NRS 78.752—Insurance and other financial arrangements against liability...

In this very litigious society, anyone can sue anyone for almost any reason at any time. Corporations are not exempt from being sued but anyone suing a Nevada corporation could be surprised at just how resistant to attack Nevada corporate structures can be. (Important side note:  To avail your Nevada corporation of the protection inherent in Nevada’s statutes, you should always ensure that the other party to any contract agrees that the contract is made in Nevada and any disputes are to be resolved according to the laws of Nevada.)

Let’s look at a provision of Nevada law that affords a Nevada-based C corporation amazing defensive capabilities: NRS 78.752, which was added in 1987. Here’s how it begins (emphasis added):

1. A corporation may purchase and maintain insurance or make other financial arrangements on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise for any liability asserted against him and liability and expenses incurred by him... or arising out of his status as such, whether or not the corporation has the authority to indemnify him against such liability and expenses.....

Paragraph 2 states that “other financial arrangements” may include the creation of a trust fund; the establishment of a program of self-insurance; the securing of its obligation of indemnification by granting a security interest or other lien on any assets of the corporation; and/or the stablishment of a letter of credit, guaranty or surety.  Specifically excluded from this protection are “...intentional misconduct, fraud or a knowing violation of law...”. In paragraph 4, we find that “In the absence of fraud... the decision of the board of directors... is conclusive...”.

Thus, when a Nevada corporation is sued and the litigant names as co-defendants any of the officers, directors, employees or agents of the corporation, the corporation is entitled by NRS 78.752 to set aside funds for the liability asserted.  Since many suits “go for broke”, quite literally, a Nevada corporation can often set aside ALL of its assets so that they may be used to defend itself. At best, the attacker is likely to end up with a “mouthful of dirt”, as the Nevada corporation defends itself to its utmost.

Sometimes it is just as important what the statutes do NOT say.  Next week, we’ll examine some key provisions NOT included in Nevada’s corporate statutes, which greatly enhance PRIVACY aspects.