On April 11, 2014, Minnesota Governor Mark Dayton signed into law the Minnesota Revised Uniform Limited Liability Company Act (“Revised LLC Act”). Minnesota is the tenth state to adopt the Revised LLC Act. The adoption of the Revised LLC Act brings Minnesota limited liability company law more in line with the laws of Delaware and many other states.
Does the Revised LLC Act Apply to All LLCs?
The Revised LLC Act will apply to all limited liability companies formed on or after August 1, 2015. It will apply to all existing Minnesota limited liability companies beginning on January 1, 2018, when the existing Minnesota Limited Liability Company Act (the “Minnesota LLC Act”) is repealed.
What Does the Revised LLC Act Do?
One primary development with the Revised LLC Act is the reliance on a member’s contractual rights as provided for in an operating agreement. The operating agreement is the term used in the Revised LLC Act for what was previously referred to as the “member control agreement.” The operating agreement moves many of the rights and duties previously contained within the articles, bylaws, and member control agreement into a single contractual arrangement of the members. The operating agreement eliminates the dangers inherent in a single entity having three separate, conflicting organizational documents.
Another notable change in the Revised LLC Act is the ability to limit or eliminate the standard of conduct requirements for members, managers, and governors. Under the Minnesota LLC Act, members, managers, and governors are held to a statutory standard of conduct that cannot be modified. The Revised LLC Act allows the operating agreement to modify the duty of care and modify or eliminate the duty of loyalty, so long as the modification or elimination is not “manifestly unreasonable.” Courts are to determine if the term is “manifestly unreasonable” by the circumstances existing at the time the term became part of the operating agreement, and may invalidate the term only if, in light of the purposes and activities of the limited liability company, it is readily apparent that the objective of the term is unreasonable, or the term is an unreasonable means to achieve the provision’s objective. The contractual requirement for good faith and fair dealing cannot be eliminated, but the operating agreement can specify the standards by which performance will be measured, providing more flexibility to the duties of members, managers, and governors in relation to one another and the LLC.
For additional information on the Revised LLC Act, and why you may want to consider an early adoption before it becomes mandatory, contact the business law lawyers at Trepanier MacGillis Battina P.A.
About the Author:
Minnesota business law attorney James C. MacGillis practices in the area of business formations and governance, and regularly advises and represents businesses in employment and business disputes. Jim may be reached at 612.455.0503 or firstname.lastname@example.org. Trepanier MacGillis Battina P.A. is a Minnesota business law firm located in Minneapolis, Minnesota.
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