USA – NEVADA Trends and Developments Contributed by: Krisanne Cunningham, David Lewandowski, Christopher Walther and Jeffrey Zucker, Fennemore
to obtain the approval of the stockholders, if needed. While the following discussion focuses on privately held Nevada corporations, similar considerations gen - erally apply to Nevada LLCs under NRS Chapters 86 and 92A, except where noted below. The inquiry into whether a corporation’s stockholders will need to approve an M&A transaction is governed primarily by NRS Chapter 78 for asset and stock sales and by NRS Chapter 92A for mergers. The general rule under Nevada corporate law is that the Board has full control over the affairs of the corporation unless Nevada law or the governing documents of the corporation expressly provide otherwise. Howev - er, NRS Chapters 78 and 92A do require stockholder approval for certain M&A transactions, in addition to any approval provisions in the corporation’s governing documents. In the case of a sale of the assets of a Nevada cor - poration, NRS Chapter 78 generally does not require stockholder approval unless the entity’s governing documents expressly provide otherwise or there is an asset sale involving the sale, lease or exchange of all of the corporation’s assets, including its goodwill, in which case NRS Section 78.565 requires the affirma - tive vote of stockholders holding at least a majority of the stockholder voting power. Notably, the reference in NRS Section 78.565 to sell - ing “all” of the corporation’s assets could, by its lit - eral meaning, be interpreted to mean that stockholder approval does not need to be obtained if a selling cor - poration will retain any assets, no matter how insignifi - cant those assets are. Although Nevada courts have not yet addressed the issue, we believe it is prudent to obtain stockholder approval for any sale of assets rising to the level of a sale of substantially all of the assets (and not just all of the assets). NRS Chapter 86 does not contain a provision equivalent to NRS 78.565, so the foregoing analysis of that statute does not apply to a Nevada LLC. By contrast, stockholder approval is typically required for a merger involving a Nevada corporation under NRS Section 92A.120 (or NRS Section 92A.150 for a Nevada LLC), unless the merger falls under one of the exceptions specified in NRS Sections 92A.130
or 92A.180. Under the general stockholder approval process set forth in NRS Section 92A.120, the Board must approve a plan of merger and then recommend that plan to the stockholders, who then in turn must also approve that plan. It should be noted that Nevada generally prohibits “force the vote” provisions, which would allow shareholders to vote on a proposed merger not recommended by the Board. NRS Sec - tions 92A.130 and 92A.180 (the latter of which also applies to a Nevada LLC) provide exceptions in which stockholder approval need not be obtained if: • the surviving corporation in the merger will undergo few, if any, changes in its ownership and govern - ance as a result of the merger; or • a parent corporation is merging with its subsidiary. Unless the Board is confident that the merger will fall under one of the aforementioned exceptions, the Board might choose to obtain stockholder approval in order to avoid having the merger later challenged for this reason. The inquiry into how the stockholders approve an M&A transaction is largely governed by NRS Section 78.320. The stockholders can generally approve a transaction by: • the affirmative vote of a majority of the stockholder voting power present at a stockholder meeting; or • written consent of the stockholders holding at least a majority of the stockholder voting power, unless expressly provided otherwise in the corporation’s articles or bylaws. If not otherwise required, Boards usually prefer to obtain stockholder approval by written consent in light of the various time, expense and procedural challeng - es associated with noticing and holding stockholder meetings, although a written consent admittedly might not be feasible depending on the number of stock - holders and their receptiveness to the proposed trans - action. By comparison, the members of a Nevada LLC typically approve transactions exclusively by written consent, unless the LLC’s governing documents adopt member meeting and voting requirements similar to those found in the corporate context.
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