Opinion ID: 1059739
Heading Depth: 1
Heading Rank: 6

Heading: statutory requirements for selling corporation's assets

Text: Willard next attacks the directors' compliance with the provisions of Code § 13.1-724. [17] Specifically, Willard asserts that A.S. and Rose Mary failed to follow the procedures contained in subsection (B)(1) in two respects: (1) that the board of directors failed to communicate the basis for its determination that the proposed transaction would be submitted to the stockholders with no recommendation from the directors; and (2) that the proposed Asset Purchase Agreement sent to the stockholders for approval was actually different from the one approved by the board of directors. The notice of the December 20, 1996 special meeting of stockholders disclosed the familial relationship among A.S., Rose Mary, and David. According to the circuit court, that relationship was a special circumstance that formed the basis of the decision by the board to refer the proposed transaction to the stockholders without a recommendation. We agree. Disclosure of the familial relationship in the notice for the special meeting of stockholders was sufficient notification of the basis for the board's decision. Thus, the disclosure satisfied the requirements of Code § 13.1-747(B)(1). The court also found that the terms of the revised Asset Purchase Agreement, which A.S. signed without board approval, fell within the authority to negotiate that the board of directors had granted to him at the special meeting on November 19, 1996. The minutes of the special meeting of the board of directors on November 19 reflect that the board authorized A.S. to sign the agreement but reserved the right for him to negotiate any matters of concern to the stockholders. In the revised document, Capps agreed to assume certain liabilities of Moneta; whereas, the original agreement stated that Capps shall not assume any liabilities of [Moneta]. While this modification resulted in a reduction in the purchase price, we believe that the outstanding liabilities of the seller and the extent to which the buyer will assume those liabilities are matters of concern to stockholders. Thus, we conclude that A.S. acted within the authority granted to him when he executed the revised Asset Purchase Agreement and that the submission of that agreement to the stockholders for approval did not violate the requirements of Code § 13.1-724(B)(1), even though it contained some terms that were different from those in the original agreement approved by the board of directors.