June 12, 2009
More Texas Hurdles for Creditors of LLC Members or Limited Partners
Tom Rutledge has already pointed out that SB 1442 pre-emptsSection 9.406 and 9.408 of the Texas UCC. Sections 40 and 53 of the bill go even further, and adds language that prohibits the foreclosure of a "charging order lien", whether "under this code or any other law," for ownership interests in LLCs and in limited partnerships. Tex. Bus. Org. Code §§ 101.112(c) & 153.256(c) (emphasis added).
posted by Gary Rosin
Texas Adopts Series LLCs
Among things, SB 1442 amends the Texas Business Organizations Code to provide for series LLCs. Id.at § 45 (adding Subchapter M, §§ 101.601 et/ seq.). The Bill Analysis describes the amendment as follows:
S.B. 1442 authorizes the creation of a series limited liability company by allowing a limited liability company agreement to establish or provide for the establishment of one or more designated series of members, managers, membership interests, or assets
that has separate rights, powers, or duties with respect to specified property or obligations of the company or profits and losses associated with specified property or obligations, or
that has a separate business purpose or investment objective.
The bill sets out provisions relating to
the enforceability of the obligations and expenses of a series against its assets,
the holding of assets associated with a series, and
the requirements for a notice of limitation on the liabilities of a series.
establishes the general powers of a series;
provides that a member or manager associated with a series or a member or manager of the company is not liable for a debt, obligation, or liability of a series unless the company agreement specifically provides otherwise; and
allows the company agreement to expand or restrict any duties, including fiduciary duties, and related liabilities that a member, manager, officer, or other person associated with a series has to the series or the company, a member or manager associated with the series, or a member or manager of the company.
authorizes the company agreement to establish classes or groups of members or managers associated with a series and
sets forth provisions relating to
the governing authority of a series,
the effect of certain events on a manager or member with respect to a series,
the status of a member with respect to a distribution,
the establishment of a record date for allocations and distributions, and
the making of distributions with respect to a series.
The bill establishes that the provisions of law related to limited liability companies apply to a series limited liability company and its associated members and managers, to the extent the provisions governing each company are not inconsistent.
authorizes a series and its business and affairs to wind up and terminate without causing the winding up of the company[,]
provides that the series terminates on the completion of the winding up process[,}.
... specifies the conditions that require the winding up of a series and sets out procedures for the winding up and termination[, and]
... provides for the revocation of a voluntary winding up, the cancellation of an event requiring a winding up, the authority of a series to continue business following either situation, and the winding up by order of a district court with appropriate jurisdiction.
Id. at 4-5 (indentations added).
While the general approach of Subchapter M is a statute-within-a-statute, Section 101.609 includes a general incorporation of Chapter 101 (The tex. Bus. Org. Code "spoke" for LLCs):
Sec. 101.609. APPLICABILITY OF OTHER PROVISIONS OF CHAPTER; SYNONYMOUS TERMS.
(a) To the extent not inconsistent with this subchapter, this chapter applies to a series and its associated members and managers.
(b) For purposes of the application of any other provision of this chapter to a provision of this subchapter, and as the context requires:
(1) a reference to "limited liability company" or "company" means the "series";
(2) a reference to "member" means "member associated with the series"; and
(3) a reference to "manager" means "manager associated with the series."
posted by Gary Rosin