Nevada hearing on AB239 advances corporate law updates aimed at clarity for businesses

CARSON CITY — The Senate Judiciary Committee heard testimony May 14 on Assembly Bill 239, a package of corporate-law changes drafted by the Nevada State Bar’s business law section that its authors say will clarify corporate governance rules and help Nevada remain competitive for incorporations.

Assemblyman Joe Dally, sponsor of AB239, told the committee the bill was developed by the State Bar’s business law section to “update and refine our business laws” and to reduce ambiguity that can deter investment. Robert Kim, chair of the business law section executive committee, and vice chair Albert Kovacs explained key provisions at the hearing.

AB239 would, among other changes, allow corporations to include in their articles of incorporation a shareholder-approved waiver that would require internal corporate disputes to be tried by a judge rather than a jury; define “controlling stockholder” by the practical ability to elect a majority of directors and set a safe harbor for related-party transactions approved by disinterested directors or a special committee; change the voting standard for amending authorized shares so that approval may be obtained by a majority of shares present at a properly convened meeting for that purpose; and create a process to permit a corporate reorganization that inserts an upstream holding company in a single filing while protecting stockholder voting rights for certain transactions for two years after the reorganization.

Proponents said the changes provide predictability. “We believe this bill will strengthen Nevada’s business law statutes, ensuring predictability for those who do business in our state,” Dally said. Kim said the bill aims to clarify standards that have produced recurring questions in practice and to keep Nevada competitive with other incorporation-friendly states.

Supporters in the room and on the phone included business groups and corporate counsel: Peter Guzman of the Latin Chamber of Commerce; Keith Bishop, an author of a treatise on Nevada corporate law; John Sandy of Las Vegas Sands; Paul Miracken of the Vegas Chamber; Emily Osterberg of the Henderson Chamber of Commerce; Samantha Barnes of the Las Vegas Global Economic Alliance; and Benjamin Edwards, a University of Nevada Las Vegas law professor (speaking in his personal capacity). The Las Vegas Sands general counsel also participated in drafting the bill, Sandy said.

Committee members asked detailed questions about interactions with federal securities law, the jury-waiver provision and the holding-company reorganization. Senator Krasner asked whether SEC rules apply to publicly traded corporations; Kim replied that SEC obligations remain in force and the bill is not intended to change those federal compliance requirements. On the jury-waiver provision, Senator Hanson asked whether the amendment requires corporations to give up a Seventh Amendment right to a jury trial. Kim clarified that the bill would allow a corporation, with shareholder approval, to adopt an articles provision requiring internal corporate actions be tried without a jury; it does not automatically eliminate the right for every corporation. On the holding-company reorganization, senators pressed how stockholder interests would be protected; Kim said the bill builds in a two-year lookback, so transactions that would have required shareholder approval before the reorganization still require approval during that window.

Opposition testimony was not offered at the hearing. Multiple members of the committee and witnesses discussed policy trade-offs — for example, balancing attracting incorporations against protecting minority stockholders — but supporters emphasized built-in safeguards such as the disinterested-director safe harbor and the two-year stockholder protections for holding-company reorganizations.

Why it matters: Nevada competes with other states to attract incorporations and corporate filings generate recurring business-license revenues; proponents said clearer statutory rules can reduce litigation, speed capital formation and encourage businesses to incorporate in Nevada.

Looking ahead: The committee did not take a vote on AB239 during the hearing portion; the bill moved into a work-session segment of the day where other bills were considered. If advanced by the Senate, the bill would proceed to the floor for consideration and, if passed there, to the Assembly for concurrence.