2006 Code of Virginia § 13.1-718 - Action on a plan of merger or share exchange

13.1-718. Action on a plan of merger or share exchange.

A. In the case of a domestic corporation that is a party to a merger or shareexchange:

1. The plan of merger or share exchange shall be adopted by the board ofdirectors.

2. Except as provided in subsection F of this section and in 13.1-719 and13.1-719.1, after adopting the plan of merger or share exchange the board ofdirectors shall submit the plan to the shareholders for their approval. Theboard of directors shall also transmit to the shareholders a recommendationthat the shareholders approve the plan, unless the board of directors makes adetermination that because of conflicts of interest or other specialcircumstances it should not make such a recommendation, in which case theboard of directors must transmit to the shareholders the basis for thatdetermination.

B. The board of directors may condition its submission of the plan of mergeror share exchange to the shareholders on any basis.

C. If the plan of merger or share exchange is required to be approved by theshareholders, and if the approval is to be given at a meeting, thecorporation shall notify each shareholder, whether or not entitled to vote,of the meeting of shareholders at which the plan is to be submitted forapproval. The notice shall state that the purpose, or one of the purposes, ofthe meeting is to consider the plan and must contain or be accompanied by acopy or summary of the plan. If the corporation is to be merged into anexisting domestic or foreign corporation or eligible entity and itsshareholders are to receive shares or other interests or the right to receiveshares or other interests in the surviving corporation or eligible entity,the notice shall also include or be accompanied by a copy or summary of thearticles of incorporation or organic document of that corporation or eligibleentity. If the corporation is to be merged into a domestic or foreigncorporation or eligible entity that is to be created pursuant to the mergerand its shareholders are to receive shares or other interests or the right toreceive shares or other interests in the surviving corporation or eligibleentity, the notice shall include or be accompanied by a copy or a summary ofthe articles of incorporation or organic document of the new domestic orforeign corporation or eligible entity.

D. Unless the articles of incorporation, or the board of directors actingpursuant to subsection B, require a greater vote, the plan of merger or shareexchange to be authorized shall be approved by each voting group entitled tovote on the plan by more than two-thirds of all the votes entitled to be castby that voting group. The articles of incorporation may provide for a greateror lesser vote than that provided for in this subsection or a vote byseparate voting groups so long as the vote provided for is not less than amajority of all the votes cast on the plan by each voting group entitled tovote on the transaction at a meeting at which a quorum of the voting groupexists.

E. Separate voting by voting groups is required:

1. On a plan of merger by each class or series of shares that:

a. Is to be converted under the plan of merger into shares, other securities,eligible interests, obligations, rights to acquire shares, other securitiesor eligible interests, cash, other property or any combination of theforegoing; or

b. Would be entitled to vote as a separate group on a provision in the planthat, if contained in a proposed amendment to articles of incorporation,would require action by separate voting groups under 13.1-708;

2. On a plan of share exchange, by each class or series of shares included inthe exchange, with each class or series constituting a separate voting group;and

3. On a plan of merger or share exchange, if the voting group is entitledunder the articles of incorporation to vote as a voting group to approve aplan of merger or share exchange.

F. Unless the articles of incorporation otherwise provide, approval by thecorporation's shareholders of a plan of merger or share exchange is notrequired if:

1. The corporation will survive the merger or is the acquiring corporation ina share exchange;

2. Except for amendments permitted by 13.1-706, its articles ofincorporation will not be changed;

3. Each shareholder of the corporation whose shares were outstandingimmediately before the effective date of the merger or share exchange willhold the same number of shares, with identical preferences, limitations, andrights immediately after the effective date of the merger or share exchange;and

4. With respect to shares of the surviving corporation in a merger that areentitled to vote unconditionally in the election of directors, the number ofshares outstanding immediately after the merger, plus the number of sharesissuable as a result of the merger, either by the conversion of securitiesissued pursuant to the merger or the exercise of options, rights, andwarrants issued pursuant to the merger, will not exceed by more than 20% thetotal number of shares of the surviving corporation outstanding immediatelybefore the merger.

G. If as a result of a merger or share exchange one or more shareholders of adomestic corporation would become subject to owner liability for the debts,obligations, or liabilities of any other person or entity, approval of theplan of merger or share exchange shall require the execution, by eachshareholder, of a separate written consent to become subject to such ownerliability.

(Code 1950, 13.1-70; 1956, c. 428; 1975, c. 500; 1985, c. 522; 1991, c.109; 2005, c. 765; 2006, cc. 363, 663.)