Implementing the Minnesota Revised Uniform Limited Liability Company Act
Our prepared analysis aims to help clients implement the Minnesota Revised Uniform Limited Liability Company Act, which we refer to as the Revised Act. The Revised Act has been adopted in Minnesota and will replace Minnesota's current limited liability company statute set forth in Chapter 322B of the Minnesota Statutes, which we refer to as the Existing Statute. Read our analysis on implementation of the Revised Act.
The Revised Act, which will be found in Chapter 322C of the Minnesota Statutes, provides increased flexibility and freedom to contract to members of a limited liability company, or LLC, through increased reliance on a single contractual arrangement among the members, termed an "operating agreement."
A summary of our implementation thoughts is set forth below.
When forming new LLCs under the Existing Statute before the Revised Act becomes effective, practitioners should consider the following matters relating to the Revised Act, which will ease the eventual transition to the Revised Act:
- Exculpatory provisions relating to the liability of governors under the Existing Statute should be placed in the member control agreement and not the articles.
- Exculpatory provisions tailored to the Revised Act can be included in the member control agreement with the proviso that they will become operational and will replace any other exculpatory provisions when the Revised Act becomes effective.
- Include amendment procedures in the operating agreement to make it easy to adopt the early application of the Revised Statute after it becomes effective on August 1, 2015, and before it becomes mandatory on January 1, 2018.
- Place minimal reliance on statutory defaults under the Existing Statute to prevent having to renegotiate these items when the entity becomes subject to the Revised Statute.
The extent to which documentation for Minnesota LLCs developed under the Existing Statute will need to be revised or re-drafted to operate under the Revised Statute will depend on the facts and circumstances on an entity-by-entity basis. The governing documentation for some LLCs will require little or no modification, while the need for modification will be greater in other situations. Items to consider include:
- Simplifying the articles of organization.
- Creating an operating agreement for purposes of the Revised Act by consolidating substantive provisions in the articles of organization, member control agreement, and by-laws.
- Eliminating reliance on statutory defaults in the Existing Statute when drafting the operating agreement.
- Eliminating terms which relate solely to the Existing Statute when drafting the operating agreement.
- Identifying rights under the Existing Statute that the parties wish to preserve in the operating agreement.
The transition to the Revised Act should also be considered when investing in or acquiring a Minnesota LLC.
Read our previous analysis of the Revised Act.
To discuss implementing the Minnesota Revised Uniform Limited Liability Company Act, contact your usual Stinson Leonard Street contact.