Code § 13.1-724(A) requires approval by shareholders if a disposition would leave their corporation without a significant continuing business activity, and Code § 13.1-724(E) requires that such dispositions must be authorized by “an affirmative vote of more than two-thirds of the corporation’s shareholders.” The circuit court erred in determining that the statute allows a majority of shareholders to obviate the need for more than two-thirds shareholder approval via corporate bylaw.
The plain language of § 13.1-724 does not support the corporation’s claim that it can adopt a bylaw that redefines the meaning of “significant continuing business activity” to be anything that the majority designates it to be. The statute’s safe-harbor provision providing for an exception to the statutory threshold does not give a corporation the authority to amend or create a new threshold that will be deemed sufficient as a matter of law to constitute a “significant continuing business activity.”
Here, a shareholder with over one-third ownership never abandoned her claim that the company’s proposed sale was unlawful. Given her continuous warnings on this point putting the company on notice, the circuit court abused its discretion when it found that laches barred the corporation’s request for a temporary injunction.
Reversed and remanded.