FOR DISCUSSION ONLY
RECORD
OWNERS OF BUSINESS ACT
Amendments To:
Revised
Uniform Limited Liability Company Act (2006)
NATIONAL
CONFERENCE OF COMMISSIONERS
ON UNIFORM
STATE LAWS
MEETING IN ITS ONE-HUNDRED-AND-SEVENTEENTH YEAR
BIG SKY, MONTANA
JULY 18 - JULY 25, 2008
RECORD
OWNERS OF BUSINESS ACT
Amendments To:
Revised
Uniform Limited Liability Company Act (2006)
WITHOUT
PREFATORY NOTE OR COMMENTS
Copyright 82008
By
NATIONAL
CONFERENCE OF COMMISSIONERS
ON UNIFORM
STATE LAWS
The ideas and conclusions set forth in this draft,
including the proposed statutory language and any comments or reporter=s notes,
have not been passed upon by the National Conference of Commissioners on
Uniform State Laws or the Drafting Committee.
They do not necessarily reflect the views of the Conference and its
Commissioners and the Drafting Committee and its Members and Reporter. Proposed statutory language may not be used
to ascertain the intent or meaning of any promulgated final statutory proposal.
DRAFTING COMMITTEE ON RECORD OWNERS OF BUSINESS ACT
The
Committee appointed by and representing the National Conference of
Commissioners on Uniform State Laws in preparing this Act consists of the
following individuals:
Harry J. Haynsworth, IV, 2200 IDS Center, 80 S. 8th St., Minneapolis, MN 55402, Chair
Bruce A. Coggeshall, One Monument Sq., Portland, ME 04101
ann e. conaway, Widener University School of Law, 4601
Concord Pike, Wilmington, DE 19803
David G. Nixon, 2340 Green Acres Rd., Suite 12, Fayetteville,
AR 72703
Steve Wilborn, 306 Tower Dr., Shelbyville, KY 40065
Nora Winkelman, Office of General Counsel, 333 Market St., 17th Flr., Harrisburg, PA 17101
William H. Clark, Jr., One Logan Square, 18th and Cherry Streets, Philadelphia, PA 19103-6996, Reporter
EX OFFICIO
MARTHA LEE WALTERS, Oregon
Supreme Court, 1163 State St., Salem, OR 97301-2563, President
William H. Henning, University of Alabama School of Law, Box 870382, Tuscaloosa, AL 35487-0382, Division Chair
AMERICAN BAR ASSOCIATION ADVISOR
Allan G. Donn, One Commercial Place, Suite 1800, Norfolk, VA
23510, ABA Advisor
ERIC FELDMAN, 1313 N. Market St., P.O. Box 951, Wilmington, DE 19899-0951, ABA Section Advisor
ROBERT R. KEATINGE, 555 17th St., Suite 3200, Denver, CO 80202-3979, ABA Section Advisor
EXECUTIVE DIRECTOR
JOHN A. SEBERT, 111 N. Wabash Ave., Suite 1010, Chicago, IL 60602, Executive Director
Copies of this Act may be obtained from:
NATIONAL CONFERENCE OF COMMISSIONERS
ON UNIFORM STATE LAWS
111 N. Wabash Ave., Suite 1010
Chicago, Illinois 60602
312/450-6600
www.nccusl.org
RECORD OWNERS OF BUSINESS ACT
TABLE OF CONTENTS
AMENDMENTS TO UNIFORM LIMITED LIABILITY
COMPANY ACT (2006)
Version 1
SECTION 102.
DEFINITIONS
SECTION 110.
OPERATING AGREEMENT; SCOPE, FUNCTION, AND LIMITATIONS.
SECTION 115. CHANGE
OF ADDRESS OR RESIGNATION OF AGENT FOR
SERVICE OF PROCESS
SECTION 201. FORMATION
OF LIMITED LIABILITY COMPANY; CERTIFICATE
OF ORGANIZATION
SECTION 207.
LIABILITY FOR INACCURATE INFORMATION IN FILED RECORD.
SECTION 209.
ANNUAL REPORT FOR [SECRETARY OF STATE].
SECTION 401.
BECOMING MEMBER
SECTION 410. RIGHT
OF MEMBERS, MANAGERS, AND DISSOCIATED INFORMATION.
MEMBERS TO
SECTION 502.
TRANSFER OF TRANSFERABLE INTEREST.
SECTION 705.
ADMINISTRATIVE DISSOLUTION
Version 2
SECTION 102.
DEFINITIONS
SECTION 110.
OPERATING AGREEMENT; SCOPE, FUNCTION, AND LIMITATIONS.
SECTION 115. CHANGE
OF ADDRESS OR RESIGNATION OF AGENT FOR
SERVICE OF PROCESS
SECTION 201.
FORMATION OF LIMITED LIABILITY COMPANY; CERTIFICATE
OF ORGANIZATION
SECTION 207.
LIABILITY FOR INACCURATE INFORMATION IN FILED RECORD.
SECTION 209.
ANNUAL REPORT FOR [SECRETARY OF STATE].
SECTION 401.
BECOMING MEMBER
SECTION 410. RIGHT
OF MEMBERS, MANAGERS, AND DISSOCIATED INFORMATION.
MEMBERS TO
SECTION 502.
TRANSFER OF TRANSFERABLE INTEREST.
SECTION 705.
ADMINISTRATIVE DISSOLUTION
AMENDMENTS TO UNIFORM LIMITED LIABILITY COMPANY ACT (2006)
(not requiring public disclosure of persons responsible for
the activities of a limited liability company)
SECTION 102.
DEFINITIONS. In this [act]:
* * *
(1A) “Closely-held
company” means a limited liability company that has not more than 50
members. The term does not include a
company in which one or more persons with a class or series of publicly-traded
equity securities are entitled to receive a majority of any distribution from
the company.
* * *
(17A) “Records contact” means the individual required by Section 410(i).
* * *
(a) Except as
otherwise provided in subsections (b) and (c), the operating agreement governs:
(1)
relations among the members as members and between the members and the
limited liability company;
(2)
the rights and duties under this [act] of a person in the capacity of
manager;
(3)
the activities of the company and the conduct of those activities; and
(4)
the means and conditions for amending the operating agreement.
(b) To the extent
the operating agreement does not otherwise provide for a matter described in
subsection (a), this [act] governs the matter.
(c) An operating
agreement may not:
(1)
vary a limited liability company’s capacity under Section 105 to sue and
be sued in its own name;
(2)
vary the law applicable under Section 106;
(3)
vary the power of the court under Section 204;
(4)
subject to subsections (d) through (g), eliminate the duty of loyalty,
the duty of care, or any other fiduciary duty;
(5)
subject to subsections (d) through (g), eliminate the contractual
obligation of good faith and fair dealing under Section 409(d);
(6) unreasonably restrict the duties and rights
stated in Section 410;
(7)
vary the power of a court to decree dissolution in the circumstances
specified in Section 701(a)(4) and (5);
(8)
vary the requirement to wind up a limited liability company’s business
as specified in Section 702(a) and (b)(1);
(9)
unreasonably restrict the right of a member to maintain an action under
[Article] 9;
(10)
restrict the right to approve a merger, conversion, or domestication
under Section 1014 to a member that will have personal liability with respect
to a surviving, converted, or domesticated organization; or
(11)
except as otherwise provided in Section 112(b), restrict the rights
under this [act] of a person other than a member or manager;
(12)
vary the requirements of Section 401(f) – (h);
(13)
vary the requirements of Section 410(h) – (j); or
(14)
vary the prohibitions in Sections 401(j) or 502(d) against a limited
liability company issuing a certificate in bearer form.
(d) If not
manifestly unreasonable, the operating agreement may:
(1)
restrict or eliminate the duty:
(A) as required in Section 409(b)(1) and (g), to
account to the limited liability company and to hold as trustee for it any
property, profit, or benefit derived by the member in the conduct or winding up
of the company’s business, from a use by the member of the company’s property,
or from the appropriation of a limited liability company opportunity;
(B) as required in Section 409(b)(2) and (g), to
refrain from dealing with the company in the conduct or winding up of the
company’s business as or on behalf of a party having an interest adverse to the
company; and
(C) as required by Section 409(b)(3) and (g), to
refrain from competing with the company in the conduct of the company’s
business before the dissolution of the company;
(2)
identify specific types or categories of activities that do not violate
the duty of loyalty;
(3)
alter the duty of care, except to authorize intentional misconduct or
knowing violation of law;
(4)
alter any other fiduciary duty, including eliminating particular aspects
of that duty; and
(5)
prescribe the standards by which to measure the performance of the
contractual obligation of good faith and fair dealing under Section 409(d).
(e) The operating
agreement may specify the method by which a specific act or transaction that
would otherwise violate the duty of loyalty may be authorized or ratified by
one or more disinterested and independent persons after full disclosure of all
material facts.
(f) To the extent
the operating agreement of a member-managed limited liability company expressly
relieves a member of a responsibility that the member would otherwise have
under this [act] and imposes the responsibility on one or more other members,
the operating agreement may, to the benefit of the member that the operating
agreement relieves of the responsibility, also eliminate or limit any fiduciary
duty that would have pertained to the responsibility.
(g) The operating
agreement may alter or eliminate the indemnification for a member or manager
provided by Section 408(a) and may eliminate or limit a member or manager’s
liability to the limited liability company and members for money damages,
except for:
(1)
breach of the duty of loyalty;
(2) a
financial benefit received by the member or manager to which the member or
manager is not entitled;
(3) a
breach of a duty under Section 406;
(4)
intentional infliction of harm on the company or a member; or
(5) an
intentional violation of criminal law.
(h) The court
shall decide any claim under subsection (d) that a term of an operating
agreement is manifestly unreasonable.
The court:
(1)
shall make its determination as of the time the challenged term became
part of the operating agreement and by considering only circumstances existing
at that time; and
(2)
may invalidate the term only if, in light of the purposes and activities
of the limited liability company, it is readily apparent that:
(A) the objective of the term is unreasonable; or
(B) the term is an unreasonable means to achieve
the provision’s objective.
SECTION 115. CHANGE
OF ADDRESS OR RESIGNATION OF AGENT FOR SERVICE OF PROCESS.
(a) To change its address or resign as an
agent for service of process of a limited liability company or foreign limited
liability company, the agent must deliver to the [Secretary of State] for
filing a statement of resignation change containing:
(1) the company name and stating that the
agent is resigning.;
(2) the name of the agent;
(3) if the address of the agent is to be changed,
the new address; and
(4) if the agent is resigning, a statement to
that effect.
(b) The [Secretary of State] shall file a
statement of resignation delivered under subsection (a) and mail or otherwise
provide or deliver a copy to the designated office of the limited liability
company or foreign limited liability company and another copy to the principal
office of the company if the mailing addresses of the principal office appears
in the records of the [Secretary of State] and is different from the mailing
address of the designated office. A
statement of change takes effect upon its filing by the [Secretary of State].
(c) The agent
for service of process must promptly furnish the limited liability company with
notice in a record of the filing of the statement of change.
(c) (d) An agency for service of process terminates
on the earlier of:
(1) the 31st day after the [Secretary of State]
files the a statement of resignation change that
contains the statement described in subsection (a)(4);
(2) when a record designating a new agent for
service of process is delivered to the [Secretary of State] for filing on
behalf of the limited liability company or foreign limited liability company
and becomes effective.
SECTION 201. FORMATION OF LIMITED LIABILITY COMPANY;
CERTIFICATE OF ORGANIZATION.
(a) One or more persons may act as organizers to
form a limited liability company by signing and delivering to the [Secretary of
State] for filing a certificate of organization.
(b) A certificate of organization must state:
(1) the name of the limited liability company,
which must comply with Section 108;
(2) the street and mailing addresses of the
initial designated office and the name and street and mailing addresses of the
initial agent for service of process of the company; and
(3) if the company will have no members when the
[Secretary of State] files the certificate, a statement to that effect; and
(4) a statement as to whether or not the company
is a closely-held company and if it is a closely-held company, the name and a
business or residential street address of its records contact.
(c) Subject to Section 112(c), a certificate of
organization may also contain statements as to matters other than those
required by subsection (b). However, a
statement in a certificate of organization is not effective as a statement of
authority.
(d) Unless the filed certificate of organization
contains the statement as provided in subsection (b)(3), the following rules
apply:
(1) A limited liability company is formed when
the [Secretary of State] has filed the certificate of organization and the
company has at least one member, unless the certificate states a delayed
effective date pursuant to Section 205(c).
(2) If the certificate states a delayed effective
date, a limited liability company is not formed if, before the certificate
takes effect, a statement of cancellation is signed and delivered to the
[Secretary of State] for filing and the [Secretary of State] files the
certificate.
(3) Subject to any delayed effective date and
except in a proceeding by this state to dissolve a limited liability company,
the filing of the certificate of organization by the [Secretary of State] is
conclusive proof that the organizer satisfied all conditions to the formation
of a limited liability company.
(e) If a filed
certificate of organization contains a statement as provided in subsection
(b)(3), the following rules apply:
(1) The certificate lapses and is void unless,
within [90] days from the date the [Secretary of State] files the certificate,
an organizer signs and delivers to the [Secretary of State] for filing a notice
stating:
(A) that the limited liability company has at least
one member; and
(B) the date on which a person or persons became
the company’s initial member or members.
(2) If an organizer complies with paragraph (1),
a limited liability company is deemed formed as of the date of initial
membership stated in the notice delivered pursuant to paragraph (1).
(3) Except in a proceeding by this state to
dissolve a limited liability company, the filing of the notice described in
paragraph (1) by the [Secretary of State] is conclusive proof that the
organizer satisfied all conditions to the formation of a limited liability
company.
(a) If a record delivered to the [Secretary of State] for filing under this [act] and filed by the [Secretary of State] contains inaccurate information, a person that suffers a loss by reliance on the information may recover damages for the loss from:
(1) a person that signed the record, or caused another to sign it on the person’s behalf, and knew the information to be inaccurate at the time the record was signed; and
(2) subject to subsection (b), a member of a member-managed limited liability company or the manager of a manager-managed limited liability company, if:
(A) the record was delivered for filing on behalf of the company; and
(B) the member or manager had notice of the inaccuracy for a reasonably sufficient time before the information was relied upon so that, before the reliance, the member or manager reasonably could have:
(i) effected an amendment under Section 202;
(ii) filed a petition under Section 204; or
(iii) delivered to the [Secretary of State] for filing a statement of change under Section 114 or a statement of correction under Section 206.
(b) To the extent that the operating agreement of a member-managed limited liability company expressly relieves a member of responsibility for maintaining the accuracy of information contained in records delivered on behalf of the company to the [Secretary of State] for filing under this [act] and imposes that responsibility on one or more other members, the liability stated in subsection (a)(2) applies to those other members and not to the member that the operating agreement relieves of the responsibility.
(c)
An individual who signs a record authorized or required to be filed
under this [act] affirms under penalty of perjury that:
(1) the information stated in the record is
accurate; and
(2) a person named in the record as an agent for service or process or records contact has consented to serve as such.
(a) Each year, a
limited liability company or a foreign limited liability company authorized to
transact business in this state shall deliver to the [Secretary of State] for
filing a report that states:
(1)
the name of the company;
(2)
the street and mailing addresses of the company’s designated office and
the name and street and mailing addresses of its agent for service of process
in this state;
(3)
the street and mailing addresses of its principal office; and
(4) a
statement as to whether or not the company is a closely-held company and if it
is a closely-held company, the name and a business or residential street
address of its records contact; and
(5)
in the case of a foreign limited liability company, the state or other
jurisdiction under whose law the company is formed and any alternate name
adopted under Section 805(a).
(b) Information in
an annual report under this section must be current as of the date the report
is delivered to the [Secretary of State] for filing.
(c) The first
annual report under this section must be delivered to the [Secretary of State]
between [January 1 and April 1] of the year following the calendar year in
which a limited liability company was formed or a foreign limited liability
company was authorized to transact business.
A report must be delivered to the [Secretary of State] between [January
1 and April 1] of each subsequent calendar year.
(d) If an annual
report under this section does not contain the information required in
subsection (a), the [Secretary of State] shall promptly notify the reporting
limited liability company or foreign limited liability company and return the
report to it for correction. If the report
is corrected to contain the information required in subsection (a) and
delivered to the [Secretary of State] within 30 days after the effective date
of the notice, it is timely delivered.
(e) If an a
filed annual report under this section contains an address of a
designated office, or the name or address of an agent for service
of process, or name or address of a records contact which differs from
the information shown in the records of the [Secretary of State] immediately
before the annual report becomes effective filing, the differing
information in the annual report is considered a statement of change under
Section 114.
(a) If a limited liability company is to have
only one member upon formation, the person becomes a member as agreed by that
person and the organizer of the company.
That person and the organizer may be, but need not be, different
persons. If different, the organizer
acts on behalf of the initial member.
(b) If a limited liability company is to have
more than one member upon formation, those persons become members as agreed by
the persons before the formation of the company. The organizer acts on behalf of the persons
in forming the company and may be, but need not be, one of the persons.
(c) If a filed certificate of organization
contains the statement required by Section 201(b)(3), a person becomes an
initial member of the limited liability company with the consent of a majority
of the organizers. The organizers may
consent to more than one person simultaneously becoming the company’s initial
members.
(d) After formation of a limited liability
company, a person becomes a member:
(1) as provided in the operating agreement;
(2) as the result of a transaction effective
under [Article] 10;
(3) with the consent of all the members; or
(4) if, within 90 consecutive days after the
company ceases to have any members:
(A) the last person to have been a member, or the
legal representative of that person, designates a person to become a member;
and
(B) the designated person consents to become a
member.
(e) A person may become a member without
acquiring a transferable interest and without making or being obligated to make
a contribution to the limited liability company.
(f) An individual may not become a member of a
closely-held company after [the effective
date of this subsection] unless the individual provides the company with a
certification as to whether the individual is holding his or her membership for
the benefit of another person. The
certification must be kept as part of the record of the members and transferees
of the company required by Section 410(h).
(g) A person incorporated or formed under the
laws of a jurisdiction other than the United States or a state may not become a
member of a closely-held company after [the
effective date of this subsection] unless the person provides the company
with a current certification stating the name and business or residential
street address in the United States of an individual whose principal residence
is in the United States and who has access to the records described in
subsection (h) and can produce the records within the United States promptly
upon appropriate request by an authorized agent of a governmental body.
(h) The records produced under subsection (g)
must:
(1) include the name and last known address of
each record owner of the member;
(2) indicate for each record owner of the member
that is a person incorporated or formed by a public filing, whether within or
outside the United States, the jurisdiction under whose laws the record owner
is incorporated or formed; and
(3) indicate at the time the record is produced
the voting power in the member held by each record owner of the member or
describe the manner in which the record owner’s voting power in the member is
determined.
(i) Section 410(k) applies to the individual
required by subsection (g).
(j) A limited liability company may not issue a
certificate evidencing the interest of a member in the company in bearer form.
(k) A certification under subsection (f) or (g)
that is incorrect does not affect the existence of the limited liability
company or the validity of any acts of the company.
(a) In a
member-managed limited liability company, the following rules apply:
(1) On
reasonable notice, a member may inspect and copy during regular business hours,
at a reasonable location specified by the company, any record maintained by the
company regarding the company’s activities, financial condition, and other
circumstances, to the extent the information is material to the member’s rights
and duties under the operating agreement or this [act].
(2)
The company shall furnish to each member:
(A) without demand, any information concerning
the company’s activities, financial condition, and other circumstances which
the company knows and is material to the
proper exercise of the member’s rights and duties under the operating
agreement or this [act], except to the extent the company can establish that it
reasonably believes the member already knows the information; and
(B) on demand, any other information concerning
the company’s activities, financial condition, and other circumstances, except
to the extent the demand or information demanded is unreasonable or otherwise
improper under the circumstances.
(3)
The duty to furnish information under paragraph (2) also applies to each
member to the extent the member knows any of the information described in
paragraph (2).
(b) In a
manager-managed limited liability company, the following rules apply:
(1)
The informational rights stated in subsection (a) and the duty stated in
subsection (a)(3) apply to the managers and not the members.
(2)
During regular business hours and at a reasonable location specified by
the company, a member may obtain from the company and inspect and copy full
information regarding the activities, financial condition, and other
circumstances of the company as is just and reasonable if:
(A) the member seeks the information for a
purpose material to the member’s interest as a member;
(B) the member makes a demand in a record
received by the company, describing with reasonable particularity the information
sought and the purpose for seeking the information; and
(C) the information sought is directly connected
to the member’s purpose.
(3)
Within 10 days after receiving a demand pursuant to paragraph (2)(B),
the company shall in a record inform the member that made the demand:
(A) of the information that the company will
provide in response to the demand and when and where the company will provide
the information; and
(B) if the company declines to provide any
demanded information, the company’s reasons for declining.
(4)
Whenever this [act] or an operating agreement provides for a member to
give or withhold consent to a matter, before the consent is given or withheld,
the company shall, without demand, provide the member with all information that
is known to the company and is material to the member’s decision.
(c) On 10 days’
demand made in a record received by a limited liability company, a dissociated
member may have access to information to which the person was entitled while a member
if the information pertains to the period during which the person was a member,
the person seeks the information in good faith, and the person satisfies the
requirements imposed on a member by subsection (b)(2). The company shall respond to a demand made
pursuant to this subsection in the manner provided in subsection (b)(3).
(d) A limited
liability company may charge a person that makes a demand under this section
the reasonable costs of copying, limited to the costs of labor and material.
(e) A member or
dissociated member may exercise rights under this section through an agent or,
in the case of an individual under legal disability, a legal
representative. Any restriction or
condition imposed by the operating agreement or under subsection (g) applies
both to the agent or legal representative and the member or dissociated member.
(f) The rights
under this section do not extend to a person as transferee.
(g) In addition to
any restriction or condition stated in its operating agreement, a limited
liability company, as a matter within the ordinary course of its activities,
may impose reasonable restrictions and conditions on access to and use of
information to be furnished under this section, including designating
information confidential and imposing nondisclosure and safeguarding
obligations on the recipient. In a
dispute concerning the reasonableness of a restriction under this subsection,
the company has the burden of proving reasonableness.
(h) A
closely-held company shall maintain a current record:
(1)
showing the name and last known address of each member and of each
transferee of which the company has notice;
(2)
indicating for each member or transferee that is a person incorporated
or formed by a public filing, whether within or outside the United States, the
jurisdiction under whose laws the person is incorporated or formed;
(3)
including the certifications required by Section 401(f) and (g); and
(4)
showing for each manager, if any, of the company:
(A) who is an individual, the name and a
residential or business street address of the individual; and
(B) that is a person other than an individual,
its name, the address of its principal office, and the jurisdiction under whose
laws the person is incorporated or formed.
(i) A closely-held company shall at all times have an individual whose prin