Corporate Sale of Substantially All Assets Approval Requirements in West Virginia
At a glance
| Governing law, corporation, assets, and transaction scope | West Virginia Business Corporation Act article 31D-12; ordinary domestic corporation. Covers sale, lease, exchange, or other non-exempt disposition leaving no significant continuing activity; consolidated-subsidiary assets deemed parent assets (§ 31D-12-1202(a), (h)) |
|---|---|
| Ordinary-course, significant-activity, and substantially-all trigger | Trigger is non-exempt disposition leaving corporation without significant continuing business activity, not express all/substantially-all formula. Usual/regular-course disposition of any/all assets exempt unless articles opt in (§§ 31D-12-1201(1), -1202(a)) |
| Quantitative safe harbor, subsidiaries, and investment-holding tests | Conclusive retained-activity safe harbor: ≥25% prior-year total assets AND ≥25% of either continuing pretax income OR continuing revenue, corporation and subsidiaries consolidated. No below-threshold presumption or investment- holding rule stated (§ 31D-12-1202(a), (h)) |
| Board resolution, recommendation, conflict exception, and conditioning | Board initiates by authorizing resolution, submits, and recommends approval; conflict/special-circumstances nonrecommendation requires basis. Board may condition submission on any basis (§ 31D-12-1202(b)-(c)) |
| Shareholder meeting notice, nonvoting holders, terms, and consideration | Every voting/nonvoting holder gets 10-60-day notice stating purpose and describing disposition, terms, conditions, consideration. Written action requires unanimous voting-holder consent within 60 days and 10-day advance notice/materials to nonvoters (§§ 31D-7-704 to -705, 31D-12-1202(d)) |
| Vote denominator, classes/groups, articles, and higher thresholds | Majority of votes entitled constitutes required quorum; with quorum, votes cast for must exceed votes cast against. Articles or board condition may require greater vote/quorum; no disposition-specific class vote stated (§§ 31D-7-725, 31D-12-1202(c), (e)) |
| Ordinary-course, encumbrance, subsidiary, distribution, and dissolution exclusions | Unless articles opt in: usual-course assets, any-course encumbrance, wholly owned entities, and pro rata class/series distribution exempt. Disposition during dissolution outside § 1202; no investment-management exception stated (§§ 31D-12-1201, -1202(g)) |
| Agreement execution, closing, abandonment, and contract rights | After approval and before consummation, corporation may abandon without holder action, subject to other parties' contractual rights. Article 12 states no statutory agreement execution, filing, amendment, or closing process (§ 31D-12-1202(f)) |
| Appraisal/dissent notice and transaction effect | Eligible voter gets appraisal on consummated § 1202 disposition, subject to market, consideration, interested-person, and preferred-share limits. Meeting notice states whether rights are, are not, or may be available and includes article when applicable (§§ 31D-13-1302, -1320) |
| Fiduciary, successor-liability, creditor, tax, antitrust, securities, and fact boundaries | Holder with appraisal right may challenge completed action only for specified authorization defect or fraud/material misrepresentation. Approval does not decide trigger facts, fairness, fiduciary compliance, successor liability, creditors, tax, securities, antitrust, or other external law (§ 31D-13-1302(d)) |
Requirements one by one
The 25% safe harbor is conclusive in one direction
W. Va. Code § 31D-12-1202(a) applies when a non-exempt disposition would leave the corporation without significant continuing business activity. Retaining at least 25% of prior-year total assets and at least 25% of either continuing pretax income or continuing revenue is conclusive, measured for the corporation and subsidiaries on a consolidated basis.
The text does not say that falling below the percentages creates a presumption that significant activity is absent. Direct and indirect consolidated- subsidiary assets are deemed parent assets.
The board initiates, recommends, and may condition
The board first authorizes by resolution, submits the disposition, and recommends approval. A conflict or special circumstance can support no recommendation if the board transmits its basis. It may condition submission on any basis.
Every shareholder receives terms and consideration
Section 31D-12-1202(d) requires notice to each voting and nonvoting holder. It states the purpose and describes the disposition, terms, conditions, and consideration. W. Va. Code § 31D-7-705 supplies the 10-to-60-day interval.
The disposition vote requires a quorum of at least a majority of all votes entitled. Under § 31D-7-725, votes cast for then must exceed votes cast against, unless a greater rule applies. The articles or a board condition may require a greater vote or quorum.
Written action under § 31D-7-704 requires all voting holders, completed within 60 days. Protected nonvoters receive the meeting-equivalent materials at least 10 days before action.
Four exclusions and dissolution sit outside the trigger
W. Va. Code § 31D-12-1201 removes a usual-course disposition, an encumbrance in or outside that course, a transfer to wholly owned entities, and a pro rata class or series asset distribution. The articles may require approval for those otherwise exempt actions. A disposition in the course of dissolution is outside § 31D-12-1202.
Approval can be abandoned before consummation
After shareholder approval and before consummation, § 31D-12-1202(f) permits the corporation to abandon without holder action, subject to other parties' contractual rights. Article 12 states no separate statutory agreement execution, filing, amendment, or closing process.
Appraisal and challenge limits require separate checks
W. Va. Code § 31D-13-1302(a)(3) grants appraisal to a holder entitled to vote when a § 31D-12-1202 disposition is consummated. Market, consideration, interested-person, and preferred-share rules can change eligibility. Section 31D-13-1320 requires the meeting notice to state whether appraisal is, is not, or may be available and to include the article when applicable.
A holder entitled to appraisal may challenge the completed action only for the authorization defects or fraud/material misrepresentation specified in § 31D-13-1302(d).
What trips people up
- The safe harbor does not run backward. The statute makes the 25% pair conclusive when met but does not declare a below-threshold presumption.
- Written action remains unanimous. West Virginia does not add the articles- based meeting-equivalent consent route used by several modern-act states.
- Dissolution changes the governing article. A disposition during dissolution is outside § 31D-12-1202 rather than an exception inside it.
Common questions
Are subsidiary assets counted with the parent?
Yes. Direct and indirect consolidated-subsidiary assets are deemed parent assets for § 31D-12-1202.
Must nonvoting holders receive the disposition notice?
Yes. The statute sends the notice to every holder and requires terms, conditions, and consideration.
Can the corporation abandon after approval?
Yes, before consummation and without another holder action, subject to other parties' contractual rights.
Statutes and sources
- W. Va. Code §§ 31D-7-704 to -705 and -725 — unanimous consent, meeting notice, and votes-cast approval. Official Article 31D-7 PDF, accessed September 5, 2026.
- W. Va. Code §§ 31D-12-1201 to -1202 — exclusions, significant-activity trigger, 25% safe harbor, subsidiaries, board action, notice, vote, dissolution, and abandonment. Official Article 31D-12 PDF, accessed September 5, 2026.
- W. Va. Code §§ 31D-13-1302 and -1320 — appraisal eligibility, notice, and challenge limits. Official Article 31D-13 PDF, accessed September 5, 2026.
Source links
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