Corporate Services of Nevada
502 North Division St.,
Carson City, Nevada 89703-4103
Phone: (775) 883-3711,
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FAX: (775) 883-2723
502 North Division St.,
Carson City, Nevada 89703-4103
Phone: (775) 883-3711,
Toll free: (800) 655-0538,
FAX: (775) 883-2723
Nevada is the right choice for you to incorporate - offering many advantages to other "incorporation states".
LEGAL ADVANTAGES; A COMPARISON WITH DELAWARE (continued)
Not intended to be legal advice, for discussion purposes only.
7. Dividends
Nevada law is more permissive than Delaware law insofar as when dividends may be paid. For Nevada corporations, except as otherwise provided in the corporation’s articles of incorporation, no distribution (including dividends on, or redemption or repurchases of, shares of capital stock) may be made if, after giving effect to such distribution, the corporation would not be able to pay its debts as they become due in the usual course of business, or the corporation’s total assets would be less than the sum of its total liabilities plus the amount that would be needed at the time of a liquidation to satisfy the preferential rights of preferred stockholders. Nev. Rev. Stat. § 78.288.
Under Delaware law, subject to any restrictions provided in the certificate of incorporation, a corporation may declare dividends out of surplus or, if no surplus exists, out of net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year (provided that the amount of capital of the corporation following the declaration and payment of the dividend is not less than the aggregate amount of the capital represented by the issued and outstanding stock of all classes having a preference upon the distribution of assets). Del. Code Ann. tit. viii, § 170.
8. Restrictions on Business Combinations
Both Nevada and Delaware law contain provisions restricting the ability of a corporation to engage in business combinations with an interested stockholder.
In Nevada, the business combination statutes prohibit certain “combinations” between a Nevada corporation
and an “interested stockholder” for three years after such a person becomes an interested stockholder. See Nev.
Rev. Stat. §§ 78.411 - 78.444. An interested stockholder is anyone who is the beneficial owner of 10 percent or more of the voting power of the outstanding voting shares of the corporation or an affiliate or associate of the corporation and at any time within 3 years immediately before the date in question was the beneficial owner of 10 percent or more of the then outstanding shares of the corporation. Nev. Rev. Stat. § 78.423. The three-year moratorium can be lifted only by advance approval by a corporation’s board of directors. Nev. Rev. Stat. § 78.438. Further, after the three-year period, combinations remain prohibited unless (1) they are approved by the board of directors before the date that the person first became an interested stockholder or a majority of the outstanding voting power not beneficially owned by the interested party, or (2) the interested stockholder satisfies certain fair-value requirements. Nev. Rev. Stat. §§ 78.439, 78.441. A Nevada corporation may opt out of the statute with appropriate provisions in its articles of incorporation; however, the opt-out would apply only prospectively. Nev. Rev. Stat. § 78.434.
Under Delaware law, a corporation is not permitted to engage in a business combination with any interested stockholder for a three-year period following the date such stockholder became an interested stockholder, unless (i) the transaction resulting in a person becoming an interested stockholder, or the business combination, is approved by the board of directors of the corporation before the person becomes an interested stockholder; (ii) upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the outstanding voting stock of the corporation outstanding at the time the transaction commenced (excluding shares owned by persons who are both officers and directors of the corporation, and shares held by certain employee stock ownership plans); or (iii) at or after the date the person becomes an interested stockholder, the business combination is approved by the corporation’s board of directors and by the holders of at least two thirds of the corporation’s outstanding voting stock at an annual or special meeting and not by written consent, excluding shares owned by the interested stockholder. Del. Code Ann. tit. viii, § 203(a). Delaware law defines “interested stockholder” generally as a person who owns 15% or more of the outstanding shares of a corporation’s voting stock. Del. Code Ann. tit. viii, § 203(c)(5). Like Nevada, Delaware allows corporations to “opt out” of the business combinations statutes. Del. Code Ann. tit. viii, § 203(b)(1-3).
Not intended to be legal advice, for discussion purposes only.
7. Dividends
Nevada law is more permissive than Delaware law insofar as when dividends may be paid. For Nevada corporations, except as otherwise provided in the corporation’s articles of incorporation, no distribution (including dividends on, or redemption or repurchases of, shares of capital stock) may be made if, after giving effect to such distribution, the corporation would not be able to pay its debts as they become due in the usual course of business, or the corporation’s total assets would be less than the sum of its total liabilities plus the amount that would be needed at the time of a liquidation to satisfy the preferential rights of preferred stockholders. Nev. Rev. Stat. § 78.288.
Under Delaware law, subject to any restrictions provided in the certificate of incorporation, a corporation may declare dividends out of surplus or, if no surplus exists, out of net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year (provided that the amount of capital of the corporation following the declaration and payment of the dividend is not less than the aggregate amount of the capital represented by the issued and outstanding stock of all classes having a preference upon the distribution of assets). Del. Code Ann. tit. viii, § 170.
8. Restrictions on Business Combinations
Both Nevada and Delaware law contain provisions restricting the ability of a corporation to engage in business combinations with an interested stockholder.
In Nevada, the business combination statutes prohibit certain “combinations” between a Nevada corporation
and an “interested stockholder” for three years after such a person becomes an interested stockholder. See Nev.
Rev. Stat. §§ 78.411 - 78.444. An interested stockholder is anyone who is the beneficial owner of 10 percent or more of the voting power of the outstanding voting shares of the corporation or an affiliate or associate of the corporation and at any time within 3 years immediately before the date in question was the beneficial owner of 10 percent or more of the then outstanding shares of the corporation. Nev. Rev. Stat. § 78.423. The three-year moratorium can be lifted only by advance approval by a corporation’s board of directors. Nev. Rev. Stat. § 78.438. Further, after the three-year period, combinations remain prohibited unless (1) they are approved by the board of directors before the date that the person first became an interested stockholder or a majority of the outstanding voting power not beneficially owned by the interested party, or (2) the interested stockholder satisfies certain fair-value requirements. Nev. Rev. Stat. §§ 78.439, 78.441. A Nevada corporation may opt out of the statute with appropriate provisions in its articles of incorporation; however, the opt-out would apply only prospectively. Nev. Rev. Stat. § 78.434.
Under Delaware law, a corporation is not permitted to engage in a business combination with any interested stockholder for a three-year period following the date such stockholder became an interested stockholder, unless (i) the transaction resulting in a person becoming an interested stockholder, or the business combination, is approved by the board of directors of the corporation before the person becomes an interested stockholder; (ii) upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the outstanding voting stock of the corporation outstanding at the time the transaction commenced (excluding shares owned by persons who are both officers and directors of the corporation, and shares held by certain employee stock ownership plans); or (iii) at or after the date the person becomes an interested stockholder, the business combination is approved by the corporation’s board of directors and by the holders of at least two thirds of the corporation’s outstanding voting stock at an annual or special meeting and not by written consent, excluding shares owned by the interested stockholder. Del. Code Ann. tit. viii, § 203(a). Delaware law defines “interested stockholder” generally as a person who owns 15% or more of the outstanding shares of a corporation’s voting stock. Del. Code Ann. tit. viii, § 203(c)(5). Like Nevada, Delaware allows corporations to “opt out” of the business combinations statutes. Del. Code Ann. tit. viii, § 203(b)(1-3).
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