State Corporate Law Changes Reflect Current Governance Issues

July 1, 2010

Amendments to the Virginia Stock Corporation Act (the “Act”) have been passed by the 2010 General Assembly and will take effect today, July 1. The changes conform provisions of the Act to recently revised provisions of the Model Business Corporation Act relating to technological innovations and shareholder relations and clarify other provisions. The amendments, while applicable specifically to Virginia corporations, demonstrate governance reforms recently adopted and under consideration in many other states, including Delaware.

The Virginia amendments include the following topics and are discussed, along with other amendments, in more detail in our client memo:

  • Expanded provisions governing the electronic transmission of notices and other communications
  • Bylaws may require corporations to include shareholders’ director nominees in proxies and reimburse shareholders for proxy solicitation expenses in connection with the election of directors
  • Boards of directors may authorize corporate officers to make stock-based equity compensation awards, subject to limitations
  • Boards of directors may establish separate record dates for determining shareholders entitled to notice of meetings and shareholders entitled to vote at meetings
  • Boards of directors may allow shareholders to participate remotely in shareholders’ meetings
  • Repeals the existing provision that limits the power of boards of directors to alter the board’s size by an amount not greater than 30% of its existing size
  • Confirms that indemnification “to the fullest extent permitted by law” includes mandatory advancement and reimbursement of expenses based on the “willful misconduct or knowing violation of criminal law standard” of conduct

There are many proposed changes to the corporate governance landscape generally. They take the form of state law amendments, such as those in Virginia, federal legislation, including provisions of the financial services reform bills, rules of the Securities and Exchange Commission and rules of the stock exchanges. McGuireWoods is actively monitoring these developments and participates in legislative activities relating to corporate governance. You may contact any of the authors for additional information.