2006 Code of Virginia § 13.1-671.1 - Shareholder agreements

13.1-671.1. Shareholder agreements.

A. An agreement among the shareholders of a corporation that complies withthis section is effective among the shareholders and the corporation, eventhough it is inconsistent with one or more other provisions of this chapterin that it:

1. Eliminates the board of directors or, subject to the requirements ofsubsection D of 13.1-647 and subsection A of 13.1-693, one or moreofficers or restricts the discretion or powers of the board of directors orone or more officers;

2. Governs the authorization or making of distributions, whether or not inproportion to ownership of shares, subject to the limitations in 13.1-653;

3. Establishes who shall be directors or officers of the corporation, ortheir terms of office or manner of selection or removal;

4. Governs, in general or in regard to specific matters, the exercise ordivision of voting power by or between the shareholders and directors or byor among any of them, including use of weighted voting rights or directorproxies;

5. Establishes the terms and conditions of any agreement for the transfer oruse of property or the provision of services between the corporation and anyshareholder, director, officer or employee of the corporation, or among anyof them;

6. Transfers to one or more shareholders or other persons all or part of theauthority to exercise the corporate powers or to manage the business andaffairs of the corporation, including the resolution of any issue about whichthere exists a deadlock among directors or shareholders;

7. Requires dissolution of the corporation at the request of one or more ofthe shareholders or upon the occurrence of a specified event or contingency;or

8. Otherwise governs the exercise of the corporate powers or the managementof the business and affairs of the corporation or the relationship among theshareholders, the directors and the corporation, or among any of them, and isnot contrary to public policy.

B. An agreement authorized by this section shall be:

1. a. Set forth in the articles of incorporation or bylaws and approved byall persons who are shareholders at the time of the agreement; or

b. Set forth in a written agreement that is signed by all persons who areshareholders at the time of the agreement;

2. Subject to amendment only by all persons who are shareholders at the timeof the amendment, unless the agreement provides otherwise; and

3. Valid for 10 years, unless the agreement provides otherwise.

C. The existence of an agreement authorized by this section shall be notedconspicuously on the front or back of each certificate for outstanding sharesor on the information statement required by subsection B of 13.1-648. If atthe time of the agreement the corporation has shares outstanding representedby certificates, the corporation shall recall the outstanding certificatesand issue substitute certificates that comply with this subsection. Thefailure to note the existence of the agreement on the certificate orinformation statement shall not affect the validity of the agreement or anyaction taken pursuant to it. Any purchaser of shares who, at the time ofpurchase, did not have knowledge of the existence of the agreement shall beentitled to rescission of the purchase. A purchaser shall be deemed to haveknowledge of the existence of the agreement if its existence is noted on thecertificate or information statement for the shares in compliance with thissubsection and, if the shares are not represented by a certificate, theinformation statement is delivered to the purchaser at or prior to the timeof purchase of the shares. An action to enforce the right of rescissionauthorized by this subsection must be commenced within the earlier of 90 daysafter discovery of the existence of the agreement or two years after the timeof purchase of the shares.

D. An agreement authorized by this section shall cease to be effective whenthe corporation becomes a public corporation. If the agreement ceases to beeffective for any reason, the board of directors may, if the agreement iscontained or referred to in the corporation's articles of incorporation orbylaws, adopt an amendment to the articles of incorporation or bylaws,without shareholder action, to delete the agreement and any references to it.

E. An agreement authorized by this section that limits the discretion orpowers of the board of directors shall relieve the directors of, and imposeupon the person or persons in whom such discretion or powers are vested,liability for acts or omissions imposed by law on directors to the extentthat the discretion or powers of the directors are limited by the agreement.

F. The existence or performance of an agreement authorized by this sectionshall not be a ground for imposing personal liability on any shareholder forthe acts or debts of the corporation even if the agreement or its performancetreats the corporation as if it were a partnership or results in failure toobserve the corporate formalities otherwise applicable to the mattersgoverned by the agreement.

G. Incorporators or subscribers for shares may act as shareholders withrespect to an agreement authorized by this section if no shares were issuedwhen the agreement was made.

H. No action taken pursuant to this section shall change any requirement tofile articles or other documents with the Commission or affect the rights ofany creditors or other third parties.

(1990, c. 337; 1997, c. 226; 2005, c. 765.)