Corporate Dividend and Distribution Requirements in Nevada
At a glance
| Governing law, entity, distribution, and scope | NRS ch. 78; ordinary domestic stock corporation. Distribution includes direct/indirect money or property except own shares, debt, dividends, purchases, redemptions, and other acquisitions; may include partially paid shares; § 78.288 excludes § 78.590 liquidation distributions (§§ 78.015, 78.191, 78.288) |
|---|---|
| Board, committee, shareholder, and charter authority | Board authorizes subject to articles and § 78.288(2). Board-created committee may exercise specified board powers; may include non-director natural persons unless articles/bylaws say otherwise. No distribution-specific committee bar or general stockholder approval in Chapter 78 provisions (§§ 78.120, 78.125, 78.288) |
| Cash, property, shares, debt, repurchase, and redemption forms | Direct/indirect money or other property except own shares, incurred debt, dividend declaration/payment, purchase, redemption, other acquisition, debt, or otherwise (§ 78.191); share dividends under § 78.215; redemption may use cash, debt, securities, or property (§ 78.196(2)) |
| Surplus, net-profit, equity, and capital-source test | No separate surplus, retained-earnings, net-profit, stated-capital, or other capital-source test in § 78.288; Nevada uses the dual post-distribution limits plus articles and class/series terms |
| Liquidity, balance-sheet, liability, and preference test | After distribution: corporation must be able to pay debts as due, and assets must be at least liabilities plus amount needed for superior immediate- dissolution preferences unless articles specifically allow otherwise (§ 78.288(2)) |
| Financial statements, valuation, reserves, and reliance | Board may use reasonable accounting statements, fair valuation expressly including unrealized appreciation/depreciation, or another reasonable method (§ 78.288(3)); qualified reliance includes records, officers/employees, counsel, accountants, financial/valuation advisers, bankers, or trusted committee (§ 78.138(2)); no reserve formula |
| Record date, measurement date, payment delay, and revocation | Board may fix nonretroactive distribution record date; § 78.288 states no default or forward maximum. Acquisition: earlier transfer/debt or holder- status end; other debt: distribution; other payments: authorization if within 120 days, payment if later (§ 78.288(4), (7)); no general revocation rule |
| Class, series, equal treatment, stock distribution, and fractions | Same-class/series powers, preferences, restrictions, and rights identical; articles or authorized designation sets distribution terms (§§ 78.195, 78.196). Share dividends pro rata; cross-class issue needs articles, issuing- class majority, or no outstanding shares (§ 78.215). Fractions, extra fraction, value cash, or registered/bearer scrip (§ 78.205) |
| Distribution debt, priority, liquidation, insolvency, and boundaries | Compliant distribution debt is at parity with general unsecured creditors unless subordinated. Conditional debt may be excluded from liabilities and retested when paid (§ 78.288(5)-(6)); § 78.590 liquidation excluded and Chapter 112 inapplicable to compliant distribution; liability, bankruptcy, covenant, tax, valuation, and advice issues outside scope |
Requirements one by one
Governing law, entity, distribution, and scope
NRS §§ 78.015 and 78.191 apply Chapter 78 to an ordinary Nevada domestic stock corporation and define distributions for the stock-and-distributions subchapter. A distribution includes a direct or indirect transfer of money or property other than the corporation's own shares, or incurred debt, to or for holders with respect to shares. Dividends, purchases, redemptions, other acquisitions, debt, and other forms are expressly listed.
NRS § 78.288(8) excludes liquidation distributions under NRS § 78.590(1). This page covers the nonliquidating branch.
Board, committee, shareholder, and charter authority
NRS § 78.288(1) assigns authorization to the board, subject to articles restrictions and the financial tests. It expressly permits distributions on partially paid shares. NRS § 78.120 gives the board full control subject to the chapter and articles.
Under NRS § 78.125, a committee may exercise board powers to the extent specified in the board resolution or bylaws, and it may include non-director natural persons unless the articles or bylaws provide otherwise. Chapter 78 states no distribution-specific committee prohibition or general stockholder-approval step in the surveyed provisions.
Cash, property, shares, debt, repurchase, and redemption forms
NRS § 78.191 reaches money, other property, incurred debt, dividend declarations and payments, purchases, redemptions, other acquisitions, debt distributions, and other forms. NRS § 78.196(2) also permits articles or an authorized certificate of designation to make a class or series redeemable for cash, indebtedness, securities, or other property.
The corporation's own shares are excluded from the definition's property branch and follow the separate NRS § 78.215 share-dividend rules.
Surplus, net-profit, equity, and capital-source test
NRS § 78.288 states no separate surplus, retained-earnings, net-profit, stated- capital, or other source test. Nevada instead uses the two post-distribution limits in Subsection 2, together with articles and class or series terms.
This reports the statutory test without applying it to a corporation's numbers.
Liquidity, balance-sheet, liability, and preference test
NRS § 78.288(2) bars a distribution that would leave the corporation unable to pay debts as they become due in the usual course. It also bars a distribution that would leave assets below liabilities plus the amount needed for superior preferences on an immediate dissolution.
The articles may specifically permit departure from the preference add-on, but the exception does not extend to the debts-as-due or basic assets-versus- liabilities parts.
Financial statements, valuation, reserves, and reliance
NRS § 78.288(3) permits reasonable accounting statements, a fair valuation that expressly may include unrealized appreciation and depreciation, or another reasonable method. The distribution section supplies no reserve formula.
Under NRS § 78.138(1)-(2), qualified reliance may extend to corporate records; reliable directors, officers, or employees; counsel; accountants; financial or valuation advisers; investment bankers; other competent experts; or a trusted committee. Knowledge making reliance unwarranted defeats that route.
Record date, measurement date, payment delay, and revocation
NRS § 78.288(7) lets the board fix a distribution record date that cannot precede the resolution fixing it. Unlike many Model Act versions, the section states no default record date or forward maximum.
For a purchase, redemption, or other acquisition, Subsection 4 uses the earlier of property transfer or debt incurrence and the end of holder status. Other debt distributions are measured when distributed. Other payments use authorization when paid within 120 days and payment when later. The section states no general revocation power.
Class, series, equal treatment, stock distributions, and fractions
NRS §§ 78.195 and 78.196 require identical powers, designations, preferences, restrictions, and rights within a class or series, while sending class and series distribution and redemption terms to the articles or an articles-authorized board resolution and filed designation.
Under NRS § 78.215(3)-(5), share dividends are pro rata and without consideration. A cross-class or cross-series issue requires articles authorization, majority approval by the class or series to be issued, or no outstanding shares of that class or series. NRS § 78.205(1)-(2) permits a fractional certificate, an additional fraction completing a share, specified- value cash, or registered or bearer scrip; scrip carries only the rights it states.
Distribution debt, priority, liquidation, insolvency, and boundaries
NRS § 78.288(5) places compliant distribution debt at parity with general unsecured creditors unless subordinated by agreement. Under Subsection 6, debt payable only when a distribution could then be made is excluded from liabilities; if issued as a distribution, each principal or interest payment is retested when actually paid.
Subsection 8 excludes § 78.590 liquidation distributions, and Subsection 9 makes Chapter 112 inapplicable to a distribution made in accordance with Chapter 78. Director or stockholder liability, recovery, bankruptcy, covenants, fiduciary duties, tax, accounting, and valuation advice remain outside scope.
What trips people up
- Partially paid shares are express recipients. Section 78.288 does not restrict its authorization to fully paid shares.
- Fair valuation expressly reaches unrealized changes. Appreciation and depreciation need not already be realized to fall within the statutory method.
- The record-date rule has no default. Section 78.288 only authorizes a nonretroactive date; it does not substitute the authorization date if none is fixed.
- A committee may include a non-director. At least one member must be a director, but the articles or bylaws control whether others may serve.
Common questions
Does Nevada require surplus or current net profits?
No separate source test appears in NRS § 78.288. The operative limits are the debts-as-due and assets-versus-liabilities-plus-preferences tests.
May the articles remove both financial tests?
No. The articles exception reaches the superior-preference add-on, not the debts-as-due requirement or the basic assets-versus-liabilities comparison.
Does § 78.288 govern liquidation distributions?
No. Subsection 8 expressly excludes distributions in liquidation under NRS § 78.590.
Statutes and sources
- NRS §§ 78.015 and 78.191 — Chapter 78 applicability and distribution definition. Official Nevada Legislature Chapter 78 text (accessed 2026-09-04).
- NRS §§ 78.120, 78.125, and 78.138 — board and committee authority and qualified reliance. Official Nevada Legislature Chapter 78 text (accessed 2026-09-04).
- NRS §§ 78.195, 78.196, 78.205, and 78.215 — class/series terms, preferences, redemption forms, fractions, and share dividends. Official Nevada Legislature Chapter 78 text (accessed 2026-09-04).
- NRS § 78.288 — authority, solvency, valuation, timing, debt, liquidation, and Chapter 112 boundary. Official text (accessed 2026-09-04).
Source links
Every statute quoted above, linked, with the date we checked it.
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