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Nevada Corporations |
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Financial Privacy in Nevada Statutes
NRS 78.257 Right of stockholders to inspect and audit financial records; exceptions. 1. Any person who has been a stockholder of record of any corporation and owns not less than 15 percent of all of the issued and outstanding shares of the stock of such corporation or has been authorized in writing by the holders of at least 15 percent of all its issued and outstanding shares, upon at least 5 days' written demand, is entitled to inspect in person or by agent or attorney, during normal business hours, the books of account and all financial records of the corporation, to make extracts therefrom, and to conduct an audit of such records. Holders of voting trust certificates representing 15 percent of the issued and outstanding shares of the corporation shall be regarded as stockholders for the purpose of this subsection. The right of stockholders to inspect the corporate records may not be limited in the articles or bylaws of any corporation. 2. All costs for making extracts of records or conducting an audit must be borne by the person exercising rights under subsection 1. 3. The rights authorized by subsection 1 may be denied to any stockholder upon his refusal to furnish the corporation an affidavit that such inspection, extracts or audit is not desired for any purpose not related to his interest in the corporation as a stockholder. Any stockholder or other person, exercising rights under subsection 1, who uses or attempts to use information, documents, records or other data obtained from the corporation, for any purpose not related to the stockholder's interest in the corporation as a stockholder, is guilty of a gross misdemeanor. ... A gross misdemeanor conviction could result in punishment by incarceration for up to one year in the county jail AND a $2,000 fine. And please note that this statute spells out rights of the stockholders to inspect corporate records-the stockholders, not "just anyone". There is no mandate of any kind for non-stockholders to ever inspect any corporate records. It is a gross misdemeanor for any non-stockholder to even attempt to use information from the corporate records in any way contrary to the interests of the stockholders. While NRS 78.105 requires the corporation to keep certain records at its registered office, the stated purpose is that such records are to be available for inspection by stockholders. What if there are no stockholders? Should those records be there, where some unsuspecting snoop is left to run the risk of attempting to use them for a nefarious purpose, in violation of NRS 78.257? What should a well-intentioned director of a corporation that has not issued stock do? When Is an Owner NOT a Stockholder?If you own part (or all) of a corporation, you're a stockholder, right? In Nevada, the answer to that question is, "Not necessarily". Let's look at another unique provision of Nevada corporate law: NRS 78.197 Rights of persons holding obligations of corporation. A corporation may provide in its articles of incorporation that the holder of a bond, debenture or other obligation of the corporation may have any of the rights of a stockholder in the corporation. With this provision in your Articles of Incorporation, you "may have any of the rights of a stockholder"-without owning stock! Thus, the holder of a note COULD own the corporation and could even be afforded the same VOTING RIGHTS as a stockholder-without being a stockholder. If this provision is NOT in your current Articles of Incorporation, check and see if this clause, or one like it, is: ARTICLE VIII-AMENDMENTS Except with respect to amending the non-assessability of shares per Article IV, this corporation reserves the right to amend, alter, change or repeal any provision contained in these Articles of Incorporation or its Bylaws in the manner now or hereafter prescribed by statute or by these Articles of Incorporation or by the corporation's Bylaws, and all rights conferred upon the stockholders are granted subject to this reservation. If so, the corporation may "amend... these Articles of Incorporation... in the manner prescribed by... the corporation's Bylaws". In other words, the Articles of Incorporation are modified by the Bylaws. If this provision exists in your Articles, we suggest that you amend the Bylaws to reflect wording such as NRS 78.197 suggests for the Articles of Incorporation. If neither of these provisions exists in your corporation's Articles, you might want to file an Amendment of the Articles of Incorporation. We can handle such a filing with the Secretary of State for you, just ask. There is, of course, a great deal more to the Nevada Revised Statutes, Chapter 78, relating to C corporations but it is not our intent to put detailed analysis of every provision on this site. We merely want to provide an overview of certain key elements. Click on "Private Control" below to continue your study of PRIVACY.
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PRIVACY has been made inherent in Nevada's corporate statutes. Nevada statutes:
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