Category: RULLCA

NEW LLC ACT IN CONNECTICUT

By , March 22, 2017 1:30 pm

The post under the link below will be of particular importance to lawyers in Connecticut and elsewhere who form LLCs under Connecticut law and to lawyers interested in the Revised Uniform Limited Liability Company Act.

Here is the link:

http://www.lexology.com/library/detail.aspx?g=3b9e0dca-29a5-4b39-bcac-0774fa206fb0&l=7U9VCC2

Here is the first paragraph of the post:

The Connecticut Uniform Limited Liability Company Act, Public Act 16-97 (the “New Act”) will become effective for all existing and new Connecticut LLCs on July 1, 2017. The New Act is more comprehensive, modern and well written than the current Connecticut LLC Act (the “Current Act”). The New Act is patterned after the most recent version of the Uniform LLC Act adopted by the Uniform Law Commission. Connecticut is the 17th state to enact a version of the Uniform LLC Act.

RULLCA

By , July 25, 2016 10:31 am

The link below provides basic information and section-by-section comments on the terms of the Revised Uniform LLC Act (“RULLCA”).  Other information about RULLCA can be found elsewhere in the Uniform Laws website.  16 states have adopted RULLCA, and three have pending bills that would adopt it.    The 16 states that have adopted it are, in alphabetical order:

  1. Alabama
  2. California
  3. Connecticut
  4. District of Columbia
  5. Florida
  6. Idaho
  7. Iowa
  8. Minnesota
  9. Nebraska
  10. New Jersey
  11. North Dakota
  12. South Dakota,
  13. Utah
  14. Vermont
  15. Washington
  16. Wyoming

Here’s the link with the above comments:  http://www.uniformlaws.org/shared/docs/limited%20liability%20company/ullca_final_06rev.pdf

NORTH DAKOTA ADOPTS RULLCA

By , July 12, 2016 10:48 am

As noted in the link below, North Dakota has recently adopted the Revised Uniform LLC Act as its LLC act.  There are now roughly 10 states that have adopted RULLCA.  My view of RULLCA is that it has many excellent provisions, but also two significant flaws—the absence of a default rule governing allocations of profits and losses; and the non-use of the very helpful statutory phrase “unless the operating agreement provides otherwise.”

Here is the link:  http://www.lexology.com/library/detail.aspx?g=9bf063f0-fe04-4ebc-8597-2942d5205cae&l=7RVSTU5

MEMBER EXPULSIONS UNDER RULLCA

By , October 21, 2015 10:44 am

In many operating agreements for multi-member LLCs, provisions providing for expulsions of members that engage in misconduct can be of critical importance.  The Revised Uniform Limited Liability Company Act (“RULLCA”) has been adopted by 14 states and is pending in three more states.  The excellent new post by Peter Mahler under the link below discusses the RULLCA member expulsion provisions.  If you practice in a RULLCA state, you need to be familiar with these provisions, and even if you practice in a non-RULLCA state, you will get some useful ideas from Peter’s post.

A general comment:  I think that RULLCA contains many fine provisions, but on a net basis, I don’t think states should adopt it, since, among other problems, (i) it has no general statement of policy guiding its interpretation; (ii) incredibly, it has no default allocation provision; (iii) it doesn’t use the phrase “unless the operating agreement provides otherwise” to denote default provisions, but instead contains a confusing general provision about what are aren’t default provisions.  I hope the states that have adopted RULLCA will correct these and various other RULLCA laws.

http://www.nybusinessdivorce.com/2015/09/articles/llcs/involuntary-member-dissociation-under-rullca/

RULLCA UPDATE

By , December 22, 2014 11:17 am

Here is a link to an excellent CCH current update about the adoption of the Revised Limited Liability Company Act (“RULLCA”):   http://www.cunninghamonoperatingagreements.com/wp-content/uploads/RULLCA-CCH-ARTICLE-12-22-14.docx.

According to the update, the following 12 U.S. jurisdictions, in alphabetical order, have adopted RULLCA:  Alabama, California, District of Columbia, Florida, Idaho, Iowa, Minnesota, Nebraska, New Jersey, South Carolina, Utah, and Wyoming.  At least one state—Arkansas—has considered adopting RULLCA but has decided not to do so, at least for now.

The members of the RULLCA drafting committee have, collectively, vast expertise about LLC statutory and case law, they worked very hard on RULLCA, and there are many excellent provisions in RULLCA.  However, I deeply dislike RULLCA for, among others, the following reasons:

  • The RULLCA comments provide no overarching drafting philosophy.  Clearly, that philosophy should be (i) to provide a maximally user-friendly LLC statute for small businesses in the relevant jurisdiction and for lawyers who know little or nothing about LLC law, but who nevertheless form LLCs for their clients from time to time; and  (ii) to provide maximum flexibility for both small and large LLCs in tailoring their LLCs to meet member needs and interests.
  • Unlike the Delaware Limited Liability Company Act and many other LLC acts, RULLCA does not make use of the phrase “unless the operating agreement provides otherwise” to denote default provisions.  Instead, it has a single, very dense provision stating which provisions in it may be altered in an operating agreement.  Lawyers who lack LLC expertise may be unaware of this provision or may misconstrue it and, as a result, may screw up operating agreements and other LLC matters beyond belief.
  • Unlike most or all non-RULLCA LLC acts, RULLCA, for no good reason, and astoundingly, lacks a default allocation rule.   This lack will someday lead to enormous disputes among members of RULLCA LLCs and how LLC profits should be allocated among them.
  • Unlike the Delaware Limited Liability Company Act and the LLC acts of roughly 18 other states, RULLCA does not contain the freedom of contract provision set forth in DLLC Act § 18-1101(b).  This provisions provides as follows:  “It is the policy of this [act] to give maximum effect to the principle of freedom of contract and to the enforceability of LLC agreements.”  It is a marvelous and indeed an indispensable charter for creative LLC lawyers and accountants and their clients.

All of the above major flaws in RULLCA, and a number of other major flaws in it, can and should be fixed in the above 12 jurisdictions, and they can be fixed by very simple amendments to RULLCA.