basis, in good faith, and in the honest belief that the action taken is in the best interests of the corporation. However, this protection is not absolute. If a transaction involves a conflict of interest, the director or officer must typically demonstrate that the transaction was fair to the corporation at the time it was authorized. This fairness is assessed by considering the terms of the transaction, the economic and other considerations for the corporation, and the benefit received by the director or officer. Virginia law also recognizes that interested director transactions can be ratified by a vote of disinterested directors or shareholders, which can cure a potential breach. In the scenario presented, the director’s personal acquisition of a valuable patent, previously developed using corporate resources and intended for corporate use, without full disclosure and fair compensation to the corporation, would likely be viewed as a violation of the duty of loyalty. The absence of a fair process and the direct personal enrichment at the corporation’s expense would overcome the business judgment rule’s presumption of good faith. The measure of damages would aim to restore the corporation to the position it would have been in had the breach not occurred, which could include the fair market value of the patent or any profits derived from its misuse.

In Virginia, the distribution of corporate assets upon dissolution is governed by the Virginia Stock Corporation Act, specifically provisions concerning the winding up of a corporation’s affairs. After satisfying all debts and liabilities, remaining assets are distributed to shareholders. The order of distribution is crucial and depends on the rights associated with different classes of stock. Preferred stock often carries liquidation preferences, meaning these shareholders are entitled to receive a specified amount before common stockholders receive anything. If preferred stock has a cumulative dividend right, any unpaid dividends accrued up to the date of dissolution must also be paid to preferred shareholders before common shareholders receive any distribution. The Virginia Stock Corporation Act, in § 13.1-747, outlines that the board of directors shall cause the corporation to be wound up. Section § 13.1-748 details the procedure for winding up, including the settlement of claims and the distribution of assets. If the articles of incorporation specify a liquidation preference for preferred stock, this preference must be honored. For instance, if preferred stock has a liquidation preference of $100 per share, and there are 1,000 shares of preferred stock, a total of $100,000 must be distributed to preferred shareholders before any distribution to common shareholders. Any remaining assets after preferred shareholders have received their liquidation preference and any accrued dividends are then distributed to common shareholders on a pro-rata basis. The question asks about the priority of distribution, and the correct answer reflects the statutory hierarchy established by Virginia law, prioritizing preferred stock with liquidation preferences and accrued dividends over common stock.

The Virginia Stock Corporation Act, specifically the provisions concerning the issuance of shares, dictates the requirements for valid share issuance. When a corporation issues shares for consideration, that consideration must be legally sufficient. Virginia law generally permits consideration in the form of cash, property, or services already performed. Future services are not considered legally sufficient consideration for the issuance of shares under Virginia corporate law. Therefore, an agreement to issue shares in exchange for services to be rendered in the future would be invalid. The corporation’s board of directors has the authority to determine the adequacy of consideration, but this determination must be made in accordance with statutory requirements. Issuing shares for future services would violate the principle that shares must be issued for present value. This principle is fundamental to protecting existing shareholders from dilution and ensuring that the corporation receives tangible benefit for its equity. The act emphasizes that shares are issued for “consideration,” which implies something of present value, not a promise of future value.

The Virginia Stock Corporation Act, specifically § 13.1-733, addresses the redemption of shares. This section outlines the conditions under which a corporation may redeem its own shares. A crucial aspect of this redemption is the requirement that the corporation must have sufficient authorized but unissued shares of the same class or series, or shares of another class or series that it is permitted to issue, to be reissued. Alternatively, the corporation can reduce its stated capital. The scenario describes a Virginia corporation, “Appalachian Outfitters Inc.,” that wishes to redeem shares. The company has 10,000 shares of Class A common stock authorized, with 8,000 issued and outstanding. It plans to redeem 2,000 of these shares. Since the corporation has 2,000 authorized but unissued shares of Class A common stock (10,000 authorized – 8,000 issued = 2,000 unissued), it can proceed with the redemption by using these unissued shares. This avoids the need to reduce stated capital, which is a more complex process. The key legal principle here is the availability of authorized but unissued shares for the purpose of treasury stock acquisition through redemption, as permitted by Virginia law. This mechanism allows for capital restructuring without necessarily altering the corporation’s overall authorized share structure or reducing its stated capital.

The Virginia Stock Corporation Act, specifically referencing provisions akin to those found in Title 13.1, Chapter 9 of the Code of Virginia, governs the issuance of stock. When a corporation proposes to issue shares for consideration other than cash, such as services or property, the board of directors must determine the fair value of the non-cash consideration. This valuation is critical for ensuring that the issued shares are considered fully paid and non-assessable, thereby protecting both the corporation and its shareholders from future claims. The Act generally permits such exchanges, provided the board acts in good faith and makes a reasonable determination of value. The process involves the board of directors approving the exchange and minuting their findings regarding the fair value of the property or services received in relation to the par value or stated value of the shares issued. This valuation is a fiduciary duty of the directors, requiring due diligence and a sound basis for their assessment. Failure to properly value non-cash consideration could lead to legal challenges regarding the validity of the stock issuance or shareholder derivative suits alleging breaches of fiduciary duty. The fair value determination is not necessarily the market value but rather a good faith assessment of what the property or services are worth to the corporation at the time of the transaction.

The Virginia Stock Corporation Act, specifically concerning the issuance of shares, outlines specific requirements for the board of directors’ authorization and the proper record-keeping of share issuances. When a corporation is authorized to issue a certain number of shares, the board of directors must adopt a resolution approving the issuance of a specific number of those shares, detailing the terms and conditions of the issuance, including the consideration to be received. This resolution serves as the formal authorization for the transaction. Furthermore, the Act mandates that the corporation maintain accurate and complete records of all stock issuances, including the names of shareholders, the number and class of shares issued to each, and the dates of issuance. Failure to adhere to these procedural requirements can render an issuance voidable or subject the corporation and its directors to liability. In this scenario, the board’s failure to adopt a formal resolution authorizing the specific issuance of the 10,000 shares to the venture capital firm, coupled with the lack of proper documentation of the consideration received (which would typically be detailed in the resolution), means the issuance did not comply with the statutory mandates for stock issuance under Virginia law. The subsequent attempt to rectify this by amending the minutes retroactively does not cure the initial defect in authorization and record-keeping. Therefore, the issuance is considered invalid as it did not follow the prescribed legal process for stock issuance in Virginia.

The Virginia Stock Corporation Act, specifically Virginia Code § 13.1-722.1, addresses the preemptive rights of shareholders. Preemptive rights allow existing shareholders to maintain their proportionate ownership interest in a corporation when new shares are issued. Unless the articles of incorporation expressly deny preemptive rights, every shareholder of record at the time of a proposed share issuance is entitled to a preemptive right to acquire the proportional amount of the unissued shares of the class of stock of which they are a holder. This right is crucial for preventing dilution of ownership and voting power. The statute provides a mechanism for corporations to handle preemptive rights, including notice requirements to shareholders about their rights and the opportunity to exercise them within a specified period, typically 30 days. The articles of incorporation can modify or eliminate these rights, but if they do not, the statutory presumption favors their existence. Therefore, for a corporation formed in Virginia whose articles of incorporation are silent on preemptive rights, shareholders retain this entitlement.

The scenario involves a Virginia corporation, “Appalachian Timber Co.,” that is considering a significant capital infusion through the issuance of new preferred stock. The core legal question revolves around the procedural requirements for such an issuance under Virginia corporate law, specifically the Virginia Stock Corporation Act (VSCA). When a corporation proposes to issue shares of a class already authorized but not yet issued, or to issue shares of a new class, the VSCA generally requires board of directors’ approval. Specifically, Section 13.1-627 of the VSCA outlines the procedures for authorizing and issuing shares. For a Virginia stock corporation, the board of directors must adopt a resolution authorizing the issuance of the shares, specifying the terms of the preferred stock, including dividend rights, liquidation preferences, and conversion privileges, if any. This resolution must then be filed with the State Corporation Commission (SCC) as an amendment to the articles of incorporation if it involves a new class of stock or alters the preferences, limitations, or relative rights of existing classes. However, if the preferred stock is of a class already authorized in the articles of incorporation and the issuance is within the parameters of that authorized class, a filing with the SCC may not be strictly necessary as an amendment. The critical element is the board’s resolution, which sets the terms and authorizes the issuance. While shareholder approval is typically required for fundamental corporate changes like mergers or amendments that alter the rights of existing shareholders, the mere issuance of authorized preferred stock, even if it impacts the capital structure, usually falls within the board’s authority, provided the articles of incorporation grant the board the power to fix the terms of preferred stock. Therefore, the primary legal step is the adoption of a board resolution.