SF0018

Official summary

Bill No.: <billno> Drafter: <drafterinit> Bill No.: SF0018 Drafter: LGC LSO No.: 10LSO-0044 Effective Date: 7/1/2010 Enrolled Act No.: SEA0051 Chapter No.: Prime Sponsor: Joint Corporations, Elections and Political Subdivisions Interim Committee Catch Title: Limited liability companies-revisions. Subject: Uniform Limited Liability Company Act Summary/Major Elements: ARTICLE 1. GENERAL PROVISIONS The act repeals current Title 17, chapter 15 and replaces those statutes with statutes based largely on the Uniform Limited Liability Company Act of 2007. W.S. 17-29-110 addresses the scope and function of, and limitations on, an LLC's operating agreement. This act places limitations on the members ability to limit the fiduciary duties of loyalty and care owed by the members or managers of an LLC. ARTICLE 2. FORMATION, ARTICLES OF ORGANIZATION AND OTHER FILINGS The act eliminates the need for flexible limited liability companies by providing that any LLC may be formed by one or more persons. Otherwise, the substance of the statutes governing formation is the same as current law. ARTICLE 3. RELATIONS OF MEMBERS AND MANAGERS TO PERSONS DEALING WITH LIMITED LIABILITY COMPANY The act addresses the relationship of members and managers of an LLC to third parties. New is the statement of authority which is an ability of an LLC to file a statement of record indicating the powers of those conducting business on behalf of the LLC. The statement may include a disclosure of the powers granted and/or limitations on the powers granted to members/managers. The statement of authority may be filed with the Wyoming Secretary of State or, if there are specific limitations relative to the powers of members/managers in dealing with the companys real property, it can be filed in any county and recorded as a notice against real estate owned by the LLC in that county. ARTICLE 4. RELATIONS OF MEMBERS TO EACH OTHER AND TO THE LIMITED LIABILITY COMPANY The act provides default provisions unless the members make a different agreement in their operating agreement. The revised act deviates substantially from current law with respect to rights of the members to manage the company and share in distributions from the company. Under current law, unless the members make an agreement to the contrary, they manage the company and share distributions according to their respective contributions to capital. In this revised act, distributions and management are to be made in equal shares among members and dissociated members unless otherwise provided in the operating agreement or otherwise indicated on a tax filing. This section continues the existing provisions in Wyoming LLCs that a members dissociation does not entitle the member to a distribution from the company. The default rule of the revised act favors the LLC over dissociated members. A person who withdraws, is expelled or dies is not entitled to a return of his capital or his equity unless the operating agreement makes provisions therefore, or unless the LLC is dissolved. ARTICLE 5. TRANSFERABLE INTERESTS AND RIGHTS OF TRANSFEREES AND CREDITORS Article 5 deals with how and when owners of an LLC can transfer their interests, the rights that are received by the transferee following a transfer, and the rights of an owners creditors with respect to the LLC ownership interests. This article deals with the charging order remedy that a creditor is afforded and sets forth certain restrictions on the transfer ownership rights and the ability of a creditor or transferee to exercise ownership rights. ARTICLE 6. MEMBERS DISSOCIATION This article addresses a members ability to dissociate. A member has the power to dissociate at any time by expressly withdrawing as a member. The dissociation is wrongful only if it expressly breaches a provision of the operating agreement or it occurs before termination of the company. ARTICLE 7. DISSOLUTION AND WINDING UP This revised act deviates substantially from current law with respect to rights of the members to share in distributions from the company. Under current law, unless the members make an agreement to the contrary, they share distributions according to their respective contributions to capital. Here, distributions are to be made in equal shares among members and dissociated members unless otherwise provided in the operating agreement or otherwise indicated on a tax filing. ARTICLE 8. (RESERVED) This article is reserved for future use. Foreign limited liability companies are currently dealt with adequately in W.S. 17-16-1533. ARTICLE 9. ACTIONS BY MEMBERS Article 9 provides for the direct and derivative claims by members and for the establishment, conduct, and judicial review of special litigation committees. The current Wyoming law does not have a corresponding section. New is W.S. 17-29-905 which allows members to create a Special Litigation Committee. A Special Litigation Committee (SLC) can serve as an alternative dispute mechanism, protect the interests of members who are neither plaintiffs nor defendants (if any), and bring to any judicial decision the benefits of a specially tailored business judgment. ARTICLE 10. MERGER, CONVERSION, CONTINUANCE, TRANSFER AND DOMESTICATION Article 10 of the act describes how LLCs transform from one type of entity to another. ARTICLE 11. MISCELLANEOUS PROVISIONS This Article contains miscellaneous provisions that are general in nature. The provisions provide for uniform applicability and authority for the secretary of state to promulgate rules to administer the new laws. The act also provides a four year transition for the equal shares provisions and equal management provisions in the new act.