Virginia Code 13.1-1227: Distributions to beneficial owners
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.
Terms Used In Virginia Code 13.1-1227
- Articles of trust: includes the original articles of trust, the original certificate of trust issued by the Commission, and all amendments to the articles of trust. See Virginia Code 13.1-1201
- Assets: (1) The property comprising the estate of a deceased person, or (2) the property in a trust account.
- Beneficial owner: means any owner of a beneficial interest in a business trust, the fact of ownership to be determined and evidenced, whether by means of registration, the issuance of certificates or otherwise, in conformity to the applicable provisions of the governing instrument of the business trust. See Virginia Code 13.1-1201
- Business trust: includes , without limitation, any of the following entities that conform with subdivisions 1 and 2 of this definition:
(1) A trust of the type known at common law as a "business trust" or "Massachusetts trust";
(2) A trust qualifying as a real estate mortgage investment conduit under § 860 D of the United States Internal Revenue Code of 1986, as amended, or under any successor provision;
(3) A trust qualifying as a real estate investment trust under §§ 856 through 859 of the United States Internal Revenue Code of 1986, as amended, or under any successor provision; or
(4) A "real estate investment trust" or "trust" created under former Chapter 9 of Title 6 or former Chapter 9 of Title 6. See Virginia Code 13.1-1201
- Governing instrument: means a trust instrument that creates a business trust and provides for the governance of the affairs of the business trust and the conduct of its business, including, without limitation, a declaration of trust. See Virginia Code 13.1-1201
- Liabilities: The aggregate of all debts and other legal obligations of a particular person or legal entity.
- Trust: includes a common law trust, business trust, and foreign business trust. See Virginia Code 13.1-1201
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.