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Yes: 493 • No: 1
VirginiaHB4392026 Regular SessionHouseWALLET
Virginia Nonstock Corporation Act; numerous revisions to Act, delayed effective date.
Sponsored By: Patrick A. Hope (Democratic)
Became Law
Summary
Virginia Nonstock Corporation Act. Provides for numerous revisions to the Virginia Nonstock Corporation Act. Among other revisions, the bill (i) authorizes certain actions to derive from its bylaws in addition to its articles of incorporation, (ii) makes changes to the process of amending articles of incorporation and bylaws, (iii) authorizes inclusion of an exclusive forum provision in the bylaws, (iv) permits transfer of membership interests, (v) authorizes members to bring derivative proceedings, (vi) permits a court to remove a director in certain circumstances, (vii) provides for abandonment of an amendment or restatement of the articles of incorporation, (viii) extends the current provisions related to mergers to include interest exchanges and to provide for parent-subsidiary mergers, (ix) replaces existing provisions on conversion with provisions based on the Virginia Stock Act, and (x) adds provisions governing charitable corporations and charitable assets, including the authority of the Office of the Attorney General with respect to such. The bill includes technical amendments and has a delayed effective date of January 1, 2027. This bill is identical to SB 246.
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Bill Overview
Analyzed Economic Effects
43 provisions identified: 15 benefits, 10 costs, 18 mixed.
New compliance rules for foreign companies
Beginning January 1, 2027, a foreign company that misses its annual report or fee loses authority to do business on the last day of the fourth month after the due date. Failing to keep or quickly replace a registered agent can also trigger automatic revocation. Foreign companies must keep a Virginia registered office and agent, follow strict change and resignation steps, and accept service through the agent or, if none can be found, the Commission clerk. They must file amended certificates after key changes and seek a withdrawal certificate to leave Virginia. The Commission can revoke authority for continued violations, failure to file, loss of existence in the home state, or a federal conviction for a pattern of hiring unauthorized workers; that conviction brings at least a one‑year bar on reinstatement and must be reported with the judgment.
Clear rules to close a nonstock corporation
A dissolved company stays in existence only to wind up. It must collect assets, pay debts, and then distribute what is left by a set order, including honoring assets held for charities. Known claim notices must give at least 120 days to confirm and 180 days to sue if a claim is not admitted. Public or website notice can bar other claims after the statute of limitations or three years, and courts can require security for unknown claims. Directors are protected from liability if they follow these claim steps. Courts can dissolve a corporation for deadlock, fraud, waste, or other listed reasons and may appoint a receiver or custodian. To finish, the company files articles of termination that certify state taxes are paid; a company that never started may terminate early. Missing annual reports or fees can trigger automatic termination on the last day of the fourth month after the due date; serious immigration‑law convictions can lead to involuntary termination and at least a one‑year bar on reinstatement. A company can be reinstated within five years by paying a $100 reinstatement fee, all past fees and penalties, filing the latest report, and fixing name or agent issues. Ending existence does not kill claims that arose before termination.
Easier entity conversions with safeguards
A Virginia corporation can convert to another eligible entity, and a foreign eligible entity can convert into a Virginia corporation if its own law allows and it complied with that law. Old interest‑holder liabilities from before domestication still follow the foreign rules and can be collected, but members are not liable for liabilities that arise after domestication. A conversion plan must be adopted by the board and approved by more than two‑thirds of the votes and of each voting group unless the articles or bylaws set another standard. The board must send proper notice and typically give a recommendation unless there is a conflict.
Rules for out-of-state companies in Virginia
Out‑of‑state companies must get a certificate before doing business in Virginia. Some actions do not count as doing business, like defending lawsuits, holding meetings, having bank accounts, brief one‑time deals, and interstate sales. The application needs your name, home state and date of formation, principal office, Virginia registered agent and office, directors and officers, and an authenticated copy of your articles, with fees. Beginning January 1, 2027, if a foreign corporation authorized in Virginia converts to another type, the new entity must file an authenticated conversion instrument within 30 days; Virginia property passes only after filing, and it must register within 30 days if it keeps doing business. A foreign corporation with withdrawn or revoked authority can be reinstated within five years by paying past fees and penalties, filing the annual report, updating records, and fixing its name or agent.
Clearer HOA rules and priorities
Community associations may place required rules in their bylaws instead of the articles. Bylaws in place on or before January 1, 1986 continue to control certain procedures unless the association votes to change them. If bylaws or articles conflict with a recorded declaration or condominium documents about dues or membership, the recorded declaration or condominium instruments control.
Clear rules for member meetings
Corporations must hold an annual members’ meeting unless directors are chosen by written consent or ballot-only voting. Special meetings can be called by leaders or, if not otherwise stated, by members holding one‑twentieth of the votes, with enough signed demands delivered within 60 days. Members get 10–60 days’ notice (25–60 days for major actions), and record dates cannot be more than 70 days before the meeting. The board can allow remote participation and must explain how. A court can order a meeting if no annual meeting occurs within 15 months or a proper special‑meeting demand is ignored.
Director elections and fast court fixes
Directors are elected by a plurality unless the articles or bylaws say otherwise. Cumulative voting applies only if authorized and noticed, including a 48‑hour notice of intent if not stated in the meeting notice. When cumulative voting is used, directors generally cannot be elected by written consent unless it is unanimous. Courts can quickly decide election and office disputes and can order meetings or other relief.
Faster member actions without meetings
Members may take action without a meeting by signing written consents, including electronically, if allowed by the articles or bylaws. Consents must be delivered to the secretary and received within 60 days after the earliest signature. After enough consents are collected, nonconsenting members must get at least 10 days’ notice before the action is taken.
Standard voting and proxy rules
Members vote only if the articles or, if allowed, the bylaws grant that right. Members may vote by proxy; a proxy can be electronic, takes effect when received, and usually lasts 11 months. Inspectors can be appointed to verify, count, and certify votes, and the corporation may accept or reject votes in good faith with protection from damages. The default quorum is members holding one‑tenth of the votes, separate voting groups vote separately, and the articles or bylaws can change quorum or voting thresholds.
Board control and director qualifications
Each corporation has a board that runs the business and exercises corporate powers, subject to any limits in the articles or agreements. Articles or bylaws can set director qualifications; otherwise, directors need not live in Virginia or be members. The board size is set in the articles or bylaws, and no one becomes a director without agreeing first.
Deals with interested directors need approval
A transaction involving a director’s conflict is not void just for that reason. It stands if the director’s interest and the key facts were disclosed to the board or a committee, and the board, committee, or members approved or later ratified it.
Domestication keeps company rights and gifts
When a Virginia corporation moves its legal home, it is not dissolved. Contracts, assets, and debts continue. The Commission clerk is the agent for service in actions enforcing member rights. Gifts, bequests, and trust duties meant for the old company pass to the domesticated company.
Easier entity conversions in 2027
Beginning January 1, 2027, Virginia law lets businesses convert between LLCs, stock and nonstock corporations, business trusts, and certain partnerships under a formal plan and filings. Property, liabilities, and interests continue through the conversion as the statutes provide. The act also repeals older sections to align with the new conversion rules.
Fixing past corporate mistakes
A board can ratify a past defective action by resolution and, if the original action needed member approval, by a member vote. The corporation must promptly notify members, and any challenge must be filed within 120 days after validation. Once validated, the action counts from the original date and later actions that relied on it also stand. After ratifying, the corporation must file articles of ratification with the Commission. The State Corporation Commission can decide if a corporate action or ratification is valid and may modify or waive ratification steps.
Officer roles and recordkeeping duties
Corporations must have officers with titles and duties set by the articles, bylaws, or the board. One person may hold more than one office. The secretary (or a designated officer) must keep minutes and required records. Appointing, removing, or resigning as an officer does not by itself create or change contract rights.
One-year name registration for foreign firms
A foreign company can register a corporate name in Virginia for one year if the name is available. It must file an application with its incorporation details, a short business description, and a certificate of good standing. It can renew during the 60 days before the registration ends.
Simpler changes to registered agents
A corporation can change its registered office or agent by filing a short statement with the State Corporation Commission. In some cases, the agent can sign it. A resigning agent files a notice and must mail a copy to the corporation by the next business day. The resignation takes effect at 12:01 a.m. on the 31st day after filing, unless a new agent is filed sooner.
Protecting charitable assets in deals
Charitable property cannot be diverted by mergers or similar major deals unless Virginia’s cy pres and non‑diversion rules are followed. People affiliated with a charity cannot take financial benefits from such a deal unless they are charitable entities themselves. Reasonable pay for services is still allowed.
Indemnification and insurance for leaders
A corporation may indemnify a director who acted in good faith. It must pay a director’s reasonable costs if the director wholly prevails in a case about board service. The company can advance legal costs if the director promises in writing to repay if indemnification is not allowed. Courts can order indemnification or advances and can require the company to pay the director’s costs to get that order. Disinterested directors, special counsel, or members must approve indemnification decisions. Officers get the same rights unless limited by the articles or bylaws. The company may buy insurance for directors and officers, and may promise in advance to indemnify and advance expenses, except for willful misconduct or knowing crimes.
Flat fees for corporate filings
The law sets flat fees for many filings. Examples: $50 charter or entrance fee; $100 for entity conversion filings; $25 for common filings like incorporation, amendments, mergers, and certificates of authority; $10 for name reservations and dissolutions; $6 for a specific certificate. If you overpay or a filing is not accepted, you can claim a refund within one year. When you pay annual registration fees, the Commission applies your money to the oldest unpaid fees and penalties first.
Keep key minutes and records
Beginning January 1, 2027, corporations must keep permanent minutes of member and board meetings and accounting records to prepare financial statements. If the corporation has members, it must keep a current members record that can make an alphabetical list by class. Keep articles, bylaws, resolutions, minutes and member communications for three years, a list of current directors and officers, and the latest annual report. Records may be electronic if they can be converted to paper in a reasonable time.
Nonstock corporations: annual report and fee
Beginning January 1, 2027, Virginia nonstock corporations and authorized foreign corporations must file an annual report. It lists the company name, principal office, registered agent and office, and directors and principal officers. It is due on or before the last day of the 12th month after the month you were incorporated or authorized, and you may file up to three months early. A $25 annual registration fee is due the same day each year. Foreign certificates already issued stay valid but must follow this chapter starting in 2027, and the Commission may spread due dates month by month.
Reinstatement fee set at $100
The law sets a $100 fee to reinstate a corporation’s existence when you apply to the Commission. Beginning January 1, 2027, foreign corporations that seek to reinstate their Virginia authority also pay $100 (up from $10).
Tighter limits on director indemnity
The law limits when a corporation can pay a director’s legal costs. In suits by or for the corporation, it may cover only reasonable expenses if the director met the legal standard, unless a court orders more or broader rights apply. The company cannot indemnify a director for an improper personal benefit when a court found the director liable for that benefit.
Foreign company filings, fees, and penalties
Beginning January 1, 2027, a foreign survivor of a merger must file an authenticated copy with the Commission within 30 days. If it will keep doing business in Virginia and lacks a certificate, it must apply within 30 days and file the merger papers. Property in Virginia passes to the survivor only when the authenticated copy is filed. A foreign company doing business without a certificate cannot start lawsuits until it gets one, and its officers, directors, or employees who knowingly do so face a $500 to $5,000 penalty. Such companies are deemed to appoint the Commission clerk to accept legal papers. The Commission will not file most documents if fees or penalties are unpaid, and paid annual registration fees are not refunded.
Nonprofits cannot issue shares or dividends
Nonstock corporations may not issue shares of stock. They cannot pay dividends or share income with members, directors, or officers. They can pay reasonable compensation for services and may transfer assets to another nonprofit that is a member. Distributions on dissolution are allowed under the law.
Stronger filing penalties and court limits
It is a Class 1 misdemeanor to sign a filing you know is materially false and send it to the Commission. The Commission will hear challenges to a certificate only if a member or director files a petition within 30 days alleging a material misstatement of statutory compliance. Courts generally cannot block meetings or filings for amendments or mergers, except in narrow cases like fraud. The Commission can correct clerical errors.
Private foundations must follow federal rules
A corporation that counts as a private foundation must distribute enough income each year to avoid the federal tax on undistributed income. It must avoid self‑dealing, excess business holdings, risky investments that trigger liability, and taxable expenditures, unless its articles say otherwise. These rules track current and future federal law and limit how the foundation can use its money.
Simple $10 certificate for title
Beginning January 1, 2027, when a corporation changes its name or structure, the clerk can issue a certificate to preserve continuity of property title. You can record it in the deed books for a $10 court clerk fee, and no tax is due on admission. Comparable certificates from a foreign jurisdiction may also be recorded for $10 with no tax.
Derivative suits, demand and court checks
A member can sue on the corporation’s behalf only after sending a written demand and waiting 90 days, unless the demand is rejected sooner or serious harm would occur. The member must meet standing rules and fairly represent the corporation. Any settlement or dismissal needs court approval, and members may get court‑ordered notice. Courts can award the plaintiff’s expenses if the case gave the corporation a substantial benefit, or make the plaintiff or lawyer pay if the case was in bad faith.
Member rights, dues, and suspensions
A corporation can have different classes of members, or none, as set in its articles or bylaws. Members are not personally liable for corporate debts. If allowed by the articles or bylaws, the corporation can charge dues and enforce nonpayment with steps like suspension or termination. A member has one year to sue over a suspension or end of membership, and past dues still apply.
Stronger rights to see nonprofit records
Beginning January 1, 2027, members can inspect the voting list starting five business days after meeting notice, and the company may post it online. To inspect records, you must give at least 10 business days’ written notice, meet good‑faith and proper‑purpose rules for some records, and the company may require reasonable confidentiality limits. The company may charge only its estimated cost to make and send copies. If access is refused, a circuit court can order inspection fast and may make the company pay your costs; directors have similar inspection rights with court backup. On written request, the company must share its most recent annual financial statements or explain the accounting basis; if it does not respond within 30 days, you can ask the court.
Caps and risks for directors and officers
Damages against an officer or director are capped at the lesser of any limit in the articles or bylaws and the greater of $100,000 or their last 12 months’ cash pay. For tax‑exempt corporations, the cap is the last 12 months’ cash pay. The cap does not apply to willful misconduct or knowing crimes. Directors are personally liable for unlawful distributions; suits generally must start within two years. A liable director can seek contribution from other directors and recoup from members who received the unlawful payout, usually within one year after liability is final.
Clearer filing and notice rules for corporations
The Commission accepts electronic filings and sets how they are signed and certified. Filed papers must be legible, in English, properly signed, and include any fee. You can set a delayed effective date and time; it kicks in by the stated time or by 11:59 p.m. on the 15th day, whichever is earlier. You can correct filing errors, but only within 30 days. Certified copies and good‑standing certificates serve as proof if fees and reports are current. Notices can be sent electronically with consent, and consent ends after two known failed sends. People who act as a corporation knowing it is not formed are personally liable. Court‑approved federal reorganizations can be filed and take effect without extra board or member votes.
Converting a company: steps and protections
Many entities can convert into or out of a corporation. A conversion needs a written plan with who becomes what, how interests change, and the new articles or rules, then filing articles of conversion; you may amend or abandon the plan before it takes effect. When it is effective, property and contracts stay, debts stay, interests are reclassified per the plan, the new governing records apply, and the company is not dissolved. Prior interest‑holder liabilities from before conversion remain, but new ones do not attach. If a foreign company is the survivor, the Commission clerk is the agent for service. Gifts and trusts that take effect after conversion go to the new entity.
Forming and running a nonstock corporation
Articles must include the name, whether the corporation has members, how directors are chosen if members do not elect them, and the initial registered office and agent. The Commission issues a certificate when filings and fees are correct, and corporate existence starts then. Members or directors can sign written governance agreements that reassign control or even require dissolution; these stop once there are more than 300 members. Bylaws may require internal suits be filed only in a named Virginia court, and the board can adopt emergency bylaws for disasters or pandemics. If two years of paper meeting notices come back undeliverable, the corporation may stop paper notices until the member gives a current address.
How companies dissolve or reverse
The law lists what starts dissolution: rules in the charter or bylaws, director or member action, a court order, or automatic or involuntary termination. After approval, the company files articles of dissolution; it is dissolved when the Commission issues the certificate and required fees and taxes are paid. Before the termination certificate takes effect, the company can revoke the dissolution by the required vote and filing; revocation relates back so business continues as if not dissolved.
What members get in a domestication
When a company changes its legal home, old membership interests turn into the mix stated in the plan. That can be new interests, other securities, rights to acquire interests, cash, or property. Members are limited to those plan terms and any appraisal rights under the law.
When members must approve big sales
Member votes are not needed for routine sales or leases, mortgages or pledges, transfers to wholly owned affiliates, or some sales that leave at least 33% of activity. Selling all or nearly all assets outside normal business needs board action, notice to members, and generally more than two‑thirds approval.
Domestication rules for moving companies
A corporation may change its home state if its law allows it and it follows the plan and filing steps. The plan must name the jurisdictions, explain how interests change, and include proposed articles and bylaws if the new entity will be domestic. After filing articles of domestication and paying fees, the Commission issues a certificate; a foreign company’s authority in Virginia is canceled or withdrawn when domestication takes effect. Property and contract rights carry over automatically, and all debts and liabilities continue. The new name can replace the old name in pending cases, but it is not required. The domesticated company is the same entity and keeps its original incorporation date.
Mergers, exchanges, and conversions rules
Merger plans must list all parties, the survivor, key terms, and how interests convert. Boards send plans to members for a vote; approval usually needs more than two‑thirds in each voting group, with some class votes required. A parent with 90% of each voting class can merge a subsidiary without the subsidiary’s approval and must notify the other members within 10 days after it takes effect. When a merger is effective, the survivor automatically gets the merged companies’ property and takes on their debts. A foreign survivor is treated as appointing the Commission clerk to accept legal papers for member rights cases. Parties may abandon a merger or exchange before its certificate takes effect. If a conversion would impose new interest‑holder liability, each affected member must sign a separate written consent. New interest‑holder liability after a merger or exchange applies only to liabilities that arise after it becomes effective.
Nonprofits’ article changes and member votes
A corporation can amend its articles at any time, and members do not gain vested property rights from article terms. If there are no voting members, the board may adopt amendments, often by a two‑thirds board vote. The board may make some routine article changes without member approval unless the articles say otherwise. When there are voting members, the board must send proposed amendments and a recommendation to members, and approval usually needs more than two‑thirds of votes in each voting group unless the articles set a different rule.
Rules for officer duties and turnover
Officer powers and duties come from the articles or bylaws, or from the board if consistent with the bylaws. Officers may rely in good faith on competent staff, lawyers, or accountants unless they know the reliance is unwarranted. An officer can resign by written notice, effective on delivery or a later accepted time. The board, or the appointing officer, can remove an officer with or without cause. A former or mislisted officer can file with the Commission to correct the public record, and the corporation can amend its annual report to show the change.
Sponsors & Cosponsors
Sponsor
Patrick A. Hope
Democratic • House
Cosponsors
There are no cosponsors for this bill.
Roll Call Votes
House vote • 3/12/2026
Senate amendments agreed to by House
Yes: 98 • No: 0
Senate vote • 3/11/2026
Commerce and Labor Amendment agreed to
Yes: 0 • No: 0
Senate vote • 3/11/2026
Reconsideration of Senate passage agreed to by Senate Block Vote
Yes: 40 • No: 0
Senate vote • 3/11/2026
Passed Senate with amendments Block Vote
Yes: 39 • No: 0
Senate vote • 3/11/2026
Passed Senate with amendments Block Vote
Yes: 40 • No: 0
Senate vote • 3/10/2026
Constitutional reading dispensed Block Vote (on 2nd reading)
Yes: 37 • No: 0
Senate vote • 3/10/2026
Passed by for the day Block Vote (Voice Vote)
Yes: 0 • No: 0
Senate vote • 3/9/2026
Reported from Commerce and Labor with amendments
Yes: 13 • No: 0
House vote • 2/4/2026
Passed House Block Vote
Yes: 98 • No: 0
House vote • 2/4/2026
Read third time and passed House Block Vote
Yes: 97 • No: 1
House vote • 1/29/2026
Reported from Labor and Commerce with substitute
Yes: 22 • No: 0
House vote • 1/27/2026
Subcommittee recommends reporting with substitute
Yes: 9 • No: 0 • Other: 1
House vote • 1/20/2026
Referred from General Laws and referred to Labor and Commerce (Voice Vote)
Yes: 0 • No: 0
Actions Timeline
Acts of Assembly Chapter text (CHAP0393)
4/8/2026GovernorApproved by Governor-Chapter393 (Effective 1/1/2027)
4/8/2026GovernorFiscal Impact Statement from State Corporation Commission (HB439)
4/6/2026HouseGovernor's Action Deadline 11:59 p.m., April 13, 2026
3/31/2026GovernorEnrolled Bill communicated to Governor on March 31, 2026
3/31/2026HouseSigned by Speaker
3/31/2026HouseBill text as passed House and Senate (HB439ER)
3/30/2026HouseEnrolled
3/30/2026HouseSigned by President
3/30/2026SenateSenate amendments agreed to by House (98-Y 0-N 0-A)
3/12/2026HousePassed Senate with amendments Block Vote (40-Y 0-N 0-A)
3/11/2026SenateReconsideration of Senate passage agreed to by Senate Block Vote (40-Y 0-N 0-A)
3/11/2026SenatePassed Senate with amendments Block Vote (39-Y 0-N 0-A)
3/11/2026SenateCommerce and Labor Amendment agreed to
3/11/2026SenateEngrossed by Senate as amended
3/11/2026SenateRead third time
3/11/2026SenatePassed by for the day Block Vote (Voice Vote)
3/10/2026SenateConstitutional reading dispensed Block Vote (on 2nd reading) (37-Y 0-N 0-A)
3/10/2026SenateRules suspended
3/10/2026SenateSenate committee offered
3/9/2026SenateReported from Commerce and Labor with amendments (13-Y 0-N)
3/9/2026SenateReferred to Committee on Commerce and Labor
2/5/2026SenateConstitutional reading dispensed (on 1st reading)
2/5/2026SenatePassed House Block Vote (98-Y 0-N 0-A)
2/4/2026HouseReconsideration of passage agreed to by House
2/4/2026House
Bill Text
Chaptered
4/8/2026
Enrolled
3/30/2026
Amendment
3/11/2026
Amendment
3/10/2026
Amendment
3/9/2026
Substitute
1/29/2026
Substitute
1/28/2026
Substitute
1/27/2026
Introduced
1/12/2026
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