Stephen Brock

Chief Executive Officer

Public Company Management Corporation

Nevada Legislature Legislative Commission’s Subcommittee

To Study the Benefits, Costs, and Feasibility of
The Implementation of Courts of Chancery

9:00 AM
May 28, 2008
Room 4401
Grant Sawyer Building
555 East Washington Avenue
Las Vegas, Nevada
Stephen Brock
Chief Executive Officer
Public Company Management Corporation

Areas of focus:

• The revenue potential of an institutionalized business

court;
• The costs that would likely be incurred implementing
such a court; and
• A roadmap for the implementation of such a court.

2
Stephen Brock
Chief Executive Officer
Public Company Management Corporation

• In fiscal year 2007, Nevada’s Commercial Recordings

Division generated approximately $82.0 million in
revenue directly related to entities formed and
maintained on the record in the Secretary of State's
office.
• At the end of calendar year 2007, there were
approximately 315,000 entities on file at that Division.
• These numbers imply that the total revenue generated
by each registrant averages roughly $260.00 per year.

3
Stephen Brock
Chief Executive Officer
Public Company Management Corporation

• Nevada’s initial fee for registration of new entity is

$50 for non-profit entity and $75 for for-profit entity.
• Importantly, corporations may require a larger fee, up
to $35,000, based on their capitalization.
• Figures from the Nevada Secretary of State’s office
indicate that our State’s average initial fee is currently
$85 per registrant.

4
Stephen Brock
Chief Executive Officer
Public Company Management Corporation

• Once organized, a fee for an initial list of officers is

required and, thereafter, a fee for an updated list of
officers due annually.
• Annual fee is $25 for a non-profit entity and $125 for a
for-profit entity.
• Corporations may require a fee of up to $11,100 based
upon capitalization. Figures supplied by the Secretary
of State’s office indicate that, in fiscal year 2007, our
State’s average recurring revenue fee was $177 per
registrant
5
Stephen Brock
Chief Executive Officer
Public Company Management Corporation

• This is where an institutionalized business court enters

the picture… the predictability provided to businesses
by a highly efficient business court can be a major
factor in attracting large-capitalization companies to
our State.
• And larger capitalization companies generate
substantially higher fees.

6
Stephen Brock
Chief Executive Officer
Public Company Management Corporation

• The Commercial Recording Division’s total revenue

figure has two components… initial and recurring.
• It is this second component that can be so important
because it recurs year-in and year-out with little effort
of cost expended.
• In fact, the Wall Street financial community refers to
this sort of revenue stream as “recurring revenue.”
• Wall Street values this type of revenue stream very
highly because it is predictable and because it is highly
profitable.
7
Stephen Brock
Chief Executive Officer
Public Company Management Corporation

• This, again, is where an institutionalized business court

enters the picture… the predictability provided to
businesses by a highly efficient business court can be a
major factor in retaining large-capitalization
companies as registrants in Nevada.
• And larger capitalization companies generate
substantially higher fees.

8
Stephen Brock
Chief Executive Officer
Public Company Management Corporation

• Wall Street understands that all revenue dollars are

not created equal.
• The Wall Street firms that assign ratings to our State’s
bonds understand that recurring revenue streams are
less risky, and that can result in a lower cost of capital
for our State.
• Over time, a lower cost of capital can save our State
millions of dollars in interest payments.

9
Stephen Brock
Chief Executive Officer
Public Company Management Corporation

• New service enhancements could generate substantial

increases in 1) the number of new Nevada registrants,
2) the number of new Nevada registrants that are high
capitalization companies, 3) the State’s customer
retention rate, 4) average total revenue per registrant,
and 5) average recurring revenue per registrant.
• the Commercial Recording Division’s total
annual revenue could be increased
dramatically from the recent $82 million
with a business court system in place.
10
Stephen Brock
Chief Executive Officer
Public Company Management Corporation

The costs necessary to support this projected revenue

increase are actually quite palatable from a return on
investment standpoint…

11
Stephen Brock
Chief Executive Officer
Public Company Management Corporation

• The State of Delaware’s Chancery Court, considered to

be a key factor in that State’s dominance of the
company registration market in the US, has a fiscal
year 2008 operating budget of just $3.1 million, and
that figure represents just 3.5% of Delaware’s total
$89.1 million judiciary budget.
• General fund revenue collections by the Delaware
Department of State have increased 33.0% since 2000
to a new record of $701 million in fiscal year 2007.

12
Stephen Brock
Chief Executive Officer
Public Company Management Corporation

• On the marketing side, I propose that the State

implement an incentive program that directly funds
marketing expenses out of revenue generated.
• For instance, the Nevada Secretary of State’s
office might be awarded a marketing budget
equal to 5.0% of all revenue generated by
that office over a certain baseline.

13
Stephen Brock
Chief Executive Officer
Public Company Management Corporation

• It is imperative for the Subcommittee to understand

that the corporate charter market in the U.S. is
becoming increasingly competitive.
• Lured by the success of Delaware, various states across
all regions of the U.S. are creating incentives for
entities to incorporate in their jurisdictions.
• Intensive competition is spreading into the
international arena.
• Failure to move forward will likely result in being left
behind.
14