2005 Nevada Revised Statutes - Chapter 78A — Close Corporations

CHAPTER 78A - CLOSE CORPORATIONS

GENERAL PROVISIONS

NRS 78A.001 Definitions.

NRS 78A.004 Recorddefined.

NRS 78A.006 Signdefined.

NRS 78A.008 Signaturedefined.

NRS 78A.010 Applicabilityof chapter.

NRS 78A.013 Formrequired for filing of records.

NRS 78A.015 Filingof records written in language other than English.

FORMATION

NRS 78A.020 Filingrequirements; required and optional provisions of articles of incorporation.

NRS 78A.030 Procedurefor existing corporation to become close corporation.

SHARES OF STOCK

NRS 78A.040 Noticerequired on share certificates; effect of notice and restrictions on transferof shares; shareholders to be provided with copies of provisions restrictingrights.

NRS 78A.050 Transferof shares prohibited; exceptions.

NRS 78A.060 Effectof attempt to transfer shares in violation of prohibition.

POWERS AND DUTIES

NRS 78A.070 Shareholdersagreements: Authority to enter; effect; amendment.

NRS 78A.080 Shareholdersagreements: Validity.

NRS 78A.090 Operationwithout board of directors; elimination and reinstatement of board.

NRS 78A.100 Annualmeeting.

NRS 78A.110 Recordssigned, acknowledged or verified by person acting in more than one capacity.

NRS 78A.120 Limitationon liability of shareholders.

NRS 78A.130 Mergeror share exchange; sale, lease or exchange of assets.

NRS 78A.140 Appointmentof custodian, receiver or provisional director.

NRS 78A.150 Provisionaldirector: Requirements for appointment; qualifications, rights and powers;compensation.

NRS 78A.160 Optionof stockholder to dissolve corporation: Inclusion in certificate ofincorporation; exercise of option; notice on stock certificate.

TERMINATION OF STATUS AS CLOSE CORPORATION

NRS 78A.170 Timeof termination of status.

NRS 78A.180 Voluntarytermination of status.

NRS 78A.190 Involuntarytermination of status; intervention by court.

NRS 78A.200 Effectof termination of status.

_________

GENERAL PROVISIONS

NRS 78A.001 Definitions. As used in this chapter, unless the context otherwiserequires, the words and terms defined in NRS78A.004, 78A.006 and 78A.008 have the meaning ascribed to themin those sections.

(Added to NRS by 2003, 3108)

NRS 78A.004 Recorddefined. Record means information that is inscribedon a tangible medium or that is stored in an electronic or other medium and isretrievable in perceivable form.

(Added to NRS by 2003, 3108)

NRS 78A.006 Signdefined. Sign means to affix a signature toa record.

(Added to NRS by 2003, 3108)

NRS 78A.008 Signaturedefined. Signature means a name, word, symbolor mark executed or otherwise adopted, or a record encrypted or similarly processedin whole or in part, by a person with the present intent to identify himselfand adopt or accept a record. The term includes, without limitation, anelectronic signature as defined in NRS719.100.

(Added to NRS by 2003, 3108)

NRS 78A.010 Applicabilityof chapter. The provisions of this chapter applyto all close corporations formed pursuant to NRS 78A.020. Unless otherwise provided bythis chapter, the provisions of chapter 78 ofNRS are applicable to all close corporations.

(Added to NRS by 1989, 940)

NRS 78A.013 Formrequired for filing of records.

1. Each record filed with the Secretary of State pursuantto this chapter must be on or accompanied by a form prescribed by the Secretaryof State.

2. The Secretary of State may refuse to file a recordwhich does not comply with subsection 1 or which does not contain all theinformation required by statute for filing the record.

3. If the provisions of the form prescribed by theSecretary of State conflict with the provisions of any record that is submittedfor filing with the form:

(a) The provisions of the form control for all purposeswith respect to the information that is required by statute to appear in therecord in order for the record to be filed; and

(b) Unless otherwise provided in the record, theprovisions of the record control in every other situation.

4. The Secretary of State may by regulation providefor the electronic filing of records with the Office of the Secretary of State.

(Added to NRS by 2003, 20th SpecialSession, 40)

NRS 78A.015 Filingof records written in language other than English. Norecord which is written in a language other than English may be filed or submittedfor filing in the Office of the Secretary of State pursuant to the provisionsof this chapter unless it is accompanied by a verified translation of thatrecord into the English language.

(Added to NRS by 1995, 1117; A 2003, 3108)

FORMATION

NRS 78A.020 Filingrequirements; required and optional provisions of articles of incorporation.

1. A close corporation must be formed in accordancewith NRS 78.030 to 78.055, inclusive, subject to the followingrequirements:

(a) All of the issued stock of the corporation of allclasses, exclusive of treasury shares, must be represented by certificates andmust be held of record by a specified number of persons, not to exceed 30.

(b) All of the issued stock of all classes must besubject to one or more of the restrictions on transfer pursuant to NRS 78A.050.

(c) The corporation shall not offer any of its stock ofany class that would constitute a public offering within the meaning of theSecurities Act of 1933, 15 U.S.C. 77 et seq.

2. The articles of incorporation of a closecorporation must:

(a) Set forth the matters required by NRS 78.035 except that the articles muststate that there will be no board of directors if so agreed pursuant to NRS 78A.070.

(b) Contain a heading stating the name of thecorporation and that it is a close corporation.

3. The articles of incorporation of a closecorporation may set forth the qualifications of stockholders by specifying theclasses of persons who are entitled to be holders of record of stock of anyclass, the classes of persons who are not entitled to be holders of record ofstock of any class, or both.

4. To determine the number of holders of record of thestock of a close corporation, stock that is held in joint or common tenancy orby community property must be treated as held by one stockholder.

(Added to NRS by 1989, 941; A 1993, 980)

NRS 78A.030 Procedurefor existing corporation to become close corporation.

1. Any corporation organized under chapter 78 of NRS may become a close corporationpursuant to this chapter by signing, filing and recording, in accordance with NRS 78.390, a certificate of amendment ofthe certificate of incorporation which must:

(a) Contain a statement that the corporation elects tobecome a close corporation; and

(b) Meet the requirements of paragraph (a) ofsubsection 2 of NRS 78A.020.

2. Except as otherwise provided in subsection 3, theamendment must be adopted in accordance with the requirements of NRS 78.380 or 78.390.

3. If an amendment is adopted in accordance with therequirements of NRS 78.390, it must beapproved by a vote of the holders of record of at least two-thirds of theshares of each class of stock of the corporation that are outstanding and entitledto vote, unless the articles of incorporation or bylaws require approval by agreater proportion.

(Added to NRS by 1989, 941; A 1999, 1593; 2001, 1380, 3199; 2003, 3108)

SHARES OF STOCK

NRS 78A.040 Noticerequired on share certificates; effect of notice and restrictions on transferof shares; shareholders to be provided with copies of provisions restrictingrights.

1. The following statement must appear conspicuouslyon each share certificate issued by a close corporation:

 

The rights of stockholders in aclose corporation may differ materially from the rights of shareholders inother corporations. Copies of the certificate of incorporation, bylaws,shareholders agreements and other records, any of which may restrict transfersof stock and affect voting and other rights, may be obtained by a shareholderon written request to the corporation.

 

2. A person claiming an interest in the shares of aclose corporation that has complied with the requirement of subsection 1 isbound by the records referred to in the notice. A person claiming an interestin the shares of a close corporation that has not complied with the requirementof subsection 1 is bound by any record that he or a person through whom heclaims has knowledge or notice.

3. A close corporation shall provide to anyshareholder upon his written request and without charge, copies of the provisionsthat restrict transfer or affect voting or other rights of shareholdersappearing in the articles of incorporation, bylaws, shareholders agreements orvoting trust agreements filed with the corporations.

4. Except as otherwise provided in subsection 5, theclose corporation may refuse to register the transfer of stock into the name ofa person to whom the stock of a close corporation has been transferred if theperson has, or is presumed to have, notice that the transfer of the stock is inviolation of a restriction on the transfer of stock. If the close corporationrefuses to register the transfer of stock into the name of the transferee, theclose corporation must notify the transferee of its refusal and state thereasons therefor.

5. Subsection 4 does not apply if:

(a) The transfer of stock, even if contrary to therestrictions on transfer of stock, has been consented to by all thestockholders of the close corporation; or

(b) The close corporation has amended its certificateof incorporation in accordance with NRS78A.180.

6. The provisions of this section do not impair anyrights of a transferee to:

(a) Rescind the transaction by which he acquired thestock; or

(b) Recover under any applicable warranty.

7. As used in this section, transfer is not limitedto a transfer for value.

(Added to NRS by 1989, 941; A 2003, 3109)

NRS 78A.050 Transferof shares prohibited; exceptions.

1. An interest in the shares of a close corporationmay not be transferred, except to the extent permitted by the certificate ofincorporation, the bylaws, a shareholders agreement or a voting trust agreement.

2. Except as otherwise provided by the certificate ofincorporation, the provisions of this section do not apply to a transfer:

(a) To the corporation or to any other shareholder ofthe same class or series of shares.

(b) To heirs at law.

(c) That has been approved in writing by all of theholders of the shares of the corporation having voting rights.

(d) To an executor or administrator upon the death of ashareholder or to a trustee or receiver as a result of a bankruptcy,insolvency, dissolution or similar proceeding brought by or against ashareholder.

(e) By merger or share exchange or an exchange ofexisting shares for other shares of a different class or series in thecorporation.

(f) By a pledge as collateral for a loan that does not grantthe pledgee any voting rights possessed by the pledgor.

(g) Made after the termination of the status of thecorporation as a close corporation.

(Added to NRS by 1989, 942)

NRS 78A.060 Effectof attempt to transfer shares in violation of prohibition.

1. An attempt to transfer shares in a closecorporation in violation of a prohibition against such a transfer isineffective.

2. An attempt to transfer shares in a closecorporation in violation of a prohibition against transfer that is not bindingon the transferee because:

(a) The notice required by NRS 78A.040 was not given; or

(b) The prohibition is held unenforceable by a court ofcompetent jurisdiction,

gives thecorporation an option to purchase the shares from the transferee for the sameprice and on the same terms that he purchased them. To exercise the option, thecorporation must give the transferee written notice within 30 days after theyreceive a share certificate for registration in the name of the transferee.

(Added to NRS by 1989, 943)

POWERS AND DUTIES

NRS 78A.070 Shareholdersagreements: Authority to enter; effect; amendment.

1. All shareholders of a close corporation who areentitled to vote may agree in writing to regulate the exercise of the corporatepowers and the management of the business and affairs of the corporation or therelationship among the shareholders of the corporation.

2. An agreement authorized by this section iseffective even if the agreement:

(a) Eliminates a board of directors.

(b) Restricts the discretion or powers of the board ofdirectors or authorizes director proxies or weighted voting rights.

(c) Treats the corporation as a partnership.

(d) Creates a relationship among the shareholders orbetween the shareholders and the corporation that would otherwise beappropriate among partners.

3. If the corporation has a board of directors, anagreement authorized by this section that restricts the discretion or powers ofthe board of directors:

(a) Relieves directors of liability imposed by law; and

(b) Imposes that liability on each person in whom thediscretion or power of the board is vested,

to theextent that the discretion or power of the board of directors is governed bythe agreement.

4. A provision eliminating a board of directors in anagreement authorized by this section is not effective unless the articles ofincorporation contain a statement to that effect.

5. A provision entitling one or more shareholders todissolve the corporation under NRS 78A.160is effective if a statement of this right is contained in the articles ofincorporation.

6. To amend an agreement authorized by this section,all shareholders entitled to vote must approve the amendment in writing, unlessthe agreement provides otherwise.

7. Subscribers for shares may act as shareholders withrespect to an agreement authorized by this section if shares are not issuedwhen the agreement was made.

8. This section does not prohibit any other agreementbetween or among shareholders in a close corporation.

(Added to NRS by 1989, 944)

NRS 78A.080 Shareholdersagreements: Validity. A written agreementamong stockholders of a close corporation or any provision of the certificateof incorporation or of the bylaws of the corporation that relates to any phaseof the affairs of the corporation, including, but not limited to, themanagement of its business, the declaration and payment of dividends or otherdivision of profits, the election of directors or officers, the employment of stockholdersby the corporation or the arbitration of disputes is not invalid on the groundthat it is an attempt by the parties to the agreement or by the stockholders ofthe corporation to treat the corporation as if it were a partnership or toarrange relations among the stockholders or between the stockholders and thecorporation in a manner that would be appropriate only among partners.

(Added to NRS by 1989, 947)

NRS 78A.090 Operationwithout board of directors; elimination and reinstatement of board.

1. A close corporation may operate without a board ofdirectors if the certificate of incorporation contains a statement to thateffect.

2. An amendment to the certificate of incorporationeliminating a board of directors must be approved:

(a) By all the shareholders of the corporation, whetheror not otherwise entitled to vote on amendments; or

(b) If no shares have been issued, by all subscribersfor shares, if any, or if none, by the incorporators.

3. While a corporation is operating without a board ofdirectors as authorized by subsection 1:

(a) All corporate powers must be exercised by or underthe authority of, and the business and affairs of the corporation managed underthe direction of, the shareholders.

(b) Unless the articles of incorporation provideotherwise:

(1) Action requiring the approval of the boardof directors or of both the board of directors and the shareholders isauthorized if approved by the shareholders; and

(2) Action requiring a majority or greaterpercentage vote of the board of directors is authorized if approved by themajority or greater percentage of votes of the shareholders entitled to vote onthe action.

(c) A requirement by a state or the United States thata record delivered for filing contain a statement that specified action hasbeen taken by the board of directors is satisfied by a statement that thecorporation is a close corporation without a board of directors and that theaction was approved by the shareholders.

(d) The shareholders by resolution may appoint one ormore shareholders to sign records as designated directors.

4. An amendment to the articles of incorporation thatdeletes the provision which eliminates a board of directors must be approved bythe holders of at least two-thirds of the votes of each class or series ofshares of the corporation, voting as separate voting groups, whether or nototherwise entitled to vote on amendments. The amendment must specify thenumber, names and mailing addresses of the directors of the corporation ordescribe 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 Annualmeeting. A close corporation shall hold anannual meeting if one or more shareholders delivers a written notice to thecorporation requesting a meeting. Upon receipt of a notice, the closecorporation must hold a meeting within 30 days.

(Added to NRS by 1989, 945)

NRS 78A.110 Recordssigned, acknowledged or verified by person acting in more than one capacity. Notwithstanding any law to the contrary, a person whoholds more than one office in a close corporation may sign, acknowledge orverify in more than one capacity any record required to be signed, acknowledgedor verified by the holders of two or more offices.

(Added to NRS by 1989, 945; A 2003, 3110)

NRS 78A.120 Limitationon liability of shareholders. Personalliability may not be imposed upon shareholders of a close corporation solely asa result of the failure of the close corporation to observe the usual corporateformalities or requirements relating to the exercise of corporate powers ormanagement of its business and affairs, where such failure results from thedistinct nature and permissible functioning of a close corporation.

(Added to NRS by 1989, 945)

NRS 78A.130 Mergeror share exchange; sale, lease or exchange of assets.

1. A plan of merger or share exchange that if effectedwould:

(a) Terminate the close corporation status must beapproved by the holders of at least two-thirds of the votes of each class orseries 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 closecorporation must be approved by the holders of at least two-thirds of the votesof each class or series of shares of the surviving corporation, voting asseparate voting groups, whether or not the holders are entitled to vote on theplan.

2. If not made in the usual and regular course ofbusiness, a sale, lease, exchange or other disposition of all or substantiallyall of the property of a close corporation must be approved by the holders ofat least two-thirds of the votes of each class or series of shares of thecorporation, voting as separate voting groups, whether or not the holders areentitled to vote on the transaction.

(Added to NRS by 1989, 945)

NRS 78A.140 Appointmentof custodian, receiver or provisional director.

1. Upon application of a stockholder, the court mayappoint one or more persons to be custodians and, if the corporation isinsolvent, to be receivers of any close corporation when:

(a) The business and affairs of the close corporationare managed by the stockholders who are so divided that the business of thecorporation is suffering or is threatened with irreparable injury and anyremedy with respect to such a deadlock provided in the certificate ofincorporation or bylaws or in any written agreement of the stockholders hasfailed; or

(b) The petitioning stockholder has the right to thedissolution of the corporation under a provision of the certificate of incorporationpermitted by NRS 78A.160.

2. If the court determines that it would be in thebest interest of the corporation, the court may appoint a provisional directorin lieu of appointing a custodian or receiver for a close corporation. Such anappointment does not preclude any subsequent order of the court appointing acustodian or receiver for the corporation.

(Added to NRS by 1989, 946)

NRS 78A.150 Provisionaldirector: Requirements for appointment; qualifications, rights and powers;compensation.

1. Notwithstanding any contrary provision of thecertificate of incorporation, the bylaws or an agreement of the stockholders,the court may appoint a provisional director for a close corporation if theshareholders or directors, if any, are so divided concerning the management ofthe business and affairs of the corporation that the votes required for actionby the board of directors cannot be obtained, with the consequence that thebusiness and affairs of the corporation cannot be conducted to the advantage ofthe stockholders generally.

2. An application for relief pursuant to this sectionmust be filed:

(a) By at least one-half of the number of directorsthen in office;

(b) By the holders of at least one-third of all stockthen entitled to elect directors; or

(c) If there is more than one class of stock thenentitled to elect one or more directors, by the holders of two-thirds of thestock of each class.

Thecertificate of incorporation of a close corporation may provide that a lesserproportion of the directors, the stockholders or a class of stockholders mayapply for relief under this section.

3. A provisional director:

(a) Must be an impartial person who is not astockholder or a creditor of the corporation or of any subsidiary or affiliateof the corporation and whose further qualifications, if any, may be determinedby the court.

(b) Is not a custodian or receiver of the corporationand does not have the title and powers of a custodian or receiver appointedunder NRS 78A.140.

(c) Has the rights and powers of an elected director ofthe corporation, including the right to notice of and to vote at meetings of directors,until such time as he may be removed by order of the court.

4. The compensation of a provisional director must bedetermined by agreement between the provisional director and the corporationsubject to the approval of the court, which may fix his compensation in theabsence of agreement or in the event of disagreement between the provisionaldirector and the corporation.

(Added to NRS by 1989, 946)

NRS 78A.160 Optionof stockholder to dissolve corporation: Inclusion in certificate of incorporation;exercise of option; notice on stock certificate.

1. The certificate of incorporation of any closecorporation may include a provision granting to any stockholder or to theholder of any specified number or percentage of shares of any class of stock anoption to have the corporation dissolved at will or upon the occurrence of anyspecified event or contingency. Whenever any option to dissolve is exercised,the stockholders who exercise the option shall give written notice thereof toall other stockholders. Thirty days after the notice is sent, the dissolutionof the corporation must proceed as if the required number of stockholdershaving voting power consented in writing to dissolution of the corporation asprovided by NRS 78.320.

2. If the certificate of incorporation as originallyfiled does not contain a provision authorized by subsection 1, the certificatemay be amended to include such a provision if adopted by the affirmative voteof the holders of all the outstanding stock, whether or not otherwise entitledto vote, unless the certificate of incorporation specifically authorizes suchan amendment by a vote which is not less than two-thirds of all the outstandingstock, whether or not otherwise entitled to vote.

3. Each stock certificate in any corporation whosecertificate of incorporation authorizes dissolution as permitted by thissection must conspicuously note on the face of the certificate the existence ofthe provision or the provision is ineffective.

(Added to NRS by 1989, 947)

TERMINATION OF STATUS AS CLOSE CORPORATION

NRS 78A.170 Timeof termination of status. A close corporationis subject to the provisions of this chapter until:

1. The corporation files with the Secretary of State acertificate of amendment deleting from the certificate of incorporation theprovisions required or permitted by NRS78A.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 certificateof incorporation has been breached and the corporation or any stockholder has notacted pursuant to NRS 78A.190 toprevent the loss of status or remedy the breach.

(Added to NRS by 1989, 941)

NRS 78A.180 Voluntarytermination of status.

1. A corporation may voluntarily terminate its statusas a close corporation, and cease to be subject to the provisions of thischapter, by amending the certificate of incorporation to delete therefrom theadditional provisions required or permitted by NRS 78A.020 to be stated in thecertificate of incorporation of a close corporation. An amendment must beadopted and become effective in accordance with NRS 78.390, except that it must be approvedby a vote of the holders of record of at least two-thirds of the voting sharesof each class of stock of the corporation that are outstanding.

2. The certificate of incorporation of a closecorporation may provide that on any amendment to terminate the status as aclose corporation, a vote greater than two-thirds or a vote of all shares ofany class may be required. If the certificate of incorporation contains such aprovision, that provision may not be amended, repealed or modified by any voteless than that required to terminate the status of the corporation as a closecorporation.

3. A certificate filed pursuant to this section iseffective upon filing the certificate with the Secretary of State or upon alater date specified in the certificate, which must not be more than 90 daysafter the certificate is filed.

(Added to NRS by 1989, 943; A 2005, 2186)

NRS 78A.190 Involuntarytermination of status; intervention by court.

1. The status of a corporation as a close corporationterminates if one or more of the provisions or conditions of this chapter ceaseto 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 signedcertificate stating that a specified provision or condition included in thecertificate of incorporation to qualify the corporation as a close corporationhas ceased to be applicable and furnishes a copy of the certificate to eachstockholder; and

(b) The corporation, concurrently with the filing of acertificate, takes such steps as are necessary to correct the situation thatthreatens the status as a close corporation, including the refusal to registerthe transfer of stock which has been wrongfully transferred as provided by NRS 78A.050 or commencing a proceedingunder subsection 2.

2. Upon the suit of the close corporation or anystockholder, the court has jurisdiction to:

(a) Issue all orders necessary to prevent thecorporation from losing its status as a close corporation.

(b) Restore the status of the corporation as a closecorporation by enjoining or setting aside any act or threatened act on the partof the corporation or a stockholder that would be inconsistent with any of theprovisions or conditions required or permitted by this chapter to be stated inthe certificate of incorporation of a close corporation, unless it is an actapproved in accordance with NRS 78A.050.

(c) Enjoin or set aside any transfer or threatenedtransfer of stock of a close corporation that is contrary to the terms of thecertificate of incorporation or of any permitted restriction on transfer.

(d) Enjoin any public offering or threatened publicoffering of stock of the close corporation.

(Added to NRS by 1989, 943; A 1999, 1594; 2003, 3110)

NRS 78A.200 Effectof termination of status.

1. A corporation that terminates its status as a closecorporation is subject to the provisions of chapter78 of NRS.

2. Termination of the status of a close corporationdoes not affect any right of a shareholder or of the corporation under anagreement or the articles of incorporation unless invalidated by law.

(Added to NRS by 1989, 946)

 

Disclaimer: These codes may not be the most recent version. Nevada may have more current or accurate information. We make no warranties or guarantees about the accuracy, completeness, or adequacy of the information contained on this site or the information linked to on the state site. Please check official sources.

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.