Corporate Sale of Substantially All Assets Approval Requirements in Virginia
At a glance
| Governing law, corporation, assets, and transaction scope | Virginia Stock Corporation Act art. 13, §§ 13.1-723 to -724; ordinary domestic private stock corporation. Covers sale, lease, exchange, or other asset disposition outside express no-vote routes when no significant continuing business activity remains (§ 13.1-724(A)) |
|---|---|
| Ordinary-course, significant-activity, and substantially-all trigger | Shareholder approval if disposition would leave no significant continuing business activity; ordinary-course disposition exempt unless articles say otherwise. Safe harbor uses 20% assets and 20% income-or-revenue (§§ 13.1-723(1), 13.1-724(A)) |
| Quantitative safe harbor, subsidiaries, and investment-holding tests | Retained activity ≥20% consolidated total assets and ≥20% of consolidated pretax continuing income or continuing revenue, most recent completed fiscal year. Board may use reasonable accounting principles, fair valuation, or other reasonable method; direct/indirect consolidated-subsidiary assets deemed parent assets. No investment-holding rule (§ 13.1-724(A), (H)) |
| Board resolution, recommendation, conflict exception, and conditioning | Board resolution initiates/authorizes and submits; recommends unless conflict or special circumstances, then informs holders of basis. May condition shareholder approval or effectiveness (§ 13.1-724(B)-(C)) |
| Shareholder meeting notice, nonvoting holders, terms, and consideration | Every shareholder, voting or not, gets 25-60 days' meeting notice stating purpose and containing agreement copy/summary; if summary, corporation sends full agreement on request (§§ 13.1-658(A), 13.1-724(D)) |
| Vote denominator, classes/groups, articles, and higher thresholds | Default more than 2/3 of all votes entitled at quorum meeting. Articles may set greater/lesser vote or groups, but not below majority of votes cast by each entitled group with quorum; board condition may require greater vote or quorum (§ 13.1-724(C), (E)) |
| Ordinary-course, encumbrance, subsidiary, distribution, and dissolution exclusions | Unless articles override: ordinary-course disposition, any encumbrance, transfer to wholly owned corporation/eligible entity, and pro rata class/ series distribution require no holder vote. Dissolution dispositions use Article 16. Regulated-business transfer restriction is outside ordinary private scope (§§ 13.1-723, 13.1-724(G), (I)) |
| Agreement execution, closing, abandonment, and contract rights | Meeting notice includes agreement copy/summary; no separate statutory signer or filing. Unless parties agree otherwise, approved transaction may be abandoned before consummation without holder action, subject to contractual rights (§ 13.1-724(D), (F)) |
| Appraisal/dissent notice and transaction effect | A § 13.1-724 disposition triggers appraisal automatically only if interested transaction; articles/bylaws/board may grant it for another disposition. Covered-security/organized-market/open-end-fund limits and consideration/ interested-transaction restorations apply; preferred articles may limit subject to safeguards (§ 13.1-730(A)(3), (5), (B)-(C)) |
| Fiduciary, successor-liability, creditor, tax, antitrust, securities, and fact boundaries | Sections govern internal approval/appraisal, not significant-activity facts, fairness, validity, successor liability, fraudulent transfer, creditors/ liens, tax, securities, antitrust, employment, environmental, licensing, or fiduciary compliance; regulated businesses use separate restriction (§ 13.1-724(I)) |
Requirements one by one
Virginia uses a 20%/20% continuing-business safe harbor
Va. Code § 13.1-724(A) requires approval when a nonexempt asset disposition would leave no significant continuing business activity. Retaining activity representing at least 20% of consolidated total assets and 20% of either consolidated pretax continuing income or continuing revenue is conclusive. Each measure uses the most recently completed fiscal year.
The board may use financial statements prepared on reasonable accounting practices, fair valuation, or another reasonable method. The statute deems direct and indirect consolidated-subsidiary assets to be parent assets and gives no separate investment-holding rule.
The board recommends or explains and may condition
Section 13.1-724(B)-(C) requires a board resolution initiating and authorizing the disposition. The board submits it and recommends approval unless conflict or special circumstances support no recommendation, then informs shareholders of its basis.
The board may condition shareholder approval or effectiveness. The statute does not state that those internal conditions settle contract, fiduciary, or regulatory requirements.
Every holder gets the agreement or a summary
Section 13.1-724(D) gives meeting notice to every holder, voting or not, states the disposition as a meeting purpose, and includes the agreement or a summary. If only a summary is sent, the corporation must send the full agreement to a requesting shareholder.
Va. Code § 13.1-658(A) expands the normal notice window for a § 13.1-724 sale: notice runs from 25 to 60 days before the meeting.
The default is more than two-thirds of all entitled votes
Section 13.1-724(E) requires more than two-thirds of all votes entitled at a meeting with quorum, unless the articles or a board condition requires a greater vote or quorum. The articles can set a lesser vote or separate groups, but each entitled voting group with quorum must provide at least a majority of votes cast.
That article floor uses votes cast, while the default uses all votes entitled. The two denominators should not be treated as interchangeable.
Four no-vote routes and dissolution are express
Va. Code § 13.1-723 removes the holder vote, unless the articles say otherwise, for ordinary-course dispositions, any listed encumbrance, a transfer to one or more wholly owned corporations or eligible entities, and a pro rata distribution to one or more classes or series.
Section 13.1-724(G) sends a disposition in the course of dissolution to Article 16. Subsection (I) imposes a separate transferee restriction on railroads, public-service corporations, banks, and other listed regulated businesses; those specialized entities are outside this ordinary private-corporation cell.
Agreement terms control whether the default abandonment power applies
Under § 13.1-724(F), an approved disposition may be abandoned before consummation without shareholder action unless the parties agreed otherwise. Any abandonment remains subject to the parties' contractual rights.
That sentence makes the agreement relevant without deciding termination, fees, damages, title, tax, lien, or regulatory records.
Appraisal is automatic only for an interested asset disposition
Va. Code § 13.1-730(A)(3), (5), (B)-(C) grants appraisal for a § 13.1-724 asset disposition when it is an interested transaction. Another disposition receives appraisal only to the extent the articles, bylaws, or a board resolution provide it.
Covered securities, qualifying organized-market shares, and open-end investment- company shares face the stated market-out, but the interested-transaction rule restores appraisal. Preferred-share articles may limit rights subject to the section's separate-vote and one-year protections. This page does not classify a transaction as interested or administer appraisal.
What trips people up
- Virginia uses 20%, not the Model Act's common 25%. Both the asset measure and one operating measure must be met.
- The default vote is more than two-thirds. Exactly two-thirds does not meet the statutory default wording.
- Ordinary asset dispositions do not all carry appraisal. The automatic § 13.1-730 route is limited to an interested disposition, though governing records or a board resolution may add rights.
Common questions
Does mortgaging all assets require shareholder approval?
Not under § 13.1-723's default. The articles of incorporation may require it.
May the transaction be abandoned after approval?
Yes before consummation, unless the parties agreed otherwise and subject to contractual rights under § 13.1-724(F).
Does Virginia require an asset-sale filing?
Sections 13.1-723 and 13.1-724 state no ordinary asset-sale filing. Other title, dissolution, tax, lien, license, or industry rules may require separate records.
Statutes and sources
- Va. Code §§ 13.1-723 to -724. The quoted current text supplies the 20% test, board/holder procedure, notice, vote, exclusions, subsidiary treatment, dissolution, regulated-business, and abandonment rules. Official § 13.1-723 and official § 13.1-724 (accessed September 5, 2026).
- Va. Code § 13.1-658. The quoted current text supplies the 25-to-60-day meeting notice. Official current text (accessed September 5, 2026).
- Va. Code § 13.1-730. The quoted current text supplies appraisal eligibility and limitations. Official current text (accessed September 5, 2026).
Source links
Every statute quoted above, linked, with the date we checked it.
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