[Rev. 2/10/2015 4:04:37
PM--2014R2]
CHAPTER 78A - CLOSE CORPORATIONS
GENERAL PROVISIONS
NRS 78A.010 Applicability
of chapter.
NRS 78A.013 Form
required for filing of records.
NRS 78A.015 Filing
of records written in language other than English.
NRS 78A.017 Cancellation
of filings.
NRS 78A.018 Secretary
of State authorized to adopt certain regulations to allow close corporation to
carry out powers and duties through most recent technology.
FORMATION
NRS 78A.020 Filing
requirements; required and optional provisions of articles of incorporation.
NRS 78A.030 Procedure
for existing corporation to become close corporation.
SHARES OF STOCK
NRS 78A.040 Notice
required on share certificates; effect of notice and restrictions on transfer
of shares; shareholders to be provided with copies of provisions restricting
rights.
NRS 78A.050 Transfer
of shares prohibited; exceptions.
NRS 78A.060 Effect
of attempt to transfer shares in violation of prohibition.
POWERS AND DUTIES
NRS 78A.070 Shareholders’
agreements: Authority to enter; effect; amendment.
NRS 78A.080 Shareholders’
agreements: Validity.
NRS 78A.090 Operation
without board of directors; elimination and reinstatement of board.
NRS 78A.100 Annual
meeting.
NRS 78A.110 Records
signed, acknowledged or verified by person acting in more than one capacity.
NRS 78A.120 Limitation
on liability of shareholders.
NRS 78A.130 Merger
or share exchange; sale, lease or exchange of assets.
NRS 78A.140 Appointment
of custodian, receiver or provisional director.
NRS 78A.150 Provisional
director: Requirements for appointment; qualifications, rights and powers;
compensation.
NRS 78A.160 Option
of stockholder to dissolve corporation: Inclusion in certificate of incorporation;
exercise of option; notice on stock certificate.
TERMINATION OF STATUS AS CLOSE CORPORATION
NRS 78A.170 Time
of termination of status.
NRS 78A.180 Voluntary
termination of status.
NRS 78A.190 Involuntary
termination of status; intervention by court.
NRS 78A.200 Effect
of termination of status.
_________
GENERAL PROVISIONS
NRS 78A.010 Applicability of chapter. The
provisions of this chapter apply to all close corporations formed pursuant to NRS 78A.020. Unless otherwise provided by this
chapter, the provisions of chapter 78 of NRS
are applicable to all close corporations.
(Added to NRS by 1989, 940)
NRS 78A.013 Form required for filing of records.
1. Each record filed with the Secretary of
State pursuant to this chapter must be on or accompanied by a form prescribed
by the Secretary of State.
2. The Secretary of State may refuse to
file a record which does not comply with subsection 1 or which does not contain
all the information required by statute for filing the record.
3. If the provisions of the form
prescribed by the Secretary of State conflict with the provisions of any record
that is submitted for filing with the form:
(a) The provisions of the form control for all
purposes with respect to the information that is required by statute to appear
in the record in order for the record to be filed; and
(b) Unless otherwise provided in the record, the
provisions of the record control in every other situation.
4. The Secretary of State may by
regulation provide for the electronic filing of records with the Office of the
Secretary of State.
(Added to NRS by 2003, 20th
Special Session, 40)
NRS 78A.015 Filing of records written in language other than English. No record which is written in a language other
than English may be filed or submitted for filing in the Office of the
Secretary of State pursuant to the provisions of this chapter unless it is
accompanied by a verified translation of that record into the English language.
(Added to NRS by 1995, 1117; A 2003, 3108)
NRS 78A.017 Cancellation of filings. If
a close corporation has made a filing with the Secretary of State and the
Secretary of State has not processed the filing and placed the filing into the
public record, the close corporation may cancel the filing by:
1. Filing a statement of cancellation with
the Secretary of State; and
2. Paying the required fee pursuant to
subsection 7 of NRS 78.785.
(Added to NRS by 2009, 2829)
NRS 78A.018 Secretary of State authorized to adopt certain regulations to
allow close corporation to carry out powers and duties through most recent
technology. The Secretary of State
may adopt regulations to define, for the purposes of certain provisions of this
chapter, the terms “meeting,” “writing,” “written” and other terms to allow a
close corporation or other entity which is subject to the provisions of this
chapter to carry out its powers and duties as prescribed by this chapter
through the use of the most recent technology available including, without
limitation, the use of electronic communications, videoconferencing and
telecommunications.
(Added to NRS by 2011, 777)
FORMATION
NRS 78A.020 Filing requirements; required and optional provisions of
articles of incorporation.
1. A close corporation must be formed in
accordance with NRS 78.030 to 78.055, inclusive, subject to the
following requirements:
(a) All of the issued stock of the corporation of
all classes, exclusive of treasury shares, must be represented by certificates
and must be held of record by a specified number of persons, not to exceed 30.
(b) All of the issued stock of all classes must
be subject to one or more of the restrictions on transfer pursuant to NRS 78A.050.
(c) The corporation shall not offer any of its
stock of any class that would constitute a public offering within the meaning
of the Securities Act of 1933, 15 U.S.C. §§ 77a et seq.
2. The articles of incorporation of a
close corporation must:
(a) Set forth the matters required by NRS 78.035 except that the articles must
state that there will be no board of directors if so agreed pursuant to NRS 78A.070.
(b) Contain a heading stating the name of the
corporation and that it is a close corporation.
3. The articles of incorporation of a
close corporation may set forth the qualifications of stockholders by
specifying the classes of persons who are entitled to be holders of record of
stock of any class, the classes of persons who are not entitled to be holders
of record of stock of any class, or both.
4. To determine the number of holders of
record of the stock of a close corporation, stock that is held in joint or
common tenancy or by community property must be treated as held by one
stockholder.
(Added to NRS by 1989, 941; A 1993, 980; 2009, 1684)
NRS 78A.030 Procedure for existing corporation to become close corporation.
1. Any corporation organized under chapter 78 of NRS may become a close corporation
pursuant to this chapter by signing, filing and recording, in accordance with NRS 78.390, a certificate of amendment of
the certificate of incorporation which must:
(a) Contain a statement that the corporation
elects to become a close corporation; and
(b) Meet the requirements of paragraph (a) of
subsection 2 of NRS 78A.020.
2. Except as otherwise provided in
subsection 3, the amendment must be adopted in accordance with the requirements
of NRS 78.380 or 78.390.
3. If an amendment is adopted in
accordance with the requirements of NRS
78.390, it must be approved by a vote of the holders of record of at least
two-thirds of the shares of each class of stock of the corporation that are
outstanding and entitled to vote, unless the articles of incorporation or
bylaws require approval by a greater proportion.
(Added to NRS by 1989, 941; A 1999, 1593; 2001, 1380, 3199; 2003, 3108)
SHARES OF STOCK
NRS 78A.040 Notice required on share certificates; effect of notice and
restrictions on transfer of shares; shareholders to be provided with copies of
provisions restricting rights.
1. The following statement must appear
conspicuously on each share certificate issued by a close corporation:
The rights of stockholders in a
close corporation may differ materially from the rights of shareholders in
other corporations. Copies of the certificate of incorporation, bylaws,
shareholders’ agreements and other records, any of which may restrict transfers
of stock and affect voting and other rights, may be obtained by a shareholder
on written request to the corporation.
2. A person claiming an interest in the
shares of a close corporation that has complied with the requirement of
subsection 1 is bound by the records referred to in the notice. A person
claiming an interest in the shares of a close corporation that has not complied
with the requirement of subsection 1 is bound by any record that he or she or a
person through whom he or she claims has knowledge or notice.
3. A close corporation shall provide to
any shareholder upon his or her written request and without charge, copies of
the provisions that restrict transfer or affect voting or other rights of
shareholders appearing in the articles of incorporation, bylaws, shareholders’
agreements or voting trust agreements filed with the corporations.
4. Except as otherwise provided in
subsection 5, the close corporation may refuse to register the transfer of
stock into the name of a person to whom the stock of a close corporation has
been transferred if the person has, or is presumed to have, notice that the
transfer of the stock is in violation of a restriction on the transfer of
stock. If the close corporation refuses to register the transfer of stock into
the name of the transferee, the close corporation must notify the transferee of
its refusal and state the reasons therefor.
5. Subsection 4 does not apply if:
(a) The transfer of stock, even if contrary to
the restrictions on transfer of stock, has been consented to by all the
stockholders of the close corporation; or
(b) The close corporation has amended its certificate
of incorporation in accordance with NRS 78A.180.
6. The provisions of this section do not
impair any rights of a transferee to:
(a) Rescind the transaction by which the
transferee acquired the stock; or
(b) Recover under any applicable warranty.
7. As used in this section, “transfer” is
not limited to a transfer for value.
(Added to NRS by 1989, 941; A 2003, 3109)
NRS 78A.050 Transfer of shares prohibited; exceptions.
1. An interest in the shares of a close
corporation may not be transferred, except to the extent permitted by the
certificate of incorporation, the bylaws, a shareholders’ agreement or a voting
trust agreement.
2. Except as otherwise provided by the
certificate of incorporation, the provisions of this section do not apply to a
transfer:
(a) To the corporation or to any other
shareholder of the same class or series of shares.
(b) To heirs at law.
(c) That has been approved in writing by all of
the holders of the shares of the corporation having voting rights.
(d) To an executor or administrator upon the
death of a shareholder or to a trustee or receiver as a result of a bankruptcy,
insolvency, dissolution or similar proceeding brought by or against a
shareholder.
(e) By merger or share exchange or an exchange of
existing shares for other shares of a different class or series in the
corporation.
(f) By a pledge as collateral for a loan that
does not grant the pledgee any voting rights possessed by the pledgor.
(g) Made after the termination of the status of
the corporation as a close corporation.
(Added to NRS by 1989, 942)
NRS 78A.060 Effect of attempt to transfer shares in violation of
prohibition.
1. An attempt to transfer shares in a
close corporation in violation of a prohibition against such a transfer is
ineffective.
2. An attempt to transfer shares in a
close corporation in violation of a prohibition against transfer that is not
binding on the transferee because:
(a) The notice required by NRS 78A.040 was not given; or
(b) The prohibition is held unenforceable by a
court of competent jurisdiction,
Ê gives the
corporation an option to purchase the shares from the transferee for the same
price and on the same terms that the transferee purchased them. To exercise the
option, the corporation must give the transferee written notice within 30 days
after they receive a share certificate for registration in the name of the
transferee.
(Added to NRS by 1989, 943)
POWERS AND DUTIES
NRS 78A.070 Shareholders’ agreements: Authority to enter; effect; amendment.
1. All shareholders of a close corporation
who are entitled to vote may agree in writing to regulate the exercise of the
corporate powers and the management of the business and affairs of the
corporation or the relationship among the shareholders of the corporation.
2. An agreement authorized by this section
is effective even if the agreement:
(a) Eliminates a board of directors.
(b) Restricts the discretion or powers of the
board of directors or authorizes director proxies or weighted voting rights.
(c) Treats the corporation as a partnership.
(d) Creates a relationship among the shareholders
or between the shareholders and the corporation that would otherwise be
appropriate among partners.
3. If the corporation has a board of
directors, an agreement authorized by this section that restricts the
discretion or powers of the board of directors:
(a) Relieves directors of liability imposed by
law; and
(b) Imposes that liability on each person in whom
the discretion or power of the board is vested,
Ê to the
extent that the discretion or power of the board of directors is governed by
the agreement.
4. A provision eliminating a board of
directors in an agreement authorized by this section is not effective unless
the articles of incorporation contain a statement to that effect.
5. A provision entitling one or more
shareholders to dissolve the corporation under NRS
78A.160 is effective if a statement of this right is contained in the
articles of incorporation.
6. To amend an agreement authorized by
this section, all shareholders entitled to vote must approve the amendment in
writing, unless the agreement provides otherwise.
7. Subscribers for shares may act as
shareholders with respect to an agreement authorized by this section if shares
are not issued when the agreement was made.
8. This section does not prohibit any
other agreement between or among shareholders in a close corporation.
(Added to NRS by 1989, 944)
NRS 78A.080 Shareholders’ agreements: Validity. A
written agreement among stockholders of a close corporation or any provision of
the certificate of incorporation or of the bylaws of the corporation that
relates to any phase of the affairs of the corporation, including, but not
limited to, the management of its business, the declaration and payment of
dividends or other division of profits, the election of directors or officers,
the employment of stockholders by the corporation or the arbitration of
disputes is not invalid on the ground that it is an attempt by the parties to
the agreement or by the stockholders of the corporation to treat the
corporation as if it were a partnership or to arrange relations among the
stockholders or between the stockholders and the corporation in a manner that
would be appropriate only among partners.
(Added to NRS by 1989, 947)
NRS 78A.090 Operation without board of directors; elimination and
reinstatement of board.
1. A close corporation may operate without
a board of directors if the certificate of incorporation contains a statement
to that effect.
2. An amendment to the certificate of
incorporation eliminating a board of directors must be approved:
(a) By all the shareholders of the corporation,
whether or not otherwise entitled to vote on amendments; or
(b) If no shares have been issued, by all
subscribers for shares, if any, or if none, by the incorporators.
3. While a corporation is operating
without a board of directors as authorized by subsection 1:
(a) All corporate powers must be exercised by or
under the authority of, and the business and affairs of the corporation managed
under the direction of, the shareholders.
(b) Unless the articles of incorporation provide
otherwise:
(1) Action requiring the approval of the
board of directors or of both the board of directors and the shareholders is
authorized if approved by the shareholders; and
(2) Action requiring a majority or greater
percentage vote of the board of directors is authorized if approved by the
majority or greater percentage of votes of the shareholders entitled to vote on
the action.
(c) A requirement by a state or the United States
that a record delivered for filing contain a statement that specified action
has been taken by the board of directors is satisfied by a statement that the
corporation is a close corporation without a board of directors and that the
action was approved by the shareholders.
(d) The shareholders by resolution may appoint
one or more shareholders to sign records as designated directors.
4. An amendment to the articles of
incorporation that deletes the provision which eliminates a board of directors
must be approved by the holders of at least two-thirds of the votes of each
class or series of shares of the corporation, voting as separate voting groups,
whether or not otherwise entitled to vote on amendments. The amendment must specify
the number, names and mailing addresses of the directors of the corporation or
describe who will perform the duties of the board of directors.
(Added to NRS by 1989, 944; A 1999, 1593; 2001, 101, 2723; 2003, 3109)
NRS 78A.100 Annual meeting. A
close corporation shall hold an annual meeting if one or more shareholders
delivers a written notice to the corporation requesting a meeting. Upon receipt
of a notice, the close corporation must hold a meeting within 30 days.
(Added to NRS by 1989, 945)
NRS 78A.110 Records signed, acknowledged or verified by person acting in
more than one capacity. Notwithstanding
any law to the contrary, a person who holds more than one office in a close
corporation may sign, acknowledge or verify in more than one capacity any
record required to be signed, acknowledged or verified by the holders of two or
more offices.
(Added to NRS by 1989, 945; A 2003, 3110)
NRS 78A.120 Limitation on liability of shareholders. Personal liability may not be imposed upon
shareholders of a close corporation solely as a result of the failure of the
close corporation to observe the usual corporate formalities or requirements
relating to the exercise of corporate powers or management of its business and
affairs, where such failure results from the distinct nature and permissible
functioning of a close corporation.
(Added to NRS by 1989, 945)
NRS 78A.130 Merger or share exchange; sale, lease or exchange of assets.
1. A plan of merger or share exchange that
if effected would:
(a) Terminate the close corporation status must
be approved by the holders of at least two-thirds of the votes of each class or
series of shares of the close corporation, voting as separate voting groups,
whether or not the holders are entitled to vote on the plan.
(b) Create the surviving corporation as a close
corporation must be approved by the holders of at least two-thirds of the votes
of each class or series of shares of the surviving corporation, voting as
separate voting groups, whether or not the holders are entitled to vote on the
plan.
2. If not made in the usual and regular
course of business, a sale, lease, exchange or other disposition of all or
substantially all of the property of a close corporation must be approved by
the holders of at least two-thirds of the votes of each class or series of
shares of the corporation, voting as separate voting groups, whether or not the
holders are entitled to vote on the transaction.
(Added to NRS by 1989, 945)
NRS 78A.140 Appointment of custodian, receiver or provisional director.
1. Upon application of a stockholder, the
court may appoint one or more persons to be custodians and, if the corporation
is insolvent, to be receivers of any close corporation when:
(a) The business and affairs of the close
corporation are managed by the stockholders who are so divided that the
business of the corporation is suffering or is threatened with irreparable
injury and any remedy with respect to such a deadlock provided in the
certificate of incorporation or bylaws or in any written agreement of the
stockholders has failed; or
(b) The petitioning stockholder has the right to
the dissolution of the corporation under a provision of the certificate of
incorporation permitted by NRS 78A.160.
2. If the court determines that it would
be in the best interest of the corporation, the court may appoint a provisional
director in lieu of appointing a custodian or receiver for a close corporation.
Such an appointment does not preclude any subsequent order of the court
appointing a custodian or receiver for the corporation.
(Added to NRS by 1989, 946)
NRS 78A.150 Provisional director: Requirements for appointment;
qualifications, rights and powers; compensation.
1. Notwithstanding any contrary provision
of the certificate of incorporation, the bylaws or an agreement of the
stockholders, the court may appoint a provisional director for a close
corporation if the shareholders or directors, if any, are so divided concerning
the management of the business and affairs of the corporation that the votes
required for action by the board of directors cannot be obtained, with the
consequence that the business and affairs of the corporation cannot be
conducted to the advantage of the stockholders generally.
2. An application for relief pursuant to
this section must be filed:
(a) By at least one-half of the number of
directors then in office;
(b) By the holders of at least one-third of all
stock then entitled to elect directors; or
(c) If there is more than one class of stock then
entitled to elect one or more directors, by the holders of two-thirds of the
stock of each class.
Ê The
certificate of incorporation of a close corporation may provide that a lesser
proportion of the directors, the stockholders or a class of stockholders may
apply for relief under this section.
3. A provisional director:
(a) Must be an impartial person who is not a
stockholder or a creditor of the corporation or of any subsidiary or affiliate
of the corporation and whose further qualifications, if any, may be determined
by the court.
(b) Is not a custodian or receiver of the
corporation and does not have the title and powers of a custodian or receiver
appointed under NRS 78A.140.
(c) Has the rights and powers of an elected
director of the corporation, including the right to notice of and to vote at
meetings of directors, until such time as the provisional director may be
removed by order of the court.
4. The compensation of a provisional
director must be determined by agreement between the provisional director and
the corporation subject to the approval of the court, which may fix the
compensation in the absence of agreement or in the event of disagreement
between the provisional director and the corporation.
(Added to NRS by 1989, 946)
NRS 78A.160 Option of stockholder to dissolve corporation: Inclusion in
certificate of incorporation; exercise of option; notice on stock certificate.
1. The certificate of incorporation of any
close corporation may include a provision granting to any stockholder or to the
holder of any specified number or percentage of shares of any class of stock an
option to have the corporation dissolved at will or upon the occurrence of any
specified event or contingency. Whenever any option to dissolve is exercised,
the stockholders who exercise the option shall give written notice thereof to
all other stockholders. Thirty days after the notice is sent, the dissolution
of the corporation must proceed as if the required number of stockholders
having voting power consented in writing to dissolution of the corporation as
provided by NRS 78.320.
2. If the certificate of incorporation as
originally filed does not contain a provision authorized by subsection 1, the
certificate may be amended to include such a provision if adopted by the
affirmative vote of the holders of all the outstanding stock, whether or not
otherwise entitled to vote, unless the certificate of incorporation
specifically authorizes such an amendment by a vote which is not less than
two-thirds of all the outstanding stock, whether or not otherwise entitled to
vote.
3. Each stock certificate in any
corporation whose certificate of incorporation authorizes dissolution as
permitted by this section must conspicuously note on the face of the
certificate the existence of the provision or the provision is ineffective.
(Added to NRS by 1989, 947)
TERMINATION OF STATUS AS CLOSE CORPORATION
NRS 78A.170 Time of termination of status. A
close corporation is subject to the provisions of this chapter until:
1. The corporation files with the
Secretary of State a certificate of amendment deleting from the certificate of
incorporation the provisions required or permitted by NRS
78A.020, to be stated in the certificate of incorporation; or
2. A provision or condition required or
permitted by NRS 78A.020 to be stated in a
certificate of incorporation has been breached and the corporation or any
stockholder has not acted pursuant to NRS 78A.190
to prevent the loss of status or remedy the breach.
(Added to NRS by 1989, 941)
NRS 78A.180 Voluntary termination of status.
1. A corporation may voluntarily terminate
its status as a close corporation, and cease to be subject to the provisions of
this chapter, by amending the certificate of incorporation to delete therefrom
the additional provisions required or permitted by NRS
78A.020 to be stated in the certificate of incorporation of a close
corporation. An amendment must be adopted and become effective in accordance with
NRS 78.390, except that it must be
approved by a vote of the holders of record of at least two-thirds of the
voting shares of each class of stock of the corporation that are outstanding.
2. The certificate of incorporation of a
close corporation may provide that on any amendment to terminate the status as
a close corporation, a vote greater than two-thirds or a vote of all shares of
any class may be required. If the certificate of incorporation contains such a
provision, that provision may not be amended, repealed or modified by any vote
less than that required to terminate the status of the corporation as a close
corporation.
3. A certificate filed pursuant to this
section is effective at the time of the filing of the certificate with the
Secretary of State or upon a later date and time as specified in the
certificate, which date must not be more than 90 days after the date on which
the certificate is filed. If the certificate specifies a later effective date
but does not specify an effective time, the certificate becomes effective at
12:01 a.m. in the Pacific time zone on the specified later date.
(Added to NRS by 1989, 943; A 2005, 2186; 2011, 2794)
NRS 78A.190 Involuntary termination of status; intervention by court.
1. The status of a corporation as a close
corporation terminates if one or more of the provisions or conditions of this
chapter cease to exist or be fulfilled unless:
(a) Within 30 days after the occurrence of the
event, or within 30 days after the event has been discovered by the
corporation, whichever is later, the corporation files with the Secretary of
State a signed certificate stating that a specified provision or condition
included in the certificate of incorporation to qualify the corporation as a
close corporation has ceased to be applicable and furnishes a copy of the
certificate to each stockholder; and
(b) The corporation, concurrently with the filing
of a certificate, takes such steps as are necessary to correct the situation
that threatens the status as a close corporation, including the refusal to
register the transfer of stock which has been wrongfully transferred as
provided by NRS 78A.050 or commencing a proceeding
under subsection 2.
2. Upon the suit of the close corporation
or any stockholder, the court has jurisdiction to:
(a) Issue all orders necessary to prevent the
corporation from losing its status as a close corporation.
(b) Restore the status of the corporation as a
close corporation by enjoining or setting aside any act or threatened act on
the part of the corporation or a stockholder that would be inconsistent with
any of the provisions or conditions required or permitted by this chapter to be
stated in the certificate of incorporation of a close corporation, unless it is
an act approved in accordance with NRS 78A.050.
(c) Enjoin or set aside any transfer or
threatened transfer of stock of a close corporation that is contrary to the
terms of the certificate of incorporation or of any permitted restriction on
transfer.
(d) Enjoin any public offering or threatened
public offering of stock of the close corporation.
(Added to NRS by 1989, 943; A 1999, 1594; 2003, 3110)
NRS 78A.200 Effect of termination of status.
1. A corporation that terminates its
status as a close corporation is subject to the provisions of chapter 78 of NRS.
2. Termination of the status of a close
corporation does not affect any right of a shareholder or of the corporation
under an agreement or the articles of incorporation unless invalidated by law.
(Added to NRS by 1989, 946)
