In West Palm Beach Firefighters Pension Fund v. Moelis & Co., 2024 WL 747180, at *2 (Del. Ch. Feb. 23, 2024), Vice Chancellor J. Travis Laster ruled that Section 141(a) of the Delaware General Corporation Law trumps most of the provisions of a so-called "new wave" stockholder agreement. According to the Vice Chancellor, these "new wave" agreements contain "contain extensive veto rights and other restrictions on corporate action". Shortly thereafter, the Corporation Law Section of the Delaware State Bar Association sponsored a legislative "fix" to Moelis. In response, dozens of corporate law professors signed a letter expressing their opposition. Will Nevada courts follow Moelis or does Nevada statutory law compel a different result?
NRS 78.115 provides, without exception, that "[t]he business of every corporation must be managed under the direction of a board of directors or trustees, all of whom must be natural persons who are at least 18 years of age." Notably, it does not include the two exceptions found in Delaware's Section 141(a) ("except as may be otherwise provided in this chapter or in its certificate of incorporation"). Other provisions of Nevada corporate law, however, contemplate that the articles of incorporation may circumscribe the authority of the Board. Thus, NRS 78.037(2) provides that the articles may include provisions "[c]reating, defining, limiting or regulating . . . the rights, powers or duties of the directors . . .". In addition, NRS 78.120(1) provides that "[s]ubject only to such limitations as may be provided by this chapter, or the articles of incorporation of the corporation, the board of directors has full control over the affairs of the corporation".
Reading these statutes together, it is relatively clear that Nevada, like Delaware, permits the articles of incorporation to vary the mandate that the directors run the corporation. They do not, however, answer the question of whether the Nevada courts will follow Moelis and invalidate shareholder agreements that impinge on mandate of board control set forth in NRS 78.115.
[View source.]
