PRIA Logo™
VirginiaSB2462026 Regular SessionSenateWALLET

Virginia Nonstock Corporation Act; numerous revisions to Act, delayed effective date.

Sponsored By: Scott A. Surovell (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 HB 439.

Your PRIA Score

Score Hidden

Personalized for You

How does this bill affect your finances?

Sign up for a PRIA Policy Scan to see your personalized alignment score for this bill and every other piece of legislation we track. We analyze your financial profile against policy provisions to show you exactly what matters to your wallet.

Free to start

Bill Overview

Analyzed Economic Effects

45 provisions identified: 13 benefits, 5 costs, 27 mixed.

New options to convert or domesticate

A nonstock corporation may convert to a Virginia LLC under a written plan. A foreign corporation may become a Virginia corporation if its home law allows it and it follows Virginia rules. A Virginia corporation may domesticate to another jurisdiction if that law allows it and the company follows the process. Virginia law controls the legal effect of inbound domestication, and the destination law controls outbound domestication.

Court dissolution and receivership powers

A court can dissolve a corporation for serious problems like director or member deadlock, illegal or fraudulent acts, insolvency, waste of assets, abandonment, or inability to carry out purposes. Members with at least 5% of the votes, a director, a creditor, the board, or the corporation can file the case where the principal or registered office was last located. The court can preserve assets, issue injunctions, and appoint receivers to liquidate or custodians to manage the business. Appointees can sell assets, sue or defend, and be paid from corporate assets or sale proceeds.

Owner liability before and after conversion

If you knowingly act for a company before it is formed, you are personally and jointly liable for debts from that time. After an entity conversion, new members are liable only for liabilities that arise after the conversion takes effect, unless the articles, bylaws, or governing law say otherwise. Debts and claims from before the conversion still stand and are not wiped out.

Reinstatement and automatic termination rules

Reinstatement is available within five years after termination. You must file an application, pay a $100 reinstatement fee and all past annual fees and penalties, file the annual report, and update the name or registered agent if needed. Once reinstated, the law treats corporate existence as if it never ended. If you miss the annual report or registration fee deadline by the last day of the fourth month after it was due, the corporation is automatically terminated. If your registered agent resigns and you do not file a change within the set timeline, the corporation is also automatically terminated.

Rules for out-of-state corporations

Some activities do not count as doing business in Virginia, like defending lawsuits, holding meetings, bank accounts, isolated 30‑day deals, and certain film work under 90 days. If a foreign corporation has not obtained authority, its acts remain valid and it can defend cases. To do business, it must apply with corporate details, appoint a registered agent, provide authenticated articles, and pay fees; after name or jurisdiction changes, it must update filings within required timelines. If it does business without authority, officers, directors, or employees who knowingly do so face $500–$5,000 penalties, and service of process may be made on the State Corporation Commission clerk.

Rules for winding up and termination

After dissolution, a corporation still exists but may only wind up. Rights, lawsuits, voting rules, and the registered agent continue. The company must pay debts first, move restricted charitable assets to similar charities, and then distribute the rest under a plan. For known claims, it can send written notice with at least 120 days to confirm and at least 180 days to sue; for unknown claims, it can publish or post notice (for at least 30 days) and bar claims after the statute of limitations or three years. A court can set security for contingent or late-maturing claims, and directors who follow these steps are protected when they distribute assets. To end existence, the corporation files termination papers and certifies state taxes are filed and paid; the Commission’s certificate ends existence, but suits and limited actions continue. Unclaimed payouts go to the State Treasurer under abandoned property rules, and incorporators may end a corporation that never started business.

Rules for mergers and exchanges

When an interest exchange is effective, exchanged interests get only the rights in the plan or rights kept under law. New interest holders from a merger are only liable for debts that arise after the merger is effective. Old liabilities are not erased by the merger, and unchanged liabilities stay the same. Interests not exchanged keep the same liability. A merger does not count as a dissolution or force a wind‑up unless governing law or documents say so. A domestic corporation may abandon an approved plan before the certificate is effective, following plan rules or a board decision.

Caps on director and officer damages

In suits by the corporation or its members, damages against an officer or director are capped. The cap is the smaller of the amount set in the articles or bylaws and the greater of $100,000 or the person’s cash pay in the prior 12 months. For leaders of organizations described in 501(c), damages are limited to their compensation, or zero if they were unpaid. The cap does not apply to willful misconduct or knowing criminal violations and cannot be cut retroactively by amendment.

Clear rules for member meetings

Nonstock corporations must hold an annual meeting unless directors are elected by written consent or a ballot‑only meeting is allowed. The chair, president, board, or people named in the bylaws can call special meetings. If the bylaws are silent, members with one‑twentieth of the votes may call one. A court can order a meeting if no annual meeting happens within 15 months or a valid demand is ignored. Members may act by written or electronic consent when allowed, and nonconsenting voting members must get written notice after. Meeting notices must go out 10–60 days in advance (25–60 days for major actions). Record dates can be set up to 70 days before a meeting, and a new date is required if the meeting is adjourned more than 120 days.

Foreign names and registered agents

A foreign nonstock corporation can register an available name in Virginia for one year and renew it during the 60 days before it expires. Corporations may change their registered office or agent by filing a statement; in some cases the current or new agent may sign. A registered agent may resign by filing a statement and mailing a copy to the principal office. The resignation takes effect at 12:01 a.m. on the 31st day after filing or sooner if a new agent is appointed.

Private governance agreements allowed

Members or directors may make a written agreement that controls how the corporation is run, even if it conflicts with normal rules. Everyone covered must approve it, and it must be in the articles, bylaws, or a signed agreement known to the corporation. It can change board powers, voting, management, or require dissolution on events. It usually can be changed only by everyone it covers, and it stops once the corporation has more than 300 members of record.

Starts Jan 2027; prior names preserved

Beginning January 1, 2027, the revised nonstock corporation law takes effect. Name registrations filed before that date remain valid under the new law.

Members can see records and finances

Members on record for six months can inspect key records for a proper purpose, if they describe the purpose and requested records. The corporation may give paper or electronic copies and charge only a reasonable amount up to actual copying and sending cost. If wrongly denied, a court can order inspection and make the corporation pay the member’s costs and lawyer fees, with confidentiality rules if needed. Members can also request the latest fiscal‑year financial statements, and go to court if there is no response within 30 days.

Protecting charitable and trust assets

Charitable assets must stay for their charitable purpose. A merger or other big deal cannot divert them unless Virginia law, such as cy pres, allows it. If trust property moves to the surviving company in a merger, the trust’s terms still control that property. The Attorney General keeps full power to enforce rules on charitable assets.

Legal protection for directors and officers

The law lets corporations indemnify directors who act in good faith and, when a director wholly prevails in a case, requires payment of reasonable expenses unless limited by the articles. Corporations may advance legal costs if the person promises in writing to repay if later not entitled to mandatory indemnity. A court can order advances or indemnification if fair and reasonable and must do so when mandatory indemnity applies. Disinterested directors, special counsel, or members must decide if indemnity is allowed, and officers get the same rights unless the articles limit them. Companies may buy insurance for directors and officers, and cannot indemnify willful misconduct or knowing criminal acts. Existing indemnity rights cannot be cut back later unless the original rule allowed it.

Merger plan rules and post-merger gifts

A merger plan must name each party, list its state and type, name the survivor, and explain how interests convert and what the survivor’s articles will say. It must include any needed amendments or other required terms. If a will or gift names a merging entity that is not the survivor and the gift is payable after the merger, the gift goes to the surviving entity. This keeps donors’ intent in place after a merger.

Update state records after director changes

A former director can file a statement with the State Corporation Commission to fix the public record. After a director resigns or is removed, the corporation may file an amended annual report to show the change and name any successor. This keeps official records accurate and current.

Fixing past corporate action mistakes

Boards can ratify actions that were within power but taken without proper approval. Members must be notified, and any challenge must be filed within 120 days from the validation effective time. Once ratified, the action is effective as of the original date. The Commission can confirm validity and may modify or waive steps in the ratification process.

Switch or convert your nonprofit

The law sets clear steps to change a nonprofit’s home state (domestication) or entity type (conversion). A plan must name all parties, explain how member interests change, and include proposed governing documents. Members generally must approve by more than two-thirds of votes, with separate class votes when required. If any member would take on new interest‑holder liability, that member must give written consent; if no voting members exist, the board may approve by majority. After approval, you file articles with the Commission; the Commission issues a certificate and the change takes effect. Plans can be amended or abandoned before the certificate is effective; if articles were filed, a signed abandonment statement must be filed. When a conversion takes effect, all property and debts carry over and the entity continues without interruption, keeping its original organization date.

Higher fees to reinstate nonstock corporations

Reinstating a dissolved Virginia nonstock corporation now costs a one‑time $100 fee, up from $10. Reinstating a foreign corporation’s withdrawn or revoked authority also costs $100 if sought within five years, unless a statutory bar applies.

Stricter rules for out-of-state nonstock corporations

A foreign corporation must get a certificate of authority before doing business in Virginia. If it does business without that certificate, it cannot start or keep a case in Virginia court until it gets one. A foreign corporation cannot withdraw from Virginia until the Commission issues a certificate of withdrawal. The withdrawal application must use the Commission form and include required details like the company’s name and home jurisdiction.

No profit payouts by nonprofits

Nonstock corporations cannot issue stock or pay dividends to members, directors, or officers. Reasonable pay and benefits and payments to a nonprofit member are allowed, and distributions on dissolution follow the Act. In major deals involving a charitable entity, people tied to the charity cannot receive money or benefits, unless the recipient is itself a charity. Paying reasonable compensation for services is still allowed.

Criminal penalty for false filings

It is a Class 1 misdemeanor to sign a filing you know is materially false and send it to the Commission. Filing false documents can lead to criminal charges.

Annual report and $25 yearly fee

Domestic and foreign corporations must file an annual report with names, addresses, formation details, and Virginia registered agent information. The report is due by the last day of the 12th month after incorporation or authorization and each year after; you may file up to three months early. Each corporation must also pay a $25 annual registration fee by that due date. Nonstock corporations incorporated before 1970 do not pay the $25 fee.

New rules for member meetings and records

Members can join meetings remotely if the board allows it. The board may hold a meeting only online if the articles or bylaws do not require a place. To act by written consent, signed consents must reach the secretary within 60 days of the earliest consent date. Members must give a signed written demand at least 10 business days before inspecting records. The membership list must be open for inspection starting five business days after meeting notice and can be provided online with access details. The list cannot be used without board consent for money solicitations (except to ask for votes), for any commercial use, or be sold or bought.

Approvals and filings for mergers

A plan of interest exchange must identify all parties, set the terms, and explain how interests convert into consideration. Boards must adopt merger or interest-exchange plans and, in most cases, members approve by more than two-thirds of each voting group, unless the articles set a different rule not below a majority. Some deals need no member vote; if members would gain new personal liability, each must give written consent. A parent that owns at least 90% of each voting class of a subsidiary can merge without member votes and must notify other subsidiary members within 10 days after closing. After approval, the corporation must file merger or interest‑exchange documents with the State Corporation Commission to make the deal effective.

Dissolution, termination, and liquidation rules

The law lists what starts dissolution and winding up, such as bylaws events, board or member actions, court orders, automatic termination, or involuntary termination. After authorization, the corporation files articles of dissolution and is dissolved when the Commission issues the certificate and required fees and taxes are paid. A corporation may revoke dissolution any time before the termination certificate takes effect and resume business as if never dissolved. If existence is terminated, directors become trustees to collect assets, pay debts, and distribute any remainder under the statute. The Commission may involuntarily terminate for abuses, failing to keep a registered office or agent, failing to file, or a conviction under 8 U.S.C. § 1324a(f). If terminated for that conviction, reinstatement is barred for at least one year. A corporation convicted of that offense must immediately report it and file an authenticated copy of the judgment with the Commission.

Membership classes, dues, and payouts

A nonstock corporation may have one or more classes of members, or none. It can admit members for no payment or for cash, property, services, or contracts, and may issue membership certificates with transfer limits. The board or bylaws may set dues, fees, and assessments and may enforce them by suspension or termination if allowed. A challenge to a termination or suspension must start within one year, and earlier obligations still apply. Distributions to members are allowed only if the governing documents permit them, and never if the corporation is insolvent. Charitable corporations can distribute only to certain charitable members.

Mergers and conversions keep continuity

When a merger closes, interests change into the form and rights stated in the plan. A statutory conversion does not dissolve or wind up the entity. If the survivor is foreign, the Commission’s clerk can receive legal papers for member enforcement cases. Trust and bequest terms on transferred property continue after conversion. Cross‑entity conversion authorities take effect January 1, 2027.

Standard voting and proxy rules

Members can vote only if the articles or bylaws give that right. By default, each member gets one vote per director seat, and directors are elected by plurality. Cumulative voting is not allowed unless authorized, and directors cannot be elected by written consent unless the vote is unanimous. Members may vote by proxy, including electronic proxies, which last 11 months unless changed and are usually revocable. Inspectors can verify proxies and count votes, and the corporation may accept or reject votes in good faith based on evidence of authority. By default, a quorum is one‑tenth of eligible votes; a matter passes when votes for exceed votes against. Separate voting groups must each approve when required. The articles or bylaws can set different quorum or higher voting rules, and courts can quickly resolve election and office disputes.

Tighter rules for derivative lawsuits

A member may sue for the corporation only if they were a member at the time of the act (with limited exceptions), fairly represent the corporation, make a written demand, and wait 90 days unless the demand is rejected sooner or quick action is needed to prevent irreparable harm. The court must approve any settlement or end of a derivative case and may require notice to members if their interests are harmed. Most derivative suits for foreign corporations follow the law of the place of formation, with some Virginia rules still applying. Courts must dismiss if informed, independent directors in good faith decide litigation is not in the corporation’s best interest and the company explains why; after a rejected demand, the plaintiff must show why dismissal rules do not apply. When a case ends, the court may make the company pay the plaintiff’s costs for a substantial benefit, or make the plaintiff or lawyer pay costs for bad‑faith cases.

Votes for big asset sales

No member vote is needed for deals in the usual course, borrowing against assets, or transfers to a wholly owned affiliate. A sale outside normal business also needs no vote if the remaining activity still represents at least 33% of consolidated total assets. Selling all or almost all assets outside normal business needs a board resolution, proper notice, and member approval, usually more than two‑thirds of votes unless the governing documents say otherwise. The board may recommend, condition, or abandon the deal unless the parties agreed differently.

What a merger changes at closing

At closing, the survivor continues or is created, and the merged entities cease to exist. The survivor gets all property and most contract rights (unless a contract bars assignment) and takes on all debts and liabilities of the merged entities. Courts may substitute the survivor’s name in pending cases. If the survivor is a new Virginia corporation, its articles and bylaws in the plan take effect at closing. The survivor also receives the other parties’ rights and privileges and keeps its own; if the survivor is foreign, the State Corporation Commission clerk is its agent for service in member‑rights cases.

How new rules apply and save past acts

The new chapter applies to all domestic and foreign corporations and their members when it takes effect. Prior certificates of authority for foreign corporations remain valid but must follow these new rules. Repealed statutes still cover actions, rights, penalties, and cases that began before repeal, and those matters can be finished under the old law unless this chapter says otherwise.

Special rules for community associations

For community associations tied to recorded covenants, some rules may be set in bylaws instead of articles. Old pre‑1986 bylaws on internal matters stay in place unless members vote to change them. Recorded declarations or condo instruments control dues, assessments, and membership rules if they conflict with articles or bylaws.

Director and officer duties and risks

Directors must act in good faith for the corporation’s best interests and can rely on officers, experts, or committees unless they know the reliance is unwarranted. Deals involving a director’s conflict are valid if all key facts are disclosed and the board or a committee approves them. A director who approves an unlawful distribution is personally liable for the excess, with short deadlines for claims. Corporations must have officers and keep required records, and officers can rely on competent staff and experts. Officers can resign, and the board may remove officers unless the articles or bylaws say otherwise.

Fewer ways to block corporate actions

If a filed plan or document depends on outside facts, it must name the source used to find those facts. Names, addresses, required purposes, registered agent, number of members, and approval or effective dates cannot depend on outside facts. You generally cannot challenge a corporate act for lack of power, except in narrow cases like a member or director suit to stop it, the corporation’s own suit, or a case before the Commission. Only a member or director can seek a Commission hearing about a certificate, and they must file and deliver a petition within 30 days that alleges a material misstatement. Courts usually cannot delay or block meetings or filings for mergers and similar actions, and the law repeals several old sections in this chapter.

How boards meet and make decisions

Directors may join board meetings by phone or similar tech, and they are counted as present. The board can act by written consent, including electronic signatures, but some actions still require a meeting and any director can object within 10 business days. Directors can waive meeting notice by signing a waiver or by attending and not objecting. A quorum is usually a majority of the board, and directors cannot vote by proxy. Committees can handle many tasks but cannot do key actions like fill board seats or amend articles or bylaws.

How directors are chosen and removed

The law requires every nonstock corporation to have a board of directors, unless an allowed agreement says otherwise. Articles or bylaws can set who qualifies to serve, but they cannot block someone just for their opinions if that would limit fiduciary duties. The articles or bylaws set board size and may let member classes elect their own directors. Directors have a default one‑year term, and staggered terms are allowed. Members can remove directors unless the articles limit removal to cause, and special rules protect seats elected by cumulative voting. Courts can remove a director for fraud, gross abuse, or intentional harm. A director can resign now or at a later stated time, and vacancies (including future ones) can be filled before they start.

How to amend or restate articles

A corporation can amend its articles at any time to add, change, or remove allowed provisions. If there are no voting members, the board may adopt amendments, usually by a two‑thirds vote of directors in office if the articles do not set a process. If members vote, the board first adopts and recommends the change, and approval generally needs more than two‑thirds of votes cast by each voting group unless the articles set a different standard. The board can restate the articles and must file restated articles with the State Corporation Commission; the restated document replaces the old one when effective. Members do not have a vested property right in any article provision.

Merger rules for Virginia nonstock corporations

In a merger, if the survivor is a Virginia corporation, the plan can change its articles and bylaws as part of the merger. A corporation that must be Virginia‑domestic by law cannot use a merger to stop being domestic.

Clearer filing and electronic rules

The Commission accepts filings by electronic transmission, and it sets rules for signing and certifying them. Filings must be in the required format, in English, properly signed, and include the right fee. A certificate is effective when issued unless the filing sets a later date, with a 15‑day fallback rule. You can correct filing errors within 30 days with articles of correction. Anyone can get a certificate of good standing if fees are paid, the annual report is accepted, and the company is not dissolved. Articles must state the name, member setup, registered office and agent, and how directors are chosen if not by members. A federal court’s confirmed reorganization plan can be filed and carried out without new board or member votes.

How nonprofits run meetings and bylaws

Notices can be sent electronically if consented to, and the law explains when messages count as received. The law explains how to count members and how meetings and polls are run. After incorporation, corporate existence starts when the certificate is effective, and organizers must hold the first meeting or act by written consent. Bylaws can require internal claims to be heard in Virginia courts, but they cannot force arbitration or create jurisdiction that does not exist. In an emergency, boards can use special bylaws to keep the organization running with limited liability for good‑faith actions. Nonprofits treated as private foundations must make required annual payouts and follow federal limits. Members can waive notice, and the meeting chair sets rules and announces when voting opens and closes.

New filing fees and some relief

The law sets flat fees for many filings. It is $50 for a charter or entrance fee. It is $100 to file a conversion to another entity. Many core filings cost $25, and some name and ending filings cost $10. A $10 certificate can be recorded in deed books to keep title continuity. If your merger, withdrawal, termination, or conversion is effective on or before the annual fee due date, you do not owe that year’s annual registration fee. The Commission applies payments to the oldest amounts and will not issue filings until all fees and penalties are paid, but it cancels assessments when the exemption applies and refunds overpayments.

Rules for foreign nonprofits in Virginia

Foreign nonprofits can do business here with a certificate, but they get no more rights than Virginia corporations, and Virginia does not control their internal affairs. They must keep a registered office and agent, file changes, and follow agent resignation and service‑of‑process rules; if no agent can be found, service may be made on the Commission’s clerk. After a merger or conversion, they must file authenticated documents within 30 days; property in Virginia passes only once those filings are made. Missing annual filings or fees triggers automatic revocation on the last day of the fourth month after the due date, and the Commission can revoke for other listed violations, including certain federal hiring convictions with at least a one‑year bar on reinstatement. A revoked or withdrawn certificate can be reinstated within five years by paying fees, filing reports, and updating required documents.

Sponsors & Cosponsors

Sponsor

  • Scott A. Surovell

    Democratic • Senate

Cosponsors

There are no cosponsors for this bill.

Roll Call Votes

All Roll Calls

Yes: 262 • No: 0

Senate vote • 3/12/2026

House amendments agreed to by Senate

Yes: 40 • No: 0

House vote • 3/11/2026

Passed House with amendments

Yes: 99 • No: 0

House vote • 3/5/2026

Reported from Labor and Commerce with amendment(s)

Yes: 21 • No: 0

House vote • 3/3/2026

Subcommittee recommends reporting with amendment(s)

Yes: 9 • No: 0 • Other: 1

Senate vote • 1/30/2026

Read third time and passed Senate Block Vote

Yes: 38 • No: 0

Senate vote • 1/29/2026

Engrossed by Senate Block Vote (Voice Vote)

Yes: 0 • No: 0

Senate vote • 1/29/2026

Commerce and Labor Substitute agreed to

Yes: 0 • No: 0

Senate vote • 1/28/2026

Passed by for the day Block Vote (Voice Vote)

Yes: 0 • No: 0

Senate vote • 1/28/2026

Constitutional reading dispensed Block Vote (on 1st reading)

Yes: 40 • No: 0

Senate vote • 1/26/2026

Reported from Commerce and Labor with substitute

Yes: 15 • No: 0

Actions Timeline

  1. Acts of Assembly Chapter text (CHAP0394)

    4/8/2026Governor

  2. Approved by Governor-Chapter 394 (effective 1/1/2027)

    4/8/2026Governor

  3. Fiscal Impact Statement from State Corporation Commission (SB246)

    4/6/2026Senate

  4. Governor's Action Deadline 11:59 p.m., April 13, 2026

    3/31/2026Governor

  5. Enrolled Bill communicated to Governor on March 31, 2026

    3/31/2026Senate

  6. Signed by Speaker

    3/31/2026House

  7. Bill text as passed Senate and House (SB246ER)

    3/30/2026Senate

  8. Enrolled

    3/30/2026Senate

  9. Signed by President

    3/30/2026Senate

  10. House amendments agreed to by Senate (40-Y 0-N 0-A)

    3/12/2026Senate

  11. Delegate Hope Floor amendments agreed to

    3/11/2026House

  12. Passed House with amendments (99-Y 0-N 0-A)

    3/11/2026House

  13. Engrossed by House as amended

    3/11/2026House

  14. committee amendments agreed to

    3/11/2026House

  15. Read third time

    3/11/2026House

  16. Floor Offered

    3/11/2026House

  17. Moved from Uncontested Calendar to Regular Calendar

    3/11/2026House

  18. Passed by for the day

    3/10/2026House

  19. Read second time

    3/9/2026House

  20. Reported from Labor and Commerce with amendment(s) (21-Y 0-N)

    3/5/2026House

  21. House subcommittee offered

    3/3/2026House

  22. Subcommittee recommends reporting with amendment(s) (9-Y 0-N)

    3/3/2026House

  23. Assigned HCL sub: Subcommittee #1

    2/25/2026House

  24. Referred to Committee on Labor and Commerce

    2/4/2026House

  25. Read first time

    2/4/2026House

Bill Text

Related Bills

Back to State Legislation