A Brief Overview of Nebraska's New Model Business Corporation Act

Effective January 1, 2017, all corporations incorporated in Nebraska are subject to the new Nebraska Model Business Corporation Act (the “NMBCA”).   The act eliminates Nebraska’s current Business Corporation Act enacted in 1995.  There are significant changes that may impact your corporation, including:

1. Unanimous written consent of the shareholders is no longer required.

Under the prior act, a written consent in lieu of a shareholder meeting was common, however, approving an action using this method required unanimous consent.  In contrast, the NMBCA permits a corporation to take action by less than unanimous written consent if provided in the corporation’s articles of incorporation.

In contrast, both the prior act and the NMBCA require the unanimous consent for any action taken by the board of directors.

2. Shareholders and directors may participate in meetings by means of remote communication.

The NMBCA allows shareholders and directors to participate in meetings by remote communication – not just directors as provided in the prior act.  The board of directors may permit any or all directors to participate in a regular or special meeting by using any means of communication if all directors participating may simultaneously hear each other during the meeting.  This means, for example, a board meeting could be held through a telephone call or videoconferencing.

Similarly, a shareholder may participate in any shareholder meetings by means of remote communication if authorized by the board.  The shareholder may also vote if the corporation has implemented procedures to verify that each person participating is in fact a shareholder.  The shareholder must also have a reasonable opportunity to communicate and read or hear the proceedings of the meeting.  Any notice of an annual or special meeting of the shareholders must describe the means of remote communication to be used if authorized.

3. Electronic notices and records are only effective if authorized.

While the prior act allowed notices to be sent via electronic transmission, the NMBCA requires the consent of the recipient and/or the sender to send and receive electronic notices or records.  If the notice or electronic record can be directly reproduced in paper form (i.e. an e-mail or fax), only the recipient must consent in writing.  In contrast, if the notice cannot be directly reproduced in paper form (i.e. a voicemail or text message), both the sender and recipient must consent.  The simplest way to authorize this method of communication is to have the corporation, its registered agent, shareholders, directors, and officers execute separate consent forms for the use of electronic notices and records.

These rules also effect the appointment of a proxy.  Both the prior act and the NMBCA require that the electronic transmission appointing a proxy include information from which the recipient can determine that the transmission was authorized by the sender.  The NMBCA further requires that the electronic transmission contain the date of the transmission.

4. Disqualified directors may not vote or participate in authorizing a conflicting interest transaction.

The NMBCA substantially alters the rules for determining whether a director may approve a conflicting interest transaction.  The prior act was silent on whether a disqualified director could vote to authorize such a transaction or be counted for purposes of quorum.  In contrast, Section 21-1,222 of the NMBCA requires the qualified directors to deliberate and vote outside the presence of and without the participation of a disqualified director.  Further, a disqualified director may not be counted for purposes of quorum.  It is especially important to bring your articles, bylaws, and corporate practices into compliance with this section to prevent a corporate action from being challenged as invalid.

Under a separate but related doctrine, a director is also prohibited from taking advantage of a business opportunity that the corporation should have been able to pursue first.  The corporate opportunity doctrine is well established in Nebraska case law but it is formally recognized in the NMBCA.

5. Officers have a duty to disclose certain information.

Section 21-2,107 of the NMBCA imposes additional duties upon a director, including the affirmative obligation to disclose information relating to violations of law or material breaches of duty by officers, employees or agents of the corporation.  This duty is triggered if he or she believes a violation actually or probably has occurred or is likely to occur.  The director must inform his superior officer or board of directors.

6. The NMBCA became effective January 1, 2017.

These changes were made fully applicable to all existing Nebraska corporations on January 1, 2017.  Unlike the Nebraska Uniform Limited Liability Company Act enacted recently, the NMBCA does not provide any grace period for existing corporations.


It is extremely important that you are aware of these changes and their potential impact on your corporation.  If you have an existing Nebraska corporation, please consider having a Woods Aitken attorney review your corporation’s current articles of incorporation and bylaws to be in compliance with the new act.