NRS 78.257:  Right of stockholders to inspect and audit financial records; exceptions

Last week we discussed NRS 78.105 and how it appears to have been written specifically to provide access to the corporation’s records by the corporation’s stockholders. What about a case where the stockholder’s interest in accessing the records has nothing to do with the stockholder’s interest in the corporation? And what about other parties who might want to access the corporation’s private records? NRS 78.257 holds the answer to those questions, though the answers are, no doubt, NOT what such parties might wish to hear!

After defining who is entitled to inspect the corporate records and the notice that must be given for doing so in paragraph 1, then specifying that the inspecting party bears the costs of extracting such in paragraph 2, NRS 78.257, paragraph 3, states (emphasis added):

3. The rights authorized by subsection 1 may be denied to any stockholder upon his refusal to furnish the corporation an affidavit that such inspection, extracts or audit is not desired for any purpose not related to his interest in the corporation as a stockholder. Any stockholder or other person, exercising rights under subsection 1, who uses or attempts to use information, documents, records or other data obtained from the corporation, for any purpose not related to the stockholder’s interest in the corporation as a stockholder, is guilty of a gross misdemeanor. ...

A gross misdemeanor conviction is punishable by incarceration for up to one year in the county jail and a $2,000 fine. Note that this statute spells out rights of the stockholders to inspect corporate records—the stockholders, not “just anyone”. There is no mandate of any kind for non-stockholders to ever inspect any corporate records. It is a gross misdemeanor for any non-stockholder to even attempt to use information from the corporate records in any way contrary to the interests of the stockholders.

Next week, we’ll look at a method of owning a corporation without owning its stock—and yes, the answer to that riddle can also be found built right into the Nevada Revised Statutes!