Virginia Law

Article 4. Beneficial Owners.

A. 1. A contribution of a beneficial owner to the business trust may be in cash, property, or services rendered, or a promissory note or other binding obligation to contribute cash or property or to perform services.

2. A person may become a beneficial owner of a business trust and may receive a beneficial interest in a business trust without making a contribution or being obligated to make a contribution to the business trust.

B. 1. Except as provided in the articles of trust or the governing instrument of the business trust, a beneficial owner is obligated to the business trust to perform any promise to contribute cash or property or to perform services, even if the beneficial owner is unable to perform because of death, disability, or any other reason.

2. Subject to the provisions of subdivision 3 of this subsection, if a beneficial owner does not make the required contribution of property or services, the beneficial owner is obligated at the option of the business trust to contribute cash equal to that portion of the agreed value, as stated in the records of the business trust, of the contribution that has not been made.

3. The option provided in subdivision 2 shall be in addition to, and not in lieu of, any other rights, including the right to specific performance, that the business trust may have against the beneficial owner under the governing instrument or applicable law.

C. 1. A governing instrument may provide that the interest of any beneficial owner who fails to make any contribution that the beneficial owner is obligated to make shall be subject to specific penalties for, or specified consequences of, the failure.

2. The penalty or consequence may take the form of:

a. Reducing or eliminating the defaulting beneficial owner's proportionate interest in the business trust or subordinating the beneficial owner's interest to that of the nondefaulting beneficial owners;

b. A forced sale of the beneficial owner's interest;

c. A forfeiture of the beneficial owner's interest;

d. A lending by other beneficial owners of the amount necessary to meet the defaulting beneficial owner's commitment;

e. A fixing of the value of the defaulting beneficial owner's interest by appraisal or by formula, and a redemption or sale of the defaulting beneficial owner's interest at that value; or

f. Any other penalty or consequence.

D. No promise of a beneficial owner to contribute to a business trust is enforceable unless set out in a writing signed by the beneficial owner.

2002, c. 621.

Except to the extent otherwise expressly provided in the governing instrument of the business trust, the beneficial owners shall be entitled to the same limitation of personal liability extended to shareholders of a Virginia corporation formed under Chapter 9 (§ 13.1-601 et seq.) of this title.

2002, c. 621.

A. Except to the extent otherwise provided in the articles of trust or in the governing instrument of a business trust, a beneficial owner shall have an undivided beneficial interest in the property of the business trust and shall share in the profits and losses of the business trust in the proportion (expressed as a percentage) of the entire undivided beneficial interest in the business trust owned by the beneficial owner. The governing instrument of a business trust may provide that the business trust or the trustees, acting for and on behalf of the business trust, shall be deemed to hold beneficial ownership of any income earned on securities owned by the business trust issued by any business entities formed, organized or existing under the laws of any jurisdiction, including the laws of any foreign country.

B. 1. Except to the extent otherwise provided in the articles of trust or in the governing instrument of a business trust, a beneficial owner has no interest in specific business trust property.

2. A creditor of the beneficial owner has no right to obtain possession of, or otherwise exercise legal or equitable remedies with respect to, the property of the business trust.

C. A beneficial owner's beneficial interest in the business trust is personal property notwithstanding the nature of the property of the business trust.

D. Except to the extent otherwise provided in the articles of trust or in the governing instrument of a business trust, a beneficial owner's beneficial interest in the business trust is freely transferable.

E. Except to the extent otherwise provided in the articles of trust or in the governing instrument of a business trust, at the time a beneficial owner becomes entitled to receive a distribution, the beneficial owner has the status of, and is entitled to all remedies available to, a creditor of the business trust with respect to the distribution. A governing instrument may provide for the establishment of record dates with respect to allocations and distributions by a business trust.

F. A beneficial owner of a business trust does not have a vested property right resulting from any provision of the articles of trust.

2002, c. 621.

A. The trustees may authorize and the business trust may make distributions to its beneficial owners, subject to restriction by the articles of trust or governing instrument and the limitation in subsection C.

B. If the trustees do not fix the record date for determining beneficial owners entitled to a distribution, other than one involving a repurchase or reacquisition of beneficial interests, it is the date the trustees authorize the distribution.

C. No distribution may be made if, after giving it effect:

1. The business trust would not be able to pay its debts as they become due in the usual course of business; or

2. The business trust's total assets would be less than the sum of its total liabilities plus (unless the articles of trust permit otherwise) the amount that would be needed, if the business trust were to be dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of beneficial interests whose preferential rights are superior to those receiving the distribution.

D. The trustees may base a determination that a distribution is not prohibited under subsection C either on financial statements prepared on the basis of accounting practices and principles that are reasonable in the circumstances or on a fair valuation or other method that is reasonable in the circumstances.

E. The effect of a distribution under subsection C is measured:

1. In the case of a distribution by purchase, redemption, or other acquisition of the business trust's beneficial interests, as of the earlier of (i) the date money or other property is transferred or debt incurred by the business trust or (ii) the date the beneficial owners cease to be beneficial owners with respect to the acquired beneficial interests;

2. In the case of any other distribution of indebtedness, as of the date the indebtedness is distributed;

3. In all other cases, as of (i) the date the distribution is authorized if the payment occurs within 120 days after the date of authorization or (ii) the date payment is made if it occurs more than 120 days after the date of authorization.

F. A business trust's indebtedness to a beneficial owner incurred by reason of a distribution made in accordance with this section is at parity with the business trust's indebtedness to its general, unsecured creditors except to the extent subordinated by agreement.

2002, c. 621.