The 2011 Nevada legislative session ended on June 7. While there are specific legislative acts that, by their terms take effect earlier, most legislative acts in Nevada take effect on Oct. 1. You've undoubtedly been informed of the "hot button" topics as they occurred, such as those changes affecting deeds of trust, trustees, foreclosures, deficiency actions and creditor's rights; therefore, those topics are excluded from this review. This review will address changes made to Nevada's business entity statutes, in particular, those affecting corporations and limited liability companies, as well as a select few acts that may be of interest but which escaped the eye of the media during the legislative session. This summary doesn't profess to be all-inclusive and you should consult your legal counsel to determine the existence, application and effect of any changes to Nevada law.
Title 7; Corporations, Limited Liabilities Companies, Partnerships etc.
First and foremost, filing fees payable to the Nevada Secretary of State in connection with the formation of new entities and associations and the filing of annual lists were not increased. Likewise, the Nevada State Business License fees, the administration of which came under the administration of the Nevada Secretary of State's Office in 2009, have not increased. Surely welcomed news.
With respect to statutory changes to Title 7, the bulk of the changes to Title 7 are found in Senate Bill (SB) 405 and Assembly Bill (AB) 564. SB 405 and AB 564 are both effective as of Oct. 1.
SB 405: While the bulk of the changes set forth in SB 405 are technical changes and clarifications to existing statutes, there are some interesting highlights:
* Electronic signatures. A new chapter has been added to Title 7 based upon the Electronic Signatures in Global and National Commerce Act. This new chapter provides the manner in which notices and consents, including those related to corporate actions, may be delivered, received, stored and signed. As a result of adoption of these new provisions, the corporation, limited liability company, partnership and business trust statutes were also revised to make use of the defined terms set forth in this new chapter.
* State business license. An additional category was added to the entities excluded from the requirement to obtain a Nevada State Business License. Entities organized under Chapter 81 (Miscellaneous Organizations), so long as the business is a nonprofit organization that qualifies as tax-exempt organization under the Internal Revenue Code Section 501(c), are now excluded. This was a conforming change which recognized that under prior Nevada law (pre-1991) nonprofit organizations were originally formed under Chapter 81 and other acts, not only under Chapter 82 (Nonprofit Corporations post 1991). Certain classes of entities formed under Chapter 81 still exist, one example being older homeowners' associations.
* Combinations with interested stockholders. There were several substantive changes to the Combinations with Interested Stockholders Act (Nevada Revised Statutes, Section 78.411 through 78.444). Of particular note is that the period of time in which a corporation is restricted from engaging in an combination with an interested stockholder has been reduced from three to two years and an additional "carve-out" provision has been added that permits stockholders holding at least 60 percent of the outstanding voting power of the corporation not owned by the interested stockholder to approve an otherwise prohibited combination a "super majority-of-the-minority" provision.
* Stock Transfer Restrictions. Nevada Revised Statutes Section 78.242 was amended to expressly permit a restriction on the "amount" of a corporation's stock that may owned by a person or group of persons. The prior version of this statute only addressed written restrictions on transfer or registration of transfer of the stock of a corporation.
* Notice of Meeting Signature Requirement Eliminated. Nevada law required that a notice of meeting of the stockholders of a corporation be signed by a designated officer. This signature requirement has been eliminated, primarily to accommodate and facilitate the use of electronic noticing.
AB 564 is the Nevada Secretary of State's legislation. The most intriguing aspects of this legislation amends Nevada Revised Statutes Chapter 86 (Limited Liability Companies) to provide that an operating agreement need not be in writing but in any tangible or electronic format and that the Secretary of State may prescribe a form of operating agreement.
In addition to changes made to Title 7, the following additional Acts are notable:
* Eminent Domain. SB 86 eliminates the right of a non-governmental agency to exercise the power of eminent domain to acquire real property for mining and related purposes. In reviewing the legislative history related to SB 86, this long held and seemingly valuable right of private mining companies seemed to fall without a spirited fight. However, the legislation left unanswered the effect of this Act on actions currently pending. The provision of SB 86 became effective on April 29, 2011.
* Commercial Tenancies. AB 398 adopts provisions related to the rights of commercial landlords to interfere with a tenant's use of a commercial premises and, to the extent the commercial lease is silent on such issues, how personal property of commercial tenants may be disposed of upon abandonment and providing a mechanism as to determining when a commercial tenant may be deemed to have abandoned such personal property. This act also provides, where a commercial lease is silent on the issue, procedures for locking-out a commercial tenant and a commercial tenant's right to recover possession of the commercial premises. This Act is effective as of Oct. 1.
* Private Transfer Fees. AB 271 declares that the public policy of the state favors marketability of real property and the transferability of an interest in real property free of defects in title or unreasonable restraints on alienation and finds that private transfer fees violate this public policy. As of the effective date of this act, newly created private transfer fees are prohibited and void. With respect to pre-existing private transfer fees, affirmative action from the party who is entitled to receive a private transfer fee is required or the private transfer fee will be deemed "void" and lack of action may subject the payee of the private transfer fee to liability. Finally, a seller of real property subject to a private transfer fee must provide an express disclosure statement in the form provided in the Act. This act became effective on May 20.
Gregg P. Barnard is a shareholder in the Nevada law firm of Woodburn and Wedge.
