CHAPTER 78 - PRIVATE CORPORATIONS

Nevada Companies Act

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

STOCK AND OTHER SECURITIES; DISTRIBUTIONS

NRS 78.191 “Distribution” defined

As used in NRS 78.191 to 78.307, inclusive, unless the context otherwise requires, the word “distribution” means a direct or indirect transfer of money or other property other than its own shares or the incurrence of indebtedness by a corporation to or for the benefit of its stockholders with respect to any of its shares. A distribution may be in the form of a declaration or payment of a dividend, a purchase, redemption or other acquisition of shares, a distribution of indebtedness, or otherwise.

(Added to NRS by 1991, 1185)

NRS 78.195 Issuance of more than one class or series of stock; rights of stockholders

1. If a corporation desires to have more than one class or series of stock, the articles of incorporation must prescribe, or vest authority in the board of directors to prescribe, the classes, series and the number of each class or series of stock and the voting powers, designations, preferences, limitations, restrictions and relative rights of each class or series of stock. If more than one class or series of stock is authorized, the articles of incorporation or the resolution of the board of directors passed pursuant to a provision of the articles must prescribe a distinguishing designation for each class and series. The voting powers, designations, preferences, limitations, restrictions, relative rights and distinguishing designation of each class or series of stock must be described in the articles of incorporation or the resolution of the board of directors before the issuance of shares of that class or series.

2. All shares of a series must have voting powers, designations, preferences, limitations, restrictions and relative rights identical with those of other shares of the same series and, except to the extent otherwise provided in the description of the series, with those of other series of the same class.

3. Unless otherwise provided in the articles of incorporation, no stock issued as fully paid up may ever be assessed and the articles of incorporation must not be amended in this particular.

4. Any rate, condition or time for payment of distributions on any class or series of stock may be made dependent upon any fact or event which may be ascertained outside the articles of incorporation or the resolution providing for the distributions adopted by the board of directors if the manner in which a fact or event may operate upon the rate, condition or time of payment for the distributions is stated in the articles of incorporation or the resolution. As used in this subsection, “fact or event” includes, without limitation, the existence of a fact or occurrence of an event, including, without limitation, a determination or action by a person, the corporation itself or any government, governmental agency or political subdivision of a government.

5. The provisions of this section do not restrict the directors of a corporation from taking action to protect the interests of the corporation and its stockholders, including, but not limited to, adopting or signing plans, arrangements or instruments that grant rights to stockholders or that deny rights, privileges, power or authority to a holder of a specified number of shares or percentage of share ownership or voting power.

[11:177:1925; A 1929, 413; 1941, 374; 1931 NCL § 1610]—(NRS A 1961, 195; 1985, 1787; 1987, 577; 1989, 873; 1991, 1221; 1993, 954; 1995, 2097; 1999, 1582; 2001, 1361, 3199; 2003, 3086)

NRS 78.1955 Establishment of matters regarding class or series of stock by resolution of board of directors

1. If the voting powers, designations, preferences, limitations, restrictions and relative rights of any class or series of stock have been established by a resolution of the board of directors pursuant to a provision in the articles of incorporation, a certificate of designation setting forth the resolution and stating the number of shares for each designation must be signed by an officer of the corporation and filed with the Secretary of State. A certificate of designation signed and filed pursuant to this section must become effective before the issuance of any shares of the class or series.

2. Unless otherwise provided in the articles of incorporation or the certificate of designation being amended, if no shares of a class or series of stock established by a resolution of the board of directors have been issued, the designation of the class or series, the number of the class or series and the voting powers, designations, preferences, limitations, restrictions and relative rights of the class or series may be amended by a resolution of the board of directors pursuant to a certificate of amendment filed in the manner provided in subsection 4.

3. Unless otherwise provided in the articles of incorporation or the certificate of designation, if shares of a class or series of stock established by a resolution of the board of directors have been issued, the designation of the class or series, the number of the class or series and the voting powers, designations, preferences, limitations, restrictions and relative rights of the class or series may be amended by a resolution of the board of directors only if the amendment is approved as provided in this subsection. Unless otherwise provided in the articles of incorporation or the certificate of designation, the proposed amendment adopted by the board of directors must be approved by the vote of stockholders holding shares in the corporation entitling them to exercise a majority of the voting power, or such greater proportion of the voting power as may be required by the articles of incorporation or the certificate of designation, of:

(a) The class or series of stock being amended; and

(b) Each class and each series of stock which, before amendment, is senior to the class or series being amended as to the payment of distributions upon dissolution of the corporation, regardless of any limitations or restrictions on the voting power of that class or series.

4. A certificate of amendment to a certificate of designation must be signed by an officer of the corporation and filed with the Secretary of State and must:

(a) Set forth the original designation and the new designation, if the designation of the class or series is being amended;

(b) State that no shares of the class or series have been issued or state that the approval of the stockholders required pursuant to subsection 3 has been obtained; and

(c) Set forth the amendment to the class or series or set forth the designation of the class or series, the number of the class or series and the voting powers, designations, preferences, limitations, restrictions and relative rights of the class or series, as amended.

5. A certificate filed pursuant to subsection 1 or 4 is effective upon filing the certificate with the Secretary of State or upon a later date specified in the certificate, which must not be more than 90 days after the certificate is filed.

6. If shares of a class or series of stock established by a certificate of designation are not outstanding, the corporation may file a certificate which states that no shares of the class or series are outstanding and which contains the resolution of the board of directors authorizing the withdrawal of the certificate of designation establishing the class or series of stock. The certificate must identify the date and certificate of designation being withdrawn and must be signed by an officer of the corporation and filed with the Secretary of State. Upon filing the certificate and payment of the fee required pursuant to NRS 78.765, all matters contained in the certificate of designation regarding the class or series of stock are eliminated from the articles of incorporation.

7. NRS 78.380, 78.385 and 78.390 do not apply to certificates of amendment filed pursuant to this section.

NRS 78.196 Required and authorized classes or series of stock; shares called for redemption

1. Each corporation must have:

(a) One or more classes or series of shares that together have unlimited voting rights; and

(b) One or more classes or series of shares that together are entitled to receive the net assets of the corporation upon dissolution.

Ê If the articles of incorporation provide for only one class of stock, that class of stock has unlimited voting rights and is entitled to receive the net assets of the corporation upon dissolution.

2. The articles of incorporation, or a resolution of the board of directors pursuant thereto, may authorize one or more classes or series of stock that:

(a) Have special, conditional or limited voting powers, or no right to vote, except to the extent otherwise provided by this title;

(b) Are redeemable or convertible:

(1) At the option of the corporation, the stockholders or another person, or upon the occurrence of a designated event;

(2) For cash, indebtedness, securities or other property; or

(3) In a designated amount or in an amount determined in accordance with a designated formula or by reference to extrinsic data or events;

(c) Entitle the stockholders to distributions calculated in any manner, including dividends that may be cumulative, noncumulative or partially cumulative;

(d) Have preference over any other class or series of shares with respect to distributions, including dividends and distributions upon the dissolution of the corporation;

(e) Have par value; or

(f) Have powers, designations, preferences, limitations, restrictions and relative rights dependent upon any fact or event which may be ascertained outside of the articles of incorporation or the resolution if the manner in which the fact or event may operate on such class or series of stock is stated in the articles of incorporation or the resolution. As used in this paragraph, “fact or event” includes, without limitation, the existence of a fact or occurrence of an event, including, without limitation, a determination or action by a person, the corporation itself or any government, governmental agency or political subdivision of a government.

3. Unless otherwise provided in the articles of incorporation or in a resolution of the board of directors establishing a class or series of stock, shares which are subject to redemption and which have been called for redemption are not deemed to be outstanding shares for purposes of voting or determining the total number of shares entitled to vote on a matter on and after the date on which:

(a) Written notice of redemption has been sent to the holders of such shares; and

(b) A sum sufficient to redeem the shares has been irrevocably deposited or set aside to pay the redemption price to the holders of the shares upon surrender of any certificates.

4. The description of voting powers, designations, preferences, limitations, restrictions and relative rights of the classes or series of shares contained in this section is not exclusive.

NRS 78.197 Rights of persons holding obligations of corporation

A corporation may provide in its articles of incorporation that the holder of a bond, debenture or other obligation of the corporation may have any of the rights of a stockholder in the corporation.

(Added to NRS by 1987, 574; A 1993, 955)

NRS 78.200 Rights or options to purchase stock

1. A corporation may create and issue rights or options entitling the holders thereof to purchase from the corporation any shares of its stock of any class or classes to be evidenced by or in such instrument or instruments as are approved by the board of directors.

2. The terms upon which, the time or times, which may be limited or unlimited in duration, at or within which, and the price or prices, including a formula by which such price or prices may be determined, at which any such shares may be purchased from the corporation upon the exercise of any such right or option may be fixed and stated in the articles of incorporation or in a resolution or resolutions adopted by the board of directors providing for the creation and issue of the rights or options, and, in every case, set forth or incorporated by reference in the instrument or instruments evidencing the rights or options. The judgment of the board of directors as to the consideration for such rights or options issued is conclusive in the absence of actual fraud in the transaction.

3. The board of directors may authorize one or more officers of the corporation to:

(a) Designate the persons to be recipients of rights or options created by the corporation; and

(b) Determine the number of rights or options to be received by the persons designated pursuant to paragraph (a).

4. The authorization pursuant to subsection 3 must specify the maximum number of rights or options the officer or officers may award. The board of directors may not authorize an officer to designate himself as a recipient of the rights or options.

NRS 78.205 Fractions of shares: Issuance; alternatives to issuance

1. A corporation is not obligated to but may sign and deliver a certificate for or including a fraction of a share.

2. In lieu of signing and delivering a certificate for a fraction of a share, a corporation may:

(a) Pay to any person otherwise entitled to become a holder of a fraction of a share an amount in cash based on a per share value, and that value or the method of determining that value must be specified in the articles, plan of reorganization, plan of merger or exchange, resolution of the board of directors, or other instrument pursuant to which the fractional share would otherwise be issued;

(b) Issue such additional fraction of a share as is necessary to increase the fractional share to a full share; or

(c) Sign and deliver registered or bearer scrip over the manual or facsimile signature of an officer of the corporation or of its agent for that purpose, exchangeable as provided on the scrip for full share certificates, but the scrip does not entitle the holder to any rights as a stockholder except as provided on the scrip. The scrip may provide that it becomes void unless the rights of the holders are exercised within a specified period and may contain any other provisions or conditions that the corporation deems advisable. Whenever any scrip ceases to be exchangeable for full share certificates, the shares that would otherwise have been issuable as provided on the scrip are deemed to be treasury shares unless the scrip contains other provisions for their disposition.

3. Any proposed corporate action that would result in money or scrip being delivered instead of fractional shares to stockholders who:

(a) Before the proposed corporate action becomes effective, hold 1 percent or more of the outstanding shares of the affected class or series; and

(b) Would otherwise be entitled to receive fractions of shares in exchange for the cancellation of all their outstanding shares,

Ê is subject to the provisions of NRS92A.300 to 92A.500, inclusive. If the proposed corporate action is subject to those provisions, any stockholder who is obligated to accept money or scrip rather than receive a fraction of a share resulting from the action taken pursuant to this section may dissent in accordance with the provisions of NRS 92A.300 to 92A.500, inclusive, and obtain payment of the fair value of the fraction of a share to which the stockholder would otherwise be entitled.

NRS 78.2055 Decrease in number of issued and outstanding shares of class or series: Resolution by board of directors; approval by stockholders; rights of stockholders

1. Unless otherwise provided in the articles of incorporation, a corporation that desires to decrease the number of issued and outstanding shares of a class or series held by each stockholder of record at the effective date and time of the change without correspondingly decreasing the number of authorized shares of the same class or series may do so if:

(a) The board of directors adopts a resolution setting forth the proposal to decrease the number of issued and outstanding shares of a class or series; and

(b) The proposal is approved by the vote of stockholders holding a majority of the voting power of the affected class or series, or such greater proportion as may be provided in the articles of incorporation, regardless of limitations or restrictions on the voting power of the affected class or series.

2. If the proposal required by subsection 1 is approved by the stockholders entitled to vote, the corporation may reissue its stock in accordance with the proposal after the effective date and time of the change.

3. Except as otherwise provided in this subsection, if a proposed decrease in the number of issued and outstanding shares of any class or series would adversely alter or change any preference, or any relative or other right given to any other class or series of outstanding shares, then the decrease must be approved by the vote, in addition to any vote otherwise required, of the holders of shares representing a majority of the voting power of each class or series whose preference or rights are adversely affected by the decrease, or such greater proportion as may be provided in the articles of incorporation, regardless of limitations or restrictions on the voting power of the adversely affected class or series. The decrease does not have to be approved by the vote of the holders of shares representing a majority of the voting power of each class or series whose preference or rights are adversely affected by the decrease if the articles of incorporation specifically deny the right to vote on such a decrease.

4. Any proposal to decrease the number of issued and outstanding shares of any class or series, if any, that includes provisions pursuant to which only money will be paid or scrip will be issued to stockholders who:

(a) Before the decrease in the number of shares becomes effective, hold 1 percent or more of the outstanding shares of the affected class or series; and

(b) Would otherwise be entitled to receive fractions of shares in exchange for the cancellation of all their outstanding shares,

Ê is subject to the provisions of NRS 92A.300 to 92A.500, inclusive. If the proposal is subject to those provisions, any stockholder who is obligated to accept money or scrip rather than receive a fraction of a share resulting from the action taken pursuant to this section may dissent in accordance with the provisions of NRS 92A.300 to 92A.500, inclusive, and obtain payment of the fair value of the fraction of a share to which the stockholder would otherwise be entitled.

NRS 78.207 Change in number of authorized shares of class or series: Resolution by board of directors; approval by stockholders; rights of stockholders

1. Unless otherwise provided in the articles of incorporation, a corporation that desires to change the number of shares of a class or series, if any, of its authorized stock by increasing or decreasing the number of authorized shares of the class or series and correspondingly increasing or decreasing the number of issued and outstanding shares of the same class or series held by each stockholder of record at the effective date and time of the change, may, except as otherwise provided in subsections 2 and 3, do so by a resolution adopted by the board of directors, without obtaining the approval of the stockholders. The resolution may also provide for a change of the par value, if any, of the same class or series of the shares increased or decreased. After the effective date and time of the change, the corporation may issue its stock in accordance therewith.

2. A proposal to increase or decrease the number of authorized shares of any class or series, if any, that includes provisions pursuant to which only money will be paid or scrip will be issued to stockholders who:

(a) Before the increase or decrease in the number of shares becomes effective, in the aggregate hold 10 percent or more of the outstanding shares of the affected class or series; and

(b) Would otherwise be entitled to receive fractions of shares in exchange for the cancellation of all of their outstanding shares,

Ê must be approved by the vote of stockholders holding a majority of the voting power of the affected class or series, or such greater proportion as may be provided in the articles of incorporation, regardless of limitations or restrictions on the voting power thereof.

3. Except as otherwise provided in this subsection, if a proposed increase or decrease in the number of authorized shares of any class or series would adversely alter or change any preference or any relative or other right given to any other class or series of outstanding shares, then the increase or decrease must be approved by the vote, in addition to any vote otherwise required, of the holders of shares representing a majority of the voting power of each class or series whose preference or rights are adversely affected by the increase or decrease, regardless of limitations or restrictions on the voting power thereof. The increase or decrease does not have to be approved by the vote of the holders of shares representing a majority of the voting power in each class or series whose preference or rights are adversely affected by the increase or decrease if the articles of incorporation specifically deny the right to vote on such an increase or decrease.

4. Any proposal to increase or decrease the number of authorized shares of any class or series, if any, that includes provisions pursuant to which only money will be paid or scrip will be issued to stockholders who:

(a) Before the increase or decrease in the number of shares becomes effective, hold 1 percent or more of the outstanding shares of the affected class or series; and

(b) Would otherwise be entitled to receive a fraction of a share in exchange for the cancellation of all of their outstanding shares,

Ê is subject to the provisions of NRS 92A.300 to 92A.500, inclusive. If the proposal is subject to those provisions, any stockholder who is obligated to accept money or scrip rather than receive a fraction of a share resulting from the action taken pursuant to this section may dissent in accordance with those provisions and obtain payment of the fair value of the fraction of a share to which the stockholder would otherwise be entitled.

[Part 6:177:1925; A 1951, 28]—(NRS A 1959, 688; 1991, 1224; 1993, 956; 1995, 2098; 1997, 699; 2001, 1364, 3199; 2003, 3090)

NRS 78.209 Change in number of authorized shares of class or series: Filing and effectiveness of certificate of change; amendment of articles of incorporation

1. A change pursuant to NRS 78.207 is not effective until after the filing in the Office of the Secretary of State of a certificate, signed by an officer of the corporation, setting forth:

(a) The current number of authorized shares and the par value, if any, of each class or series, if any, of shares before the change;

(b) The number of authorized shares and the par value, if any, of each class or series, if any, of shares after the change;

(c) The number of shares of each affected class or series, if any, to be issued after the change in exchange for each issued share of the same class or series;

(d) The provisions, if any, for the issuance of fractional shares, or for the payment of money or the issuance of scrip to stockholders otherwise entitled to a fraction of a share and the percentage of outstanding shares affected thereby; and

(e) That any required approval of the stockholders has been obtained.

Ê The provisions in the articles of incorporation of the corporation regarding the authorized number and par value, if any, of the changed class or series, if any, of shares shall be deemed amended as provided in the certificate at the effective date and time of the change.

2. Unless an increase or decrease of the number of authorized shares pursuant to NRS 78.207 is accomplished by an action that otherwise requires an amendment to the articles of incorporation of the corporation, such an amendment is not required by that section.

3. A certificate filed pursuant to subsection 1 is effective upon filing the certificate with the Secretary of State or upon a later date specified in the certificate, which must not be more than 90 days after the certificate is filed.

4. If a certificate filed pursuant to subsection 1 specifies an effective date, the board of directors may terminate the effectiveness of the certificate by resolution. A certificate of termination must:

(a) Be filed with the Secretary of State before the effective date specified in the certificate filed pursuant to subsection 1;

(b) Identify the certificate being terminated;

(c) State that the effectiveness of the certificate has been terminated;

(d) Be signed by an officer of the corporation; and

(e) Be accompanied by the fee required pursuant to NRS 78.765.

NRS 78.211 Consideration for shares: Authority of board of directors; effect of receipt; corporate action pending receipt in future

1. The board of directors may authorize shares to be issued for consideration consisting of any tangible or intangible property or benefit to the corporation, including, but not limited to, cash, promissory notes, services performed, contracts for services to be performed or other securities of the corporation. The judgment of the board of directors as to the consideration received for the shares issued is conclusive in the absence of actual fraud in the transaction.

2. When the corporation receives the consideration for which the board of directors authorized the issuance of shares, the shares issued therefor are fully paid.

3. The corporation may place in escrow shares issued for a contract for future services or benefits or a promissory note, or make any other arrangements to restrict the transfer of the shares. The corporation may credit distributions made for the shares against their purchase price, until the services are performed, the benefits are received or the promissory note is paid. If the services are not performed, the benefits are not received or the promissory note is not paid, the shares escrowed or restricted and the distributions credited may be cancelled in whole or in part.

4. For the purposes of this section, “benefit to the corporation” includes, without limitation, the authorization of the issuance of shares to up to 100 persons without consideration for the sole purpose of qualifying the corporation as a real estate investment trust pursuant to 26 U.S.C. §§ 856 et seq., as amended, or any successor provision, and any regulations adopted pursuant thereto.

NRS 78.215 Issuance of shares for consideration or as share dividend

1. A corporation may issue and dispose of its authorized shares for such consideration as may be prescribed in the articles of incorporation or, if no consideration is so prescribed, then for such consideration as may be fixed by the board of directors.

2. If a consideration is prescribed for shares without par value, that consideration must not be used to determine the fees required for filing articles of incorporation pursuant to NRS 78.760.

3. Unless the articles of incorporation provide otherwise, shares may be issued pro rata and without consideration to the corporation’s stockholders or to the stockholders of one or more classes or series. An issuance of shares under this subsection is a share dividend.

4. Shares of one class or series may not be issued as a share dividend in respect of shares of another class or series unless:

(a) The articles of incorporation so authorize;

(b) A majority of the votes entitled to be cast by the class or series to be issued approve the issue; or

(c) There are no outstanding shares of the class or series to be issued.

5. If the board of directors does not fix the record date for determining stockholders entitled to a share dividend, it is the date the board of directors authorizes the share dividend.

[13:177:1925; NCL § 1612]—(NRS A 1975, 478; 1991, 1225; 1993, 958)

NRS 78.220 Subscriptions for corporate shares: Payment; default; irrevocability

1. Subscriptions to the shares of a corporation, whether made before or after its organization, must be paid in full at such time or in such installments at such times as determined by the board of directors. Any call made by the board of directors for payment on subscriptions must be uniform as to all shares of the same class or series.

2. If default is made in the payment of any installment or call, the corporation may proceed to collect the amount due in the same manner as any debt due the corporation. In addition, the corporation may sell a sufficient number of the subscriber’s shares at public auction to pay for the installment or call and any incidental charges incurred as a result of the sale. No penalty causing a forfeiture of a subscription, of stock for which a subscription has been signed, or of amounts paid thereon, may be declared against any subscriber unless the amount due remains unpaid for 30 days after written demand. Such written demand shall be deemed made when it is mailed by registered or certified mail, return receipt requested, to the subscriber’s last known address. If any of the subscriber’s shares are sold at public auction, any excess of the proceeds over the total of the amount due plus any incidental charges of the sale must be paid to the subscriber or his legal representative. If an action is brought to recover the amount due on a subscription or call, any judgment in favor of the corporation must be reduced by the amount of the net proceeds of any sale by the corporation of the subscriber’s stock.

3. All stock subject to a delinquent installment or call and all amounts previously paid by a delinquent subscriber for the stock must be forfeited to the corporation if an amount due from a subscriber remains unpaid, the corporation has complied with the requirements of subsection 2 and:

(a) A bidder does not purchase the subscriber’s shares at public auction; or

(b) The corporation does not collect the defaulted amount by an action at law.

4. If a receiver of a corporation has been appointed, all unpaid subscriptions must be paid at such times and in such installments as the receiver or the court may direct, subject, however, to the provisions of the subscription contract.

5. A subscription for shares of a corporation to be organized is irrevocable for 6 months unless otherwise provided by the subscription agreement or unless all of the subscribers consent to the revocation of the subscription.

[14:177:1925; NCL § 1613]—(NRS A 1977, 651; 2001, 1367, 3199; 2003, 3091)

NRS 78.225 Stockholder’s liability: No individual liability except for payment for which shares were authorized to be issued or which was specified in subscription agreement

Unless otherwise provided in the articles of incorporation, no stockholder of any corporation formed under the laws of this State is individually liable for the debts or liabilities of the corporation. A purchaser of shares of stock from the corporation is not liable to the corporation or its creditors with respect to the shares, except to pay the consideration for which the shares were authorized to be issued or which was specified in the written subscription agreement.

[15:177:1925; A 1929, 413; NCL § 1614]—(NRS A 1991, 1225)

NRS 78.230 Liability of holder of stock as collateral security; liability of executors, administrators, guardians and trustees

1. No person holding shares in any corporation as collateral security shall be personally liable as a stockholder.

2. No executor, administrator, guardian or trustee, unless he, without authorization, shall have voluntarily invested the trust funds in such shares, shall be personally liable as a stockholder, but the estate and funds in the hands of such executor, administrator, guardian or trustee shall be liable.

[16:177:1925; NCL § 1615]

NRS 78.235 Stock certificates: Validation; facsimile signatures; uncertificated shares and informational statements; replacement

1. Except as otherwise provided in subsection 4, every stockholder is entitled to have a certificate, signed by officers or agents designated by the corporation for the purpose, certifying the number of shares in the corporation owned by the stockholder. A corporation has no power to issue a certificate in bearer form, and any such certificate that is issued is void and of no force or effect.

2. Whenever any certificate is countersigned or otherwise authenticated by a transfer agent or transfer clerk, and by a registrar, then a facsimile of the signatures of the officers or agents, the transfer agent or transfer clerk or the registrar of the corporation may be printed or lithographed upon the certificate in lieu of the actual signatures. If a corporation uses facsimile signatures of its officers and agents on its stock certificates, it cannot act as registrar of its own stock, but its transfer agent and registrar may be identical if the institution acting in those dual capacities countersigns or otherwise authenticates any stock certificates in both capacities.

3. If any officer or officers who have signed, or whose facsimile signature or signatures have been used on, any certificate or certificates for stock cease to be an officer or officers of the corporation, whether because of death, resignation or other reason, before the certificate or certificates have been delivered by the corporation, the certificate or certificates may nevertheless be adopted by the corporation and be issued and delivered as though the person or persons who signed the certificate or certificates, or whose facsimile signature or signatures have been used thereon, had not ceased to be an officer or officers of the corporation.

4. Unless otherwise provided in the articles of incorporation or bylaws, the board of directors may authorize the issuance of uncertificated shares of some or all of the shares of any or all of its classes or series. The issuance of uncertificated shares has no effect on existing certificates for shares until surrendered to the corporation, or on the respective rights and obligations of the stockholders. Unless otherwise provided by a specific statute, the rights and obligations of stockholders are identical whether or not their shares of stock are represented by certificates.

5. Within a reasonable time after the issuance or transfer of shares without certificates, the corporation shall send the stockholder a written statement containing the information required on the certificates pursuant to subsection 1. At least annually thereafter, the corporation shall provide to its stockholders of record, a written statement confirming the information contained in the informational statement previously sent pursuant to this subsection.

6. Unless otherwise provided in the articles of incorporation or bylaws, a corporation may issue a new certificate of stock or, if authorized by the board of directors pursuant to subsection 4, uncertificated shares in place of a certificate previously issued by it and alleged to have been lost, stolen or destroyed. A corporation may require an owner or legal representative of an owner of a lost, stolen or destroyed certificate to give the corporation a bond or other security sufficient to indemnify it against any claim that may be made against it for the alleged loss, theft or destruction of a certificate, or the issuance of a new certificate or uncertificated shares.

[Part 18:177:1925; A 1929, 413; 1937, 8; 1931 NCL § 1617]—(NRS A 1965, 1012; 1987, 579; 1991, 1226; 1993, 959; 2001, 1367, 3199; 2007, 2417)

NRS 78.240 Shares of stock are personal property; transfers

The shares of stock in every corporation shall be personal property and shall be transferable on the books of the corporation, in such manner and under such regulations as may be provided in the bylaws, and as provided in chapter 104 of NRS.

[Part 18:177:1925; A 1929, 413; 1937, 8; 1931 NCL § 1617]—(NRS A 1965, 917)

NRS 78.242 Restrictions on transfer of stock

1. Subject to the limitation imposed by NRS 104.8204, a written restriction on the transfer or registration of transfer of the stock of a corporation, if permitted by this section, may be enforced against the holder of the restricted stock or any successor or transferee of the holder, including an executor, administrator, trustee, guardian or other fiduciary entrusted with like responsibility for the person or estate of the holder.

2. A restriction on the transfer or registration of transfer of the stock of a corporation may be imposed by the articles of incorporation or by the bylaws or by an agreement among any number of stockholders or between one or more stockholders and the corporation. No restriction so imposed is binding with respect to stocks issued before the adoption of the restriction unless the stockholders are parties to an agreement or voted in favor of the restriction.

3. A restriction on the transfer or the registration of transfer of shares is valid and enforceable against the transferee of the stockholder if the restriction is not prohibited by other law and its existence is noted conspicuously on the front or back of the stock certificate or is contained in the statement of information required by NRS 78.235. Unless so noted, a restriction is not enforceable against a person without knowledge of the restriction.

4. A restriction on the transfer or registration of transfer of stock of a corporation is permitted, without limitation by this enumeration, if it:

(a) Obligates the stockholder first to offer to the corporation or to any other stockholder or stockholders of the corporation or to any other person or persons or to any combination of the foregoing a prior opportunity, to be exercised within a reasonable time, to acquire the stock;

(b) Obligates the corporation or any holder of stock of the corporation or any other person or any combination of the foregoing to purchase stock which is the subject of an agreement respecting the purchase and sale of the stock;

(c) Requires the corporation or any stockholder or stockholders to consent to any proposed transfer of the stock or to approve the proposed transferee of stock;

(d) Prohibits the transfer of the stock to designated persons or classes of persons, and such designation is not manifestly unreasonable; or

(e) Prohibits the transfer of stock:

(1) To maintain the corporation’s status when it is dependent on the number or identity of its stockholders;

(2) To preserve exemptions under federal or state laws governing taxes or securities, including, without limitation, the qualification of the corporation as a real estate investment trust pursuant to 26 U.S.C. §§ 856 et seq., as amended, or any successor provision, and any regulations adopted pursuant thereto; or

(3) For any other reasonable purpose.

5. For the purposes of this section, “stock” includes a security convertible into or carrying a right to subscribe for or to acquire stock.

NRS 78.245 Corporate stocks, bonds and securities not taxed when owned by nonresidents or foreign corporations

No stocks, bonds or other securities issued by any corporation organized under this chapter, nor the income or profits therefrom, nor the transfer thereof by assignment, descent, testamentary disposition or otherwise, shall be taxed by this State when such stocks, bonds or other securities shall be owned by nonresidents of this State or by foreign corporations.

[87:177:1925; A 1929, 413; NCL § 1686]

NRS 78.250 Cancellation of outstanding certificates or change in informational statements: Issuance of new certificates or statements; order for surrender of certificates; penalties for failure to comply

1. When the articles of incorporation are amended in any way affecting the statements contained in certificates for outstanding shares or informational statements sent pursuant to NRS 78.235, or it becomes desirable for any reason, in the discretion of the board of directors, to cancel any outstanding certificate for shares and issue a new certificate therefor conforming to the rights of the holder, the board of directors may send additional informational statements as provided in NRS 78.235 and order any holders of outstanding certificates for shares to surrender and exchange them for new certificates within a reasonable time to be fixed by the board of directors.

2. Such an order may provide that the holder of any certificate so ordered to be surrendered is not entitled to vote or to receive distributions or exercise any of the other rights of stockholders of record until he has complied with the order, but the order operates to suspend such rights only after notice and until compliance.

3. The duty to surrender any outstanding certificates may also be enforced by action at law.

[18a:177:1925; added 1937, 8; 1931 NCL § 1617.01]—(NRS A 1987, 580; 1993, 960)

NRS 78.257 Right of stockholders to inspect, copy and audit financial records; exceptions; civil and criminal liability; penalty

1. Any person who has been a stockholder of record of any corporation and owns not less than 15 percent of all of the issued and outstanding shares of the stock of such corporation or has been authorized in writing by the holders of at least 15 percent of all its issued and outstanding shares, upon at least 5 days’ written demand, is entitled to inspect in person or by agent or attorney, during normal business hours, the books of account and all financial records of the corporation, to make copies of records, and to conduct an audit of such records. Holders of voting trust certificates representing 15 percent of the issued and outstanding shares of the corporation are regarded as stockholders for the purpose of this subsection. The right of stockholders to inspect the corporate records may not be limited in the articles or bylaws of any corporation.

2. All costs for making copies of records or conducting an audit must be borne by the person exercising his rights set forth in subsection 1.

3. The rights authorized by subsection 1 may be denied to any stockholder upon his refusal to furnish the corporation an affidavit that such inspection, copies or audit is not desired for any purpose not related to his interest in the corporation as a stockholder. Any stockholder or other person, exercising rights set forth in subsection 1, who uses or attempts to use information, records or other data obtained from the corporation, for any purpose not related to the stockholder’s interest in the corporation as a stockholder, is guilty of a gross misdemeanor.

4. If any officer or agent of any corporation keeping records in this State willfully neglects or refuses to permit an inspection of the books of account and financial records upon demand by a person entitled to inspect them, or refuses to permit an audit to be conducted, as provided in subsection 1, the corporation shall forfeit to the State the sum of $100 for every day of such neglect or refusal, and the corporation, officer or agent thereof is jointly and severally liable to the person injured for all damages resulting to him.

5. A stockholder who brings an action or proceeding to enforce any right set forth in this section or to recover damages resulting from its denial:

(a) Is entitled to costs and reasonable attorney’s fees, if he prevails; or

(b) Is liable for such costs and fees, if he does not prevail,

Ê in the action or proceeding.

6. Except as otherwise provided in this subsection, the provisions of this section do not apply to any corporation that furnishes to its stockholders a detailed, annual financial statement or any corporation that has filed during the preceding 12 months all reports required to be filed pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934. A person who owns, or is authorized in writing by the owners of, at least 15 percent of the issued and outstanding shares of the stock of a corporation that has elected to be governed by subchapter S of the Internal Revenue Code and whose shares are not listed or traded on any recognized stock exchange is entitled to inspect the books of the corporation pursuant to subsection 1 and has the rights, duties and liabilities provided in subsections 2 to 5, inclusive.

NRS 78.265 Preemptive rights of stockholders in corporations organized before October 1, 1991

1. The provisions of this section apply to corporations organized in this State before October 1, 1991.

2. Except to the extent limited or denied by this section or the articles of incorporation, shareholders have a preemptive right to acquire unissued shares, treasury shares or securities convertible into such shares.

3. Unless otherwise provided in the articles of incorporation:

(a) A preemptive right does not exist:

(1) To acquire any shares issued to directors, officers or employees pursuant to approval by the affirmative vote of the holders of a majority of the shares entitled to vote or when authorized by a plan approved by such a vote of shareholders;

(2) To acquire any shares sold for a consideration other than cash;

(3) To acquire any shares issued at the same time that the shareholder who claims a preemptive right acquired his shares;

(4) To acquire any shares issued as part of the same offering in which the shareholder who claims a preemptive right acquired his shares; or

(5) To acquire any shares, treasury shares or securities convertible into such shares, if the shares or the shares into which the convertible securities may be converted are upon issuance registered pursuant to section 12 of the Securities Exchange Act of 1934, 15 U.S.C. § 781.

(b) Holders of shares of any class that is preferred or limited as to dividends or assets are not entitled to any preemptive right.

(c) Holders of common stock are not entitled to any preemptive right to shares of any class that is preferred or limited as to dividends or assets or to any obligations, unless convertible into shares of common stock or carrying a right to subscribe to or acquire shares of common stock.

(d) Holders of common stock without voting power have no preemptive right to shares of common stock with voting power.

(e) The preemptive right is only an opportunity to acquire shares or other securities upon such terms as the board of directors fixes for the purpose of providing a fair and reasonable opportunity for the exercise of such right.

[23:177:1925; NCL § 1622]—(NRS A 1977, 909; 1987, 581; 1991, 1227)

NRS 78.267 Preemptive rights of stockholders in corporations organized on or after October 1, 1991

1. The provisions of this section apply to corporations organized in this State on or after October 1, 1991.

2. The stockholders of a corporation do not have a preemptive right to acquire the corporation’s unissued shares except to the extent the articles of incorporation so provide.

3. A statement included in the articles of incorporation that “the corporation elects to have preemptive rights” or words of similar import have the following effects unless the articles of incorporation otherwise provide:

(a) The stockholders of the corporation have a preemptive right, granted on uniform terms and conditions prescribed by the board of directors to provide a fair and reasonable opportunity to exercise the right, to acquire proportional amounts of the corporation’s unissued shares upon the decision of the board of directors to issue them.

(b) A stockholder may waive his preemptive right. A waiver evidenced by a writing is irrevocable even though it is not supported by consideration.

(c) There is no preemptive right with respect to:

(1) Shares issued as compensation to directors, officers, agents or employees of the corporation, its subsidiaries or affiliates;

(2) Shares issued to satisfy rights of conversion or options created to provide compensation to directors, officers, agents or employees of the corporation, its subsidiaries or affiliates;

(3) Shares authorized in articles of incorporation which are issued within 6 months from the effective date of incorporation; or

(4) Shares sold otherwise than for money.

(d) Holders of shares of any class without general voting rights but with preferential rights to distributions or assets have no preemptive rights with respect to shares of any class.

(e) Holders of shares of any class with general voting rights but without preferential rights to distributions or assets have no preemptive rights with respect to shares of any class with preferential rights to distributions or assets unless the shares with preferential rights are convertible into or carry a right to subscribe for or acquire shares without preferential rights.

(f) Shares subject to preemptive rights that are not acquired by stockholders may be issued to any person for 1 year after being offered to stockholders at a consideration set by the board of directors that is not lower than the consideration set for the exercise of preemptive rights. An offer at a lower consideration or after the expiration of one year is subject to the stockholders’ preemptive rights.

4. As used in this section, “shares” includes a security convertible into or carrying a right to subscribe for or acquire shares.

(Added to NRS by 1991, 1187)

NRS 78.275 Assessments on stock: Levy and collection; sale after default in payment. [Effective through June 30, 2008.]

1. The directors may at such times and in such amount, as they may from time to time deem the interest of the corporation to require, levy and collect assessments upon the assessable stock of the corporation in the manner provided in this section.

2. Notice of each assessment must be given to the stockholders personally, or by publication once a week for at least 4 weeks, in some newspaper published in the county in which the registered office or place of business of the corporation is located, and in a newspaper published in the county wherein the property of the corporation is situated if in this State, and if no paper is published in either of those counties, then the newspaper published nearest to the registered office in the State.

3. If after the notice has been given, any stockholder defaults in the payment of the assessment upon the shares held by him, so many of those shares may be sold as will be necessary for the payment of the assessment upon all the shares held by him, together with all costs of advertising and expenses of sale. The sale of the shares must be made at the office of the corporation at public auction to the highest bidder, after a notice thereof published for 4 weeks as directed in this section, and a copy of the notice mailed to each delinquent stockholder if his address is known 4 weeks before the sale. At the sale the person who offers to pay the assessment so due, together with the expenses of advertising and sale, for the smallest number of shares, or portion of a share, as the case may be, shall be deemed the highest bidder.

[Part 74:177:1925; NCL § 1673]—(NRS A 1993, 960)

NRS 78.275 Assessments on stock: Levy and collection; sale after default in payment. [Effective July 1, 2008.]

1. The directors may at such times and in such amount, as they may from time to time deem the interest of the corporation to require, levy and collect assessments upon the assessable stock of the corporation in the manner provided in this section.

2. Notice of each assessment must be given to the stockholders personally, or by publication once a week for at least 4 weeks, in some newspaper published in the county in which the principal office of the corporation is located or, if the principal office of the corporation is not located in this State, in Carson City, and in a newspaper published in the county wherein the property of the corporation is situated if in this State.

3. If, after the notice has been given, any stockholder defaults in the payment of the assessment upon the shares held by him, so many of those shares may be sold as will be necessary for the payment of the assessment upon all the shares held by him, together with all costs of advertising and expenses of sale. The sale of the shares must be made at the office of the corporation at public auction to the highest bidder, after a notice thereof published for 4 weeks as directed in this section, and a copy of the notice mailed to each delinquent stockholder if his address is known 4 weeks before the sale. At the sale the person who offers to pay the assessment so due, together with the expenses of advertising and sale, for the smallest number of shares, or portion of a share, as the case may be, shall be deemed the highest bidder.

[Part 74:177:1925; NCL § 1673]—(NRS A 1993, 960; 2007, 2646, effective July 1, 2008)

NRS 78.280 Purchase by corporation of its own stock at assessment sale when no other available purchaser

1. Every corporation in this State may, whenever at any assessment sale of the stock of the corporation no person will take the stock and pay the assessment, or amount unpaid and due thereon and costs, purchase such stock and hold the stock for the benefit of the corporation.

2. All purchases of its own stock by any corporation in this State which have been previously made at assessment sales whereat outside persons have failed to bid, and which purchases were for the amount of assessments due, and costs or otherwise, are valid, and vest the legal title to the stock in the corporation.

3. The stock so purchased is subject to the control of the remaining stockholders, who may dispose of the stock as they may deem fit.

4. Whenever any portion of the stock of any corporation is held by the corporation by purchase or otherwise, a majority of the remaining shares of stock in the corporation is a majority of the shares of the stock in the incorporated company, for all purposes of election or voting on any question before a stockholders’ meeting.

[Part 74:177:1925; NCL § 1673]—(NRS A 1993, 2764)

NRS 78.283 Treasury shares: Definition; limitations; retirement and disposal

1. As used in this section, “treasury shares” means shares of a corporation issued and thereafter acquired by the corporation or another entity, the majority of whose outstanding voting power to elect its general partner, directors, managers or members of the governing body is beneficially held, directly or indirectly, by the corporation, which have not been retired or restored to the status of unissued shares.

2. Treasury shares held by the corporation do not carry voting rights or participate in distributions, may not be counted as outstanding shares for any purpose and may not be counted as assets of the corporation for the purpose of computing the amount available for distributions.

3. Treasury shares held by another entity, the majority of whose outstanding voting power to elect its general partner, directors, managers or members of the governing body is beneficially held, directly or indirectly, by the corporation, do not carry voting rights and, unless otherwise determined by the board of directors of the corporation, do not participate in distributions, may not be counted as outstanding shares for any purpose and may not be counted as assets of the entity.

4. Unless the articles of incorporation provide otherwise, treasury shares may be retired and restored to the status of authorized and unissued shares without an amendment to the articles of incorporation or may be disposed of for such consideration as the board of directors may determine.

5. This section does not limit the right of a corporation to vote its shares held by it in a fiduciary capacity.

NRS 78.288 Distributions to stockholders

1. Except as otherwise provided in subsection 2 and the articles of incorporation, a board of directors may authorize and the corporation may make distributions to its stockholders, including distributions on shares that are partially paid.

2. No distribution may be made if, after giving it effect:

(a) The corporation would not be able to pay its debts as they become due in the usual course of business; or

(b) Except as otherwise specifically allowed by the articles of incorporation, the corporation’s total assets would be less than the sum of its total liabilities plus the amount that would be needed, if the corporation were to be dissolved at the time of distribution, to satisfy the preferential rights upon dissolution of stockholders whose preferential rights are superior to those receiving the distribution.

3. The board of directors may base a determination that a distribution is not prohibited pursuant to subsection 2 on:

(a) Financial statements prepared on the basis of accounting practices that are reasonable in the circumstances;

(b) A fair valuation, including, but not limited to, unrealized appreciation and depreciation; or

(c) Any other method that is reasonable in the circumstances.

4. The effect of a distribution pursuant to subsection 2 must be measured:

(a) In the case of a distribution by purchase, redemption or other acquisition of the corporation’s shares, as of the earlier of:

(1) The date money or other property is transferred or debt incurred by the corporation; or

(2) The date upon which the stockholder ceases to be a stockholder with respect to the acquired shares.

(b) In the case of any other distribution of indebtedness, as of the date the indebtedness is distributed.

(c) In all other cases, as of:

(1) The date the distribution is authorized if the payment occurs within 120 days after the date of authorization; or

(2) The date the payment is made if it occurs more than 120 days after the date of authorization.

5. A corporation’s indebtedness to a stockholder incurred by reason of a distribution made in accordance with this section is at parity with the corporation’s indebtedness to its general unsecured creditors except to the extent subordinated by agreement.

6. Indebtedness of a corporation, including indebtedness issued as a distribution, is not considered a liability for purposes of determinations pursuant to subsection 2 if its terms provide that payment of principal and interest are made only if and to the extent that payment of a distribution to stockholders could then be made pursuant to this section. If the indebtedness is issued as a distribution, each payment of principal or interest must be treated as a distribution, the effect of which must be measured on the date the payment is actually made.

NRS 78.300 Liability of directors for unlawful distributions

1. The directors of a corporation shall not make distributions to stockholders except as provided by this chapter.

2. Except as otherwise provided in subsection 3 and NRS 78.138, in case of any violation of the provisions of this section, the directors under whose administration the violation occurred are jointly and severally liable, at any time within 3 years after each violation, to the corporation, and, in the event of its dissolution or insolvency, to its creditors at the time of the violation, or any of them, to the lesser of the full amount of the distribution made or of any loss sustained by the corporation by reason of the distribution to stockholders.

3. The liability imposed pursuant to subsection 2 does not apply to a director who caused his dissent to be entered upon the minutes of the meeting of the directors at the time the action was taken or who was not present at the meeting and caused his dissent to be entered on learning of the action.

[75:177:1925; A 1931, 415; 1949, 158; 1943 NCL § 1674]—(NRS A 1987, 83; 1991, 1229; 2001, 3174)

NRS 78.307 “Investment company” and “open-end investment company” defined; redemption of shares by open-end investment company

1. As used in this section, unless the context requires otherwise:

(a) “Investment company” means any corporation, trust, association or fund which is engaged or proposes to engage in the business of investing, reinvesting, owning, holding or trading in securities, and whose assets are invested principally in cash or in securities of other issuers.

(b) “Open-end investment company” means any investment company which issues one or more series or classes of securities under the terms of which the holder of the security, upon presentation thereof to the issuer, is entitled to receive approximately his proportionate share of the current net assets of the issuer applicable to such series or class, or the cash equivalent thereof.

2. An open-end investment company may, from time to time, redeem its shares, in accordance with their terms, at approximately the proportionate share of the current net assets of the issuer applicable to such shares, or the cash equivalent thereof.

(Added to NRS by 1961, 174)

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