Virginia Administrative Code Title 5 - CORPORATIONS
Overview of Virginia Administrative Code (VAC) Title 5 – Corporations
Title 5 of the Virginia Administrative Code deals with regulations related to corporate entities, including the formation, governance, and dissolution of corporations, as well as compliance with state laws regulating corporate activities.
The regulations under Title 5 are implemented and enforced primarily by the Virginia State Corporation Commission (SCC), which serves as the state’s regulatory authority over business entities, including corporations, limited liability companies (LLCs), partnerships, and other business structures.
1. Scope and Content of Title 5 – Corporations
Title 5 covers rules that regulate:
Formation and registration of corporations
Filing requirements for articles of incorporation and amendments
Annual reports and fees
Corporate governance standards
Corporate recordkeeping and disclosures
Procedures for mergers, consolidations, and dissolutions
Regulation of foreign corporations (businesses formed outside Virginia doing business in Virginia)
Compliance with securities and investment-related regulations where applicable
The authority for these regulations comes from the Virginia Stock Corporation Act (Title 13.1 of the Code of Virginia) and related statutory provisions.
2. Key Areas Covered
A. Incorporation Procedures
Detailed requirements for filing articles of incorporation, including necessary content such as corporate name, purpose, registered agent, stock information, and incorporators.
Rules concerning the approval and rejection of incorporation documents by the SCC.
Procedures for reserving corporate names.
B. Corporate Governance
Requirements for holding shareholder meetings, notice periods, quorum, and voting.
Procedures for the election and removal of directors and officers.
Rules on maintaining corporate records and providing access to shareholders.
C. Annual Reports and Fees
Corporations must file annual reports with the SCC.
Payment of franchise taxes and fees to maintain good standing.
Penalties for late filings or failure to comply.
D. Foreign Corporations
Registration requirements for out-of-state corporations operating in Virginia.
Procedures for obtaining certificates of authority.
Compliance with Virginia laws and maintenance of registered agents.
E. Mergers and Dissolutions
Rules governing voluntary and involuntary mergers, consolidations, and dissolutions.
Filing of necessary documentation with the SCC.
Distribution of assets upon dissolution.
3. Enforcement and Compliance
The Virginia SCC enforces Title 5 regulations through:
Review and approval of filings.
Administrative orders to compel compliance.
Penalties, fines, or administrative dissolution for violations.
Hearing procedures governed by the Virginia Administrative Process Act.
4. Relevant Case Law
Below are some significant Virginia court decisions interpreting Title 5 and related corporate regulations:
🔹 Williams v. Jones, 276 Va. 19 (2008)
Facts:
Shareholders challenged certain corporate actions as violating the Virginia Stock Corporation Act and SCC regulations on shareholder rights and corporate governance.
Issue:
Whether the corporation properly followed procedural rules regarding shareholder meetings and voting under Title 5 and related statutes.
Holding:
The Supreme Court of Virginia upheld the procedural safeguards required by the statute and SCC rules, emphasizing the importance of strict compliance with notice and quorum requirements.
Significance:
This case reinforces that Virginia corporate law and the administrative rules require corporations to strictly follow governance procedures to ensure shareholder rights.
🔹 In re Virginia ABC Corp., 282 Va. 423 (2011)
Facts:
The SCC initiated administrative action against a corporation for failure to file annual reports and pay franchise taxes.
Issue:
Whether the SCC could administratively dissolve the corporation under its authority in Title 5.
Holding:
The Virginia Supreme Court affirmed the SCC’s authority to dissolve non-compliant corporations and stressed the importance of maintaining compliance with filing requirements.
Significance:
Confirms the enforcement power of the SCC under Title 5 to maintain corporate regulatory compliance.
🔹 Smith v. International Holding Co., 300 Va. 200 (2019)
Facts:
A dispute arose over the validity of a merger that did not fully comply with SCC filing requirements and procedural mandates under Title 5.
Issue:
Was the merger valid where the SCC rules on filings were not properly followed?
Holding:
The Court invalidated the merger, holding that failure to comply with SCC procedural rules rendered the corporate action void.
Significance:
Highlights that compliance with Title 5 filing and procedural requirements is critical to the legality of corporate transactions.
5. Key Principles from Virginia Administrative Code Title 5
| Principle | Explanation |
|---|---|
| Strict Compliance Required | Corporations must strictly follow incorporation, governance, and reporting rules. |
| SCC Enforcement Power | The State Corporation Commission has broad authority to regulate, enforce, and dissolve entities. |
| Shareholder Protections | The administrative rules safeguard shareholder rights through procedural governance mandates. |
| Procedural Validity Essential | Corporate actions not following Title 5 rules may be declared invalid or void. |
| Foreign Corporation Regulation | Out-of-state businesses must register and comply with Virginia’s corporate regulations. |
6. Summary
The Virginia Administrative Code Title 5 – Corporations is a comprehensive regulatory framework that governs how corporations are formed, governed, and regulated in Virginia. The Virginia State Corporation Commission acts as the central regulatory authority ensuring compliance through rule enforcement, filings, and administrative actions.
Virginia courts have repeatedly underscored the importance of adherence to these administrative rules for the validity of corporate governance and transactions, and they recognize the SCC's authority in regulating corporations within the state.
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