Every year, the Virginia General Assembly passes stacks of laws in a brief whirlwind. Most of the time, these changes nibble around the edges of topics for our clients to consider. This year, they completely revised the Virginia Nonstock Corporation Act (“Act”) effective January 1, 2027. The changes address committees, membership, financial transparency, board procedures, and charitable assets. Given the scope of changes, every Virginia non-profit should review their governing documents and processes to ensure they are complying with the new Act.

Why State Law Matters

Most Virginia non-profits are organized as a Virginia nonstock corporation. This means they must comply with both Virginia state corporate law and separately comply with federal tax law for non-profit and tax issues.

Virginia law governs the corporation’s formation and operation. This includes how directors are selected, how boards and committees make decisions, and what rights corporate members have. IRS recognition under Section 501(c)(3) separately establishes that the organization qualifies for federal charitable tax exemption. Incorporating under Virginia law does not establish federal tax exemption. Similarly, receiving IRS recognition does not replace compliance with Virginia’s corporate governance rules. The organization must satisfy both sets of requirements.

The Act’s January 1, 2027, changes apply even for entities that have been in business and held Section 501(c)(3) status for decades. Your board should review the articles of incorporation, bylaws, committee charters, and actual practices to determine what updates are needed.

Board Committees and Advisory Committees

Revised Virginia Code § 13.1-869 expressly distinguishes committees performing board functions from advisory committees. A committee exercising delegated board authority must include at least two directors. Non-directors may also serve, but cannot vote on matters in which the committee performs a board function. The organization’s governing documents may impose additional restrictions.

An advisory committee may include non-directors and cannot exercise board powers. The statute provides that advisory committees have no fiduciary duties or other responsibility to the corporation. Directors participating in those committees retain their separate responsibilities as directors, and applicable confidentiality or contractual obligations still matter.

Consider a finance committee with two directors and a volunteer accountant. It could exercise properly delegated board authority, with only the directors voting on board functions. A group with one director and several community volunteers could instead provide advice and recommendations for board approval. Calling either group a “standing committee” does not determine its authority. Committee charters should explain membership, voting, responsibilities, and matters reserved to the board. Certain powers, including amending bylaws and filling board vacancies, cannot be delegated to a board committee.

The board’s oversight role also remains central. The Act’s revised language expressly refers to oversight, while retaining Virginia’s standard requiring directors to exercise their good faith business judgment in the corporation’s best interests. Delegation should come with appropriate reporting and follow-up. Directors should understand what committees and management are authorized to do, receive meaningful information, and address significant problems when they arise.

Board Composition and Corporate Membership

Revised Section 13.1-857 expressly provides that an ex officio director is a voting director unless the articles or bylaws state otherwise. If an executive director or former board president occupies a board seat because of that position but is not intended to have voting rights, the documents should clearly address voting rights. “Ex officio” does not automatically mean “nonvoting.” This code change is welcome as we find many organizations are quite confused and opaque on their intentions around this question.

The revisions in the Act also permit director terms to be established in the bylaws; the default term is one year when the governing documents do not establish one.

Membership is another potential source of surprises. Nonstock corporations may have voting members, nonvoting members, multiple membership classes, or no members. The revisions permit membership classes, qualifications, and rights to be established directly in the bylaws. Nonprofits should distinguish corporate membership from participation in programs or services. A person called a “member” in marketing materials may have a different legal status under the governing documents. Conversely, nonvoting corporate members may still possess statutory information rights.

New Section 13.1-837.2 also addresses suspension and termination of corporate membership. The reasons and procedures must be provided in the articles or bylaws. Organizations should confirm that their documents support their intended approach to nonpayment, misconduct, resignation, and other membership issues, and coordinate those provisions with service agreements.

Financial Transparency and Corporate Records

New Section 13.1-935.2 allows a corporate member to request the most recent fiscal year’s financial statements that have been prepared. The corporation must deliver them or make them available through its website or another recognized means. An accountant’s report must accompany the statements when applicable; otherwise, specified information about the accounting basis must be supplied. Reasonable confidentiality restrictions are permitted, and requests lacking good faith or a proper purpose may be declined under the statutory standard.

Failure to respond within 30 days after delivery to the secretary can lead to expedited court proceedings and potential expense awards. This provision does not itself establish a universal audit requirement. It does make assigning responsibility for requests and maintaining accessible financial information particularly important.

Existing member inspection rights are also revised. The general advance-notice period increases from five to ten business days, and demands must be signed and delivered to the corporate secretary. Additional conditions apply to certain records. The statute permits reasonable confidentiality restrictions for specified materials and restricts unauthorized use of membership lists. Boards should update their procedures while preserving statutory access rights. Permanent records of board and member meetings, written actions, and committee actions taken in place of the board remain essential.

Amending Bylaws and Approving Decisions

The revisions also affect how organizations change their rules and approve decisions. Revised Section 13.1-892 expressly recognizes voting members’ authority to amend or repeal bylaws. Boards generally retain amendment authority, subject to statutory limits and applicable reservations or restrictions. Before adopting governance updates, confirm who must approve them and what notice and voting requirements apply.

Electronic decision-making also deserves a check. Unanimous written board consent remains available, subject to the governing documents. Action by fewer than all directors requires express authorization in the articles and compliance with approval, advance-notice, and objection requirements. An email chain showing majority support does not automatically satisfy those requirements. Remote board meetings already are permitted, subject to applicable conditions; the revisions should not be mistaken for first-time authorization to meet electronically.

Protecting Charitable Assets

For charitable nonprofits, new provisions expressly protect assets dedicated to charitable purposes during fundamental transactions, including mergers, conversions, and dissolution. A restructuring cannot simply erase donor restrictions or redirect charitable property to private benefit. Reasonable compensation for services remains permissible under the statutory exception. Boards considering affiliations or major organizational changes should evaluate asset restrictions alongside corporate approvals.

The Attorney General provision preserves existing authority over charitable assets. Virginia already treats charitable corporate assets as held for the public purposes established by governing documents, gifts, and applicable law. Describing the revisions as creating charitable oversight for the first time would overstate the change.

Governance Disputes and New Procedural Tools

The Act also adds detailed procedures for member derivative lawsuits brought on the corporation’s behalf, including a written demand and generally a 90-day waiting period, subject to exceptions. A separate provision permits judicial removal of directors for specified serious misconduct when additional statutory findings are satisfied. These provisions reinforce the importance of prompt responses to formal demands, independent review, sound conflict procedures, and documented decisions.

Other changes provide options worth discussing with counsel. Bylaws may designate courts for certain internal corporate disputes, subject to statutory limitations. Existing clauses mandating arbitration of those claims require review because the revised statute prohibits such requirements. Merger and conversion procedures are modernized. A new ratification process can address certain authorization defects in prior corporate actions, although correction requires the applicable approvals, notices, and filings.

A Game Plan Before January 1

The next step is to get started with a focused governance review. Assign a board officer or committee to work with management and counsel, gather the current governing documents and committee charters, and compare them with actual practices. Prioritize committee authority, membership status, ex officio voting rights, financial-information requests, and approval procedures. Prepare coordinated amendments and resolutions, obtain the required approvals, and train the people who will implement them. Changes adopted before January 1, 2027, should comply with existing law until the revisions take effect.

We would welcome the opportunity to help your board and executive team identify the changes that matter, update your documents, and develop practical procedures. Please contact Timothy R. Hughes at thughes@beankinney.com or R. Douglas Taylor, Jr. at rdougtaylor@beankinney.com to discuss your organization’s next steps.

This article is for informational purposes only and does not contain or convey legal advice. Consult an attorney. Any views or opinions expressed herein are those of the authors and are not necessarily the views of the firm or any client of the firm.