Download Zipped Enrolled WordPerfect HB0127.ZIP
[Introduced][Amended][Status][Bill Documents][Fiscal Note][Bills Directory]
H.B. 127 Enrolled
1
LIMITED LIABILITY COMPANY
2
AMENDMENTS
3
2006 GENERAL SESSION
4
STATE OF UTAH
5
Chief Sponsor: J. Stuart Adams
6
Senate Sponsor:
Curtis S. Bramble
7
8
LONG TITLE
9
General Description:
10
This bill modifies Title 48, Chapter 2c, Utah Revised Limited Liability Company Act.
11
Highlighted Provisions:
12
This bill:
13
. allows the creation of a series within a limited liability company;
14
. provides that a series may have a separate business purpose and separate rights and
15
liabilities from the limited liability company or another series of the company;
16
. describes the requirements for creating a series;
17
. provides a method for making distributions from a series;
18
. outlines methods for termination of a series;
19
. describes the winding up process for a series;
20
. outlines the requirements for a foreign limited liability company, the operating
21
agreement of which allows the creation of a series, to do business in the state; and
22
. makes technical changes.
23
Monies Appropriated in this Bill:
24
None
25
Other Special Clauses:
26
None
27
Utah Code Sections Affected:
28
AMENDS:
29
48-2c-120, as last amended by Chapter 141, Laws of Utah 2005
30
ENACTS:
31
48-2c-606, Utah Code Annotated 1953
32
48-2c-607, Utah Code Annotated 1953
33
48-2c-608, Utah Code Annotated 1953
34
48-2c-609, Utah Code Annotated 1953
35
48-2c-610, Utah Code Annotated 1953
36
48-2c-611, Utah Code Annotated 1953
37
48-2c-612, Utah Code Annotated 1953
38
48-2c-613, Utah Code Annotated 1953
39
48-2c-614, Utah Code Annotated 1953
40
48-2c-615, Utah Code Annotated 1953
41
48-2c-616, Utah Code Annotated 1953
42
43
Be it enacted by the Legislature of the state of Utah:
44
Section 1.
Section
48-2c-120
is amended to read:
45
48-2c-120. Articles of organization and operating agreement.
46
(1) A company's articles of organization or operating agreement may not:
47
(a) restrict a right to inspect and copy records under Section
48-2c-113
;
48
(b) reduce the duties of members or managers under Section
48-2c-807
;
49
(c) eliminate the obligation of good faith and fair dealing, except that the members by
50
written agreement may determine the standards by which the performance of the obligation is
51
to be measured, if the standards are not manifestly unreasonable;
52
(d) vary any filing requirement under this chapter;
53
(e) vary any requirement under this chapter that a particular action or provision be
54
reflected in a writing;
55
(f) vary the right to expel a member based on any event specified in Subsection
56
48-2c-710
(3);
57
(g) vary the remedies under Section
48-2c-1210
for judicial dissolution of a company;
58
(h) except as allowed by Section
48-2c-1103
or any other provision of law, restrict
59
rights of, or impose duties on, persons other than the members, their assignees and transferees,
60
the managers, and the company, without the consent of those persons; or
61
(i) eliminate or limit the personal liability of any person vested with management
62
authority to the company or its members for damages for any breach of duty in the capacity
63
where a judgment or other final adjudication adverse to the manager establishes that the
64
manager's acts or omissions:
65
(i) were in bad faith;
66
(ii) involved gross negligence;
67
(iii) involved willful misconduct; or
68
(iv) [the manager personally gained] resulted in a financial profit or other advantage to
69
which the manager was not legally entitled.
70
(2) The articles of organization and operating agreement may:
71
(a) vary the requirement under Section
48-2c-1104
that, if all of the other members of
72
the company other than the member proposing to dispose of the member's interest do not
73
approve of the proposed transfer or assignment by unanimous written consent, the transferee of
74
the member's interest shall have no right to participate in the management of the business or
75
affairs of the company or to become a member; and
76
(b) vary the requirement under Section
48-2c-703
that, after the filing of the original
77
articles of organization, a person may be admitted as an additional member only upon the
78
written consent of all members.
79
Section 2.
Section
48-2c-606
is enacted to read:
80
48-2c-606. Series of members, managers, or limited liability company interests.
81
(1) (a) An operating agreement may establish or provide for the establishment of one or
82
more designated series of members, managers, or interests in the company having separate
83
rights, powers, or duties with respect to specified property or obligations of the limited liability
84
company or profits and losses associated with specified property or obligations.
85
(b) The separate rights, powers, and duties of a series shall be identified in the
86
operating agreement.
87
(2) A series may have a business purpose or investment objective separate from the
88
company.
89
(3) A series' debts, liabilities, obligations, and expenses are enforceable against the
90
assets of that series only, and not against the assets of the company generally or any other series
91
if:
92
(a) the operating agreement provides for separate treatment of the series;
93
(b) separate and distinct records are maintained concerning the series;
94
(c) the assets associated with the series are held and accounted for separately from the
95
other assets of the company and any other series; and
96
(d) notice of the limitation on liability of a series is included in the company's articles
97
of organization.
98
(4) None of the debts, liabilities, obligations, and expenses incurred, contracted for, or
99
otherwise existing with respect to the company generally or any other series are enforceable
100
against the assets of a series if:
101
(a) the operating agreement provides for separate treatment of the series;
102
(b) separate and distinct records are maintained concerning the series;
103
(c) the assets associated with the series are held and accounted for separately from the
104
other assets of the company and any other series; and
105
(d) notice of the limitation on liability of a series is included in the company's articles
106
of organization.
107
(5) A series may contract on its own behalf and in its own name, including through a
108
manager.
109
(6) Notwithstanding other provisions of this section:
110
(a) property and assets of a series may not be transferred to the company generally or
111
another series if the transfer impairs the ability of the series releasing the property or assets to
112
pay its debts existing at the time of the transfer unless fair value is given to the transferring
113
series for the property or assets transferred; and
114
(b) a tax or other liability of the company generally or of a series may not be assigned
115
by the series against which the tax or other liability is imposed to the company generally or to
116
another series within the company if the assignment impairs a creditor's right and ability to
117
fully collect an amount due when owed.
118
Section 3.
Section
48-2c-607
is enacted to read:
119
48-2c-607. Notice of series -- Articles of organization.
120
(1) Notice in a company's articles of organization of the limitation on liabilities of a
121
series, as required by Section
48-2c-606
, is sufficient whether or not the company has
122
established any series at the time the notice is included in the articles of organization.
123
(2) The notice required by Section
48-2c-606
need not reference any specific series.
124
(3) The filing of the notice required by Section
48-2c-606
with the division constitutes
125
notice of the limitation on liability of a series.
126
Section 4.
Section
48-2c-608
is enacted to read:
127
48-2c-608. Agreement to be liable.
128
Notwithstanding Section
48-2c-601
, a member or manager may agree to be obligated
129
personally for any or all of the debts, obligations, and liabilities of one or more series.
130
Section 5.
Section
48-2c-609
is enacted to read:
131
48-2c-609. Series related provisions in operating agreement.
132
(1) An operating agreement may provide for classes or groups of members or managers
133
associated with a series with separate rights, powers, or duties as provided in Subsection
134
48-2c-606
(1).
135
(2) An operating agreement may provide for the future creation of additional classes or
136
groups of members or managers associated with a series having such relative rights, powers,
137
and duties as may from time to time be established, including rights, powers, and duties senior
138
to existing classes and groups of members or managers associated with the series.
139
(3) An operating agreement may provide for the taking of an action without the vote or
140
approval of any member or manager, or class or group of members or managers, including:
141
(a) an action to create a class or group of a series of interests in the company that was
142
not previously outstanding; and
143
(b) amending the operating agreement.
144
(4) An operating agreement may provide that any member or class or group of
145
members associated with a series has no voting rights.
146
(5) (a) An operating agreement may grant to all or certain identified members or
147
managers, or a specified class or group of the members or managers associated with a series,
148
the right to vote separately or with all or any class or group of the members or managers
149
associated with the series, on any matter.
150
(b) Voting by members or managers associated with a series may be on a per capita,
151
number, financial interest, class, group, or any other basis.
152
Section 6.
Section
48-2c-610
is enacted to read:
153
48-2c-610. Management of a series.
154
(1) Unless otherwise provided in an operating agreement, the management of a series is
155
vested in the members associated with the series in proportion to the then-current percentage or
156
other interest of members in the profits of the series owned by all of the members associated
157
with the series.
158
(2) Unless otherwise provided in an operating agreement, the decision of members
159
owning more than 50% of the then-current percentage or other interest in the profits controls.
160
(3) Notwithstanding Subsection (2), if an operating agreement provides for the
161
management of the series in whole or in part by a manager, the management of the series is
162
vested to that extent in the manager, who is chosen in the manner provided in the operating
163
agreement.
164
(4) The manager of a series holds the offices and has the responsibilities accorded to
165
the manager under the operating agreement.
166
(5) A series may have more than one manager.
167
(6) Subject to a manager's resignation, a manager ceases to be a manager with respect
168
to a series as provided in the operating agreement.
169
(7) Except as otherwise provided in an operating agreement, any event under this
170
chapter or in an operating agreement that causes a manager to cease to be a manager with
171
respect to a series does not, by itself, cause the manager to cease to be a manager of the limited
172
liability company or with respect to any other series.
173
Section 7.
Section
48-2c-611
is enacted to read:
174
48-2c-611. Distributions concerning a series.
175
(1) Subject to an operating agreement, at the time a member associated with a series
176
becomes entitled to receive a distribution with respect to the series, the member has the status
177
of, and is entitled to all remedies available to, a creditor of the series with respect to the
178
distribution.
179
(2) An operating agreement may provide for the establishment of a record date for
180
allocations and distributions concerning a series.
181
(3) Notwithstanding Section
48-2c-1005
, a limited liability company may make a
182
limited distribution with respect to a series only.
183
(4) No distribution may be made by a company under this section with respect to a
184
series if, after giving effect to the distribution:
185
(a) the series would not be able to pay its debts as they become due in the usual and
186
regular course of its business; or
187
(b) the value of the series' total assets would be less than the sum of:
188
(i) its total liabilities; and
189
(ii) unless the articles of organization or the operating agreement permit otherwise, the
190
amount that would be needed, if the series were to be dissolved and wound up at the time of the
191
distribution, to satisfy the preferential rights upon dissolution and winding up of members
192
whose preferential rights are superior to the rights of members receiving the distribution.
193
(5) The company may base a determination that a distribution is not prohibited under
194
Subsection (4) either on:
195
(a) financial statements prepared on the basis of accounting practices and principles
196
that are reasonable in the circumstances; or
197
(b) a fair valuation or other method that is reasonable in the circumstances.
198
(6) For purposes of this section, amounts constituting reasonable compensation for
199
present or past services or reasonable payments made in the ordinary course of business
200
pursuant to a bona fide retirement plan or other benefits program do not constitute a
201
distribution.
202
(7) A member who receives a distribution in violation of this section is liable to the
203
series for the amount of the distribution.
204
(8) Subject to Section
48-2c-1006
, this section does not affect any obligation or
205
liability of a member under an agreement or other applicable law for the amount of a
206
distribution.
207
Section 8.
Section
48-2c-612
is enacted to read:
208
48-2c-612. Member removal from a series -- Effect.
209
(1) Unless otherwise provided in the operating agreement, a member ceases to be
210
associated with a series and to have the power to exercise any rights or powers of a member
211
with respect to the series upon the assignment of all of the member's interest in the company
212
with respect to the series.
213
(2) Unless otherwise provided in an operating agreement, any event under this chapter
214
or the operating agreement that causes a member to cease to be associated with a series does
215
not, by itself:
216
(a) cause the member to cease to be associated with any other series;
217
(b) terminate the continued membership of a member in the limited liability company;
218
or
219
(c) cause the termination of the series, regardless of whether the member is the last
220
remaining member associated with the series.
221
Section 9.
Section
48-2c-613
is enacted to read:
222
48-2c-613. Termination of series.
223
(1) Subject to Section
48-2c-1201
, except to the extent otherwise provided in the
224
operating agreement, a series may be terminated and its affairs wound up without causing the
225
dissolution of the limited liability company.
226
(2) The termination of a series does not affect the limitation on liabilities of the series
227
provided by Section
48-2c-606
.
228
(3) A series is terminated and its affairs shall be wound up upon the dissolution of the
229
limited liability company under Section
48-2c-1201
or otherwise upon the first to occur of the
230
following:
231
(a) the time specified in the operating agreement;
232
(b) the happening of events specified in the operating agreement;
233
(c) unless otherwise provided in the operating agreement, the affirmative vote or
234
written consent of:
235
(i) (A) the members of the limited liability company associated with the series; or
236
(B) if there is more than one class or group of members associated with the series, by
237
each class or group of members associated with the series; and
238
(ii) (A) members associated with the series who own more than 2/3 of the then-current
239
percentage or other interest in the profits of the series owned by all of the members associated
240
with the series; or
241
(B) the members in each class or group of the series, as appropriate; or
242
(d) the termination of the series under Section
48-2c-614
.
243
Section 10.
Section
48-2c-614
is enacted to read:
244
48-2c-614. Court-decreed termination of series.
245
On application by or for a member or manager associated with a series, the district court
246
may decree termination of the series whenever it is not reasonably practicable to carry on the
247
business of the series in conformity with an operating agreement.
248
Section 11.
Section
48-2c-615
is enacted to read:
249
48-2c-615. Participation in winding up.
250
(1) Notwithstanding Section
48-2c-1303
, unless otherwise provided in the operating
251
agreement, the series' affairs may be wound up by the following:
252
(a) a manager associated with a series who has not wrongfully terminated the series; or
253
(b) if there is no manager under Subsection (1)(a):
254
(i) the members associated with the series, or a person approved by the members
255
associated with the series, who own more than 50% of the then-current percentage or other
256
interest in the profits of the series owned by all of the members associated with the series; or
257
(ii) if there is more than one class or group of members associated with the series, then
258
by each class or group of members associated with the series owning more than 50% of the
259
then-current percentage or other interest in the profits of the series owned by all of the
260
members in each class or group associated with the series.
261
(2) (a) The district court may, upon cause shown, wind up the affairs of the series upon
262
application of any member associated with the series, the member's personal representative, or
263
the member's assignee.
264
(b) If the district court winds up the affairs of a series under Subsection (2)(a), the
265
district court may appoint a liquidating trustee.
266
(3) (a) A person winding up the affairs of a series may, in the name of the limited
267
liability company and on behalf of the limited liability company and the series, take any action
268
with respect to the series that is allowed by Part 13, Winding Up.
269
(b) A person winding up the affairs of a series shall comply with Part 13, Winding Up.
270
(c) The winding up the affairs of a series in accordance with this section does not:
271
(i) affect the liability of members; or
272
(ii) impose liability on a liquidating trustee.
273
Section 12.
Section
48-2c-616
is enacted to read:
274
48-2c-616. Foreign limited liability company -- Series.
275
(1) If a foreign limited liability company that is registering to do business in the state is
276
governed by an operating agreement establishing or providing for the establishment of a series,
277
that fact shall be stated on the application for authority to transact business in the state.
278
(2) (a) A company shall identify on an application for authority to transact business in
279
the state which of the protections for the series and company found in Section
48-2c-606
apply
280
to a series.
281
(b) If different protections found in Section
48-2c-606
apply to different series of a
282
company, the application for authority to transact business in the state shall identify:
283
(i) the protections that apply to each existing series; and
284
(ii) the protections that will apply to any later-created series.
[Bill Documents][Bills Directory]