SEC Overlooks Nevada’s Transfer Agent Licensing Laws

Transfer agents provide a number of crucial services, primarily for publicly traded companies.  Among other responsibilities, they maintain ownership records, record security transfers, issue and cancel certificates and distribute dividends.  Since 1975, persons performing transfer agent services for public companies must be licensed by the “appropriate regulatory authority” (“ARA”) pursuant to Section 17A(c) of the

Court Rules Coequal Stockholders Owe Fiduciary Duties To Each Other

Stockholders in closely held corporations often operate their companies as if they were partnerships.  Does that mean that the stockholders, like partners, owe fiduciary duties to each other? In Jones v. H. F. Ahmanson & Co., 1 Cal. 3d 93 (1969), the California Supreme Court famously held: Majority shareholders may not use their power to

The Charging Order – How The Nevada Secretary Of State Doesn’t Get It Quite Right

In 2007, Nevada imposed an interesting limitation, the charging order, on the ability of creditors to foreclose on shares of closely-held Nevada corporations.  Here’s how the Nevada Secretary of State’s website describes the statute, NRS 78.746: Charging order protection for stock of closely-held corporations protects stockholders of all Nevada corporations with between 2 and 75

Nevada’s Secretary of State Concatenates Veil Piercing, Indemnification And Exculpation

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The Nevada Secretary of State’s website unabashedly proclaims “Nevada is the second most popular commercial filing jurisdiction in the country, due largely to our favorable business laws and low-tax environment.”  The website then continues with a list of “legal advantages”, including the following: Piercing the corporate veil in Nevada requires the presence of “fraud” or

The Tax Man Cometh To Nevada Businesses

Nevada likes to market itself as a low tax jurisdiction, touting the fact that “Nevada does not impose income tax on domestic or foreign corporations.”  It may not impose a tax on income, but it does impose a tax on “commerce”.  This new tax is imposed on businesses with a “Nevada gross revenue” exceeding $4 million in the taxable year.  A

Nevada Corporations And Virtual Stockholder Meetings

Companies typically cite cost savings and ease of access as the motivation for holding virtual stockholder meetings.  Andy D. Bryant, Chairman of the Board of Intel Corporation, for example, provided the following rationale in the company’s 2016 proxy materials: Intel has for years been a leader in the use of technology to improve and broaden

Three Considerations For Drafting A Code of Business Conduct

Although the Securities and Exchange Commission does not require that a company adopt a code of business conduct and ethics, I would be very surprised to hear of an SEC reporting company that has not adopted such a code.  Item 406 of Regulation S-K requires a reporting company to disclose whether it has “adopted a code of ethics

Donald Trump’s Contribution To Nevada Corporate Law (And My Book)

A signature block in a contract seems like a small thing, but sometimes it can lead to litigation.  When an officer signs a contract, is he signing solely as agent for the corporation or might he also be signing in his individual capacity?  In 1993, future presidential candidate Donald J. Trump faced just that question

Nevada Supreme Court Refuses To “Blue Pencil” Unreasonable Non-Compete

Nevada, unlike California, applies a reasonableness test to non-compete agreements.  Although the Nevada courts haven’t identified a specific heuristic to be followed, a covenant not to compete will be found to be unreasonable when in the absence of statutory authorization or dominant social or economic justification, “it is greater than is required for protection of the person for whose

What Is A Knowing Violation Of Law?

Nevada’s private corporation law automatically exculpates directors and officers from individual liability from individual liable to the corporation or its stockholders or creditors for any damages as a result of any act or failure to act in his or her capacity as a director or officer unless it is proven that: The director’s or officer’s