Continuing its tradition of bipartisan, thoughtful development of corporate laws and fostering an atmosphere supportive of responsible businesses, the Nevada Legislature has approved—and Gov. Joe Lombardo has signed—Assembly Bill No. 239 (AB 239). Advanced with the leadership and guidance of sponsor Assemblymember Joe Dalia, AB 239 updates and supplements Title 7 of the Nevada Revised Statutes (NRS), which governs business entities, including corporations and limited liability companies. The changes became effective upon Gov. Lombardo's signature on May 30, 2025, but have yet to be codified.
Brownstein’s Nevada corporate and Nevada government relations teams were instrumental in the crafting and passage of AB 239. Albert Z. Kovacs and Ellen Schulhofer, both shareholders in Brownstein’s Nevada corporate group, are members (and vice chair and former vice chair, respectively) of the Executive Committee of the Business Law Section of the State Bar of Nevada, which was the primary proponent of the bill. Mackenzie Warren Kay, senior policy advisor and counsel in Brownstein’s Nevada government relations group, together with policy advisor and associate Harrison J. Bohn, shepherded AB 239 through a dynamic and busy legislative session on behalf of the Business Law Section.
Assembly Joint Resolution 8 (AJR 8), approved by both the Nevada Assembly and Senate, proposes to amend the Nevada Constitution to provide for the establishment of a dedicated business court with appointed judges (unlike other courts in Nevada, which have elected judges) that, if established, would have exclusive original jurisdiction to hear disputes involving stockholder rights, mergers and acquisitions, fiduciary duties, receiverships involving business entities and other commercial or contractual disputes between business entities, as well as any other business disputes of a similar nature in which equitable or declaratory relief is sought. The Nevada Supreme Court would have exclusive appellate jurisdiction over cases within the original jurisdiction of the business court. In order to take effect, AJR 8 would need to pass both houses of the Nevada Legislature during its 2027 session and thereafter also be approved by way of a citizen referendum.
Fiduciary Duties of Stockholders and Controlling Stockholders
The NRS codifies the fiduciary duties of corporate directors and offices, but prior to AB 239, there was no similar statutory provision addressing whether and to what extent stockholders may owe fiduciary duties. AB 239 amends NRS 78.240 to address those issues. The amendment states that, as a general rule (subject to provisions relating to controlling stockholders, described below), stockholders, as such, do not have any fiduciary duty to the corporation or any other stockholder, and are entitled to exercise or withhold the voting power of their shares in their own personal interest. This reinforces the concept already existing in NRS 78.240 that shares of corporate stock are personal property and acknowledges that stockholders are not uniform in their investment horizons, objectives or perspectives. However, a stockholder who is a “controlling stockholder” does, in such capacity, have the fiduciary duty to refrain from exerting undue influence over any director or officer of the corporation with the purpose and proximate effect of inducing a breach of fiduciary duty by such director or officer (for which the director or officer is individually liable under NRS 78.138) that (i) directly relates to the initiation, evaluation, negotiation, authorization or approval by the board of directors, or a committee thereof, of a contract or transaction to which the controlling stockholder or any of its affiliates or associates is a party or in which the controlling stockholder or any of its affiliates or associates has a material and nonspeculative financial interest, and (ii) results in a material, nonspeculative and non-ratable financial benefit to the controlling stockholder, which benefit excludes, and results in a material and nonspeculative detriment to, the other stockholders generally. A “controlling stockholder” is defined as a stockholder that has the voting power, by way of stock ownership or other rights under the articles of incorporation, to elect a majority of the corporation’s directors. NRS 78.240, as amended by AB 239, also includes a “safe harbor” provision establishing a presumption that a controlling stockholder has not breached its limited fiduciary duty if the relevant contract or transaction has been authorized or approved by a committee of disinterested directors or recommended to the board of directors by such a committee. The statute further clarifies that the exercise or withholding of voting power by a controlling stockholder, or the indication or implication by a controlling stockholder as to whether or to what extent such voting power may be exercised or withheld, does not, by itself, constitute or indicate a breach of the controlling stockholder’s fiduciary duty.
Limited Waiver of Jury Trials for Internal Actions
Unlike Delaware, where corporate litigation is generally held in the Court of Chancery (where jury trials are unavailable), it is possible for the resolution of corporate law case in Nevada to involve fact-finding by a jury. Without enacting any mandatory changes, AB 239 amends NRS 78.046 to permit a Nevada corporation to include a provision in its articles of incorporation (and not the bylaws) to provide that, to the extent not inconsistent with U.S. federal law, all or certain “internal actions” (as already defined in NRS 78.046) to be tried in a Nevada state court must be tried before the presiding judge as finder of fact, and not before a jury. The scope of “internal actions” is unchanged and relates to the same scope of corporate litigation that NRS 78.046 already permits Nevada corporations to require be heard in specified courts pursuant to a forum selection clause. Unlike a forum selection clause, which could be included in either the articles of incorporation or the bylaws, the limited jury waiver now permissible under the amended statute must be included in the articles of incorporation, which means either that the waiver is (i) included in the original articles of incorporation before stockholders acquire their stock, or (ii) adopted by way of an amendment to the articles, requiring both board and stockholder approval.
Reduced Voting Standard for Changes in Authorized Capital Stock of Public Companies
AB 239 provides publicly traded corporations with relief with respect to the stockholder voting standard for the approval of an amendment to the articles of incorporation that relates only to an increase or decrease in the authorized shares of capital stock. For many publicly traded corporations, the ability to routinely and quickly access capital markets through equity offerings is crucial. However, if the company has a broad retail stockholder base or has difficulty getting a response from its stockholders, it can be difficult to obtain the “majority of the outstanding voting power” vote previously required under NRS 78.390 to effectuate an articles amendment to provide the company with additional shares for issuance, even if a majority of the responsive stockholders overwhelmingly support the amendment.
The revisions to NRS 78.390 in AB 239 allow a publicly traded corporation (but not privately held corporations) to amend the articles of incorporation to increase or decrease the number of authorized shares of capital stock with stockholder approval under the voting standard (established either by the NRS or set forth in the corporation’s governing documents) for “routine” matters, rather than requiring the stricter “majority of the outstanding voting power” standard. This approach permits a publicly traded corporation with a non-responsive stockholder base to preserve its ability to issue additional shares, while still requiring stockholder approval of the amendment using the same voting standard as the corporation uses for other matters submitted for a stockholder vote. The approach in AB 239 mirrors the approach enacted in 2023 with respect to stock splits with stockholder approval under NRS 78.2055.
Holding Company Merger Provisions
A new provision of NRS Chapter 92A would permit a corporation, without stockholder approval (and unless a merger under the new provision is forbidden by the articles of incorporation), to undertake a merger with a wholly owned subsidiary whereby the existing corporation becomes a subsidiary of a new holding corporation with a capital and ownership structure substantively identical to the pre-merger corporation. The new statute is similar in scope and substance to Section 251(g) of the Delaware General Corporation Law and also includes specific requirements aimed at preventing use of the new provision to circumvent other requirements under Nevada law or achieve objectives unrelated to the holding company reorganization.
Clarification and Confirmation of Dissenter’s Rights as an Exclusive Remedy
AB 239 amends NRS 92A.380(2) to further clarify and emphasize that, absent extraordinary circumstances, the appraisal remedy afforded under the Nevada dissenter’s rights statutes (NRS 92A.300-92A.500) is an exclusive remedy. The provision, as amended, confirms that a stockholder who is entitled to dissent from a corporate action under the dissenter’s rights statutes must not otherwise object to or challenge that corporate action, except to the extent that the corporation did not obtain the requisite vote or consent of the stockholders to approve the corporate action, or the corporate action itself is the proximate result of actual fraud against the stockholder or the corporation.
Other Amendments Regarding Corporations
AB 239 also makes certain notable changes to NRS Chapter 78 governing corporations. Among other clarifications, the amendments:
- Clarify NRS 75.150 to confirm that any materials provided along with any notice or other communication under NRS Title 7 are deemed to be a part of the notice;
- Supplement NRS 78.315 to clarify and confirm that the board of directors may approve agreements, instruments or other documents in final form or such preliminary form as the directors deem appropriate in their business judgment;
- Update NRS 78.365 to expressly confirm that provisions of stockholder agreements can be made dependent upon external facts or events;
- Amend NRS 78.390 to clarify and confirm that, except as otherwise provided in the articles of incorporation, a proposed amendment that designates one or more new series of an existing class as having any preference or any relative or other right that has higher or equal seniority to the corresponding preference or relative or other right of an existing series of the same class does not, solely by virtue of the higher or equal seniority of the preference or right of the proposed new series, constitute an amendment that would adversely alter or change the preference or rights of the existing series;
- Update and modernize NRS 92A.120 to give more precision and clarity (without changing the substance of the provision) to the mechanics relating to the approvals required in order to effectuate a merger, conversion or exchange; and
- Update certain outdated or inconsistent terminology in NRS Title 7, such as elimination of the sometimes confusing term “share dividend,” and correct references to a “certificate of dissolution” to be “articles of dissolution.”
