West Virginia Code
1 - GENERAL PROVISIONS
2 - INCORPORATION
3 - PURPOSES AND POWERS
4 - NAME
5 - OFFICE AND AGENT
6 - SHARES AND DISTRIBUTIONS
31 D- 6 - 601
31 D- 6 - 602
31 D- 6 - 603
31 D- 6 - 604
31 D- 6 - 620
31 D- 6 - 621
31 D- 6 - 622
31 D- 6 - 623
31 D- 6 - 624
31 D- 6 - 625
31 D- 6 - 626
31 D- 6 - 627
31 D- 6 - 628
31 D- 6 - 630
31 D- 6 - 631
31 D- 6 - 640
7 - SHAREHOLDERS
8 - DIRECTORS AND OFFICERS
9 - [RESERVED]
10 - AMENDMENT OF S OF INCORPORATI
11 - MERGERS AND SHARE EXCHANGES
12 - DISPOSITION OF ASSETS
13 - APPRAISAL RIGHTS
14 - DISSOLUTION
15 - FOREIGN CORPORATIONS
16 - RECORDS AND REPORTS
17 - TRANSITION PROVISIONS
CHAPTER 31D. WEST VIRGINIA BUSINESS CORPORATION ACT.
ARTICLE 6. SHARES AND DISTRIBUTIONS.
§31D-6-601. Authorized shares.
(a) The articles of incorporation must prescribe the classes of shares and the number of shares of each class that the corporation is authorized to issue. If more than one class of shares is authorized, the articles of incorporation must prescribe a distinguishing designation for each class and, prior to the issuance of shares of a class, the preferences, limitations and relative rights of that class must be described in the articles of incorporation. All shares of a class must have preferences, limitations and relative rights identical with those of other shares of the same class except to the extent otherwise permitted by section six hundred two of this article.
(b) The articles of incorporation must authorize: (1) One or more classes of shares that together have unlimited voting rights; and (2) one or more classes of shares which may be the same class or classes as those with voting rights that together are entitled to receive the net assets of the corporation upon dissolution.
(c) The articles of incorporation may authorize one or more classes of shares that:
(1) Have special, conditional or limited voting rights, or no right to vote, except to the extent prohibited by this chapter;
(2) Are redeemable or convertible as specified in the articles of incorporation: (A) At the option of the corporation, the shareholder or another person or upon the occurrence of a designated event; (B) for cash, indebtedness, securities or other property; or (C) in a designated amount or in an amount determined in accordance with a designated formula or by reference to extrinsic data or events;
(3) Entitle the holders to distributions calculated in any manner, including dividends that may be cumulative, noncumulative or partially cumulative; or
(4) Have preference over any other class of shares with respect to distributions, including dividends and distributions upon the dissolution of the corporation.
(d) The description of the designations, preferences, limitations and relative rights of share classes in subsection (c) of this section is not exhaustive.
(a) If the articles of incorporation provide, the board of directors may determine, in whole or in part, the preferences, limitations and relative rights within the limits set forth in section six hundred one of this article of: (1) Any class of shares before the issuance of any shares of that class; or (2) one or more series within a class before the issuance of any shares of that series.
(b) Each series of a class must be given a distinguishing designation.
(c) All shares of a series must have preferences, limitations and relative rights identical with those of other shares of the same series and, except to the extent otherwise provided in the description of the series, with those of other series of the same class.
(d) Before issuing any shares of a class or series created under this section, the corporation must deliver to the Secretary of State for filing articles of amendment, which are effective without shareholder action, that set forth:
(1) The name of the corporation;
(2) The text of the amendment determining the terms of the class or series of shares;
(3) The date it was adopted; and
(4) A statement that the amendment was duly adopted by the board of directors.
(a) A corporation may issue the number of shares of each class or series authorized by the articles of incorporation. Shares that are issued are outstanding shares until they are reacquired, redeemed, converted or canceled.
(b) The reacquisition, redemption, or conversion of outstanding shares is subject to the limitations of subsection (c) of this section and section six hundred forty of this article.
(c) At all times that shares of the corporation are outstanding, one or more shares that together have unlimited voting rights and one or more shares that together are entitled to receive the net assets of the corporation upon dissolution must be outstanding.
(a) A corporation may:
(1) Issue fractions of a share or pay in money the value of fractions of a share;
(2) Arrange for disposition of fractional shares by the shareholders; or
(3) Issue scrip in registered or bearer form entitling the holder to receive a full share upon surrendering enough scrip to equal a full share.
(b) Each certificate representing scrip must be conspicuously labeled "scrip" and must contain the information required by subsection (b), section six hundred twenty-five of this article.
(c) The holder of a fractional share is entitled to exercise the rights of a shareholder, including the right to vote, to receive dividends and to participate in the assets of the corporation upon liquidation. The holder of scrip is not entitled to any of these rights unless the scrip provides for them.
(d) The board of directors may authorize the issuance of scrip subject to any condition considered desirable, including:
(1) That the scrip will become void if not exchanged for full shares before a specified date; and
(2) That the shares for which the scrip is exchangeable may be sold and the proceeds paid to the scripholders.
§31D-6-620. Subscription for shares before incorporation.
(a) A subscription for shares entered into before incorporation is irrevocable for six months unless the subscription agreement provides a longer or shorter period or all the subscribers agree to revocation.
(b) The board of directors may determine the payment terms of subscription for shares that were entered into before incorporation, unless the subscription agreement specifies them. A call for payment by the board of directors must be uniform so far as practicable as to all shares of the same class or series unless the subscription agreement specifies otherwise.
(c) Shares issued pursuant to subscriptions entered into before incorporation are fully paid and nonassessable when the corporation receives the consideration specified in the subscription agreement.
(d) If a subscriber defaults in payment of money or property under a subscription agreement entered into before incorporation, the corporation may collect the amount owed as any other debt. Alternatively, unless the subscription agreement provides otherwise, the corporation may rescind the agreement and may sell the shares if the debt remains unpaid for more than twenty days after the corporation sends written demand for payment to the subscriber.
(e) A subscription agreement entered into after incorporation is a contract between the subscriber and the corporation subject to section six hundred twenty-one of this article.
(a) The powers granted in this section to the board of directors may be reserved to the shareholders by the articles of incorporation.
(b) The board of directors may authorize shares to be issued for consideration consisting of any tangible or intangible property or benefit to the corporation, including cash, promissory notes, services performed, contracts for services to be performed or other securities of the corporation.
(c) Before the corporation issues shares, the board of directors must determine that the consideration received or to be received for shares to be issued is adequate. That determination by the board of directors is conclusive insofar as the adequacy of consideration for the issuance of shares relates to whether the shares are validly issued, fully paid and nonassessable.
(d) When the corporation receives the consideration for which the board of directors authorized the issuance of shares, the shares issued are fully paid and nonassessable.
(e) The corporation may place in escrow shares issued for a contract for future services or benefits or a promissory note, or make other arrangements to restrict the transfer of the shares, and may credit distributions in respect of the shares against their purchase price until the services are performed, the note is paid or the benefits received. If the services are not performed, the note is not paid or the benefits are not received, the shares escrowed or restricted and the distributions credited may be canceled in whole or in part.
(f) An issuance of shares or other securities convertible into or rights exercisable for shares, in a transaction or a series of integrated transactions, requires approval of the shareholders at a meeting at which a quorum exists consisting of at least a majority of the votes entitled to be cast on the matter, if:
(1) The shares, other securities or rights are issued for consideration other than cash or cash equivalents; and
(2) The voting power of shares that are issued and issuable as a result of the transaction or series of integrated transactions will comprise more than twenty percent of the voting power of the shares of the corporation that were outstanding immediately before the transaction.
(g) As used in subsection (f) of this section:
(1) For purposes of determining the voting power of shares issued and issuable as a result of a transaction or series of integrated transactions, the voting power of shares is the greater of: (A) The voting power of the shares to be issued; or (B) the voting power of the shares that would be outstanding after giving effect to the conversion of convertible shares and other securities and the exercise of rights to be issued.
(2) A series of transactions is integrated if consummation of one transaction is made contingent on consummation of one or more of the other transactions.
(a) A purchaser from a corporation of its own shares is not liable to the corporation or its creditors with respect to the shares except to pay the consideration for which the shares were authorized to be issued pursuant to section six hundred twenty-one of this article or specified in the subscription agreement entered pursuant to section six hundred twenty of this article.
(b) Unless otherwise provided in the articles of incorporation, a shareholder of a corporation is not personally liable for the acts or debts of the corporation except that he or she may become personally liable by reason of his or her own acts or conduct.
(a) Unless the articles of incorporation provide otherwise, shares may be issued pro rata and without consideration to the corporation's shareholders or to the shareholders of one or more classes or series. An issuance of shares under this subsection is a share dividend.
(b) Shares of one class or series may not be issued as a share dividend in respect of shares of another class or series unless: (1) The articles of incorporation authorize; (2) a majority of the votes entitled to be cast by the class or series to be issued approve the issue; or (3) there are no outstanding shares of the class or series to be issued.
(c) If the board of directors does not fix the record date for determining shareholders entitled to a share dividend, it is the date the board of directors authorizes the share dividend.
A corporation may issue rights, options or warrants for the purchase of shares of the corporation. The board of directors shall determine the terms upon which the rights, options or warrants are issued, their form and content, and the consideration for which the shares are to be issued.
(a) Shares may, but need not, be represented by certificates. Unless this chapter or another provision of this code expressly provides otherwise, the rights and obligations of shareholders are identical whether or not their shares are represented by certificates.
(b) At a minimum each share certificate must state on its face:
(1) The name of the issuing corporation and that it is organized under the law of this state;
(2) The name of the person to whom issued; and
(3) The number and class of shares and the designation of the series, if any, the certificate represents.
(c) If the issuing corporation is authorized to issue different classes of shares or different series within a class, the designations, relative rights, preferences and limitations applicable to each class and the variations in rights, preferences and limitations determined for each series and the authority of the board of directors to determine variations for future series must be summarized on the front or back of each certificate. Alternatively, each certificate may state conspicuously on its front or back that the corporation will furnish the shareholder this information on request in writing and without charge.
(d) Each share certificate: (1) Must be signed, either manually or in facsimile, by two officers designated in the bylaws or by the board of directors; and (2) may bear the corporate seal or its facsimile.
(e) If the person who signed, either manually or in facsimile, a share certificate no longer holds office when the certificate is issued, the certificate remains valid.
(a) Unless the articles of incorporation or bylaws provide otherwise, the board of directors of a corporation may authorize the issue of some or all of the shares of any or all of its classes or series without certificates. The authorization does not affect shares already represented by certificates until they are surrendered to the corporation.
(b) Within a reasonable time after the issue or transfer of shares without certificates, the corporation shall send the shareholder a written statement of the information required on certificates by subsections (b) and (c), section six hundred twenty-five of this article and, if applicable, section six hundred twenty-seven of this article.
(a) The articles of incorporation, bylaws, an agreement among shareholders or an agreement between shareholders and the corporation may impose restrictions on the transfer or registration of transfer of shares of the corporation. A restriction does not affect shares issued before the restriction was adopted unless the holders of the shares are parties to the restriction agreement or voted in favor of the restriction.
(b) A restriction on the transfer or registration of transfer of shares is valid and enforceable against the holder or a transferee of the holder if the restriction is authorized by this section and its existence is noted conspicuously on the front or back of the certificate or is contained in the information statement required by subsection (b), section six hundred twenty-six of this article. Unless a restriction is noted as required by this subsection, a restriction is not enforceable against a person without knowledge of the restriction.
(c) A restriction on the transfer or registration of transfer of shares is authorized:
(1) To maintain the corporation's status when it is dependent on the number or identity of its shareholders;
(2) To preserve exemptions under federal or state securities law; or
(3) For any other reasonable purpose.
(d) A restriction on the transfer or registration of transfer of shares may:
(1) Obligate the shareholder first to offer the corporation or other persons an opportunity to acquire the restricted shares;
(2) Obligate the corporation or other persons to acquire the restricted shares;
(3) Require the corporation, the holders of any class of its shares or another person to approve the transfer of the restricted shares, if the requirement is not manifestly unreasonable; or
(4) Prohibit the transfer of the restricted shares to designated persons or classes of persons, if the prohibition is not manifestly unreasonable.
(e) For purposes of this section, "shares" includes a security convertible into or carrying a right to subscribe for or acquire shares.
A corporation may pay the expenses of selling or underwriting its shares, and of organizing or reorganizing the corporation, from the consideration received for shares.
BY SHAREHOLDERS AND CORPORATION.
§31D-6-630. Shareholders' preemptive rights.
(a) The shareholders of a corporation do not have a preemptive right to acquire the corporation's unissued shares except to the extent the articles of incorporation provide.
(b) A statement included in the articles of incorporation that "the corporation elects to have preemptive rights", or words of similar import, means that the following principles apply, except to the extent the articles of incorporation expressly provide otherwise:
(1) The shareholders of the corporation have a preemptive right, granted on uniform terms and conditions prescribed by the board of directors to provide a fair and reasonable opportunity to exercise the right, to acquire proportional amounts of the corporation's unissued shares upon the decision of the board of directors to issue them.
(2) A shareholder may waive his or her preemptive right. A waiver evidenced by a writing is irrevocable even though it is not supported by consideration.
(3) There is no preemptive right with respect to:
(A) Shares issued as compensation to directors, officers, agents or employees of the corporation, its subsidiaries or affiliates;
(B) Shares issued to satisfy conversion or option rights created to provide compensation to directors, officers, agents or employees of the corporation, its subsidiaries or affiliates;
(C) Shares authorized in articles of incorporation that are issued within six months from the effective date of incorporation; or
(D) Shares sold otherwise than for money.
(4) Holders of shares of any class without general voting rights but with preferential rights to distributions or assets have no preemptive rights with respect to shares of any class.
(5) Holders of shares of any class with general voting rights but without preferential rights to distributions or assets have no preemptive rights with respect to shares of any class with preferential rights to distributions or assets unless the shares with preferential rights are convertible into or carry a right to subscribe for or acquire shares without preferential rights.
(6) Shares subject to preemptive rights that are not acquired by shareholders may be issued to any person for a period of one year after being offered to shareholders at a consideration set by the board of directors that is not lower than the consideration set for the exercise of preemptive rights. An offer at a lower consideration or after the expiration of one year is subject to the shareholders' preemptive rights.
(c) For purposes of this section, "shares" includes a security convertible into or carrying a right to subscribe for or acquire shares.
(a) Subject to the provisions of chapter thirty-one-a of this code and unless otherwise prohibited by law, a corporation may acquire its own shares and shares so acquired constitute authorized but unissued shares.
(b) If the articles of incorporation prohibit the reissue of the acquired shares, the number of authorized shares is reduced by the number of shares acquired.
§31D-6-640. Distributions to shareholders.
(a) A board of directors may authorize and the corporation may make distributions to its shareholders subject to restriction by the articles of incorporation and the limitation in subsection (c) of this section.
(b) If the board of directors does not fix the record date for determining shareholders entitled to a distribution, it is the date the board of directors authorizes the distribution: Provided, That this subsection does not apply to a distribution involving a purchase, redemption or other acquisition of the corporation's shares.
(c) No distribution may be made if, after giving it effect:
(1) The corporation would not be able to pay its debts as they become due in the usual course of business; or
(2) The corporation's total assets would be less than the sum of its total liabilities plus the amount that would be needed, if the corporation were to be dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of shareholders whose preferential rights are superior to those receiving the distribution unless the articles of incorporation permit otherwise.
(d) The board of directors may base a determination that a distribution is not prohibited under subsection (c) of this section either on financial statements prepared on the basis of accounting practices and principles that are reasonable in the circumstances or on a fair valuation or other method that is reasonable in the circumstances.
(e) Except as provided in subsection (g) of this section, the effect of a distribution under subsection (c) of this section is measured:
(1) In the case of distribution by purchase, redemption or other acquisition of the corporation's shares, as of the earlier of: (A) The date money or other property is transferred or debt incurred by the corporation; or (B) the date the shareholder ceases to be a shareholder with respect to the acquired shares;
(2) In the case of any other distribution of indebtedness, as of the date the indebtedness is distributed; and
(3) In all other cases, as of: (A) The date the distribution is authorized if the payment occurs within one hundred twenty days after the date of authorization; or (B) the date the payment is made if it occurs more than one hundred twenty days after the date of authorization.
(f) A corporation's indebtedness to a shareholder incurred by reason of a distribution made in accordance with this section is at parity with the corporation's indebtedness to its general, unsecured creditors except to the extent subordinated by agreement.
(g) Indebtedness of a corporation, including indebtedness issued as a distribution, is not considered a liability for purposes of determinations under subsection (c) of this section if its terms provide that payment of principal and interest are made only if and to the extent that payment of a distribution to shareholders could then be made under this section. If the indebtedness is issued as a distribution, each payment of principal or interest is treated as a distribution, the effect of which is measured on the date the payment is actually made.