Nevada's 92A, quietly: what Carson City keeps adjusting
Nevada has spent the last several sessions filing down the rough edges of its mergers and conversions statute, with an eye on the state next door
Contents 4 sections
evada has been in a long, quiet argument with Delaware about whose entity code ought to govern the next generation of closely held companies, and Chapter 92A is one of the places where the argument shows up in statute. The 2015 legislative session produced another round of adjustments to the chapter, and by May 2016 practitioners are still sorting through what the changes actually do in a transaction.
The short version: Nevada keeps sanding down procedural friction in mergers and conversions while keeping its dissenter's-rights regime narrower than Delaware's. The state is not trying to be Delaware. It is trying to be the choice for a different kind of buyer — one who values privacy, lower franchise cost, and a smaller appraisal surface, and who does not expect to end up in Chancery.
What Chapter 92A actually does
Chapter 92A is Nevada's combined statute for mergers, conversions, exchanges, and dissenter's rights. It is the plumbing used any time a Nevada entity combines with another entity, changes form (corporation to LLC, LP to corporation, and so on), or is acquired through a share exchange. Most of the chapter is procedural: who must approve, what the plan must contain, how the filings are made with the Secretary of State, and how owners who vote against the transaction can demand to be cashed out at fair value.
The structure will feel familiar to anyone who has worked with the DGCL or the Model Business Corporation Act, because 92A borrows from both. There is a plan of merger. The constituent entities' governing bodies adopt it. The requisite owners approve it. Articles of merger go to the Secretary of State. The surviving entity inherits assets and liabilities by operation of law. Dissenting owners — in the transactions where dissent is allowed — are entitled to payment of fair value in cash rather than the merger consideration.
What distinguishes 92A from its Delaware counterpart is less the spine than the edges. Nevada's chapter has always been more permissive on cross-entity conversions; you can turn a Nevada LP into a Nevada LLC or an LLC into a corporation without the two-step dance some states require. It has also been more protective of directors and managers, consistent with Nevada's broader statutory posture on fiduciary liability. And it defines the set of transactions triggering dissenter's rights more narrowly than Delaware does under the appraisal section of the DGCL.
Why the state keeps amending it
Nevada's business-entity code has been on a more-or-less continuous revision cycle since the mid-2000s, when the Legislature began treating entity law as an economic-development lever rather than a bookkeeping exercise. The 2015 session continued that pattern. The through-line, as far as an outside reader can tell from the output of successive sessions, is to remove procedural traps that cost deals time and money without loosening the substantive protections the state's reputation rests on.
Two directions show up repeatedly. One is cleanup: tightening defined terms, clarifying what vote is required when an entity participates in a merger as a non-surviving party, aligning the LLC chapter's treatment of mergers with 92A's general rules. The other is optionality: expanding the universe of "other entities" that can participate in a Nevada merger or conversion, so that an out-of-state LP or a foreign LLC can combine with a Nevada corporation in a single filing rather than three.
The effect on the working transaction lawyer is incremental. A merger that would have closed in Nevada in 2010 closes in Nevada in 2016 with fewer consent signatures and fewer separate filings. The substantive outcome is the same. The hour count is lower.
Dissenter's rights, honestly compared
This is where founders who have read about Delaware appraisal and assumed Nevada is similar should slow down.
Delaware's appraisal regime, under the DGCL's appraisal section, is broad and procedurally demanding. Stockholders of a Delaware corporation who meet the holding and dissent-perfection requirements can walk a merger into Chancery and ask the court to determine fair value, often with the help of competing expert reports and a discount-rate fight that runs for a year. The statute has been a fixture of merger practice and, in the period leading up to 2016, a favorite tool of appraisal arbitrageurs trading into announced deals.
Nevada's 92A regime is narrower by design. Fewer transactions trigger dissent. The market-out, which strips dissenter's rights from transactions involving publicly traded or widely held securities, is written more generously to the company than Delaware's. And the procedural posture of a 92A fair-value proceeding — in a Nevada district court, not a specialized equity court — is less predictable for the dissenter and, on average, less expensive for the issuer.
For a founder deciding where to form, the practical implications fall out as follows. If your cap table is going to include institutional investors who expect to exit through a sale, Delaware's appraisal exposure is part of what those investors are paying for; it disciplines boards and gives minority holders a real option. If your cap table is closely held, family-controlled, or otherwise unlikely to see a contested sale, Nevada's narrower regime is a feature rather than a bug. You will pay less to get out, because there is less machinery for anyone to use against you.
This is not a reason to prefer Nevada when the facts point to Delaware. It is a reason to understand that the two statutes do different work.
What remains unclear
Two things are not yet settled.
The first is how aggressively Nevada courts will police fair-value proceedings under the amended chapter. Delaware Chancery has built a body of appraisal law thick enough to price deals against; Nevada has not, because the volume is lower and the cases are spread across general-jurisdiction district courts. A reader trying to predict what a Nevada fair-value determination will look like in a specific deal is still working with a small sample, and the 2015 cleanup did not meaningfully change that.
The second is how the conversion provisions will interact with federal tax treatment in cases that the drafters did not explicitly contemplate. Converting a Nevada LP to a Nevada corporation is straightforward under 92A; whether the transaction is a reorganization, a contribution, or something requiring gain recognition is a federal question, and the state statute cannot answer it. Practitioners who have leaned on the procedural ease of Nevada conversions have sometimes found the tax conversation more complicated than the filing.
If you form in Nevada this quarter because your client wants the franchise economics and the privacy posture, the 2015 revisions do not change the calculus. They make the plumbing slightly better. The dissenter's-rights difference, which has always been the most underappreciated point of contrast with Delaware, is still the one worth walking a client through before the first subscription agreement goes out.