In 2016, respondent China Yida Holding, Co. (CY), a Nevada corporation, merged with a private holding company, taking CY private and delisting it from the Nasdaq stock exchange. The merger agreement and the proxy statement filed with the Securities and Exchange Commission provided for dissenters' rights. When a stockholder attempted to exercise dissenters' rights, the company took the position that the stockholder never had dissenters rights because Nevada's market-out exception applied.
Nevada's market-out exception provides that there is no right to dissent in favor of any class of securities that is a "covered security" as defined in Section 18(b)(1)(A) or (B) of the Securities Act of 1933, 15 U.S.C. § 77r(b)(1)(A) or (B), as amended., unless the articles of incorporation of the corporation issuing the class or series or the resolution of the board of directors approving the plan of merger, conversion or exchange expressly provide otherwise. CY's articles did not provide otherwise. Thus, the only question was whether a board resolution expressly provided otherwise. The Nevada Supreme Court found such a resolution not in the minutes of a board meeting but in the introduction to the merger agreement:
Pope Investments, LLC v. China Yida Holding, Co., 137 Nev. Adv. Op. 33.
What constitutes the board's resolution is not limited by any particular formal requirements, and here, the statement of the board's approving the merger agreement in the introduction to the merger agreement constitutes the relevant board resolution. The resolution here provided the shareholders with a right to dissent because the merger agreement envisioned that there was authority to dissent that could be validly exercised. In so doing, the resolution provided a right to dissent. This reading is supported by contemporaneous representations to shareholders that they had rights to dissent and by all of the directors that the transaction was fair because objecting shareholders had a right to dissent.