What Is the Business Combination Statute in Nevada?

What Is the Business Combination Statute in Nevada?

Posted on June 18, 2024 in asset protection

Business owners are looking for more than a way to provide for themselves and their families; they are looking for sustainability for the growth of their companies. One such decision is whether to combine their business with that of another in order to maximize the potential growth of the company, more commonly known as a business combination. However, this process can leave many questions, including what is the business combination statute in Nevada.

Fortunately, with the help of a Henderson business lawyer from Ken R. Ashworth & Associates, you won’t be left wondering. We want to empower business owners to understand the laws that impact their decision-making so they can continue to move their company forward while expanding in the direction they envision.

Business Combination

A business combination is made to gain strategic assets, people, or intellectual property that is owned or used by another company. The benefit of such a merger is that it provides businesses with the opportunity to expand into a new market, larger market, or geographic location. While some companies that are considered small businesses may be stifled by such moves from other companies, it can also interfere with others who have capitalized on the market.

There are four types of business combinations that may be more reminiscent of a math class than business. These are:

1. Horizontal. This is one of the most recognizable combinations in that it involves two companies that are in the same industry and provide the same services. A common example is similar fast food chains that merge to increase the number of stores.
2. Vertical. This type of combination occurs when two businesses that are part of different stages of the supply chain merge. In the fast food industry, this could be when the restaurant acquires the supplier of their products, which may also supply other chains.
3. Circular. This combination occurs when a company acquires another in different business or production fields. An example of this would be a computer company acquiring a fast food chain.
4. Diagonal. This occurs when a company responsible for producing primary goods acquires a company that benefits the production and supports the original company’s purpose. For example, if a construction machinery manufacturing company acquires a local construction company, that would be a diagonal combination.

All four types of combinations provide a set of benefits for the companies involved, and determining which is right for your company could be determined by the long-term goals of the company.

Business Combination Statute

There are certain limitations to business combinations that apply to companies that have a minimum of 200 stockholders. These statutes are outlined in Sections 78.411 through 78.444 of the Nevada Revised Statutes. Under these provisions, a company that meets this minimum threshold may not enter into a business combination with any stockholder for a minimum of two years.

At the end of that period, a company may engage in a business combination as long as one of the following conditions are met:

• The board of directors for the business in which the interested party owns stock was aware of the intent prior to the ownership of the stock.
• The combination is approved by a majority of the remaining stockholders.
• There is fair and just compensation for the remaining stockholders after the acquisition occurs, which results in the highest number of possible financial benefits in accordance with the law.

The classification of the various parties involved is also outlined in the statutes that help to protect the monopolization of industry and the investment made by shareholders to ensure that all parties involved have entered into a transparent agreement. These statutes also limit the amount of shareholding percentages a person can own to qualify for voting rights within the acquisition of another company.

A lawyer can help guide you and your business through the merger and acquisition process by helping to ensure you remain within the bounds of your company’s articles of incorporation, bylaws, and obligations to stakeholders.

FAQs

Q: What Is Statute 78.138?

A: Section 78.138 of the revised statutes outlines the responsibilities of directors and officers within a company. Within these responsibilities are the fiduciary duties they are responsible for, their exercise of powers, and their liabilities to the company and those involved. Under this statute, directors and officers within an organization can be held personally responsible for violations of business law.

Q: What Is Section 78.315 of the Revised Statutes?

A: The Nevada revised statute 78.315 covers those businesses that are considered private corporations. It outlines the rules and responsibilities of the board as well as the way in which meetings are to be conducted, what is considered a quorum for such meetings, and the ways in which participation in such meetings can occur.

Q: What Is Section 78.1955 of the Revised Statutes?

A: Section 78.1955 of the Nevada revised statutes outlines the definitions for a variety of stock through a certificate of designation. Under this statute, private corporations can make alterations to their articles of incorporation that allow for the return of certain shares to an authorized but unissued status. This statute outlines the types of amendments and the qualifications for such decisions.

Q: What Is the NRS 92A 120?

A: Nevada revised statute 92A 120 outlines the approval for any planned mergers, conversions, or exchanges that a domestic corporation would like to proceed with. Under this section, shareholders have a right to vote on such proposals and the obligations companies must adhere to during the planned process.

Contact Us for the Services of a Nevada Business Law Attorney

Growing a company begins with sound financial and strategic decision-making. Business owners who are looking to further expand their business can do so through business combinations. If you are looking to take the next step or have questions about how a business combination could affect you, contact Ken R. Ashworth & Associates today. Our team can help answer your questions so you can stay focused on your business.