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Senate Amendment 3814

Amendment Text

PAG LIN
  1  1    Amend House File 642, as amended, passed, and
  1  2 reprinted by the House, as follows:
  1  3    #1.  Page 30, by inserting after line 5 the
  1  4 following:
  1  5    "Sec. ___.  Section 490.1109, subsection 3,
  1  6 paragraph e, as enacted in 1997 Iowa Acts, House File
  1  7 628, if enacted, is amended to read as follows:
  1  8    e.  "Interested shareholder" means any person,
  1  9 other than the corporation and any direct or indirect
  1 10 majority-owned subsidiary of the corporation, that is
  1 11 the owner of fifteen ten percent or more of the
  1 12 outstanding voting stock of the corporation, or is an
  1 13 affiliate or associate of the corporation and was the
  1 14 owner of fifteen ten percent or more of the
  1 15 outstanding voting stock of the corporation at any
  1 16 time within the three-year period immediately prior to
  1 17 the date on which it is sought to be determined
  1 18 whether such person is an interested shareholder, and
  1 19 the affiliates and associates of such person.
  1 20 "Interested shareholder" does not include either of
  1 21 the following:
  1 22    (1)  A person who owns shares in excess of the
  1 23 fifteen percent limitation and who acquired such
  1 24 shares as follows:
  1 25    (a)  Pursuant to a tender offer commenced prior to
  1 26 January 1, 1998, or pursuant to an exchange offer
  1 27 announced prior to January 1, 1998, and commenced
  1 28 within ninety days after such date, if such person
  1 29 satisfies either of the following:
  1 30    (i)  Continues to own shares in excess of the
  1 31 fifteen percent limitation or would continue to own
  1 32 such shares but for action taken by the corporation.
  1 33    (ii)  Is an affiliate or associate of the
  1 34 corporation and continues, or would continue but for
  1 35 action taken by the corporation, to be the owner of
  1 36 fifteen percent or more of the outstanding voting
  1 37 stock of the corporation at any time within the three-
  1 38 year period immediately prior to the date on which it
  1 39 is sought to be determined whether such person is an
  1 40 interested shareholder.
  1 41    (b)  From a person subject to subparagraph
  1 42 subdivision (a) by gift, devise, or in a transaction
  1 43 in which no consideration for the shares was
  1 44 exchanged.
  1 45    (2)  A a person whose ownership of shares in excess
  1 46 of the fifteen ten percent limitation is the result of
  1 47 action taken solely by the corporation, provided that
  1 48 such person is an interested shareholder if, after
  1 49 such action by the corporation, the person acquires
  1 50 additional shares of voting stock of the corporation,
  2  1 other than as a result of further corporate action not
  2  2 caused, directly or indirectly, by such person.
  2  3    For purposes of determining whether a person is an
  2  4 interested shareholder, the outstanding voting stock
  2  5 of the corporation does not include any other unissued
  2  6 stock of the corporation which may be issuable
  2  7 pursuant to any agreement, arrangement, or
  2  8 understanding, or upon exercise of conversion rights,
  2  9 warrants, or options, or otherwise.
  2 10    Sec.    .  Section 490A.102, subsections 13, 16,
  2 11 and 18, Code 1997, are amended to read as follows:
  2 12    13.  "Limited liability company" or "domestic
  2 13 limited liability company" means an entity that is an
  2 14 unincorporated association having two one or more
  2 15 members, and that is organized under or subject to
  2 16 this chapter.
  2 17    16.  "Member" means a person with a membership
  2 18 interest in a limited liability company under this
  2 19 chapter or, with respect to a foreign limited
  2 20 liability company, under the laws of the state,
  2 21 foreign country, or other foreign jurisdiction under
  2 22 which such company is organized.
  2 23    18.  "Operating agreement" means any agreement,
  2 24 written or oral, of the members as to the affairs of a
  2 25 limited liability company and the conduct of its
  2 26 business.
  2 27    Sec.    .  Section 490A.202, subsection 17, Code
  2 28 1997, is amended by striking the subsection and
  2 29 inserting in lieu thereof the following:
  2 30    17.  Indemnify and hold harmless a member, manager,
  2 31 or other person against a claim, liability, or other
  2 32 demand, as provided in an operating agreement.
  2 33    Sec.    .  Section 490A.303, subsection 1,
  2 34 paragraph d, Code 1997, is amended to read as follows:
  2 35    d.  The period of its duration, which shall not may
  2 36 be perpetual.
  2 37    Sec.    .  NEW SECTION.  490A.304  CONVERSION OF
  2 38 CERTAIN ENTITIES TO A LIMITED LIABILITY COMPANY.
  2 39    1.  As used in this section, the term "other
  2 40 entity" means a corporation, business trust or
  2 41 association, real estate investment trust, common-law
  2 42 trust, or any other unincorporated business, including
  2 43 any partnership, whether general or limited, or a
  2 44 foreign limited liability company.
  2 45    2.  Any other entity may convert to a domestic
  2 46 limited liability company by complying with subsection
  2 47 8 and filing in the office of the secretary of state
  2 48 both of the following:
  2 49    a.  Articles of conversion to a limited liability
  2 50 company executed by one or more authorized persons.
  3  1    b.  Articles of organization executed by one or
  3  2 more authorized persons.
  3  3    3.  The articles of conversion to a limited
  3  4 liability company shall state all of the following:
  3  5    a.  The date on which, and jurisdiction where, the
  3  6 converting entity was first created, formed,
  3  7 incorporated, or otherwise came into being and, if it
  3  8 has changed, its jurisdiction immediately prior to its
  3  9 conversion to a domestic limited liability company.
  3 10    b.  The name of the converting entity immediately
  3 11 prior to the filing of the articles of conversion to a
  3 12 limited liability company.
  3 13    c.  The name of the limited liability company.
  3 14    d.  The future effective date or time certain of
  3 15 the conversion to a limited liability company if it is
  3 16 not to be effective upon the filing of the articles of
  3 17 conversion and the articles of organization.
  3 18    4.  Upon the filing in the office of the secretary
  3 19 of state of the articles of conversion and the
  3 20 articles of organization or upon the future effective
  3 21 date or time of the articles of conversion and the
  3 22 articles of organization, the converting entity shall
  3 23 be converted into a domestic limited liability company
  3 24 and the limited liability company, from that date or
  3 25 time, is subject to this chapter, except that the
  3 26 existence of the limited liability company is deemed
  3 27 to have commenced on the date the converting entity
  3 28 commenced its existence in the jurisdiction in which
  3 29 the converting entity was first created, formed,
  3 30 incorporated, or otherwise came into being.
  3 31    5.  The conversion of an entity into a domestic
  3 32 limited liability company does not affect any
  3 33 obligations or liabilities of the other entity
  3 34 incurred prior to its conversion to a domestic limited
  3 35 liability company, or the personal liability of any
  3 36 person incurred prior to such conversion.
  3 37    6.  When a conversion is effective, for all
  3 38 purposes of the laws of this state, all of the rights,
  3 39 privileges, and powers of the converting entity, and
  3 40 all property, real, personal, and mixed, and all debts
  3 41 due to the converting entity, as well as all other
  3 42 things and causes of action belonging to such entity,
  3 43 are vested in the domestic limited liability company
  3 44 and are the property of the domestic limited liability
  3 45 company as they were of the converting entity.  The
  3 46 title to any real property vested by deed or otherwise
  3 47 in the converting entity shall not revert or be in any
  3 48 way impaired by reason of this chapter, and all rights
  3 49 of creditors and all liens upon any property of such
  3 50 other entity are preserved unimpaired, and all debts,
  4  1 liabilities, and duties of the converting entity shall
  4  2 attach to the domestic limited liability company, and
  4  3 may be enforced against it to the same extent as if
  4  4 the debts, liabilities, and duties had been incurred
  4  5 or contracted by the domestic limited liability
  4  6 company.
  4  7    7.  Unless otherwise agreed, or as required under
  4  8 the laws of a jurisdiction other than this state, the
  4  9 converting entity is not required to wind up its
  4 10 affairs or pay its liabilities and distribute its
  4 11 assets, and the conversion does not constitute a
  4 12 dissolution of the converting entity.
  4 13    8.  Prior to filing the articles of conversion to a
  4 14 limited liability company with the office of the
  4 15 secretary of state, an operating agreement must be
  4 16 approved in the manner provided for by the documents,
  4 17 instrument, agreement, or other writing, as the case
  4 18 may be, governing the internal affairs of the
  4 19 converting entity and the conduct of its business or
  4 20 by applicable law, as appropriate.
  4 21    9.  This section shall not be construed to limit
  4 22 the ability to change the law governing, or the
  4 23 domicile of, a converting entity to this state by any
  4 24 other means provided for in an operating agreement or
  4 25 as otherwise permitted by law, including by the
  4 26 amendment of an operating agreement.
  4 27    Sec.    .  NEW SECTION.  490A.305  SERIES OF
  4 28 MEMBERS, MANAGERS, OR MEMBERSHIP INTERESTS.
  4 29    1.  An operating agreement may establish or provide
  4 30 for the establishment of designated series of members,
  4 31 managers, or membership interests having separate
  4 32 rights, powers, or duties with respect to specified
  4 33 property or obligations of the limited liability
  4 34 company or profits and losses associated with
  4 35 specified property or obligations, and, to the extent
  4 36 provided in the operating agreement, any such series
  4 37 may have a separate business purpose or investment
  4 38 objective.
  4 39    2.  Notwithstanding contrary provisions of this
  4 40 chapter, the debts, liabilities, and obligations
  4 41 incurred, contracted for, or otherwise existing with
  4 42 respect to a particular series shall be enforceable
  4 43 against the assets of that series only, and not
  4 44 against the assets of the limited liability company
  4 45 generally, if all of the following apply:
  4 46    a.  The operating agreement creates one or more
  4 47 series.
  4 48    b.  Separate and distinct records are maintained
  4 49 for the series and the assets associated with the
  4 50 series are held and accounted for separately from the
  5  1 other assets of the limited liability company, or from
  5  2 any other series of the limited liability company.
  5  3    c.  The operating agreement provides for such
  5  4 limitation on liabilities.
  5  5    d.  Notice of the limitation on liabilities of a
  5  6 series is set forth in the articles of organization of
  5  7 the limited liability company.  Filing of articles of
  5  8 organization containing a notice of the limitation on
  5  9 liabilities of a series in the office of the secretary
  5 10 of state constitutes notice of the limitation on
  5 11 liabilities of such series.
  5 12    3.  Notwithstanding section 490A.601, or a contrary
  5 13 provision in an operating agreement, a member or
  5 14 manager may agree to be obligated personally for any
  5 15 or all of the debts, obligations or liabilities of one
  5 16 or more series.
  5 17    4.  An operating agreement may provide for classes
  5 18 or groups of members or managers associated with a
  5 19 series having such relative rights, powers, and duties
  5 20 as the operating agreement may provide.  The operating
  5 21 agreement may provide for the future creation of
  5 22 additional classes or groups of members or managers
  5 23 associated with the series having such relative
  5 24 rights, powers, and duties as may from time to time be
  5 25 established, including rights, powers, and duties
  5 26 senior to existing classes and groups of members or
  5 27 managers associated with the series.  An operating
  5 28 agreement may provide for the taking of an action,
  5 29 including the amendment of the operating agreement,
  5 30 without the vote or approval of any member or manager
  5 31 or class or group of members or managers, including
  5 32 all action to create under the provisions of the
  5 33 operating agreement a class or group of the series of
  5 34 membership interests that was not previously
  5 35 outstanding.  An operating agreement may provide that
  5 36 any member or class or group of members associated
  5 37 with a series have no voting rights.
  5 38    5.  An operating agreement may grant to all or
  5 39 certain identified members or managers or a specified
  5 40 class or group of the members or managers associated
  5 41 with a series the right to vote on any matter
  5 42 separately or with all or any class or group of the
  5 43 members or managers associated with the series.
  5 44 Voting by members or managers associated with a series
  5 45 may be on a per capita, number, financial interest,
  5 46 class, group, or other basis.
  5 47    6.  Unless otherwise provided in an operating
  5 48 agreement, the management of a series shall be vested
  5 49 in the members associated with such series in
  5 50 proportion to the then-current percentage or other
  6  1 interest of members in the profits of the series owned
  6  2 by all of the members associated with such series.
  6  3 The decision of members owning more than fifty percent
  6  4 of the series or other interest in the profits shall
  6  5 control.  However, if an operating agreement provides
  6  6 for the management of the series, in whole or in part,
  6  7 by a manager, the management of the series, to the
  6  8 extent so provided, is vested in the manager who shall
  6  9 be chosen as provided in the operating agreement.  The
  6 10 manager of the series shall also hold the offices and
  6 11 have the responsibilities accorded to managers as set
  6 12 forth in the operating agreement.  A series may have
  6 13 more than one manager.  A manager shall cease to be a
  6 14 manager with respect to a series as provided in the
  6 15 operating agreement.  Except as otherwise provided in
  6 16 the operating agreement, an event under this chapter
  6 17 or identified in an operating agreement that causes a
  6 18 manager to cease to be a manager with respect to a
  6 19 series, by itself, shall not cause the manager to
  6 20 cease to be a manager of the limited liability company
  6 21 or with respect to any other series of the limited
  6 22 liability company.
  6 23    7.  Notwithstanding any other provision of this
  6 24 chapter, except subsections 8 and 11 and unless
  6 25 otherwise provided in an operating agreement, at the
  6 26 time a member associated with a series that has been
  6 27 established pursuant to subsection 1 becomes entitled
  6 28 to receive a distribution with respect to such series,
  6 29 the member has the status of, and is entitled to, all
  6 30 remedies available to a creditor of the series with
  6 31 respect to the distribution.  An operating agreement
  6 32 may provide for the establishment of a record date
  6 33 with respect to allocations and distributions with
  6 34 respect to a series.
  6 35    8.  Notwithstanding any other provision of this
  6 36 chapter, a limited liability company may make a
  6 37 distribution with respect to a series that has been
  6 38 established pursuant to subsection 1.  However, a
  6 39 limited liability company shall not make a
  6 40 distribution with respect to a series that has been
  6 41 established pursuant to subsection 1 to the extent
  6 42 that at the time of the distribution, after giving
  6 43 effect to the distribution, all liabilities of such
  6 44 series, other than liabilities to members on account
  6 45 of their membership interests with respect to such
  6 46 series and liabilities for which the recourse of
  6 47 creditors is limited to specified property of such
  6 48 series, exceed the fair value of the assets associated
  6 49 with such series.  However, the fair value of an asset
  6 50 of the series that is subject to a liability for which
  7  1 the recourse of creditors is limited shall be included
  7  2 in the assets associated with such series only to the
  7  3 extent that the fair value of that asset exceeds that
  7  4 liability.  A member who receives a distribution in
  7  5 violation of this subsection, and who knew at the time
  7  6 of the distribution that the distribution violated
  7  7 this subsection, is liable for the amount of the
  7  8 distribution.  Subject to section 490A.807, which
  7  9 applies to any distribution made with respect to a
  7 10 series under this subsection, this subsection shall
  7 11 not affect any obligation or liability of a member
  7 12 under an agreement or other applicable law for the
  7 13 amount of a distribution.
  7 14    9.  Unless otherwise provided in the operating
  7 15 agreement, a member shall cease to be associated with
  7 16 a series and to have the power to exercise any rights
  7 17 or powers of a member with respect to such series upon
  7 18 the assignment of all of the member's membership
  7 19 interest with respect to such series.  Except as
  7 20 otherwise provided in an operating agreement, an event
  7 21 under this chapter or identified in an operating
  7 22 agreement that causes a member to cease to be
  7 23 associated with a series, by itself, shall not cause
  7 24 such member to cease to be associated with any other
  7 25 series or terminate the continued membership of a
  7 26 member in the limited liability company.
  7 27    10.  Subject to section 490A.1301, except to the
  7 28 extent otherwise provided in the operating agreement,
  7 29 a series may be terminated and its affairs wound up
  7 30 without causing the dissolution of the limited
  7 31 liability company.  The termination of a series
  7 32 established pursuant to subsection 1 shall not affect
  7 33 the limitation on liabilities of such series provided
  7 34 by subsection 2.  A series is terminated and its
  7 35 affairs shall be wound up upon the dissolution of the
  7 36 limited liability company under section 490A.1301 or
  7 37 otherwise upon the first to occur of the following:
  7 38    a.  At the time specified in the operating
  7 39 agreement.
  7 40    b.  Upon the happening of events specified in the
  7 41 operating agreement.
  7 42    c.  Unless otherwise provided in the operating
  7 43 agreement, upon the written consent of all members
  7 44 associated with such series.
  7 45    d.  The termination of such series under subsection
  7 46 10.
  7 47    11.  Notwithstanding section 490A.1303, unless
  7 48 otherwise provided in the operating agreement, any of
  7 49 the following persons may wind up the affairs of the
  7 50 series:
  8  1    a.  A manager associated with a series who has not
  8  2 wrongfully terminated the series.
  8  3    b.  If there is no manager of a series, the members
  8  4 associated with the series or a person approved by the
  8  5 members associated with the series.
  8  6    c.  If there is more than one class or group of
  8  7 members associated with the series, then by each class
  8  8 or group of members associated with the series, in
  8  9 either case, by members who own more than fifty
  8 10 percent of the then-current percentage or other
  8 11 interest in the profits of the series owned by all of
  8 12 the members associated with the series or by the
  8 13 members of each class or group associated with the
  8 14 series.
  8 15    However, if the series has been established
  8 16 pursuant to subsection 1, the district court of the
  8 17 county in which the limited liability company has its
  8 18 principal place of business, upon cause shown, may
  8 19 wind up the affairs of the series upon application of
  8 20 any member associated with the series or the member's
  8 21 legal representative or assignee, and in connection
  8 22 with such winding up, may appoint a liquidating
  8 23 trustee.  The persons winding up the affairs of a
  8 24 series, in the name of the limited liability company
  8 25 and for and on behalf of the limited liability company
  8 26 and such series, may take all actions with respect to
  8 27 the series as are permitted under section 490A.1303.
  8 28 The persons winding up the affairs of a series shall
  8 29 provide for the claims and obligations of the series
  8 30 as provided in section 490A.1304 and distribute the
  8 31 assets of the series as provided in section 490A.1304.
  8 32 Actions taken pursuant to this subsection shall not
  8 33 affect the liability of members and shall not impose
  8 34 liability on a liquidating trustee.
  8 35    12.  On application by or for a member or manager
  8 36 associated with a series established pursuant to
  8 37 subsection 1, the district court in the county in
  8 38 which the limited liability company has its principal
  8 39 place of business may enter an order for dissolution
  8 40 of such series if it is not reasonably practicable to
  8 41 carry on the business of the series in conformity with
  8 42 the operating agreement.
  8 43    13.  A foreign limited liability company that is
  8 44 registering to do business in this state under this
  8 45 chapter which is governed by an operating agreement
  8 46 that establishes or provides for the establishment of
  8 47 designated series of members, managers, or membership
  8 48 interests having separate rights, powers, or duties
  8 49 with respect to specified property or obligations of
  8 50 the foreign limited liability company, or profits and
  9  1 losses associated with the specified property or
  9  2 obligations, shall indicate that fact on the
  9  3 application for registration as a foreign limited
  9  4 liability company.  In addition, the foreign limited
  9  5 liability company shall state on the application
  9  6 whether the debts, liabilities, and obligations
  9  7 incurred, contracted for, or otherwise existing with
  9  8 respect to a particular series, if any, are
  9  9 enforceable against the assets of such series only,
  9 10 and not against the assets of the foreign limited
  9 11 liability company generally.
  9 12    Sec.    .  NEW SECTION.  490A.306  ADMISSION OF
  9 13 MEMBERS.
  9 14    1.  In connection with the formation of a limited
  9 15 liability company, a person is admitted as a member of
  9 16 the limited liability company upon the later to occur
  9 17 of the following:
  9 18    a.  The formation of the limited liability company.
  9 19    b.  The time provided in, and upon compliance with,
  9 20 the operating agreement or, if the operating agreement
  9 21 does not so provide, when the person's admission is
  9 22 reflected in the records of the limited liability
  9 23 company.
  9 24    2.  After the formation of a limited liability
  9 25 company, a person is admitted as a member of the
  9 26 limited liability company as follows:
  9 27    a.  In the case of a person who is not an assignee
  9 28 of a membership interest, including a person acquiring
  9 29 a membership interest directly from the limited
  9 30 liability company and a person to be admitted as a
  9 31 member of the limited liability company without
  9 32 acquiring a membership interest in the limited
  9 33 liability company, at the time provided in and upon
  9 34 compliance with the operating agreement or, if the
  9 35 operating agreement does not so provide, upon the
  9 36 consent of all members and the person's admission
  9 37 being reflected in the records of the limited
  9 38 liability company.
  9 39    b.  In the case of an assignee of a membership
  9 40 interest, as provided in section 490A.903 and at the
  9 41 time provided in and upon compliance with the
  9 42 operating agreement, or if the operating agreement
  9 43 does not so provide, when any such person's permitted
  9 44 admission is reflected in the records of the limited
  9 45 liability company.
  9 46    c.  Unless otherwise provided in an agreement of
  9 47 merger, in the case of a person acquiring a membership
  9 48 interest in a surviving or resulting limited liability
  9 49 company pursuant to a merger approved pursuant to
  9 50 section 490A.1203, at the time provided in and upon
 10  1 compliance with the operating agreement of the
 10  2 surviving or resulting limited liability company.
 10  3    3.  A person may be admitted to a limited liability
 10  4 company as a member of the limited liability company
 10  5 and may receive a membership interest in the limited
 10  6 liability company without making a contribution or
 10  7 being obligated to make a contribution to the limited
 10  8 liability company.  Unless otherwise provided in an
 10  9 operating agreement, a person may be admitted to a
 10 10 limited liability company as a member of the limited
 10 11 liability company without acquiring a membership
 10 12 interest in the limited liability company.
 10 13    Sec.    .  NEW SECTION.  490A.307  CLASSES AND
 10 14 VOTING.
 10 15    1.  An operating agreement may provide for classes
 10 16 or groups of members and the relative rights, powers,
 10 17 and duties of such members, and may provide for the
 10 18 future creation of additional classes or groups of
 10 19 members having such relative rights, powers, and
 10 20 duties as may from time to time be established,
 10 21 including rights, powers, and duties senior to
 10 22 existing classes and groups of members.  An operating
 10 23 agreement may provide for taking action, including the
 10 24 amendment of the operating agreement, without the vote
 10 25 or approval of any member or class or group of
 10 26 members, including an action to create a class or
 10 27 group of membership interests that was not previously
 10 28 outstanding.  An operating agreement may provide that
 10 29 any member or class or group of members has no voting
 10 30 rights.
 10 31    2.  An operating agreement may grant to all or
 10 32 certain identified members or a specified class or
 10 33 group of the members the right to vote separately or
 10 34 with all or any class or group of members or managers
 10 35 on any matter.  Voting by members may be on a per
 10 36 capita, number, financial interest, class, group, or
 10 37 any other basis.
 10 38    3.  An operating agreement which grants a right to
 10 39 vote may set forth provisions relating to notice of
 10 40 the time, place, or purpose of any meeting at which
 10 41 any matter is to be voted on by any members, waiver of
 10 42 any notice, action by consent without meeting, the
 10 43 establishment of a record date, quorum requirements,
 10 44 voting in person or by proxy, or any other matter with
 10 45 respect to the exercise of any such right to vote.
 10 46    Sec.    .  NEW SECTION.  490A.603  LIABILITY OF
 10 47 MEMBERS.
 10 48    1.  Except as otherwise provided in this chapter or
 10 49 by written agreement of a member, a member or manager
 10 50 of a limited liability company is not personally
 11  1 liable solely by reason of being a member or manager
 11  2 of the limited liability company under any judgment,
 11  3 or in any other manner, for any debt, obligation, or
 11  4 liability of the limited liability company, whether
 11  5 that liability or obligation arises in contract, tort,
 11  6 or otherwise.
 11  7    2.  A member of a limited liability company is
 11  8 personally liable under a judgment or for any debt,
 11  9 obligation, or liability of the limited liability
 11 10 company, whether that liability or obligation arises
 11 11 in contract, tort, or otherwise, under the same or
 11 12 similar circumstances and to the same extent as a
 11 13 shareholder of a corporation may be personally liable
 11 14 for any debt, obligation, or liability of the
 11 15 corporation, except that the failure to hold meetings
 11 16 of members or managers or the failure to observe
 11 17 formalities pertaining to the calling or conduct of
 11 18 meetings shall not be considered a factor tending to
 11 19 establish that the members have personal liability for
 11 20 any debt, obligation, or liability of the limited
 11 21 liability company.
 11 22    3.  Nothing in this section shall be construed to
 11 23 affect the liability of a member of a limited
 11 24 liability company to third parties for the member's
 11 25 participation in tortious conduct.
 11 26    Sec.    .  Section 490A.702, subsection 4, Code
 11 27 1997, is amended by striking the subsection and
 11 28 inserting in lieu thereof the following:
 11 29    4.  Except as provided in subsection 4A, the
 11 30 validity of an act of a limited liability company is
 11 31 not challengeable on the ground that the limited
 11 32 liability company lacks or lacked the power or
 11 33 authority to act.
 11 34    Sec.    .  Section 490A.702, Code 1997, is amended
 11 35 by adding the following new subsections:
 11 36    NEW SUBSECTION.  4A.  A limited liability company's
 11 37 power to act may be challenged in the following
 11 38 proceedings:
 11 39    a.  In an action by a member against the limited
 11 40 liability company to enjoin an unauthorized act.
 11 41    b.  In an action by the limited liability company
 11 42 against an incumbent or former manager, employee, or
 11 43 agent of the limited liability company, either
 11 44 directly, derivatively, or through a receiver,
 11 45 trustee, or other legal representative.
 11 46    c.  By the attorney general under section
 11 47 490A.1409.
 11 48    NEW SUBSECTION.  4B.  In a member's proceeding
 11 49 under subsection 4A, paragraph "a", to enjoin an
 11 50 unauthorized act, the court may enjoin or set aside
 12  1 the act if equitable and if all affected persons are
 12  2 parties to the proceeding.  The court may award
 12  3 damages, other than anticipated profits, for loss
 12  4 suffered by the limited liability company or another
 12  5 party as a result of the unauthorized act being
 12  6 enjoined.
 12  7    Sec.    .  Section 490A.703, Code 1997, is amended
 12  8 by adding the following new subsection:
 12  9    NEW SUBSECTION.  2A.  a.  A written operating
 12 10 agreement or other writing may provide for a person to
 12 11 be admitted as a member of a limited liability
 12 12 company, or to become an assignee of a limited
 12 13 liability company membership interest or other rights
 12 14 or powers of a member, to the extent that either of
 12 15 the following occurs:
 12 16    (1)  If the person, or a representative authorized
 12 17 by the person orally, in writing, or by other action
 12 18 such as payment for a limited liability company
 12 19 interest, executes the operating agreement or any
 12 20 other writing evidencing the intent of such person to
 12 21 become a member or assignee.
 12 22    (2)  Without execution of the operating agreement
 12 23 or similar writing, if the person or such authorized
 12 24 representative of the person complies with the
 12 25 conditions for becoming a member or assignee as set
 12 26 forth in the operating agreement or any other writing
 12 27 and requests orally, in writing, or by other action
 12 28 such as payment for a limited liability company
 12 29 interest, that the records of the limited liability
 12 30 company reflect such admission or assignment.
 12 31    b.  A written operating agreement or another
 12 32 written agreement or writing is not unenforceable by
 12 33 reason of its not having been signed by a person being
 12 34 admitted as a member or becoming an assignee, or the
 12 35 member's or assignee's representative, as provided in
 12 36 paragraph "a".
 12 37    Sec.    .  NEW SECTION.  490A.704A  RESIGNATION OR
 12 38 WITHDRAWAL OF MEMBER.
 12 39    1.  a.  This section applies to a limited liability
 12 40 company whose original articles of organization are
 12 41 filed with the secretary of state on or after July 1,
 12 42 1997.
 12 43    b.  This section applies to a limited liability
 12 44 company whose original articles of organization are
 12 45 filed with the secretary of state and effective on or
 12 46 prior to June 30, 1997, if such company's operating
 12 47 agreement provides that it is subject to this section.
 12 48    c.  If no provision is made in the operating
 12 49 agreement, a limited liability company whose original
 12 50 articles of organization were filed with the secretary
 13  1 of state and effective on or prior to June 30, 1997,
 13  2 is subject to section 490A.704.
 13  3    2.  A member may resign or withdraw from a limited
 13  4 liability company only at the time or upon the
 13  5 happening of an event specified in an operating
 13  6 agreement and pursuant to the operating agreement.
 13  7    3.  Unless an operating agreement provides
 13  8 otherwise, a member may not resign or withdraw from a
 13  9 limited liability company prior to the dissolution and
 13 10 winding up of the limited liability company.  However,
 13 11 if the articles of organization or an operating
 13 12 agreement do not specify the time or the events upon
 13 13 the happening of which a member may resign or
 13 14 withdraw, a member may resign or withdraw from the
 13 15 limited liability company in the event any amendment
 13 16 to the articles of organization or operating agreement
 13 17 that is adopted over the member's written dissent
 13 18 adversely affects the rights or preferences of the
 13 19 dissenting member's membership interest in any of the
 13 20 ways described in paragraphs "a" through "e".  A
 13 21 resignation or withdrawal in the event of such dissent
 13 22 and adverse effect is deemed to have occurred as of
 13 23 the effective date of the amendment, if the member
 13 24 gives notice to the limited liability company not more
 13 25 than sixty days after the date of the amendment.  In
 13 26 valuing the member's distribution pursuant to this
 13 27 subsection, any depreciation in anticipation of the
 13 28 amendment shall be excluded.  An amendment that does
 13 29 any of the following is subject to this subsection:
 13 30    a.  Alters or abolishes a member's right to receive
 13 31 a distribution.
 13 32    b.  Alters or abolishes a member's right to
 13 33 voluntarily withdraw or resign.
 13 34    c.  Alters or abolishes a member's right to vote on
 13 35 any matter, except as the rights may be altered or
 13 36 abolished through the acceptance of contributions or
 13 37 the making of contribution agreements.
 13 38    d.  Alters or abolishes a member's preemptive right
 13 39 to make contributions.
 13 40    e.  Establishes or changes the conditions for or
 13 41 consequences of expulsion.
 13 42    4.  A member withdrawing under this section is not
 13 43 liable for damages for the breach of any agreement not
 13 44 to withdraw.
 13 45    5.  An operating agreement may provide that a
 13 46 membership interest may be assigned prior to the
 13 47 dissolution and winding up of the limited liability
 13 48 company.
 13 49    Sec.    .  NEW SECTION.  490A.705A  CLASSES OF
 13 50 MANAGERS AND VOTING.
 14  1    1.  An operating agreement may provide for classes
 14  2 or groups of managers having such relative rights,
 14  3 powers, and duties as the operating agreement may
 14  4 provide, and may make provision for the future
 14  5 creation of additional classes or groups of managers
 14  6 having such relative rights, powers, and duties as may
 14  7 from time to time be established, including rights,
 14  8 powers, and duties senior to existing classes and
 14  9 groups of managers.  An operating agreement may
 14 10 provide for taking action, including the amendment of
 14 11 the operating agreement, without the vote or approval
 14 12 of any manager or class or group of managers,
 14 13 including an action to create a class or group of
 14 14 membership interests that was not previously
 14 15 outstanding.
 14 16    2.  An operating agreement may grant to all or
 14 17 certain identified managers or a specified class or
 14 18 group of managers the right to vote on any matter,
 14 19 separately or with all or any class or group of
 14 20 managers or members.  Voting by managers may be on a
 14 21 per capita, number, financial interest, class, group,
 14 22 or any other basis.
 14 23    3.  An operating agreement which grants a right to
 14 24 vote may set forth provisions relating to notice of
 14 25 the time, place, or purpose of any meeting at which
 14 26 any matter is to be voted on by any manager or class
 14 27 or group of managers, waiver of any such notice,
 14 28 action by consent without a meeting, the establishment
 14 29 of a record date, quorum requirements, voting in
 14 30 person or by proxy, or any other matter with respect
 14 31 to the exercise of any such right to vote.
 14 32    Sec.    .  Section 490A.709, subsection 2,
 14 33 unnumbered paragraph 1, Code 1997, is amended to read
 14 34 as follows:
 14 35    Each member has the right for any purpose
 14 36 reasonably related to the member's interest as a
 14 37 member of the limited liability company, upon
 14 38 reasonable request and subject to reasonable standards
 14 39 as may be set forth in an operating agreement, to do
 14 40 any of the following:
 14 41    Sec.    .  NEW SECTION.  490A.710  DELEGATION OF
 14 42 RIGHTS AND POWERS TO MANAGE.
 14 43    Unless otherwise provided in the operating
 14 44 agreement, a member or manager of a limited liability
 14 45 company may delegate to one or more other persons the
 14 46 member's or manager's rights and powers to manage and
 14 47 control the business and affairs of the limited
 14 48 liability company, including to agents and employees
 14 49 of a member or manager of the limited liability
 14 50 company, and to delegate by a management agreement or
 15  1 another agreement with other persons.  Unless
 15  2 otherwise provided in the operating agreement, such
 15  3 delegation by a member or manager of a limited
 15  4 liability company shall not cause the member or
 15  5 manager to cease to be a member or manager of the
 15  6 limited liability company.
 15  7    Sec.    .  NEW SECTION.  490A.711  CONTRACTUAL
 15  8 APPRAISAL RIGHTS.
 15  9    An operating agreement or an agreement of merger
 15 10 may provide that contractual appraisal rights with
 15 11 respect to a membership interest or another interest
 15 12 in a limited liability company are available for any
 15 13 class or group of members or membership interests in
 15 14 connection with an amendment of an operating
 15 15 agreement, a merger in which the limited liability
 15 16 company is a constituent party to the merger, or the
 15 17 sale of all or substantially all of the limited
 15 18 liability company's assets.  The district court of the
 15 19 county in which the limited liability company has its
 15 20 principal place of business has jurisdiction to hear
 15 21 and determine any matter relating to such appraisal
 15 22 rights.
 15 23    Sec.    .  NEW SECTION.  490A.712  CESSATION OF
 15 24 MEMBERSHIP.
 15 25    A person ceases to be a member of a limited
 15 26 liability company upon the occurrence of any of the
 15 27 following events:
 15 28    1.  The person withdraws or resigns from the
 15 29 limited liability company.
 15 30    2.  The person is removed as a member pursuant to
 15 31 the operating agreement.
 15 32    3.  Unless otherwise provided in the operating
 15 33 agreement or with the consent of all other members,
 15 34 the person does any of the following:
 15 35    a.  Makes an assignment for the benefit of
 15 36 creditors.
 15 37    b.  Files a voluntary petition in bankruptcy.
 15 38    c.  Is adjudged bankrupt or insolvent or has
 15 39 entered against the person an order for relief in any
 15 40 bankruptcy or insolvency proceeding.
 15 41    d.  Files a petition or answer seeking for that
 15 42 person any reorganization, arrangement, composition,
 15 43 readjustment, liquidation, dissolution, or similar
 15 44 relief under any statute or rule.
 15 45    e.  Seeks, consents to, or acquiesces in the
 15 46 appointment of a trustee, receiver, or liquidator for
 15 47 the member or for all or any substantial part of the
 15 48 member's properties.
 15 49    f.  Files an answer or other pleading admitting or
 15 50 failing to contest the material allegations of a
 16  1 petition filed against the person in any proceeding
 16  2 described in this subsection.
 16  3    4.  Unless otherwise provided in the operating
 16  4 agreement, or with the consent of all other members,
 16  5 the continuation of any proceeding against the person
 16  6 seeking reorganization, arrangement, composition,
 16  7 readjustment, liquidation, dissolution, or similar
 16  8 relief under any statute or rule for one hundred
 16  9 twenty days after the commencement of such proceeding,
 16 10 or the appointment of a trustee, receiver, or
 16 11 liquidator for the member or for all or any
 16 12 substantial part of the member's properties without
 16 13 the member's agreement or acquiescence, which
 16 14 appointment is not vacated or stayed for one hundred
 16 15 twenty days or, if the appointment is stayed, for one
 16 16 hundred twenty days after the expiration of the stay
 16 17 during which period the appointment is not vacated.
 16 18    5.  Unless otherwise provided in the operating
 16 19 agreement or with the consent of all other members, in
 16 20 the case of a member who is an individual, the
 16 21 individual's death or adjudication by a court of
 16 22 competent jurisdiction as incompetent to manage the
 16 23 individual's person or property.
 16 24    6.  Unless otherwise provided in the operating
 16 25 agreement or with the consent of all other members, in
 16 26 the case of a member who is acting as a member by
 16 27 virtue of being a trustee of a trust, the termination
 16 28 of the trust.
 16 29    7.  Unless otherwise provided in the operating
 16 30 agreement or with the consent of all other members, in
 16 31 the case of a member that is a partnership or another
 16 32 limited liability company, the dissolution and
 16 33 commencement of winding up of the partnership or
 16 34 limited liability company.
 16 35    8.  Unless otherwise provided in the operating
 16 36 agreement or with the consent of all other members, in
 16 37 the case of a member that is a corporation, the
 16 38 dissolution of the corporation or the revocation of
 16 39 its articles of incorporation.
 16 40    9.  Unless otherwise provided in the operating
 16 41 agreement or with the consent of all other members, in
 16 42 the case of a member that is an estate, the
 16 43 distribution by the fiduciary of the estate's entire
 16 44 interest in the limited liability company.
 16 45    Sec.    .  Section 490A.801, Code 1997, is amended
 16 46 by adding the following new subsection:
 16 47    NEW SUBSECTION.  4.  An operating agreement may
 16 48 provide that the interest of any member who fails to
 16 49 make a contribution that the member is obligated to
 16 50 make is subject to specified penalties for, or
 17  1 specified consequences of, such failure.  The penalty
 17  2 or consequence may take the form of reducing or
 17  3 eliminating the defaulting member's proportionate
 17  4 interest in a limited liability company, subordinating
 17  5 the member's membership interest to that of a
 17  6 nondefaulting member, a forced sale of the member's
 17  7 membership interest, forfeiture of the member's
 17  8 membership interest, the lending by other members of
 17  9 the amount necessary to meet the member's commitment,
 17 10 a fixing of the value of the member's membership
 17 11 interest by appraisal or by formula and redemption, or
 17 12 sale of the member's membership interest at such value
 17 13 or other penalty or consequence.
 17 14    Sec.    .  NEW SECTION.  490A.809  RIGHT TO
 17 15 DISTRIBUTION.
 17 16    Subject to sections 490A.807 and 490A.1304, and
 17 17 unless otherwise provided in an operating agreement,
 17 18 at the time a member becomes entitled to receive a
 17 19 distribution, the member has the status of, and is
 17 20 entitled to all remedies available to, a creditor of
 17 21 the limited liability company with respect to the
 17 22 distribution.  An operating agreement may provide for
 17 23 the establishment of a record date with respect to
 17 24 allocations and distributions by a limited liability
 17 25 company.
 17 26    Sec.    .  Section 490A.902, unnumbered paragraph
 17 27 1, Code 1997, is amended to read as follows:
 17 28    Unless otherwise provided in the articles of
 17 29 organization or an operating agreement, a membership
 17 30 interest in a limited liability company is assignable
 17 31 in whole or in part.  An assignment of an interest in
 17 32 a limited liability company does not of itself
 17 33 dissolve the limited liability company.  An Except as
 17 34 provided in the articles of organization or an
 17 35 operating agreement, an assignment does not entitle
 17 36 the assignee to participate in the management and
 17 37 affairs of the limited liability company or to become
 17 38 or to exercise any rights of a member.  Such Except as
 17 39 provided in the articles of organization or an
 17 40 operating agreement, an assignment entitles the
 17 41 assignee to receive, to the extent assigned, only the
 17 42 distribution to which the assignor would be entitled.
 17 43 Except as provided in the articles of organization or
 17 44 an operating agreement, a member ceases to be a member
 17 45 upon assignment of the member's entire membership
 17 46 interest.
 17 47    Sec.    .  Section 490A.1301, subsection 3, Code
 17 48 1997, is amended by striking the subsection."
 17 49    #2.  Title page, line 1, by inserting after the
 17 50 word "to" the following:  "the organization and
 18  1 operation of certain legal entities, including".
 18  2    #3.  Title page, line 5, by inserting after the
 18  3 word "partnerships," the following:  "and including
 18  4 limited liability companies and the conversion of
 18  5 other entities to limited liability companies, and the
 18  6 rights, duties, obligations, and interests of members
 18  7 and managers with respect to such companies,".
 18  8    #4.  By renumbering as necessary.  
 18  9 
 18 10 
 18 11                               
 18 12 O. GENE MADDOX 
 18 13 HF 642.203 77
 18 14 mj/jj/28

Text: S03813                            Text: S03815
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