Nrs: Chapter 78A - Close Corporations

Link to law: https://www.leg.state.nv.us/NRS/NRS-078A.html
Published: 2015

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[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)