In May 2025, an important and largely unnoticed development occurred in the corporate-law competition among states. In response to Delaware’s SB 21, Nevada enacted AB239, extending its exculpation statute — which had previously shielded only directors and officers from monetary liability to shareholders— to controlling shareholders.

The amendment is the first of its kind. A controlling shareholder now has a single fiduciary obligation: not to pressure a director to breach a duty that would expose that director to non-exculpated liability in the context of a self-dealing transaction. That is the entire duty.

The practical consequence is striking. If a controlling shareholder extracts value from the corporation without coercing a director into fraud, intentional misconduct, or a knowing violation of law, there is no liability and no judicial scrutiny. No fairness standard. No independent committee. No majority-of-the-minority vote.

The Exculpation Categories Do Little Work

AB 239 raises a recurring question: How broad is Nevada’s exculpation statute?

In an amicus brief submitted to the Delaware Supreme Court, Nevada’s secretary of state, Francisco V. Aguilar, argued that his state’s exculpation statute does not apply to self-dealing transactions.[1] Yet, this interpretation is not consistent with Nevada’s legislative intent or with how Nevada courts have actually decided cases. [2]

NRS Section 78.138(7) was enacted in 1987. Its legislative history leaves little room for doubt about its intent. Nevada state officials explicitly framed broad liability protection as a strategy to attract corporations. State Senator William Raggio testified directly on the point, advising the committee that:

[The proposed bill] broadens the immunity of directors to include the “breach of duty of loyalty to the corporation or its shareholders, … this matter is …essential for the State of Nevada if it continues to be a leading state for incorporation –  Hearing on S.B. 46 Before the S. Comm. on Judiciary, 1987 Leg., 64th Sess. (Nev. 1987).

Nevada courts have followed that lead. Far from limiting the statute to non-self-dealing contexts, as Aguilar suggested, courts have applied the exculpation categories narrowly and in favor of defendants. Intentional misconduct requires wrongful intent pleaded with particularized facts — a demanding standard that, as the case law shows, is rarely met.[3]

Moreover, Nevada courts have required plaintiffs to plead particularized facts of wrongful intent even when the circumstances were, on their face, wrongful. In one case, a CEO and COO were drafting their own compensation contracts and approving each other’s — and still the pleading threshold was not met.[4] This stands in sharp contrast to Delaware, where it is sufficient at the pleading stage to show a structural conflict of interest.

Pleading Without Information

Even under Delaware’s framework – where plaintiffs have at least some inspection rights – pleading wrongful intent with particularity before discovery is difficult. In Nevada, plaintiffs must meet that bar without inspection rights.[5]They have no access to board minutes or other books and records but must rely solely on the public disclosures of publicly traded companies to plead facts that are entirely within defendants’ possession. The demanding pleading standard and shareholders’ lack of information ensure that most claims do not survive a motion to dismiss.

What This Means

With AB 239, Nevada has effectively removed judicial oversight of controlling shareholder self-dealing.

To survive a motion to dismiss, a shareholder would have to present particularized facts showing both that directors had wrongful intent and that the controlling shareholder exerted pressure on them, but without any access to the documents that might support such allegations.

While the corporate law world is debating SB 21, Nevada has gone significantly further, practically eliminating judicial scrutiny of self-dealing transactions.

ENDNOTES

[1] See Brief of the State of Nevada, ex rel. Francisco V. Aguilar, Secretary of State of Nevada, in his Official Capacity, as Amicus Curiae, Supporting Appellant and Reversal Maffei v. Palkon, C.A. No. 125, 2024. Of course, self-dealing transactions would be considered intentional misconduct.

[2] See Michal Barzuza, Nevada v. Delaware, working paper (2026).

[3] See id.

[4] See id.

[5] Id.

Michal Barzuza is a professor at the University of Virginia School of Law. This post is based on her recent article, “Nevada v. Delaware,” available here.