Nevada Administrative Code Chapter 62H - Records Related to Children
Background
NAC Chapter 78A governs:
Formation and registration of close corporations
Shareholder agreements and voting rights
Management structure and fiduciary duties
Transfer and sale of shares
Dissolution and enforcement of corporate obligations
Close corporations are often smaller, privately held entities where shareholder management and control are tightly defined, sometimes resembling partnerships in flexibility but retaining corporate structure.
Case 1: Violation of Shareholder Agreement
Issue
Shareholder acted outside the terms of the close corporation’s shareholder agreement.
Facts
Agreement required unanimous consent for selling corporate assets.
One shareholder approved a major asset sale without other shareholders’ consent.
Rules Applied
NAC 78A.090 – Enforcement of shareholder agreements
NAC 78A.100 – Restrictions on corporate actions without required approvals
Board’s Analysis
Shareholder agreements are binding and enforceable in close corporations.
Unauthorized actions violate both the agreement and NAC rules.
Outcome
Sale invalidated
Shareholder required to compensate the corporation for damages
Mandatory mediation among shareholders
Key Lesson
All corporate actions must comply with shareholder agreements; unilateral decisions are invalid.
Case 2: Failure to Hold Required Meetings
Issue
Close corporation failed to hold annual shareholder meetings.
Facts
Bylaws and NAC 78A require at least one annual meeting for reporting and voting purposes.
Shareholders were not notified, and no meeting was held.
Rules Applied
NAC 78A.070 – Meeting requirements for shareholders
NAC 78A.080 – Notice and quorum standards
Board’s Analysis
Annual meetings ensure transparency and proper corporate governance.
Failure to hold meetings can prevent shareholders from exercising rights.
Outcome
Corporation required to schedule immediate meeting with proper notice
Officer reprimanded for noncompliance
Compliance review mandated
Key Lesson
Annual meetings are mandatory for governance and shareholder rights; skipping them is a regulatory violation.
Case 3: Unauthorized Transfer of Shares
Issue
Shareholder transferred shares in violation of restrictions in the articles of incorporation.
Facts
Articles of incorporation and shareholder agreement required prior approval for any transfer.
Shareholder sold shares to an outsider without approval.
Rules Applied
NAC 78A.110 – Transfer restrictions on shares
NAC 78A.120 – Enforcement of shareholder approvals
Board’s Analysis
Share transfers in close corporations are tightly controlled to maintain ownership structure.
Unauthorized transfers can disrupt control and violate the agreement.
Outcome
Transfer declared null and void
Shareholder required to repurchase shares from the corporation
Written warning and corrective measures applied
Key Lesson
Close corporations often restrict share transfers; violating these restrictions can invalidate the transaction.
Case 4: Breach of Fiduciary Duty
Issue
A managing shareholder engaged in self-dealing at the expense of the corporation.
Facts
Managing shareholder entered into a contract benefiting a related company they controlled.
Contract terms were unfavorable to the close corporation.
Rules Applied
NAC 78A.140 – Fiduciary duties of officers and shareholders
NAC 78A.150 – Prohibition on self-dealing without full disclosure
Board’s Analysis
Officers and shareholders owe duties of loyalty and care to the corporation.
Self-dealing without full disclosure violates NAC and can be challenged legally.
Outcome
Contract rescinded or renegotiated
Shareholder required to compensate corporation for losses
Monitoring imposed on future transactions
Key Lesson
Fiduciary duties in close corporations are strict; self-dealing is prohibited unless fully disclosed and approved.
Case 5: Failure to File Required Reports
Issue
Close corporation failed to file annual reports with the Nevada Secretary of State.
Facts
Corporation did not submit annual reports, risking administrative dissolution.
Late fees and penalties accumulated over multiple years.
Rules Applied
NAC 78A.050 – Annual reporting requirements
NAC 78A.060 – Penalties for non-filing
Board’s Analysis
Annual filings maintain corporate good standing and legal recognition.
Noncompliance can lead to administrative penalties or dissolution.
Outcome
Reports submitted with late fees
Officers reminded of compliance responsibilities
Corporation placed on compliance monitoring
Key Lesson
Filing annual reports is mandatory to maintain corporate status and avoid penalties.
Case 6: Improper Voting Procedures
Issue
Decisions made without following the proper voting procedures outlined in bylaws.
Facts
Shareholders voted by email without unanimous consent for a matter requiring a supermajority.
One dissenting shareholder contested the decision.
Rules Applied
NAC 78A.070 – Voting and quorum rules
NAC 78A.080 – Voting requirements for significant actions
Board’s Analysis
Bylaws and NAC rules define the voting thresholds for different decisions.
Ignoring proper procedures invalidates corporate decisions.
Outcome
Decision overturned
Re-vote conducted according to proper procedures
Shareholders required to certify understanding of voting rules
Key Lesson
Voting procedures must strictly follow bylaws and NAC provisions; procedural violations can nullify decisions.
Case 7: Dissolution without Proper Authorization
Issue
A shareholder attempted to dissolve the close corporation unilaterally.
Facts
Articles of incorporation required a unanimous vote for dissolution.
Shareholder filed for dissolution without consent from other shareholders.
Rules Applied
NAC 78A.180 – Procedures for dissolution
NAC 78A.190 – Shareholder consent requirements
Board’s Analysis
Close corporations have specific rules for dissolution to protect all shareholders’ interests.
Unilateral dissolution filings violate both NAC 78A and the articles of incorporation.
Outcome
Dissolution request rejected
Shareholders required to follow formal vote and filing process
Corporation continued operations pending proper procedure
Key Lesson
Dissolution requires strict compliance with shareholder consent and NAC rules.
Overall Themes from NAC 78A Cases
Shareholder agreements are binding: All actions must comply with agreed terms.
Fiduciary duties are strict: Officers and shareholders must act in the corporation’s best interests.
Governance procedures must be followed: Meetings, votes, and approvals are legally required.
Share transfer restrictions protect ownership structure: Unauthorized transfers are invalid.
Regulatory compliance is essential: Annual reports, filings, and procedural adherence are mandatory.
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