Senate Study Bill 1199 - Introduced SENATE FILE _____ BY (PROPOSED COMMITTEE ON JUDICIARY BILL BY CHAIRPERSON ZAUN) A BILL FOR An Act relating to business entities, by providing for 1 different types of limited liability companies and the 2 dissolution of limited liability companies, providing for 3 fees, and including effective date provisions. 4 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 5 TLSB 1163XC (9) 88 da/jh
S.F. _____ DIVISION I 1 UNIFORM PROTECTED SERIES ACT —— ENACTMENT 2 ARTICLE 12 3 PART 1 4 UNIFORM PROTECTED SERIES ACT 5 SUBPART A 6 GENERAL PROVISIONS 7 Section 1. NEW SECTION . 489.12101 Short title. 8 This part may be cited as the “Uniform Protected Series Act” . 9 Sec. 2. NEW SECTION . 489.12102 Definitions. 10 As used in this part, unless the context otherwise requires: 11 1. “Asset” means any of the following: 12 a. Property in which a series limited liability company or 13 protected series has rights. 14 b. Property as to which the company or protected series has 15 the power to transfer rights. 16 2. “Associated asset” means an asset that meets the 17 requirements of section 489.12301. 18 3. “Associated member” means a member that meets the 19 requirements of section 489.12302. 20 4. “Foreign protected series” means an arrangement, 21 configuration, or other structure established by a foreign 22 limited liability company which has attributes comparable to a 23 protected series established under this part. The term applies 24 whether or not the law under which the foreign company is 25 organized refers to “protected series”. 26 5. “Foreign series limited liability company” means a 27 foreign limited liability company that has at least one foreign 28 protected series. 29 6. “Nonassociated asset” means any of the following: 30 a. An asset of a series limited liability company which is 31 not an associated asset of the company. 32 b. An asset of a protected series of the company which is 33 not an associated asset of the protected series. 34 7. “Person” means the same as defined in section 4.1 and 35 -1- LSB 1163XC (9) 88 da/jh 1/ 52
S.F. _____ includes a protected series. 1 8. “Protected series” , except in the phrase “foreign 2 protected series” , means a protected series established under 3 section 489.12201. 4 9. “Protected-series manager” means a person under whose 5 authority the powers of a protected series are exercised 6 and under whose direction the activities and affairs of the 7 protected series are managed under the operating agreement, 8 this part, and this chapter. 9 10. “Protected-series transferable interest” means a right to 10 receive a distribution from a protected series. 11 11. “Protected-series transferee” means a person to which 12 all or part of a protected-series transferable interest of a 13 protected series of a series limited liability company has 14 been transferred, other than the company. The term includes a 15 person that owns a protected-series transferable interest as 16 a result of ceasing to be an associated member of a protected 17 series. 18 12. “Series limited liability company” , except in the phrase 19 “foreign series limited liability company” , means a limited 20 liability company that has at least one protected series. 21 Sec. 3. NEW SECTION . 489.12103 Nature of protected series. 22 A protected series of a series limited liability company is a 23 person distinct from all of the following: 24 1. The company, subject to section 489.12104, subsection 25 3, section 489.12501, subsection 1, and section 489.12502, 26 subsection 4. 27 2. Another protected series of the company. 28 3. A member of the company, whether or not the member is an 29 associated member of the protected series. 30 4. A protected-series transferee of a protected series of 31 the company. 32 5. A transferee of a transferable interest of the company. 33 Sec. 4. NEW SECTION . 489.12104 Powers and duration of 34 protected series. 35 -2- LSB 1163XC (9) 88 da/jh 2/ 52
S.F. _____ 1. A protected series of a series limited liability company 1 has the capacity to sue and be sued in its own name. 2 2. Except as otherwise provided in subsections 3 and 4, a 3 protected series of a series limited liability company has the 4 same powers and purposes as the company. 5 3. A protected series of a series limited liability company 6 ceases to exist not later than when the company completes its 7 winding up. 8 4. A protected series of a series limited liability company 9 shall not do any of the following: 10 a. Be a member of the company. 11 b. Establish a protected series. 12 c. Except as permitted by law of this state other than this 13 part, have a purpose or power that the law of this state other 14 than this part prohibits a limited liability company from doing 15 or having. 16 Sec. 5. NEW SECTION . 489.12105 Governing law. 17 The law of this state governs all of the following: 18 1. The internal affairs of a protected series of a series 19 limited liability company, including all of the following: 20 a. Relations among any associated members of the protected 21 series. 22 b. Relations among the protected series and any of the 23 following: 24 (1) Any associated member. 25 (2) The protected-series manager. 26 (3) Any protected-series transferee. 27 c. Relations between any associated member and any of the 28 following: 29 (1) The protected-series manager. 30 (2) Any protected-series transferee. 31 d. The rights and duties of a protected-series manager. 32 e. Governance decisions affecting the activities and affairs 33 of the protected series and the conduct of those activities and 34 affairs. 35 -3- LSB 1163XC (9) 88 da/jh 3/ 52
S.F. _____ f. Procedures and conditions for becoming an associated 1 member or protected-series transferee. 2 2. The relations between a protected series of a series 3 limited liability company and each of the following: 4 a. The company. 5 b. Another protected series of the company. 6 c. A member of the company which is not an associated member 7 of the protected series. 8 d. A protected-series manager that is not a protected-series 9 manager of the protected series. 10 e. A protected-series transferee that is not a 11 protected-series transferee of the protected series. 12 3. The liability of a person for a debt, obligation, or 13 other liability of a protected series of a series limited 14 liability company if the debt, obligation, or liability is 15 asserted solely by reason of the person being or acting as any 16 of the following: 17 a. An associated member, protected-series transferee, or 18 protected-series manager of the protected series. 19 b. A member of the company which is not an associated member 20 of the protected series. 21 c. A protected-series manager that is not a protected-series 22 manager of the protected series. 23 d. A protected-series transferee that is not a 24 protected-series transferee of the protected series. 25 e. A manager of the company. 26 f. A transferee of a transferable interest of the company. 27 4. The liability of a series limited liability company for 28 a debt, obligation, or other liability of a protected series of 29 the company if the debt, obligation, or liability is asserted 30 solely by reason of the company doing any of the following: 31 a. Having delivered to the secretary of state for filing 32 under section 489.12201, subsection 2, a protected series 33 designation pertaining to the protected series or under section 34 489.12201, subsection 4, or section 489.12202, subsection 3, 35 -4- LSB 1163XC (9) 88 da/jh 4/ 52
S.F. _____ a statement of designation change pertaining to the protected 1 series. 2 b. Being or acting as a protected-series manager of the 3 protected series. 4 c. Having the protected series be or act as a manager of the 5 company. 6 d. Owning a protected-series transferable interest of the 7 protected series. 8 5. The liability of a protected series of a series limited 9 liability company for a debt, obligation, or other liability of 10 the company or of another protected series of the company if 11 the debt, obligation, or liability is asserted solely by reason 12 of any of the following: 13 a. The protected series is any of the following: 14 (1) A protected series of the company or having as a 15 protected-series manager the company or another protected 16 series of the company. 17 (2) Acting as a protected-series manager of another 18 protected series of the company or a manager of the company. 19 b. The company owning a protected-series transferable 20 interest of the protected series. 21 Sec. 6. NEW SECTION . 489.12106 Relation of operating 22 agreement, this part, and this chapter. 23 1. Except as otherwise provided in this section and subject 24 to sections 489.12107 and 489.12108, the operating agreement 25 of a series limited liability company governs all of the 26 following: 27 a. The internal affairs of a protected series, including all 28 of the following: 29 (1) Relations among any associated members of the protected 30 series. 31 (2) Relations among the protected series and any of the 32 following: 33 (a) Any associated member. 34 (b) The protected-series manager. 35 -5- LSB 1163XC (9) 88 da/jh 5/ 52
S.F. _____ (c) Any protected-series transferee. 1 (3) Relations between any associated member and any of the 2 following: 3 (a) The protected-series manager. 4 (b) Any protected-series transferee. 5 (4) The rights and duties of a protected-series manager. 6 (5) Governance decisions affecting the activities and 7 affairs of the protected series and the conduct of those 8 activities and affairs. 9 (6) Procedures and conditions for becoming an associated 10 member or protected-series transferee. 11 b. Relations among the protected series, the company, and 12 any other protected series of the company. 13 c. Relations between all of the following: 14 (1) The protected series, its protected-series manager, 15 any associated member of the protected series, or any 16 protected-series transferee of the protected series. 17 (2) A person in the person’s capacity as any of the 18 following: 19 (a) A member of the company which is not an associated 20 member of the protected series. 21 (b) A protected-series transferee or protected-series 22 manager of another protected series. 23 (c) A transferee of the company. 24 2. If this chapter otherwise restricts the power of an 25 operating agreement to affect a matter, the restriction 26 applies to a matter under this part in accordance with section 27 489.12108. 28 3. If law of this state other than this part imposes a 29 prohibition, limitation, requirement, condition, obligation, 30 liability, or other restriction on a limited liability 31 company, a member, manager, or other agent of the company, or a 32 transferee of the company, except as otherwise provided in law 33 of this state other than this part, the restriction applies in 34 accordance with section 489.12108. 35 -6- LSB 1163XC (9) 88 da/jh 6/ 52
S.F. _____ 4. Except as otherwise provided in section 489.12107, if 1 the operating agreement of a series limited liability company 2 does not provide for a matter described in subsection 1 in a 3 manner permitted by this article, the matter is determined in 4 accordance with the following rules: 5 a. To the extent this part addresses the matter, this part 6 governs. 7 b. To the extent this part does not address the matter, the 8 other articles of this chapter governs the matter in accordance 9 with section 489.12108. 10 Sec. 7. NEW SECTION . 489.12107 Additional limitations on 11 operating agreement. 12 1. An operating agreement shall not vary the effect of any 13 of the following: 14 a. This section. 15 b. Section 489.12103. 16 c. Section 489.12104, subsection 1. 17 d. Section 489.12104, subsection 2, to provide a protected 18 series a power beyond the powers this chapter provides a 19 limited liability company. 20 e. Section 489.12104, subsection 3 or 4. 21 f. Section 489.12105. 22 g. Section 489.12106. 23 h. Section 489.12108. 24 i. Section 489.12201, except to vary the manner in which 25 a limited liability company approves establishing a protected 26 series. 27 j. Section 489.12202. 28 k. Section 489.12301. 29 l. Section 489.12302. 30 m. Section 489.12303, subsection 1 or 2. 31 n. Section 489.12304, subsection 3 or 6. 32 o. Section 489.12401, except to decrease or eliminate a 33 limitation of liability stated in section 489.12401. 34 p. Section 489.12402. 35 -7- LSB 1163XC (9) 88 da/jh 7/ 52
S.F. _____ q. Section 489.12403. 1 r. Section 489.12404. 2 s. Section 489.12501, subsections 1, 4, and 5. 3 t. Section 489.12502, except to designate a different person 4 to manage winding up. 5 u. Section 489.12503. 6 v. Article 6. 7 w. Article 7. 8 x. Article 8, except to vary any of the following: 9 (1) The manner in which a series limited liability company 10 may elect under section 489.12803, subsection 1, paragraph “b” , 11 to be subject to this part. 12 (2) The person that has the right to sign and deliver to the 13 secretary of state for filing a record under section 489.12803, 14 subsection 2, paragraph “b” . 15 y. A provision of this part pertaining to any of the 16 following: 17 (1) Registered agents. 18 (2) The secretary of state, including provisions pertaining 19 to records authorized or required to be delivered to the 20 secretary of state for filing under this part. 21 2. An operating agreement shall not unreasonably restrict 22 the duties and rights under section 489.12305 but may impose 23 reasonable restrictions on the availability and use of 24 information obtained under section 489.12305 and may provide 25 appropriate remedies, including liquidated damages, for a 26 breach of any reasonable restriction on use. 27 Sec. 8. NEW SECTION . 489.12108 Rules for applying to 28 specified provisions of this chapter to specified provisions of 29 this part. 30 1. Except as otherwise provided in subsection 2 and section 31 489.12107, the following rules apply in applying section 32 489.12106, section 489.12304, subsections 3 and 6, section 33 489.12501, subsection 4, paragraph “a” , section 489.12502, 34 subsection 1, and section 489.12503, subsection 2: 35 -8- LSB 1163XC (9) 88 da/jh 8/ 52
S.F. _____ a. A protected series of a series limited liability company 1 is deemed to be a limited liability company that is formed 2 separately from the series limited liability company and is 3 distinct from the series limited liability company and any 4 other protected series of the series limited liability company. 5 b. An associated member of the protected series is deemed to 6 be a member of the company deemed to exist under paragraph “a” . 7 c. A protected-series transferee of the protected series is 8 deemed to be a transferee of the company deemed to exist under 9 paragraph “a” . 10 d. A protected-series transferable interest of the protected 11 series is deemed to be a transferable interest of the company 12 deemed to exist under paragraph “a” . 13 e. A protected-series manager is deemed to be a manager of 14 the company deemed to exist under paragraph “a” . 15 f. An asset of the protected series is deemed to be an asset 16 of the company deemed to exist under paragraph “a” , whether or 17 not the asset is an associated asset of the protected series. 18 g. Any creditor or other obligee of the protected series 19 is deemed to be a creditor or obligee of the company deemed to 20 exist under paragraph “a” . 21 2. Subsection 1 does not apply if its application would do 22 any of the following: 23 a. Contravene section 489.110. 24 b. Authorize or require the secretary of state to do any of 25 the following: 26 (1) Accept for filing a type of record that neither this 27 part nor any of the other articles of this chapter authorizes 28 or requires a person to deliver to the secretary of state for 29 filing. 30 (2) Make or deliver a record that neither this part nor 31 the other articles of this chapter authorizes or requires the 32 secretary of state to make or deliver. 33 SUBPART B 34 ESTABLISHING PROTECTED SERIES 35 -9- LSB 1163XC (9) 88 da/jh 9/ 52
S.F. _____ Sec. 9. NEW SECTION . 489.12201 Protected series designation 1 —— amendment. 2 1. With the affirmative vote or consent of all members 3 of a limited liability company, the company may establish a 4 protected series. 5 2. To establish a protected series, a limited liability 6 company shall deliver to the secretary of state for filing a 7 protected series designation, signed by the company, stating 8 the name of the company and the name of the protected series to 9 be established. 10 3. A protected series is established when the protected 11 series designation takes effect under section 489.205. 12 4. To amend a protected series designation, a series limited 13 liability company shall deliver to the secretary of state 14 for filing a statement of designation change, signed by the 15 company, that changes the name of the company, the name of the 16 protected series to which the designation applies, or both. 17 The change takes effect when the statement of designation 18 change takes effect under section 489.205. 19 Sec. 10. NEW SECTION . 489.12202 Name. 20 1. Except as otherwise provided in subsection 2, the name of 21 a protected series must comply with section 489.108. 22 2. The name of a protected series of a series limited 23 liability company must do all of the following: 24 a. Begin with the name of the company, including any word or 25 abbreviation required by section 489.108. 26 b. Contain the phrase “Protected Series” or “protected 27 series” or the abbreviation “P.S.” or “PS”. 28 3. If a series limited liability company changes its name, 29 the company shall deliver to the secretary of state for filing 30 a statement of designation change for each of the company’s 31 protected series, changing the name of each protected series to 32 comply with this section. 33 Sec. 11. NEW SECTION . 489.12203 Registered agent. 34 1. The registered agent in this state for a series limited 35 -10- LSB 1163XC (9) 88 da/jh 10/ 52
S.F. _____ liability company is the registered agent in this state for 1 each protected series of the company. 2 2. Before delivering a protected series designation to the 3 secretary of state for filing, a limited liability company 4 shall agree with a registered agent that the agent will serve 5 as the registered agent in this state for both the company and 6 the protected series. 7 3. A person that signs a protected series designation 8 delivered to the secretary of state for filing affirms as a 9 fact that the limited liability company on whose behalf the 10 designation is delivered has complied with subsection 2. 11 4. A person that ceases to be the registered agent for a 12 series limited liability company ceases to be the registered 13 agent for each protected series of the company. 14 5. A person that ceases to be the registered agent for a 15 protected series of a series limited liability company, other 16 than as a result of the termination of the protected series, 17 ceases to be the registered agent of the company and any other 18 protected series of the company. 19 6. Except as otherwise agreed by a series limited liability 20 company and its registered agent, the agent is not obligated to 21 distinguish between a process, notice, demand, or other record 22 concerning the company and a process, notice, demand, or other 23 record concerning a protected series of the company. 24 Sec. 12. NEW SECTION . 489.12204 Service of process, notice, 25 demand, or other record. 26 1. A protected series of a series limited liability company 27 may be served with a process, notice, demand, or other record 28 required or permitted by law by any of the following: 29 a. Serving the company. 30 b. Serving the registered agent of the protected series. 31 c. Other means authorized by law of this state other than 32 the other articles of this chapter. 33 2. Service of a summons and complaint on a series limited 34 liability company is notice to each protected series of 35 -11- LSB 1163XC (9) 88 da/jh 11/ 52
S.F. _____ the company of service of the summons and complaint and the 1 contents of the complaint. 2 3. Service of a summons and complaint on a protected series 3 of a series limited liability company is notice to the company 4 and any other protected series of the company of service of the 5 summons and complaint and the contents of the complaint. 6 4. Service of a summons and complaint on a foreign series 7 limited liability company is notice to each foreign protected 8 series of the foreign company of service of the summons and 9 complaint and the contents of the complaint. 10 5. Service of a summons and complaint on a foreign protected 11 series of a foreign series limited liability company is notice 12 to the foreign company and any other foreign protected series 13 of the company of service of the summons and complaint and the 14 contents of the complaint. 15 6. Notice to a person under subsection 2, 3, 4, or 5 is 16 effective whether or not the summons and complaint identify 17 the person if the summons and complaint name as a party and 18 identify any of the following: 19 a. The series limited liability company or a protected 20 series of the company. 21 b. The foreign series limited liability company or a foreign 22 protected series of the foreign company. 23 Sec. 13. NEW SECTION . 489.12205 Certificate of existence 24 for protected series. 25 1. On request of any person, the secretary of state shall 26 issue a certificate of existence for a protected series of a 27 series limited liability company or a certificate of authority 28 for a foreign protected series in the following circumstances: 29 a. In the case of a protected series, if all of the 30 following apply: 31 (1) No statement of dissolution, termination, or relocation 32 pertaining to the protected series has been filed. 33 (2) The company has delivered to the secretary of state 34 for filing the most recent biennial report required by section 35 -12- LSB 1163XC (9) 88 da/jh 12/ 52
S.F. _____ 489.209 and the report includes the name of the protected 1 series, unless any of the following applies: 2 (a) When the company delivered the report for filing, the 3 protected series designation pertaining to the protected series 4 had not yet taken effect. 5 (b) After the company delivered the report for filing, 6 the company delivered to the secretary of state for filing 7 a statement of designation change changing the name of the 8 protected series. 9 b. In the case of a foreign protected series, it is 10 authorized to do business in this state. 11 2. A certificate issued under subsection 1 must state all 12 of the following: 13 a. In the case of a protected series, all of the following: 14 (1) The name of the protected series of the series limited 15 liability company and the name of the company. 16 (2) That the requirements of subsection 1 are met. 17 (3) The date the protected series designation pertaining to 18 the protected series took effect. 19 (4) If a statement of designation change pertaining to 20 the protected series has been filed, the effective date and 21 contents of the statement. 22 b. In the case of a foreign protected series, that it is 23 authorized to do business in this state. 24 c. That all fees, taxes, interest, and penalties due under 25 this chapter or other law to the secretary of state have been 26 paid if all of the following apply: 27 (1) Payment is reflected in the records of the secretary of 28 state. 29 (2) Nonpayment affects the existence or good standing of the 30 protected series. 31 d. Other facts reflected in the records of the secretary of 32 state pertaining to the protected series or foreign protected 33 series which the person requesting the certificate reasonably 34 requests. 35 -13- LSB 1163XC (9) 88 da/jh 13/ 52
S.F. _____ 3. Subject to any qualification stated by the secretary 1 of state in a certificate issued under subsection 1, the 2 certificate may be relied on as conclusive evidence of the 3 facts stated in the certificate. 4 Sec. 14. NEW SECTION . 489.12206 Information required in 5 biennial report —— effect of failure to provide. 6 1. In the biennial report required by section 489.209, a 7 series limited liability company shall include the name of each 8 protected series of the company for which all of the following 9 applies: 10 a. For which the company has previously delivered to the 11 secretary of state for filing a protected series designation. 12 b. Which has not dissolved and completed winding up. 13 2. A failure by a series limited liability company to comply 14 with subsection 1 with regard to a protected series prevents 15 issuance of a certificate of good standing pertaining to the 16 protected series but does not otherwise affect the protected 17 series. 18 SUBPART C 19 ASSOCIATED ASSET, ASSOCIATED MEMBER, PROTECTED-SERIES 20 TRANSFERABLE INTEREST, MANAGEMENT, AND RIGHT OF INFORMATION 21 Sec. 15. NEW SECTION . 489.12301 Associated asset. 22 1. Only an asset of a protected series may be an associated 23 asset of the protected series. Only an asset of a series 24 limited liability company may be an associated asset of the 25 company. 26 2. An asset of a protected series of a series limited 27 liability company is an associated asset of the protected 28 series only if the protected series creates and maintains 29 records that state the name of the protected series and 30 describe the asset with sufficient specificity to permit 31 a disinterested, reasonable individual to do all of the 32 following: 33 a. Identify the asset and distinguish it from any other 34 asset of the protected series, any asset of the company, and 35 -14- LSB 1163XC (9) 88 da/jh 14/ 52
S.F. _____ any asset of any other protected series of the company. 1 b. Determine when and from what person the protected series 2 acquired the asset or how the asset otherwise became an asset 3 of the protected series. 4 c. If the protected series acquired the asset from the 5 company or another protected series of the company, determine 6 any consideration paid, the payor, and the payee. 7 3. An asset of a series limited liability company is an 8 associated asset of the company only if the company creates 9 and maintains records that state the name of the company and 10 describe the asset with sufficient specificity to permit 11 a disinterested, reasonable individual to do all of the 12 following: 13 a. Identify the asset and distinguish it from any other 14 asset of the company and any asset of any protected series of 15 the company. 16 b. Determine when and from what person the company acquired 17 the asset or how the asset otherwise became an asset of the 18 company. 19 c. If the company acquired the asset from a protected series 20 of the company, determine any consideration paid, the payor, 21 and the payee. 22 4. The records and recordkeeping required by subsections 23 2 and 3 may be organized by specific listing, category, 24 type, quantity, or computational or allocational formula or 25 procedure, including a percentage or share of any asset, or in 26 any other reasonable manner. 27 5. To the extent permitted by this section and law of this 28 state other than this part, a series limited liability company 29 or protected series of the company may hold an associated asset 30 directly or indirectly, through a representative, nominee, or 31 similar arrangement, except that all of the following applies: 32 a. A protected series shall not hold an associated asset 33 in the name of the company or another protected series of the 34 company. 35 -15- LSB 1163XC (9) 88 da/jh 15/ 52
S.F. _____ b. The company shall not hold an associated asset in the 1 name of a protected series of the company. 2 Sec. 16. NEW SECTION . 489.12302 Associated member. 3 1. Only a member of a series limited liability company may 4 be an associated member of a protected series of the company. 5 2. A member of a series limited liability company becomes an 6 associated member of a protected series of the company if the 7 operating agreement or a procedure established by the agreement 8 states all of the following: 9 a. That the member is an associated member of the protected 10 series. 11 b. The date on which the member became an associated member. 12 c. Any protected-series transferable interest the associated 13 member has in connection with becoming or being an associated 14 member. 15 3. If a person that is an associated member of a protected 16 series of a series limited liability company is dissociated 17 from the company, the person ceases to be an associated member 18 of the protected series. 19 Sec. 17. NEW SECTION . 489.12303 Protected-series 20 transferable interest. 21 1. A protected-series transferable interest of a protected 22 series of a series limited liability company must be owned 23 initially by an associated member of the protected series or 24 the company. 25 2. If a protected series of a series limited liability 26 company has no associated members when established, the 27 company owns the protected-series transferable interests in the 28 protected series. 29 3. In addition to acquiring a protected series transferable 30 series interest under subsection 2, a series limited liability 31 company may acquire a protected-series transferable interest 32 through a transfer from another person or as provided in the 33 operating agreement. 34 4. Except for section 489.12108, subsection 1, 35 -16- LSB 1163XC (9) 88 da/jh 16/ 52
S.F. _____ paragraph “c” , a provision of this part which applies to 1 a protected-series transferee of a protected series of a 2 series limited liability company applies to the company in 3 its capacity as an owner of a protected-series transferable 4 interest of the protected series. A provision of the operating 5 agreement of a series limited liability company which applies 6 to a protected-series transferee of a protected series of the 7 company applies to the company in its capacity as an owner of a 8 protected-series transferable interest of the protected series. 9 Sec. 18. NEW SECTION . 489.12304 Management. 10 1. A protected series may have more than one 11 protected-series manager. 12 2. If a protected series has no associated members, the 13 series limited liability company is the protected-series 14 manager. 15 3. Section 489.12108 applies to determine any duties of 16 a protected-series manager of a protected series of a series 17 limited liability company to all of the following: 18 a. The protected series. 19 b. Any associated member of the protected series. 20 c. Any protected-series transferee of the protected series. 21 4. Solely by reason of being or acting as a protected-series 22 manager of a protected series of a series limited liability 23 company, a person owes no duty to any of the following: 24 a. The company. 25 b. Another protected series of the company. 26 c. Another person in that person’s capacity as any of the 27 following: 28 (1) A member of the company which is not an associated 29 member of the protected series. 30 (2) A protected-series transferee or protected-series 31 manager of another protected series. 32 (3) A transferee of the company. 33 5. An associated member of a protected series of a series 34 limited liability company has the same rights as any other 35 -17- LSB 1163XC (9) 88 da/jh 17/ 52
S.F. _____ member of the company to vote on or consent to an amendment to 1 the company’s operating agreement or any other matter being 2 decided by the members, whether or not the amendment or matter 3 affects the interests of the protected series or the associated 4 member. 5 6. Article 9 applies to a protected series in accordance 6 with section 489.12108. 7 Sec. 19. NEW SECTION . 489.12305 Right of person not 8 associated member of protected series to information concerning 9 protected series. 10 1. A member of a series limited liability company which 11 is not an associated member of a protected series of the 12 company has a right to information concerning the protected 13 series to the same extent, in the same manner, and under 14 the same conditions that a member that is not a manager of 15 a manager-managed limited liability company has a right to 16 information concerning the company under section 489.410, 17 subsection 2. 18 2. A person formerly an associated member of a protected 19 series has a right to information concerning the protected 20 series to the same extent, in the same manner, and under 21 the same conditions that a person dissociated as a member of 22 a manager-managed limited liability company has a right to 23 information concerning the company under section 489.410, 24 subsection 3. 25 3. If an associated member of a protected series dies, the 26 legal representative of the deceased associated member has a 27 right to information concerning the protected series to the 28 same extent, in the same manner, and under the same conditions 29 that the legal representative of a deceased member of a limited 30 liability company has a right to information concerning the 31 company under section 489.504. 32 4. A protected-series manager of a protected series has a 33 right to information concerning the protected series to the 34 same extent, in the same manner, and under the same conditions 35 -18- LSB 1163XC (9) 88 da/jh 18/ 52
S.F. _____ that a manager of a manager-managed limited liability company 1 has a right to information concerning the company under section 2 489.410, subsection 2. 3 SUBPART D 4 LIMITATION ON LIABILITY AND ENFORCEMENT OF CLAIMS 5 Sec. 20. NEW SECTION . 489.12401 Limitations on liability. 6 1. A person is not liable, directly or indirectly, by way 7 of contribution or otherwise, for a debt, obligation, or other 8 liability of any of the following: 9 a. A protected series of a series limited liability company 10 solely by reason of being or acting as any of the following: 11 (1) An associated member, protected-series manager, or 12 protected-series transferee of the protected series. 13 (2) A member, manager, or a transferee of the company. 14 b. A series limited liability company solely by reason 15 of being or acting as an associated member, protected-series 16 manager, or protected-series transferee of a protected series 17 of the company. 18 2. Subject to section 489.12404, all of the following rules 19 apply: 20 a. A debt, obligation, or other liability of a series 21 limited liability company is solely the debt, obligation, or 22 liability of the company. 23 b. A debt, obligation, or other liability of a protected 24 series is solely the debt, obligation, or liability of the 25 protected series. 26 c. A series limited liability company is not liable, 27 directly or indirectly, by way of contribution or otherwise, 28 for a debt, obligation, or other liability of a protected 29 series of the company solely by reason of the protected series 30 being a protected series of the company or the company for any 31 of the following: 32 (1) Being or acting as a protected-series manager of the 33 protected series. 34 (2) Having the protected series manage the company. 35 -19- LSB 1163XC (9) 88 da/jh 19/ 52
S.F. _____ (3) Owning a protected-series transferable interest of the 1 protected series. 2 d. A protected series of a series limited liability company 3 is not liable, directly or indirectly, by way of contribution 4 or otherwise, for a debt, obligation, or other liability of the 5 company or another protected series of the company solely by 6 reason of any of the following: 7 (1) Being a protected series of the company. 8 (2) Being or acting as a manager of the company or a 9 protected-series manager of another protected series of the 10 company. 11 (3) Having the company or another protected series of 12 the company be or act as a protected-series manager of the 13 protected series. 14 Sec. 21. NEW SECTION . 489.12402 Claim seeking to disregard 15 limitation of liability. 16 1. Except as otherwise provided in subsection 2, a claim 17 seeking to disregard a limitation in section 489.12401 is 18 governed by the principles of law and equity, including a 19 principle providing a right to a creditor or holding a person 20 liable for a debt, obligation, or other liability of another 21 person, which would apply if each protected series of a series 22 limited liability company were a limited liability company 23 formed separately from the series limited liability company 24 and distinct from the series limited liability company and any 25 other protected series of the series limited liability company. 26 2. The failure of a limited liability company or a protected 27 series to observe formalities relating to the exercise of 28 its powers or management of its activities and affairs is 29 not a ground to disregard a limitation in section 489.12401, 30 subsection 1, but may be a ground to disregard a limitation in 31 section 489.12401, subsection 2. 32 3. This section applies to a claim seeking to disregard a 33 limitation of liability applicable to a foreign series limited 34 liability company or foreign protected series and comparable 35 -20- LSB 1163XC (9) 88 da/jh 20/ 52
S.F. _____ to a limitation stated in section 489.12401, if any of the 1 following apply: 2 a. The claimant is a resident of this state or doing 3 business or authorized to do business in this state. 4 b. The claim is to establish or enforce a liability arising 5 under law of this state other than this part or from an act or 6 omission in this state. 7 Sec. 22. NEW SECTION . 489.12403 Remedies of judgment 8 creditor of associated member or protected-series transferee. 9 Section 489.503 applies to a judgment creditor of any of the 10 following: 11 1. An associated member or protected-series transferee of a 12 protected series. 13 2. A series limited liability company, to the extent the 14 company owns a protected-series transferable interest of a 15 protected series. 16 Sec. 23. NEW SECTION . 489.12404 Enforcement against 17 nonassociated asset. 18 1. As used in this section: 19 a. “Enforcement date” means 12:01 a.m. on the date on which 20 a claimant first serves process on a series limited liability 21 company or protected series in an action seeking to enforce 22 under this section a claim against an asset of the company or 23 protected series by attachment, levy, or the like. 24 b. Subject to section 489.12608, subsection 2, “incurrence 25 date” means the date on which a series limited liability company 26 or protected series incurred the liability giving rise to a 27 claim that a claimant seeks to enforce under this section. 28 2. If a claim against a series limited liability company or 29 a protected series of the company has been reduced to judgment, 30 in addition to any other remedy provided by law or equity, 31 the judgment may be enforced in accordance with the following 32 rules: 33 a. A judgment against the company may be enforced against 34 an asset of a protected series of the company if any of the 35 -21- LSB 1163XC (9) 88 da/jh 21/ 52
S.F. _____ following applies: 1 (1) The asset was a nonassociated asset of the protected 2 series on the incurrence date. 3 (2) The asset is a nonassociated asset of the protected 4 series on the enforcement date. 5 b. A judgment against a protected series may be enforced 6 against an asset of the company if any of the following apply: 7 (1) The asset was a nonassociated asset of the company on 8 the incurrence date. 9 (2) The asset is a nonassociated asset of the company on the 10 enforcement date. 11 c. A judgment against a protected series may be enforced 12 against an asset of another protected series of the company if 13 any of the following applies: 14 (1) The asset was a nonassociated asset of the other 15 protected series on the incurrence date. 16 (2) The asset is a nonassociated asset of the other 17 protected series on the enforcement date. 18 3. In addition to any other remedy provided by law or 19 equity, if a claim against a series limited liability company 20 or a protected series has not been reduced to a judgment 21 and law other than this part permits a prejudgment remedy by 22 attachment, levy, or the like, the court may apply subsection 2 23 as a prejudgment remedy. 24 4. In a proceeding under this section, the party asserting 25 that an asset is or was an associated asset of a series limited 26 liability company or a protected series of the company has the 27 burden of proof on the issue. 28 5. This section applies to an asset of a foreign series 29 limited liability company or foreign protected series if all of 30 the following applies: 31 a. The asset is real or tangible property located in this 32 state. 33 b. The claimant is a resident of this state or doing 34 business or authorized to do business in this state, or the 35 -22- LSB 1163XC (9) 88 da/jh 22/ 52
S.F. _____ claim under section 489.12404 is to enforce a judgment, or to 1 seek a prejudgment remedy, pertaining to a liability arising 2 from law of this state other than this part or an act or 3 omission in this state. 4 c. The asset is not identified in the records of the foreign 5 series limited liability company or foreign protected series 6 in a manner comparable to the manner required by section 7 489.12301. 8 SUBPART E 9 DISSOLUTION AND WINDING UP OF PROTECTED SERIES 10 Sec. 24. NEW SECTION . 489.12501 Events causing dissolution 11 of protected series. 12 A protected series of a series limited liability company is 13 dissolved, and its activities and affairs must be wound up, 14 only on any of the following: 15 1. Dissolution of the company. 16 2. Occurrence of an event or circumstance the operating 17 agreement states causes dissolution of the protected series. 18 3. Affirmative vote or consent of all members. 19 4. Entry by the court of an order dissolving the 20 protected series on application by an associated member or 21 protected-series manager of the protected series subject to all 22 of the following: 23 a. In accordance with section 489.12108. 24 b. To the same extent, in the same manner, and on the same 25 grounds the court would enter an order dissolving a limited 26 liability company on application by a member or manager of the 27 company. 28 5. Entry by the court of an order dissolving the protected 29 series on application by the company or a member of the company 30 on the ground that the conduct of all or substantially all the 31 activities and affairs of the protected series is illegal. 32 Sec. 25. NEW SECTION . 489.12502 Winding up dissolved 33 protected series. 34 1. Subject to subsections 2 and 3 and in accordance with 35 -23- LSB 1163XC (9) 88 da/jh 23/ 52
S.F. _____ section 489.12108 all of the following apply: 1 a. A dissolved protected series shall wind up its activities 2 and affairs in the same manner that a limited liability company 3 winds up its activities and affairs under sections 489.702 4 through 489.704 subject to the same requirements and conditions 5 and with the same effects. 6 b. Judicial supervision or another judicial remedy is 7 available in the winding up of the protected series to the same 8 extent, in the same manner, under the same conditions, and with 9 the same effects that apply under section 489.702, subsection 10 5. 11 2. When a protected series of a series limited liability 12 company dissolves, the company may deliver to the secretary of 13 state for filing a statement of protected series dissolution 14 stating the name of the company and the protected series 15 and that the protected series is dissolved. The filing of 16 the statement by the secretary of state has the same effect 17 as the filing by the secretary of state of a statement of 18 dissolution under section 489.103, subsection 4, paragraph “b” , 19 subparagraph (1). 20 3. When a protected series of a series limited liability 21 company has completed winding up, the company may deliver to 22 the secretary of state for filing a statement of designation 23 cancellation stating the name of the company and the protected 24 series and that the protected series is terminated. The filing 25 of the statement by the secretary of state has the same effect 26 as the filing by the secretary of state of a statement of 27 termination under section 489.103, subsection 4, paragraph “b” , 28 subparagraph (2). 29 4. A series limited liability company has not completed its 30 winding up until each of the protected series of the company 31 has completed its winding up. 32 Sec. 26. NEW SECTION . 489.12503 Effect of reinstatement 33 of series limited liability company or revocation of voluntary 34 dissolution. 35 -24- LSB 1163XC (9) 88 da/jh 24/ 52
S.F. _____ If a series limited liability company that has been 1 administratively dissolved is reinstated, or a series limited 2 liability company that voluntarily dissolved rescinds its 3 dissolution both of the following apply: 4 1. Each protected series of the company ceases winding up. 5 2. The provisions of section 489.706 apply to each protected 6 series of the company in accordance with section 489.12108. 7 SUBPART F 8 ENTITY TRANSACTIONS RESTRICTED 9 Sec. 27. NEW SECTION . 489.12601 Definitions. 10 As used in this subpart: 11 1. “After a merger” or “after the merger” means when a merger 12 under section 489.12604 becomes effective and afterwards. 13 2. “Before a merger” or “before the merger” means before a 14 merger under section 489.12604 becomes effective. 15 3. “Continuing protected series” means a protected series of 16 a surviving company which continues in uninterrupted existence 17 after a merger under section 489.12604. 18 4. “Merging company” means a limited liability company that 19 is party to a merger under section 489.12604. 20 5. “Nonsurviving company” means a merging company that 21 does not continue in existence after a merger under section 22 489.12604. 23 6. “Relocated protected series” means a protected series 24 of a nonsurviving company which, after a merger under section 25 489.12604, continues in uninterrupted existence as a protected 26 series of the surviving company. 27 7. “Surviving company” means a merging company that 28 continues in existence after a merger under section 489.12604. 29 Sec. 28. NEW SECTION . 489.12602 Protected series shall not 30 be party to entity transaction. 31 A protected series shall not do any of the following: 32 1. Be an acquiring, acquired, converting, converted, 33 merging, or surviving entity. 34 2. Participate in a domestication. 35 -25- LSB 1163XC (9) 88 da/jh 25/ 52
S.F. _____ 3. Be a party to or be formed, organized, established, or 1 created in a transaction substantially like a merger, interest 2 exchange, conversion, or domestication. 3 Sec. 29. NEW SECTION . 489.12603 Restriction on entity 4 transaction involving protected series. 5 A series limited liability company shall not be any of the 6 following: 7 1. An acquiring, acquired, converting, converted, 8 domesticating, or domesticated entity. 9 2. Except as otherwise provided in section 489.12604, a 10 party to or the surviving company of a merger. 11 Sec. 30. NEW SECTION . 489.12604 Merger authorized —— 12 parties restricted. 13 A series limited liability company may be party to a merger 14 in accordance with sections 489.1001 through 489.1005, this 15 section, and sections 489.12605 through 489.12608 only if all 16 of the following apply: 17 1. Each other party to the merger is a limited liability 18 company. 19 2. The surviving company is not created in the merger. 20 Sec. 31. NEW SECTION . 489.12605 Plan of merger. 21 In a merger under section 489.12604, the plan of merger must 22 do all of the following: 23 1. Comply with section 489.1002. 24 2. State in a record all of the following: 25 a. For any protected series of a nonsurviving company, 26 whether after the merger the protected series will be a 27 relocated protected series or be dissolved, wound up, and 28 terminated. 29 b. For any protected series of the surviving company 30 which exists before the merger, whether after the merger the 31 protected series will be a continuing protected series or be 32 dissolved, wound up, and terminated. 33 c. For each relocated protected series or continuing 34 protected series all of the following: 35 -26- LSB 1163XC (9) 88 da/jh 26/ 52
S.F. _____ (1) The name of any person that becomes an associated member 1 or protected-series transferee of the protected series after 2 the merger, any consideration to be paid by, on behalf of, or 3 in respect of the person, the name of the payor, and the name 4 of the payee. 5 (2) The name of any person whose rights or obligations 6 in the person’s capacity as an associated member or 7 protected-series transferee will change after the merger. 8 (3) Any consideration to be paid to a person who before the 9 merger was an associated member or protected-series transferee 10 of the protected series and the name of the payor. 11 (4) If after the merger the protected series will be a 12 relocated protected series, its new name. 13 d. For any protected series to be established by the 14 surviving company as a result of the merger all of the 15 following: 16 (1) The name of the protected series. 17 (2) Any protected-series transferable interest to be 18 owned by the surviving company when the protected series is 19 established. 20 (3) The name of and any protected-series transferable 21 interest owned by any person that will be an associated 22 member of the protected series when the protected series is 23 established. 24 e. For any person that is an associated member of a 25 relocated protected series and will remain a member after 26 the merger, any amendment to the operating agreement of the 27 surviving company which is all of the following: 28 (1) Is or is proposed to be in a record. 29 (2) Is necessary or appropriate to state the rights and 30 obligations of the person as a member of the surviving company. 31 Sec. 32. NEW SECTION . 489.12606 Articles of merger. 32 In a merger under section 489.12604, the articles of merger 33 must do all of the following: 34 1. Comply with section 489.1004. 35 -27- LSB 1163XC (9) 88 da/jh 27/ 52
S.F. _____ 2. Include as an attachment the following records, each to 1 become effective when the merger becomes effective upon any of 2 the following: 3 a. For a protected series of a merging company being 4 terminated as a result of the merger, a statement of 5 termination signed by the company. 6 b. For a protected series of a nonsurviving company which 7 after the merger will be a relocated protected series all of 8 the following: 9 (1) A statement of relocation signed by the nonsurviving 10 company which contains the name of the company and the name of 11 the protected series before and after the merger. 12 (2) A statement of protected series designation signed by 13 the surviving company. 14 c. For a protected series being established by the 15 surviving company as a result of the merger, a protected series 16 designation signed by the company. 17 Sec. 33. NEW SECTION . 489.12607 Effect of merger. 18 When a merger under section 489.12604 becomes effective, in 19 addition to the effects stated in section 489.1005, all of the 20 following apply: 21 1. As provided in the plan of merger, each protected series 22 of each merging company which was established before the merger 23 is any of the following: 24 a. Is a relocated protected series or continuing protected 25 series. 26 b. Is dissolved, wound up, and terminated. 27 2. Any protected series to be established as a result of the 28 merger is established. 29 3. Any relocated protected series or continuing protected 30 series is the same person without interruption as it was before 31 the merger. 32 4. All property of a relocated protected series or 33 continuing protected series continues to be vested in the 34 protected series without transfer, reversion, or impairment. 35 -28- LSB 1163XC (9) 88 da/jh 28/ 52
S.F. _____ 5. All debts, obligations, and other liabilities of a 1 relocated protected series or continuing protected series 2 continue as debts, obligations, and other liabilities of the 3 protected series. 4 6. Except as otherwise provided by law or the plan of 5 merger, all the rights, privileges, immunities, powers, 6 and purposes of a relocated protected series or continuing 7 protected series remain in the protected series. 8 7. The new name of a relocated protected series may be 9 substituted for the former name of the protected series in any 10 pending action or proceeding. 11 8. If provided in the plan of merger all of the following 12 apply: 13 a. A person becomes an associated member or protected-series 14 transferee of a relocated protected series or continuing 15 protected series. 16 b. A person becomes an associated member of a protected 17 series established by the surviving company as a result of the 18 merger. 19 c. Any change in the rights or obligations of a person 20 in the person’s capacity as an associated member or 21 protected-series transferee of a relocated protected series or 22 continuing protected series take effect. 23 d. Any consideration to be paid to a person that before the 24 merger was an associated member or protected-series transferee 25 of a relocated protected series or continuing protected series 26 is due. 27 9. Any person that is a member of a relocated protected 28 series becomes a member of the surviving company, if not 29 already a member. 30 Sec. 34. NEW SECTION . 489.12608 Application of section 31 489.12404 after merger. 32 1. A creditor’s right that existed under section 489.12404 33 immediately before a merger under section 489.12604 may 34 be enforced after the merger in accordance with all of the 35 -29- LSB 1163XC (9) 88 da/jh 29/ 52
S.F. _____ following: 1 a. A creditor’s right that existed immediately before the 2 merger against the surviving company, a continuing protected 3 series, or a relocated protected series continues without 4 change after the merger. 5 b. A creditor’s right that existed immediately before the 6 merger against a nonsurviving company all of the following 7 apply: 8 (1) May be asserted against an asset of the nonsurviving 9 company which vested in the surviving company as a result of 10 the merger. 11 (2) Does not otherwise change. 12 c. Subject to subsection 2, all of the following apply: 13 (1) In addition to the remedy stated in paragraph “a” , a 14 creditor with a right under section 489.12404 which existed 15 immediately before the merger against a nonsurviving company or 16 a relocated protected series may assert the right against any 17 of the following: 18 (a) An asset of the surviving company, other than an asset 19 of the nonsurviving company which vested in the surviving 20 company as a result of the merger. 21 (b) An asset of a continuing protected series. 22 (c) An asset of a protected series established by the 23 surviving company as a result of the merger. 24 (d) If the creditor’s right was against an asset of the 25 nonsurviving company, an asset of a relocated series. 26 (e) If the creditor’s right was against an asset of a 27 relocated protected series, an asset of another relocated 28 protected series. 29 (2) In addition to the remedy stated in paragraph “b” , 30 a creditor with a right that existed immediately before the 31 merger against the surviving company or a continuing protected 32 series may assert the right against any of the following: 33 (a) An asset of a relocated protected series. 34 (b) An asset of a nonsurviving company which vested in the 35 -30- LSB 1163XC (9) 88 da/jh 30/ 52
S.F. _____ surviving company as a result of the merger. 1 2. For the purposes of subsection 1, paragraph “c” , and 2 section 489.12404, subsection 2, paragraph “a” , subparagraph 3 (1); section 489.12404, subsection 2, paragraph “b” , 4 subparagraph (1); and section 489.12404, subsection 2, 5 paragraph “c” , subparagraph (1), the incurrence date is deemed 6 to be the date on which the merger becomes effective. 7 3. A merger under section 489.12604 does not affect the 8 manner in which section 489.12404 applies to a liability 9 incurred after the merger. 10 SUBPART G 11 FOREIGN PROTECTED SERIES 12 Sec. 35. NEW SECTION . 489.12701 Governing law. 13 The law of the jurisdiction of formation of a foreign series 14 limited liability company governs all of the following: 15 1. The internal affairs of a foreign protected series of the 16 company, including all of the following: 17 a. Relations among any associated members of the foreign 18 protected series. 19 b. Relations between the foreign protected series and any 20 of the following: 21 (1) Any associated member. 22 (2) The protected-series manager. 23 (3) Any protected-series transferee. 24 c. Relations between any associated member and any of the 25 following: 26 (1) The protected-series manager. 27 (2) Any protected-series transferee. 28 d. The rights and duties of a protected-series manager. 29 e. Governance decisions affecting the activities and affairs 30 of the foreign protected series and the conduct of those 31 activities and affairs. 32 f. Procedures and conditions for becoming an associated 33 member or protected-series transferee. 34 2. Relations between the foreign protected series and all 35 -31- LSB 1163XC (9) 88 da/jh 31/ 52
S.F. _____ of the following: 1 a. The company. 2 b. Another foreign protected series of the company. 3 c. A member of the company which is not an associated member 4 of the foreign protected series. 5 d. A foreign protected-series manager that is not a 6 protected-series manager of the protected series. 7 e. A foreign protected-series transferee that is not a 8 foreign protected-series transferee of the protected series. 9 f. A transferee of a transferable interest of the company. 10 3. Except as otherwise provided in sections 489.12402 and 11 489.12404, the liability of a person for a debt, obligation, 12 or other liability of a foreign protected series of a foreign 13 series limited liability company if the debt, obligation, or 14 liability is asserted solely by reason of the person being or 15 acting as any of the following: 16 a. An associated member, protected-series transferee, or 17 protected-series manager of the foreign protected series. 18 b. A member of the company which is not an associated member 19 of the foreign protected series. 20 c. A protected-series manager of another foreign protected 21 series of the company. 22 d. A protected-series transferee of another foreign 23 protected series of the company. 24 e. A manager of the company. 25 f. A transferee of a transferable interest of the company. 26 4. Except as otherwise provided in sections 489.12402 and 27 489.12404 all of the following apply: 28 a. The liability of the foreign series limited liability 29 company for a debt, obligation, or other liability of a foreign 30 protected series of the company if the debt, obligation, or 31 liability is asserted solely by reason of the foreign protected 32 series being a foreign protected series of the company or the 33 company as a consequence of any of the following: 34 (1) Being or acting as a foreign protected-series manager of 35 -32- LSB 1163XC (9) 88 da/jh 32/ 52
S.F. _____ the foreign protected series. 1 (2) Having the foreign protected series manage the company. 2 (3) Owning a protected-series transferable interest of the 3 foreign protected series. 4 b. The liability of a foreign protected series for a 5 debt, obligation, or other liability of the company or 6 another foreign protected series of the company if the debt, 7 obligation, or liability is asserted solely by reason of 8 the foreign protected series as a consequence of any of the 9 following: 10 (1) Being a foreign protected series of the company or 11 having the company or another foreign protected series of the 12 company be or act as foreign protected-series manager of the 13 foreign protected series. 14 (2) Managing the company or being or acting as a foreign 15 protected-series manager of another foreign protected series 16 of the company. 17 Sec. 36. NEW SECTION . 489.12702 No attribution of 18 activities constituting doing business or for establishing 19 jurisdiction. 20 In determining whether a foreign series limited liability 21 company or foreign protected series of the company does 22 business in this state or is subject to the personal 23 jurisdiction of the courts of this state all of the following 24 apply: 25 1. The activities and affairs of the company are not 26 attributable to a foreign protected series of the company 27 solely by reason of the foreign protected series being a 28 foreign protected series of the company. 29 2. The activities and affairs of a foreign protected 30 series are not attributable to the company or another foreign 31 protected series of the company solely by reason of the foreign 32 protected series being a foreign protected series of the 33 company. 34 Sec. 37. NEW SECTION . 489.12703 Authorization of foreign 35 -33- LSB 1163XC (9) 88 da/jh 33/ 52
S.F. _____ protected series. 1 1. Except as otherwise provided in this section and 2 subject to sections 489.12402 and 489.12404, the law of this 3 state governing the filing of a certificate of authority of 4 a foreign limited liability company to do business in this 5 state, including the consequences of not complying with that 6 law, applies to a foreign protected series of a foreign series 7 limited liability company as if the foreign protected series 8 were a foreign limited liability company formed separately 9 from the foreign series limited liability company and distinct 10 from the foreign series limited liability company and any 11 other foreign protected series of the foreign series limited 12 liability company. 13 2. An application by a foreign protected series of a foreign 14 series limited liability company for a certificate of authority 15 to do business in this state must include all of the following: 16 a. The name and jurisdiction of formation of the foreign 17 series limited liability company. 18 b. If the company has other foreign protected series, 19 the name and street and mailing address of an individual who 20 knows the name and street and mailing address of all of the 21 following: 22 (1) Each other foreign protected series of the foreign 23 series limited liability company. 24 (2) The foreign protected-series manager of and agent for 25 service of process for each other foreign protected series of 26 the foreign series limited liability company. 27 2A. If the jurisdiction under whose law the foreign 28 protected series was organized does not provide for the 29 protected series to obtain a certificate of existence, 30 the foreign protected series shall attach a certificate of 31 existence for the series limited liability company of which 32 it is a protected series. In that case, a foreign protected 33 series of the foreign series limited liability company will 34 be deemed to be in existence and good standing as long as the 35 -34- LSB 1163XC (9) 88 da/jh 34/ 52
S.F. _____ series limited liability company is in existence and good 1 standing. 2 3. The name of a foreign protected series applying for a 3 certificate of authority or authorized to do business in this 4 state must comply with section 489.12202 and may do so using a 5 fictitious name pursuant to section 489.108, if the fictitious 6 name complies with section 489.12202. 7 4. A foreign protected series that has in effect a 8 certificate of authority pursuant to this section shall file 9 with the secretary of state an amendment to its application if 10 there is any change in the information required by subsection 11 2. 12 Sec. 38. NEW SECTION . 489.12704 Disclosure required when 13 foreign series limited liability company or foreign protected 14 series party to proceeding. 15 1. Not later than thirty days after becoming a party 16 to a proceeding before a civil, administrative, or other 17 adjudicative tribunal of or located in this state or a tribunal 18 of the United States located in this state all of the following 19 apply: 20 a. A foreign series limited liability company shall disclose 21 to each other party the name and street and mailing address of 22 all of the following: 23 (1) Each foreign protected series of the company. 24 (2) Each foreign protected-series manager of and a 25 registered agent for service of process for each foreign 26 protected series of the company. 27 b. A foreign protected series of a foreign series limited 28 liability company shall disclose to each other party the name 29 and street and mailing address of all of the following: 30 (1) The company and each manager of the company and an agent 31 for service of process for the company. 32 (2) Any other foreign protected series of the company and 33 each foreign protected-series manager of and an agent for 34 service of process for the other foreign protected series. 35 -35- LSB 1163XC (9) 88 da/jh 35/ 52
S.F. _____ 2. If a foreign series limited liability company or foreign 1 protected series challenges the personal jurisdiction of 2 the tribunal, the requirement that the foreign company or 3 foreign protected series make disclosure under subsection 1 is 4 tolled until the tribunal determines whether it has personal 5 jurisdiction. 6 3. If a foreign series limited liability company or foreign 7 protected series does not comply with subsection 1, a party to 8 the proceeding may do any of the following: 9 a. Request the tribunal to treat the noncompliance as a 10 failure to comply with the tribunal’s discovery rules. 11 b. Bring a separate proceeding in the court to enforce 12 subsection 1. 13 SUBPART H 14 TRANSITIONAL PROVISIONS 15 Sec. 39. NEW SECTION . 489.12803 Transitional provisions. 16 1. Before January 1, 2021, this part governs only the 17 following: 18 a. A series limited liability company formed, or a protected 19 series established, on or after January 1, 2020. 20 b. A limited liability company that is a series limited 21 liability company before January 1, 2020, and elects, in the 22 manner provided in its operating agreement or by law for 23 amending the operating agreement, to be subject to this part. 24 2. If a series limited liability company elects under 25 subsection 1, paragraph “b” , to be subject to this part: 26 a. The election applies to each protected series of the 27 company, whenever established. 28 b. A manager of the company has the right to sign and 29 deliver to the secretary of state for filing any record 30 necessary to comply with this part, whether the record pertains 31 to the company, a protected series of the company, or both. 32 3. On and after January 1, 2021, this part governs all 33 series limited liability companies and protected series. 34 4. Until January 1, 2021, sections 489.12402 and 489.12404 35 -36- LSB 1163XC (9) 88 da/jh 36/ 52
S.F. _____ do not apply to a foreign protected series that was established 1 before January 1, 2020, or a foreign limited liability company 2 that became a foreign series limited liability company before 3 January 1, 2020. 4 5. This section is repealed on January 1, 2021. 5 Sec. 40. NEW SECTION . 489.12804 Savings clause. 6 This part does not affect an action commenced, proceeding 7 brought, or right accrued before January 1, 2020. 8 Sec. 41. EFFECTIVE DATE. This division of this Act takes 9 effect January 1, 2020. 10 DIVISION II 11 UNIFORM PROTECTED SERIES ACT —— CONFORMING AMENDMENTS 12 Sec. 42. Section 10.1, subsections 9 and 17, Code 2019, are 13 amended to read as follows: 14 9. a. “Farmers cooperative limited liability company” 15 means a limited liability company organized under chapter 489 , 16 if cooperative associations hold one hundred percent of all 17 membership interests in the limited liability company. Farmers 18 cooperative associations must hold at least seventy percent 19 of all membership interests in the limited liability company. 20 If more than one type of membership interest is established, 21 including any series as provided in section 489.1201 or 22 any class or group as provided in section 489.1201 , farmers 23 cooperative associations must hold at least seventy percent of 24 all membership interests of each type. 25 b. As used in paragraph “a” , a type of membership interest 26 in a limited liability company includes any of the following: 27 (1) (a) A series as provided in chapter 489, article 12. 28 (b) This subparagraph is repealed on January 1, 2021. 29 (2) A protected series as provided in chapter 489, article 30 12. 31 17. “Networking farmers limited liability company” means a 32 limited liability company, other than a family farm limited 33 liability company as defined in section 9H.1 , organized under 34 chapter 489 if all of the following conditions are satisfied: 35 -37- LSB 1163XC (9) 88 da/jh 37/ 52
S.F. _____ a. (1) Qualified farmers must hold at least fifty-one 1 percent of all membership interests in the limited liability 2 company. If more than one type of membership interest is 3 established, including any series as provided in section 4 489.1201 or any class or group as provided in section 489.1201 , 5 qualified farmers must hold at least fifty-one percent of all 6 membership interests of each type. 7 b. (2) Qualified persons must hold at least seventy percent 8 of all membership interests in the limited liability company. 9 If more than one type of membership interest is established, 10 including any series as provided in section 489.1201 or any 11 class or group as provided in section 489.1201 , qualified 12 persons must hold at least seventy percent of all membership 13 interests of each type. 14 b. As used in paragraph “a” , a type of membership interest 15 in a limited liability company includes any of the following: 16 (1) (a) A series as provided in chapter 489, article 12. 17 (b) This subparagraph is repealed on January 1, 2021. 18 (2) A protected series of a series limited liability company 19 as provided in chapter 489, article 12. 20 Sec. 43. Section 10.10, subsection 1, paragraph c, Code 21 2019, is amended to read as follows: 22 c. (1) Less than fifty percent of the interest in the 23 farmers cooperative limited liability company is held by 24 members which are parties to intra-company loan agreements. 25 If more than one type of membership interest is established, 26 including any series as provided in section 489.1201 or any 27 class or group as provided in section 489.1201 , less than 28 fifty percent of the interest in each type of membership shall 29 be held by members which are parties to intra-company loan 30 agreements. 31 (2) As used in subparagraph (1), a type of membership 32 interest in a limited liability company includes any of the 33 following: 34 (a) (i) A series as provided in chapter 489, article 12. 35 -38- LSB 1163XC (9) 88 da/jh 38/ 52
S.F. _____ (ii) This subparagraph division is repealed on January 1, 1 2021. 2 (b) A protected series of a series limited liability company 3 as provided in chapter 489, article 12. 4 Sec. 44. Section 489.101, Code 2019, is amended to read as 5 follows: 6 489.101 Short title. 7 1. This chapter may be cited as the “Revised Uniform Limited 8 Liability Company Act” . 9 2. In addition, article 12, part 1, of this chapter may be 10 cited as provided in section 489.1201. 11 Sec. 45. Section 489.801, subsection 1, Code 2019, is 12 amended to read as follows: 13 1. The Subject to sections 489.12402 and 489.12404, the 14 law of the state or other jurisdiction under which a foreign 15 limited liability company is formed governs all of the 16 following: 17 a. The internal affairs of the company. 18 b. The liability of a member as member and a manager as 19 manager for the debts, obligations, or other liabilities of the 20 company. 21 Sec. 46. Section 489.1201, Code 2019, is amended by adding 22 the following new subsection: 23 NEW SUBSECTION . 8. This section is repealed on January 1, 24 2021. 25 Sec. 47. Section 489.1202, Code 2019, is amended by adding 26 the following new subsection: 27 NEW SUBSECTION . 7. This section is repealed on January 1, 28 2021. 29 Sec. 48. Section 489.1203, Code 2019, is amended by adding 30 the following new subsection: 31 NEW SUBSECTION . 14. This section is repealed on January 1, 32 2021. 33 Sec. 49. Section 489.1204, Code 2019, is amended to read as 34 follows: 35 -39- LSB 1163XC (9) 88 da/jh 39/ 52
S.F. _____ 489.1204 Dissociation from a series. 1 1. Unless otherwise provided in the operating agreement, 2 a member shall cease to be associated with a series and to 3 have the power to exercise any rights or powers of a member 4 with respect to such series upon the assignment of all of the 5 member’s transferable interest with respect to such series. 6 Except as otherwise provided in an operating agreement, 7 an event under this chapter or identified in an operating 8 agreement that causes a member to cease to be associated with 9 a series, by itself, shall not cause such member to cease to 10 be associated with any other series or terminate the continued 11 membership of a member in the limited liability company. 12 2. This section is repealed on January 1, 2021. 13 Sec. 50. Section 489.1205, Code 2019, is amended by adding 14 the following new subsection: 15 NEW SUBSECTION . 4. This section is repealed on January 1, 16 2021. 17 Sec. 51. Section 489.1206, Code 2019, is amended to read as 18 follows: 19 489.1206 Foreign series. 20 1. A foreign limited liability company that is authorized 21 to do business in this state under article 8 which is governed 22 by an operating agreement that establishes or provides for the 23 establishment of designated series of transferable interests 24 having separate rights, powers, or duties with respect to 25 specified property or obligations of the foreign limited 26 liability company, or profits and losses associated with the 27 specified property or obligations, shall indicate that fact on 28 the application for a certificate of authority as a foreign 29 limited liability company. In addition, the foreign limited 30 liability company shall state on the application whether the 31 debts, liabilities, and obligations incurred, contracted for, 32 or otherwise existing with respect to a particular series, if 33 any, are enforceable against the assets of such series only, 34 and not against the assets of the foreign limited liability 35 -40- LSB 1163XC (9) 88 da/jh 40/ 52
S.F. _____ company generally. 1 2. This section is repealed on January 1, 2021. 2 Sec. 52. CODE EDITOR DIRECTIVE. 3 1. The Code editor is directed to make the following 4 transfers: 5 a. Section 489.1201, as amended by this division of this 6 Act, to section 489.12901. 7 b. Section 489.1202, as amended by this division of this 8 Act, to section 489.12902. 9 c. Section 489.1203, as amended by this division of this 10 Act, to section 489.12903. 11 d. Section 489.1204, as amended by this division of this 12 Act, to section 489.12904. 13 e. Section 489.1205, as amended by this division of this 14 Act, to section 489.12905. 15 f. Section 489.1206, as amended by this division of this 16 Act, to section 489.12906. 17 2. The Code editor shall codify the sections described in 18 subsection 1 as new part 2 of article 12 of chapter 489. 19 3. The Code editor shall correct internal references in the 20 Code and in any enacted legislation as necessary due to the 21 enactment of this section. 22 Sec. 53. EFFECTIVE DATE. This division of this Act takes 23 effect January 1, 2020. 24 DIVISION III 25 MANAGEMENT OF LIMITED LIABILITY COMPANIES 26 Sec. 54. Section 489.407, subsection 2, paragraph f, Code 27 2019, is amended by striking the paragraph. 28 DIVISION IV 29 DISSOLUTION 30 Sec. 55. Section 489.105, subsection 2, paragraph a, Code 31 2019, is amended to read as follows: 32 a. Delivering to the secretary of state for filing a 33 statement of change under section 489.114 , an amendment to the 34 certificate under section 489.202 , a statement of correction 35 -41- LSB 1163XC (9) 88 da/jh 41/ 52
S.F. _____ under section 489.206 , a biennial report under section 489.209 , 1 a statement of withdrawal or a statement of rescission under 2 section 489.701A, or a statement of termination under section 3 489.702, subsection 2 , paragraph “b” , subparagraph (6). 4 Sec. 56. Section 489.117, subsection 1, Code 2019, is 5 amended by adding the following new paragraphs: 6 NEW PARAGRAPH . 0a. Statement of rescission . . . . No fee 7 NEW PARAGRAPH . 00a. Statement of withdrawal . . . No fee 8 Sec. 57. NEW SECTION . 489.701A Rescinding dissolution. 9 1. A limited liability company may rescind its dissolution, 10 unless a statement of termination applicable to the company has 11 become effective, a district court has entered an order under 12 section 489.701, subsection 1, paragraph “d” , dissolving the 13 company, or the secretary of state has dissolved the company 14 under section 489.705. 15 2. Rescinding dissolution under this section requires all 16 of the following: 17 a. The affirmative vote or consent of each member. 18 b. If the limited liability company has delivered to the 19 secretary of state for filing a statement of dissolution and 20 any of the following applies: 21 (1) The statement has not become effective, delivery 22 to the secretary of state for filing of a statement of 23 withdrawal under section 489.205 applicable to the statement 24 of dissolution. 25 (2) If the statement of dissolution has become effective, 26 delivery to the secretary of state for filing of a statement of 27 rescission stating the name of the company and that dissolution 28 has been rescinded under this section. 29 3. If a limited liability company rescinds its dissolution 30 all of the following apply: 31 a. The company resumes carrying on its activities and 32 affairs as if the dissolution had never occurred. 33 b. Subject to paragraph “c” , any liability incurred by the 34 company after the dissolution and before the rescission has 35 -42- LSB 1163XC (9) 88 da/jh 42/ 52
S.F. _____ become effective is determined as if dissolution had never 1 occurred. 2 c. The rights of a third party arising out of conduct in 3 reliance on the dissolution before the third party knew or had 4 notice of the rescission may not be adversely affected. 5 EXPLANATION 6 The inclusion of this explanation does not constitute agreement with 7 the explanation’s substance by the members of the general assembly. 8 GENERAL —— “REVISED UNIFORM LIMITED LIABILITY COMPANY 9 ACT”. This bill enacts new or amends existing sections in 10 the “Revised Uniform Limited Liability Company Act” (RULLCA) 11 as adopted by the national conference on commissioners of 12 uniform state laws, more commonly referred to as the uniform 13 law commissioners (ULC) (see Code chapter 5), enacted by the 14 General Assembly by 2008 Iowa Acts, chapter 1162, and codified 15 in Code chapter 489. 16 IOWA’S RULLCA. Code chapter 489 includes 13 articles 17 governing limited liability companies (LLCs), including their 18 formation; relations between members, managers, and other 19 persons (e.g., creditors) dealing with an LLC; transferrable 20 interests and rights; members’ dissociations; the LLC’s 21 dissolution and windup; foreign LLCs; actions by members; 22 mergers, conversions, and domestication; and professional LLCs. 23 Article 12 provides for a special type of business organization 24 referred to as a “series LLC”. Article 13 includes a number 25 of miscellaneous provisions, including providing for the 26 uniformity of the Code chapter’s application and construction, 27 the relationship of Code chapter 489 to the federal Electronic 28 Signatures in Global and National Commerce Act, and a savings 29 clause (allowing actions commenced prior to the Act’s effective 30 date). The bill enacts the Uniform Protected Series Act (UPSA) 31 and amends provisions allowing for the cancellation of an LLC’s 32 voluntary dissolution. 33 GENERAL —— LLC DESCRIPTION. An LLC is a type of 34 unincorporated business organization that combines features 35 -43- LSB 1163XC (9) 88 da/jh 43/ 52
S.F. _____ associated with for-profit corporations (Code chapter 490) and 1 partnerships (Code chapter 486A). When adequately capitalized 2 and operating pursuant to its operating agreement, an LLC 3 resembles a corporation operating under its articles of 4 incorporation and bylaws, by shielding its members (equity 5 holders) from the organization’s liabilities (debts). It 6 also resembles a partnership in that business income passes 7 through the organization to its members who report their 8 respective share of profits or losses on individual rather 9 than the organization’s (corporate) tax returns. An LLC 10 is formed by filing a certificate of organization with the 11 secretary of state (comparable to a corporation’s articles 12 of incorporation), while many of its powers and duties are 13 governed by contract (referred to as an operating agreement 14 and generally comparable to a partnership agreement). The 15 operating agreement may control the LLC’s governance (e.g., 16 whether it is member-managed or manager-managed) and the rights 17 and duties of its members and managers. A member’s interest 18 refers to the member’s proportionate equity position in the LLC 19 and associated control of its business decisions (affairs and 20 internal activities). A transferable interest refers to the 21 right of a member or former member to receive distributions 22 from the LLC in accordance with the LLC’s operating agreement. 23 Absent a provision in the operating agreement to the contrary, 24 a transferable interest does not include a unilateral 25 transfer of control rights. Dissociation occurs when a member 26 withdraws from an LLC which may be on either a voluntary or an 27 involuntary basis. 28 GENERAL —— IOWA SERIES (ARTICLE 12). Under Code chapter 489, 29 article 12, an LLC’s operating agreement may provide for the 30 establishment of a designated series. Under this arrangement, 31 an LLC acts as an umbrella organization for any number of 32 segregated transferable interests. The term commonly used to 33 describe the umbrella organization is a series LLC. So long 34 as certain conditions are satisfied, the liabilities (e.g., 35 -44- LSB 1163XC (9) 88 da/jh 44/ 52
S.F. _____ debts) and obligations (e.g., contractual promises) by one 1 series cannot be imputed to either the series LLC or another 2 series under its umbrella (Code section 489.1201). Likewise, 3 as far as income, any gain or loss of a series may be allocated 4 directly to the members of the series rather than to the series 5 LLC or another series. Because a series is a component of a 6 series LLC it cannot be completely independent. The article 7 includes special provisions for a series LLC, including for its 8 formation (Code section 489.1201), management (Code section 9 489.1202), distributions conducted as part of a dissolution 10 (Code section 489.1203), a member’s dissociation (Code section 11 489.1204), its termination (Code section 489.1205), and a 12 foreign series LLC (Code section 489.1206). 13 DIVISION I —— UNIFORM PROTECTED SERIES ACT —— GENERAL. 14 Division I enacts the UPSA adopted by the ULC which in time 15 will entirely replace current article 12. The provisions of 16 the UPSA are codified and fit within the other provisions of 17 the RULLCA. The article as amended contains two parts: part 1 18 includes the sections of the UPSA taking the place of current 19 Iowa series LLC sections and part 2 includes the current Iowa 20 series sections temporarily transferred to another part of 21 article 12 until repealed on January 1, 2021. 22 PART 1, SUBPART A —— GENERAL PROVISIONS. This subpart 23 includes definitions, a description of the nature of a 24 protected series; its power, purpose, and duration; how the 25 protected series is governed by the LLC’s operating agreement; 26 and rules for applying certain provisions of an existing LLC to 27 a protected series. Specifically, it includes the article’s 28 short title (new Code section 489.12101), describes terms used 29 in the article (new Code sections 489.12102 and 489.12103), 30 including defining “protected series” which replaces the term 31 “series” (new Code section 489.12102(18)). It defines “series 32 limited liability company” to mean a LLC that has at least one 33 protected series (or is structured to have a protected series) 34 under its umbrella (new Code section 489.12102(12)). The bill 35 -45- LSB 1163XC (9) 88 da/jh 45/ 52
S.F. _____ defines a number of other terms such as “asset” which includes 1 property in which a series LLC or protected series holds title 2 and therefore may exercise certain rights including transfer 3 (new Code section 489.12102(1)). An “associated asset” of a 4 series LLC belongs only to (i.e., is “associated with”) the 5 series LLC and an “associated asset” of a protected series 6 belongs only to (i.e., is “associated with”) that protected 7 series (new Code sections 489.12102(2) and 489.12301(1)). 8 A “protected-series transferable interest” is a type of 9 transferable interest in which an associated member has a 10 right to receive a distribution (share of an asset) from a 11 protected series under an operating agreement (Code section 12 489.12101(10)). A “protected-series manager” (new Code section 13 489.12102(9)) is a type of manager (Code section 489.102) who 14 exercises all powers necessary to direct the activities and 15 affairs of the protected series (Code section 489.12102(9)). A 16 protected series may sue and be sued in its own name (new Code 17 section 489.12104(1)) and has the same powers and purposes as 18 the series LLC (new Code section 489.12104(2)). Generally, a 19 protected series cannot survive the termination of its umbrella 20 series (new Code section 489.12104(3)). A protected series 21 cannot be a member of another series LLC or establish another 22 protected series (new Code section 489.12104(4)). A protected 23 series is subject to choice of law rules in cases where a 24 dispute arises between parties from different states (new Code 25 section 489.12105). A series LLC is governed by an operating 26 agreement (new Code section 489.12106). In certain cases, 27 the UPSA controls the series LLC and any protected series 28 regardless of the terms of an operating agreement (new Code 29 section 489.12107(1)). Various provisions govern how the UPSA 30 and the RULLCA are to be interpreted in harmony. 31 PART 1, SUBPART B —— ESTABLISHING PROTECTED SERIES. This 32 subpart provides for how a protected series is established. 33 First, it requires a vote of the series LLC’s membership (new 34 Code section 489.12201(1)). A protected series designation 35 -46- LSB 1163XC (9) 88 da/jh 46/ 52
S.F. _____ must be filed with the secretary of state (new Code section 1 489.12201(2)). The name of a protected series must comply with 2 the naming conventions applicable to an ordinary LLC but have 3 a “protected series” or “PS” designation (new Code section 4 489.12202). A series LLC (acting through its own registered 5 agent) serves as the recipient for service for all its umbrella 6 protected series (new Code section 489.12203(1)). A number 7 of provisions govern how a protected series receives service 8 of process (new Code sections 489.12203 and 489.12204). A 9 protected series may obtain a certificate of existence from 10 the secretary of state (new Code section 489.12205). An LLC 11 is required to file a biennial report with the secretary of 12 state under Code section 489.209. The report must include 13 information regarding its series (new Code section 489.12206). 14 PART 1, SUBPART C —— ASSETS, MEMBERS, MANAGEMENT, AND 15 INFORMATION. Unless provided otherwise in an operating 16 agreement, the owner of an asset is responsible for meeting 17 the record-keeping requirements for that asset. An asset 18 is only associated with a protected series or series LLC 19 if there are adequate records describing the asset (new 20 Code section 489.12301(2)). Only a member of a series LLC 21 may be an associated member of a protected series holding 22 a transferrable interest in the protected series (new Code 23 section 489.12302(1)). A transferable interest in a protected 24 series must initially be owned either by the series LLC or 25 by an associated member of the protected series (new Code 26 section 489.12303(1)). A protected series may have multiple 27 managers (new Code section 489.12304(1)) in the same manner as 28 an ordinary LLC under Code section 489.407. A manager of a 29 protected series owes a fiduciary duty to the protected series 30 rather than to the series LLC or any other protected series 31 unless the manager also manages that protected series (new 32 Code section 489.12304(4)). Any derivative claim under RULLCA 33 (article 9) applies to such claim brought against a protected 34 series (Code section 489.12304(6)). The bill does not include 35 -47- LSB 1163XC (9) 88 da/jh 47/ 52
S.F. _____ a provision in the UPSA that states an associated member of a 1 protected series has the same power to act as an agent and may 2 bind the protected series in the same manner as a member of 3 an ordinary LLC (presumably member-managed under Code section 4 489.407). Various parties have a limited right to acquire 5 information regarding a protected series, including a member 6 of the series LLC, a former associated member of a protected 7 series, the legal representative of an associated member of a 8 protected series, and a protected-series manager of a protected 9 series (new Code section 489.12305). 10 PART 1, SUBPART D —— LIABILITY LIMITATIONS AND CLAIMS. 11 This subpart limits the liability of certain persons and the 12 enforcement of claims, by creating two types of liability 13 shields: vertical and horizontal. A vertical shield applies 14 to members and managers from liability in the same manner as 15 an ordinary LLC. A horizontal shield applies to a protected 16 series of a series LLC and its associated assets from liability 17 for the debts or obligations of the series LLC or another 18 protected series. A person is not liable for the debts and 19 obligations of a protected series or a series LLC solely 20 because the person is an associated member, protected-series 21 manager, or protected-series transferee of a protected series 22 (new Code section 489.12401(1)). However, notwithstanding 23 these shields, a claimant could bring an action against a 24 protected series under certain circumstances if the same 25 action could be brought against an ordinary LLC (new Code 26 section 489.12402(1)). Remedies afforded a judgment creditor 27 of an associated member, protected-series transferee, or 28 series limited liability company holding a protected-series 29 transferable interest are the same as afforded to a judgment 30 creditor in the case of an ordinary LLC under Code section 31 489.503 (new Code section 489.12403). Creditors are provided 32 different rights to assets if they are asserting a claim to 33 pierce the organization’s veil under principles of equity (new 34 Code section 489.12402) or are asserting a claim to reach 35 -48- LSB 1163XC (9) 88 da/jh 48/ 52
S.F. _____ “nonassociated assets” meaning that the series LLC or protected 1 series has not acquired title (new Code section 489.12404). 2 PART 1, SUBPART E —— DISSOLUTION AND WINDING UP AFFAIRS. 3 If a series LLC dissolves then each protected series under 4 its umbrella dissolves simultaneously (new Code section 5 489.12501(1)). The dissolution of a protected series occurs 6 due to a provision in its operating agreement, the unanimous 7 action of its members, or pursuant to court order (new Code 8 section 489.12501(2)-(5)). Once the protected series is to be 9 dissolved, its activities and affairs are to be wound up in the 10 same manner as an ordinary LLC (new Code section 489.12502(1)) 11 referring to Code sections 489.702 through 489.704. In the 12 case of the dissolution of a series LLC, it cannot wind up 13 until each of its protected series has wound up (new Code 14 section 489.12502(4)). If a series LLC is administratively 15 dissolved by the secretary of state, and later reinstated, 16 its protected series ceases winding up (new Code section 17 489.12503). 18 PART 1, SUBPART F —— CHANGING TRANSACTIONS. This subpart 19 restricts mergers and other changing transactions involving 20 LLCs and protected series. A number of new definitions apply. 21 A “continuing protected series” refers to a protected series 22 that continues as part of the surviving series LLC (new Code 23 section 489.12601(3)). A “relocated protected series” refers 24 to a protected series which was part of a nonsurviving series 25 LLC and becomes part of the surviving series LLC (new Code 26 section 489.12601(6)). A protected series is prohibited from 27 being a direct party to an acquisition, conversion, or merger 28 (new Code section 489.12602(1)). It also cannot be a direct 29 party to a domestication (a business organization formed in 30 multiple states) (new Code section 489.12602(2)). One type of 31 allowed merger involves two existing LLCs, even if one LLC is 32 not a series LLC (new Code sections 489.12603 and 489.12604). 33 A plan of merger must comply with the same requirements 34 applicable to an ordinary LLC under Code sections 489.1001 35 -49- LSB 1163XC (9) 88 da/jh 49/ 52
S.F. _____ through 489.1005 as well as a number of other requirements 1 stated in a plan of merger (new Code section 489.12605) and 2 articles of merger (new Code section 489.12606). A plan of 3 merger sets forth the management and affairs or affairs of the 4 protected series, including its termination, establishment, or 5 relocation, assets and liabilities, powers and rights, and name 6 (new Code section 489.12607). Generally, a creditor that has a 7 right against an LLC or protected series that was terminated 8 because of a merger may retain rights against the surviving 9 series LLC or protected series (new Code section 489.12608(1)). 10 In other cases, a creditor’s rights are not affected so long as 11 the liability was incurred after the merger (new Code section 12 489.12608(3)). 13 PART 1, SUBPART G —— FOREIGN PROTECTED SERIES. The law where 14 a foreign (out-of-state) series LLC is created (referred to as 15 the “law of the jurisdiction of formation”) generally governs 16 its protected series, including its formation and governance, 17 as well as the rights and duties of its associated members, 18 protected series managers, or protected-series transferees 19 (new Code section 489.12701(1)). A foreign protected series 20 doing business in another state cannot assert that its law 21 governs another foreign protected series not doing business 22 in that state (new Code section 489.12702). Generally, a 23 foreign protected series is to be treated like a foreign LLC 24 for purposes of registering to do in-state business (new Code 25 section 489.12703). In the case of litigation, within 30 days 26 after becoming a party, a foreign series LLC or a foreign 27 protected series must disclose to any adverse party identifying 28 information regarding the foreign series LLC and each of its 29 foreign series (new Code section 489.12704(1)). 30 PART 1, SUBPART H —— TRANSITIONAL PROVISIONS. This subpart 31 does not include two sections of the UPSA that are already 32 included in Code chapter 489, article 13, including section 33 801 that addresses uniformity of application (Code section 34 489.1301) and section 802 that addresses the federal Electronic 35 -50- LSB 1163XC (9) 88 da/jh 50/ 52
S.F. _____ Signatures in Global and National Commerce Act (Code section 1 489.1302). It also does not include a severability clause 2 (that would provide for the retention of other provisions 3 in the part if one provision were held invalid) since that 4 provision already applies throughout the Code (Code section 5 4.12). 6 The provisions of UPSA, codified as new sections in article 7 12, part 1, take effect on January 1, 2020, and applies only 8 to a series LLC formed or a protected series established on or 9 after that date. One exception applies if a series LLC formed 10 prior to that date elects to be governed under the new part 11 (new Code section 489.12803(1)). Otherwise on or after January 12 1, 2021, all series LLCs and each protected series are governed 13 under the new part (new Code section 489.12803(1)). However, 14 until January 1, 2021, certain claims authorized under new 15 Code sections 489.12402 and 489.12404 cannot proceed against a 16 foreign series LLC formed prior to January 1, 2020, or foreign 17 LLC series that became a foreign series before that date (new 18 Code section 489.12803(4)). 19 DIVISION II —— UNIFORM PROTECTED SERIES ACT —— CONFORMING 20 AMENDMENTS. The bill amends the sections currently codified 21 in article 12 (Iowa series) to provide for their repeal on 22 January 1, 2021, the date when all series LLC and umbrella 23 series must comply with the new Code sections codified in 24 part 1 (UPSA). It also provides for the transfer of current 25 sections to new part 2. It amends other provisions in the 26 Code to conform with part 1, including sections that restrict 27 agricultural landholding by LLCs (Code chapter 10). It also 28 amends provisions relating to the law governing foreign LLCs by 29 referencing foreign series LLCs (Code section 489.801). The 30 division takes effect January 1, 2020. 31 DIVISION III —— DISASSOCIATION —— MANAGEMENT. The bill 32 eliminates a provision which provides for member-managed 33 limited liability companies, by removing a reference to 34 approving a merger, conversion, or domestication (Code section 35 -51- LSB 1163XC (9) 88 da/jh 51/ 52
S.F. _____ 489.407(2)(f)). There are two different methods of managing 1 a LLC. By statutory default (Code section 489.407(1)), a 2 LLC is member-managed, meaning that all members participate 3 in decisions managing the activities and affairs to the 4 organization (a partnership model). Alternatively, a 5 manager-managed LLC, formed and governed under an operating 6 agreement, provides that certain members or nonmembers are 7 designated to take such actions while the remaining members act 8 as passive investors (corporate model). 9 DIVISION IV —— DISSOLUTION. The bill provides that an LLC 10 may rescind a voluntary dissolution (new Code section 489.701A) 11 and consequently the winding up of its affairs and activities 12 (Code section 489.702). A dissolution is a fundamental 13 change transaction that triggers the LLC’s termination. It is 14 accomplished by a provision in the operating agreement, the 15 unanimous consent of its members, by district court order in 16 an action for dissolution, or by an administrative declaration 17 issued by the secretary of state (e.g., for nonpayment of 18 a fee). The bill provides that in cases of a voluntary 19 dissolution in which a statement of dissolution is filed, an 20 LLC may rescind such a statement by filing with the secretary 21 of state a statement of rescission. Generally, once an LLC 22 rescinds its dissolution, the LLC carries on its affairs as if 23 the dissolution had never occurred. One exception applies to 24 protect a person (creditor) who would be adversely affected by 25 the retroactive effect of the statement of rescission. 26 -52- LSB 1163XC (9) 88 da/jh 52/ 52