CHAPTER 78 - PRIVATE CORPORATIONS

Nevada Companies Act

Nevada - Private Corporations Nevada - Private Corporations Nevada - Private Corporations

INSOLVENCY; RECEIVERS AND TRUSTEES

NRS 78.622 Reorganization under federal law: Powers of corporation

1. If a corporation is under reorganization in a federal court pursuant to Title 11 of U.S.C., it may take any action necessary to carry out any proceeding and do any act directed by the court relating to reorganization, without further action by its directors or stockholders. This authority may be exercised by:

(a) The trustee in bankruptcy appointed by the court;

(b) Officers of the corporation designated by the court; or

(c) Any other representative appointed by the court,

Ê with the same effect as if exercised by the directors and stockholders of the corporation.

2. By filing a confirmed plan or order of reorganization, certified by the bankruptcy court, with the Secretary of State, the corporation may:

(a) Alter, amend or repeal its bylaws;

(b) Constitute or reconstitute and classify or reclassify its board of directors;

(c) Name, constitute or appoint directors and officers in place of or in addition to all or some of the directors or officers then in office;

(d) Amend its articles of incorporation;

(e) Make any change in its authorized and issued stock;

(f) Make any other amendment, change, alteration or provision authorized by this chapter; and

(g) Be dissolved, transfer all or part of its assets, or merge or consolidate, or make any other change authorized by this chapter.

3. In any action taken pursuant to subsections 1 and 2, a stockholder has no right to demand payment for his stock.

4. Any amendment of the articles of incorporation made pursuant to subsection 2 must be signed under penalty of perjury by the person authorized by the court and filed with the Secretary of State. If the amendment is filed in accordance with the order of reorganization, it becomes effective when it is filed unless otherwise ordered by the court.

5. Any filing with the Secretary of State pursuant to this section must be accompanied by the appropriate fee, if any.

NRS 78.630 Application of creditors or stockholders of insolvent corporation for injunction and appointment of receiver or trustee; hearing. [Effective through June 30, 2008.]

1. Whenever any corporation becomes insolvent or suspends its ordinary business for want of money to carry on the business, or if its business has been and is being conducted at a great loss and greatly prejudicial to the interest of its creditors or stockholders, any creditors holding 10 percent of the outstanding indebtedness, or stockholders owning 10 percent of the outstanding stock entitled to vote, may, by petition setting forth the facts and circumstances of the case, apply to the district court of the county in which the registered office of the corporation is located for a writ of injunction and the appointment of a receiver or receivers or trustee or trustees.

2. The court, being satisfied by affidavit or otherwise of the sufficiency of the application and of the truth of the allegations contained in the petition and upon hearing after such notice as the court by order may direct, shall proceed in a summary way to hear the affidavits, proofs and allegations which may be offered in behalf of the parties.

3. If upon such inquiry it appears to the court that the corporation has become insolvent and is not about to resume its business in a short time thereafter, or that its business has been and is being conducted at a great loss and greatly prejudicial to the interests of its creditors or stockholders, so that its business cannot be conducted with safety to the public, it may issue an injunction to restrain the corporation and its officers and agents from exercising any of its privileges or franchises and from collecting or receiving any debts or paying out, selling, assigning or transferring any of its estate, money, lands, tenements or effects, except to a receiver appointed by the court, until the court otherwise orders.

[46:177:1925; NCL § 1645]-(NRS A 1993, 974, 2765, 2820)

NRS 78.630 Application of creditors or stockholders of insolvent corporation for injunction and appointment of receiver or trustee; hearing. [Effective July 1, 2008.]

1. Whenever any corporation becomes insolvent or suspends its ordinary business for want of money to carry on the business, or if its business has been and is being conducted at a great loss and greatly prejudicial to the interest of its creditors or stockholders, any creditors holding 10 percent of the outstanding indebtedness, or stockholders owning 10 percent of the outstanding stock entitled to vote, may, by petition setting forth the facts and circumstances of the case, apply to the district court of the county in which the principal office of the corporation is located or, if the principal office is not located in this State, to the district court in Carson City for a writ of injunction and the appointment of a receiver or receivers or trustee or trustees.

2. The court, being satisfied by affidavit or otherwise of the sufficiency of the application and of the truth of the allegations contained in the petition and upon hearing after such notice as the court by order may direct, shall proceed in a summary way to hear the affidavits, proofs and allegations which may be offered in behalf of the parties.

3. If upon such inquiry it appears to the court that the corporation has become insolvent and is not about to resume its business in a short time thereafter, or that its business has been and is being conducted at a great loss and greatly prejudicial to the interests of its creditors or stockholders, so that its business cannot be conducted with safety to the public, it may issue an injunction to restrain the corporation and its officers and agents from exercising any of its privileges or franchises and from collecting or receiving any debts or paying out, selling, assigning or transferring any of its estate, money, lands, tenements or effects, except to a receiver appointed by the court, until the court otherwise orders.

[46:177:1925; NCL § 1645]-(NRS A 1993, 974, 2765, 2820; 2007, 2649, effective July 1, 2008)

NRS 78.635 Appointment of receiver or trustee of insolvent corporation: Powers

1. The district court, at the time of ordering the injunction, or at any time afterwards, may appoint a receiver or receivers or a trustee or trustees for the creditors and stockholders of the corporation.

2. The receiver or receivers or trustee or trustees shall have full power and authority:

(a) To demand, sue for, collect, receive and take into his or their possession all the goods and chattels, rights and credits, moneys and effects, lands and tenements, books, papers, choses in action, bills, notes and property, of every description of the corporation;

(b) To institute suits at law or in equity for the recovery of any estate, property, damages or demands existing in favor of the corporation;

(c) In his or their discretion to compound and settle with any debtor or creditor of the corporation, or with persons having possession of its property or in any way responsible at law or in equity to the corporation at the time of its insolvency or suspension of business, or afterwards, upon such terms and in such manner as he or they shall deem just and beneficial to the corporation; and

(d) In case of mutual dealings between the corporation and any person to allow just setoffs in favor of such person in all cases in which the same ought to be allowed according to law and equity.

3. A debtor who shall have in good faith paid his debt to the corporation without notice of its insolvency or suspension of business, shall not be liable therefor, and the receiver or receivers or trustee or trustees shall have power to sell, convey and assign all the estate, rights and interests, and shall hold and dispose of the proceeds thereof under the directions of the district court.

[Part 47:177:1925; NCL § 1646]-(NRS A 1969, 93)

NRS 78.640 Property and privileges of insolvent corporation vest in appointed receiver

All real and personal property of an insolvent corporation, wheresoever situated, and all its franchises, rights, privileges and effects shall, upon the appointment of a receiver, forthwith vest in him, and the corporation shall be divested of the title thereto.

[48:177:1925; NCL § 1647]

NRS 78.645 Corporation may resume control upon payment of debts and receipt of capital to conduct business; order of court dissolving corporation and forfeiting charter

1. Whenever a receiver shall have been appointed as provided in NRS 78.635 and it shall afterwards appear that the debts of the corporation have been paid or provided for, and that there remains or can be obtained by further contributions sufficient capital to enable it to resume its business, the district court may, in its discretion, a proper case being shown, direct the receiver to reconvey to the corporation all its property, franchises, rights and effects, and thereafter the corporation may resume control of and enjoy the same as fully as if the receiver had never been appointed.

2. In every case in which the district court shall not direct such reconveyance, the court may, in its discretion, make a decree dissolving the corporation and declaring its charter forfeited and void.

[49:177:1925; NCL § 1648]

NRS 78.650 Stockholders’ application for injunction and appointment of receiver when corporation mismanaged

1. Any holder or holders of one-tenth of the issued and outstanding stock may apply to the district court, held in the district where the corporation has its principal place of business, for an order dissolving the corporation and appointing a receiver to wind up its affairs, and by injunction restrain the corporation from exercising any of its powers or doing business whatsoever, except by and through a receiver appointed by the court, whenever:

(a) The corporation has willfully violated its charter;

(b) Its trustees or directors have been guilty of fraud or collusion or gross mismanagement in the conduct or control of its affairs;

(c) Its trustees or directors have been guilty of misfeasance, malfeasance or nonfeasance;

(d) The corporation is unable to conduct the business or conserve its assets by reason of the act, neglect or refusal to function of any of the directors or trustees;

(e) The assets of the corporation are in danger of waste, sacrifice or loss through attachment, foreclosure, litigation or otherwise;

(f) The corporation has abandoned its business;

(g) The corporation has not proceeded diligently to wind up its affairs, or to distribute its assets in a reasonable time;

(h) The corporation has become insolvent;

(i) The corporation, although not insolvent, is for any cause not able to pay its debts or other obligations as they mature; or

(j) The corporation is not about to resume its business with safety to the public.

2. The application may be for the appointment of a receiver, without at the same time applying for the dissolution of the corporation, and notwithstanding the absence, if any there be, of any action or other proceeding in the premises pending in such court.

3. In any such application for a receivership, it is sufficient for a temporary appointment if notice of the same is given to the corporation alone, by process as in the case of an application for a temporary restraining order or injunction, and the hearing thereon may be had after 5 days’ notice unless the court directs a longer or different notice and different parties.

4. The court may, if good cause exists therefor, appoint one or more receivers for such purpose, but in all cases directors or trustees who have been guilty of no negligence nor active breach of duty must be preferred in making the appointment. The court may at any time for sufficient cause make a decree terminating the receivership, or dissolving the corporation and terminating its existence, or both, as may be proper.

5. Receivers so appointed have, among the usual powers, all the functions, powers, tenure and duties to be exercised under the direction of the court as are conferred on receivers and as provided in NRS 78.635, 78.640 and 78.645, whether the corporation is insolvent or not.

[49a:177:1925; added 1941, 405; 1931 NCL § 1648.01]-(NRS A 1993, 2766)

NRS 78.655 Reorganization of corporation by majority of stockholders during receivership

Whenever stockholders holding stock entitling them to exercise at least a majority of the voting power of the corporation shall have agreed upon a plan for the reorganization of the corporation and a resumption by it of the management and control of its property and business, the corporation may, with the consent of the district court:

1. Upon the reconveyance to it of its property and franchises, mortgage the same for such amount as may be necessary for the purposes of reorganization; and

2. Issue bonds or other evidences of indebtedness, or additional stock of one or more classes, with or without nominal or par value, or both, or both bonds and stock, or certificates of investment or participation certificates, and use the same for the full or partial payment of the creditors who will accept the same, or otherwise dispose of the same for the purposes of the reorganization.

[50:177:1925; NCL § 1649]

NRS 78.660 Powers of district court

1. The court shall have power to send for persons and papers and to examine any persons, including the creditors and claimants, and the president, directors and other officers and agents of the corporation, on oath or affirmation, respecting its affairs and transactions and its estate, money, goods, chattels, credits, notes, bills and choses in action, real and personal estate and effects of every kind, and also respecting its debts, obligations, contracts and liabilities, and the claims against it.

2. If any person shall refuse to be sworn or affirmed, or to make answers to such questions as shall be put to him, or refuse to declare the whole truth touching the subject matter of the examination, the district court may commit such person to a place of confinement, there to remain until he shall submit himself to be examined, and pay all the costs of the proceedings against him.

[51:177:1925; NCL § 1650]

NRS 78.665 Receiver to take possession of corporate assets upon court order

The receiver, upon order of the court, with the assistance of a peace officer, may break open, in the daytime, the houses, shops, warehouses, doors, trunks, chests or other places of the corporation where any of its goods, chattels, choses in action, notes, bills, moneys, books, papers or other writings or effects have been usually kept, or shall be, and take possession of the same and of the lands and tenements belonging to the corporation.

[52:177:1925; NCL § 1651]

NRS 78.670 Inventory, list of debts and reports by receiver

The receiver, as soon as convenient, shall lay before the district court a full and complete inventory of all the estate, property and effects of the corporation, its nature and probable value, and an account of all debts due from and to it, as nearly as the same can be ascertained, and make a report to the court of his proceedings at least every 3 months thereafter during the continuance of the trust, and whenever he shall be so ordered.

[53:177:1925; NCL § 1652]

NRS 78.675 Creditors’ proofs of claims; when participation barred; notice

All creditors shall present and make proof to the receiver of their respective claims against the corporation within 6 months from the date of appointment of the receiver or trustee for the corporation, or sooner if the court shall order and direct, and all creditors and claimants failing to do so within the time limited by this section, or the time prescribed by the order of the court, shall by the direction of the court be barred from participating in the distribution of the assets of the corporation. The court shall also prescribe what notice, by publication or otherwise, shall be given to creditors of such limitation of time.

[54:177:1925; A 1949, 158; 1943 NCL § 1653]

NRS 78.680 Creditors’ claims to be in writing under oath; examination of claimants

Every claim against any corporation for which a receiver has been appointed shall be presented to the receiver in writing and upon oath. The claimant, if required, shall submit himself to such examination in relation to the claim as the court shall direct, and shall produce such books and papers relating to the claim as shall be required. The court shall have power to authorize the receiver to examine, under oath or affirmation, all witnesses produced before him touching the claim or any part thereof.

[55:177:1925; NCL § 1654]

NRS 78.685 Action on creditors’ claims; appeal of disallowed claims

1. The clerk of the district court, immediately upon the expiration of the time fixed for the filing of claims, shall notify the trustee or receiver of the filing of the claims. The trustee or receiver shall inspect the claims and within 30 days notify each claimant of his decision. The trustee or receiver may require all creditors whose claims are disputed to submit themselves to an examination in relation to their claims, and to produce such books and papers relating to their claims as the trustee or receiver requests. The trustee or receiver may examine, under oath or affirmation, all witnesses produced before him regarding the claims, and shall pass upon and allow or disallow the claims, or any part thereof, and notify the claimants of his determination.

2. Every creditor or claimant who has received notice from the receiver or trustee that his claim has been disallowed in whole or in part may appeal to the district court within 30 days thereafter. The court, after a hearing, shall determine the rights of the parties.

[56:177:1925; NCL § 1655] + [Part 57:177:1925; NCL § 1656]-(NRS A 1991, 1239)

NRS 78.695 Substitution of receiver as party; abatement of actions

1. A receiver, upon application by him, shall be substituted as party plaintiff or complainant in the place and stead of the corporation in any suit or proceeding at law or in equity which was pending at the time of his appointment.

2. No action against a receiver of a corporation shall abate by reason of his death, but, upon suggestion of the facts on the record, shall be continued against his successor, or against the corporation in case no new receiver be appointed.

[58:177:1925; NCL § 1657] + [59:177:1925; NCL § 1658]

NRS 78.700 Sales of encumbered or deteriorating property

Where property of an insolvent corporation is at the time of the appointment of a receiver encumbered with mortgages or other liens, the legality of which is brought in question, or the property is of a character which will materially deteriorate in value pending the litigation, the district court may order the receiver to sell the same, clear of encumbrances, at public or private sale, for the best price that can be obtained, and pay the money into court, there to remain subject to the same liens and equities of all parties in interest as was the property before sale, to be disposed of as the court shall direct.

[60:177:1925; NCL § 1659]

NRS 78.705 Compensation, costs and expenses of receiver

Before distribution of the assets of an insolvent corporation among the creditors or stockholders, the district court shall allow a reasonable compensation to the receiver for his services and the costs and expenses of the administration of the trust, and the cost of the proceedings in the court, to be first paid out of the assets.

[61:177:1925; NCL § 1660]

NRS 78.710 Distribution of money to creditors and stockholders

After payment of all allowances, expenses and costs, and the satisfaction of all special and general liens upon the funds of the corporation to the extent of their lawful priority, the creditors shall be paid proportionately to the amount of their respective debts, excepting mortgage and judgment creditors when the judgment has not been by confession for the purpose of preferring creditors. The creditors shall be entitled to distribution on debts not due, making in such case a rebate of interest, when interest is not accruing on the same. The surplus funds, if any, after payment of the creditors and the costs, expenses and allowances, shall be distributed among the stockholders or their legal representatives in proportion to their interests.

[62:177:1925; NCL § 1661]

NRS 78.715 Acts of majority of receivers effectual; removal and vacancies

1. Every matter and thing by this chapter required to be done by receivers or trustees shall be good and effectual, to all intents and purposes, if performed by a majority of them.

2. The district court may remove any receiver or trustee and appoint another or others in his place to fill any vacancy which may occur.

[63:177:1925; NCL § 1662]

NRS 78.720 Employees’ liens for wages when corporation insolvent

1. Whenever any corporation becomes insolvent or is dissolved in any way or for any cause, the employees doing labor or service, of whatever character, in the regular employ of the corporation, have a lien upon the assets thereof for the amount of wages due to them, not exceeding $1,000, which have been earned within 3 months before the date of the insolvency or dissolution, which must be paid before any other debt of the corporation.

2. The word “employees” does not include any of the officers of the corporation.

[86:177:1925; NCL § 1685]-(NRS A 1959, 607; 1983, 1362)

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