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The General Corporation Law That Doesn't Exist

Consider the following excerpts from recent filings made with the Securities and Exchange Commission:

The following description summarizes important terms of our capital stock. For a complete description, you should refer to our certificate of incorporation and bylaws, as well as the relevant portions of the Nevada General Corporation Law chapter 78, or the NRS (Nevada Revised Statutes).

 

After deregistration of our shares, our stockholders will have access to our corporate books and records to the extent provided by the Nevada General Corporation Law, and to any additional disclosures required by our directors' and officers' fiduciary duties to the Company and our stockholders.

 

Furthermore, the Company may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Company or another company against any expense, liability or loss, whether or not the Company would have the power to indemnify such person against such expense, liability or loss under the Nevada General Corporation Law.

The problem with these statements is that they refer to a non-existent law.  Nevada does have a general law providing for the organization of corporations, but it does not carry the name "Nevada General Corporation Law".  It is simply Chapter 78 of Nevada Revised Statutes.  (Note that the definite article "the" should not precede Nevada Revised Statutes.  See, NRS 0.010.)

Chapter 78 is fairly characterized as a general corporation law because it provides for the formation of corporations generally, as opposed to the formation of a specific corporation.  Until 1860, state legislatures created corporations by special acts.  Eventually, the practice of special charters gave way to general laws.  Nevada's constitution, which dates to 1864, actually prohibits, with certain exceptions, the creation of corporations by special legislative act:

The Legislature shall pass no Special Act in any manner relating to corporate powers except for Municipal purposes; but corporations may be formed under general laws; and all such laws may from time to time, be altered or repealed.

Art. 8, Section 1.  None other than the United States Supreme Court has explained the impetus for banning incorporation by special act:

The desire for equality and the dread of special privilege were largely responsible for the general incorporation laws as indicated by the fact that many states included in their constitutions a prohibition on the grant of special charters.

Louis K. Ligget Co. v. Lee, 288 U.S. 517, 549, n.4 (1933) (citing Nevada's constitution).

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Nevada Corporations, Nevada General Corporation Law, Nevada Revised Statutes, NRS

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30172DBAB0084D3A8F39D7AF0A8E79BC.ashx Keith Paul Bishop
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