1.1 The Virginia Stock Corporation Act

• Library: Corporations and Partnerships in Virginia (Virginia CLE) (2016 Ed.)

1.1 THE VIRGINIA STOCK CORPORATION ACT

Corporations are creatures of statute. They are sometimes referred to as "artificial persons." Statutes describe the powers that corporations possess as well as the procedures to be followed in organizing a corporation. Because corporations are so completely governed by statute, it is always prudent to refer to the text of the statute whenever called upon to form a corporation, no matter how familiar one may be with the procedure. This chapter considers the provisions of the Virginia Stock Corporation Act (the Act), which is codified in sections 13.1-601 through 13.1-800 of the Virginia Code and which governs the creation, organization, and governance of stock corporations.

Although this chapter is concerned only with stock corporations, Virginia law provides for nonstock corporations as well. It is possible to conduct a business through nonstock corporations, but these corporations typically have been used as the organizational structure for nonprofit activities, charitable ventures, clubs, and other voluntary associations. ¹ Cooperatives provide another form for the conduct of business-type activities, particularly for the rendering of services to those persons who "own" the activity. ² Traditional examples include utility cooperatives, housing cooperatives, and purchasing cooperatives. Virginia law permits professions to incorporate in the form of a professional corporation, a hybrid business organization having many of the attributes of a regular corporation but also preserving some of the attributes of the unincorporated practice of the profession, such as continuing individual liability for malpractice. ³ A business may also be conducted through a limited liability company, which is designed to provide the business with the flexibility to elect the tax treatment of a partnership and to afford members insulation from liability as in a corporation. ⁴

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An unincorporated business, trust, or association may conduct business or professional activities in the form of a business trust, an entity through which property may be held, managed, or operated by a trustee for the benefit of persons who own beneficial interests in the business trust, provided the business trust files articles of trust with the Virginia State Corporation Commission. ⁵

Before 1902, no general law existed in Virginia governing corporations, and the organization of a corporation required a private act of the Virginia General Assembly or...