When upgrading an Active Directory Domain Controller from Windows Server 2008 (or 2008 R2) to Windows Server 2012, the AD Forest must be upgraded first. This has to be manually done, as it is not part of the setup process.
To upgrade the AD Forest, right-click on the Command Prompt icon and select “Run as Administrator”. Insert the Windows Server 2012 DVD (or mount the ISO using a virtual drive) and switch to that drive inside Command Prompt: “cd [Drive letter]: <ENTER>“.
At the command prompt, type “[Drive letter]:supportadprep /forestprep <ENTER>“. You will be given a warning about how this is not a reversible operation. Type “C” and hit <ENTER> to continue. Once this is done, type “[Drive letter]:supportadprep /domainprep <ENTER>“.
After this step is complete, you may proceed with the upgrade to Windows Server 2012.