NRAI Compliance Updates - September, 2006

NRAI Compliance Updates - September 2006

Greetings,

This month we continue to see a modest volume of legislative activity. I believe this will continue until after the November elections. Even so, California has passed a bill regarding financial reporting and has sent two more topical Bills to the Governor for signature. Wyoming has introduced three legislative drafts including one that authorizes Series LLC’s in that jurisdiction. The three Wyoming Bills are reproduced below in their entirety as there is no active web link to them.

Robert K. Rowell

New, Pending and Passed Legislation

California

AB 1959

Provides that the annual report, as specified, issued by corporations, partnerships, limited liability companies or capital access companies shall include a statement of cash flows. Specifically this bill:

1) Clarifies that a "regulated management company" is a regulated investment company as defined in the Federal Internal Revenue Code.

2) Provides that consent in writing for purposes of holding a meeting or action without prior notice, includes facsimile, telegraphic, or other electronic means.

3) Makes various technical and non-substantive changes.

Full Text available at: http://info.sen.ca.gov/pub/bill/asm/ab_1951-2000/ab_1959_bill_20060907_chaptered.pdf

Current Bill Status: September 7, 2006 Chaptered by Secretary of State - Chapter 214 Statutes of 2006.

AB 2914

Extends the sunset date on licensed architects' ability to organize as limited liability partnerships (LLPs) to January 1, 2012, and increases the minimum liability coverage
requirements for architectural LLPs to $1 million (from $500,000) as of January 1, 2008.

Full Text available at: http://info.sen.ca.gov/pub/bill/asm/ab_2901-2950/ab_2914_bill_20060907_enrolled.pdf

Current Bill Status: September 12, 2006 Enrolled and to the Governor at 1:30 p.m.

SB 1207

This bill allows a corporation to amend its bylaws to allow the use of majority (rather than plurality) voting to elect a member of the board of directors of a publicly-traded California corporation, in an uncontested election, as specified, and requires the term of a seated member of the board who fails to receive a majority vote in an uncontested election to end within 90 days of the election.

Full Text available at: http://info.sen.ca.gov/pub/bill/sen/sb_1201-1250/sb_1207_bill_20060901_enrolled.pdf

Current Bill Status: September 7, 2006 sent to Governor

Wyoming

HD 52

WORKING DRAFT

HOUSE BILL NO.
Limited liability limited partnerships.
Sponsored by: Joint Corporations, Elections and Political Subdivisions Interim Committee

A BILL for AN ACT relating to limited partnerships; providing for limited liability limited partnerships; limiting liability of general partners in limited liability limited partnerships; providing for registration of foreign limited liability limited partnerships; providing definitions; providing conforming amendments; and providing for an effective date.

Be It Enacted by the Legislature of the State of Wyoming:

Section 1. W.S. 17-14-202(a) by creating new paragraphs (xiv) and (xv) and renumbering (xiv) as (xvi), 17-14-301(a) by creating a new paragraph (xiv) and renumbering (xiv) as (xv), 17-14-302(b)(ii) and (iii) and by creating a new paragraph (v), 17-14-503, 17-14-1002(a) 2007 STATE OF WYOMING 07LSO-0052.W1
by creating a new paragraph (ix) and renumbering (ix) as (x) are amended to read:

17-14-202. Definitions.

(a) As used in this act, unless the context otherwise requires:

(xiv) "Foreign limited liability limited partnership" means a foreign limited partnership whose general partners have limited liability for the obligations of the foreign limited partnership under a provision similar to W.S. 17-14-503; (xv) "Limited liability limited partnership", except in the phrase "foreign limited liability limited partnership" means a limited partnership whose certificate of limited partnership states that the limited partnership is a limited liability limited partnership; (xiv)(xvi) "This act" means W.S. 17-14-201 through 17-14-1104.

17-14-301. Certificate of limited partnership.

(a) In order to form a limited partnership a certificate of limited partnership shall be executed and filed in the office of the secretary of state. The certificate shall set forth:

(xiv) Whether the limited partnership is a limited liability limited partnership; and
(xiv)(xv) Any other matters the partners determine to include therein.

17-14-302. Amendment of certificate.

(b) Within thirty (30) days after the occurrence of any of the following events and except as provided by subsection (f) of this section, an amendment to a certificate of limited partnership reflecting the occurrence of the event shall be filed:

(ii) The admission of a new general partner; or

(iii) The withdrawal of a general partner; or.

(v) The election of all the partners to become a limited liability limited partnership.

17-14-503. General powers and liabilities.

(a) Except as provided in this act, in subsections (b) and (c) of this section or in the partnership agreement, a general partner of a limited partnership has the rights and powers and is subject to the restrictions and liabilities of a partner in a partnership without limited partners.

(b) A person that becomes a general partner of an existing limited partnership is not personally liable for an obligation of a limited partnership incurred before the person became a partner.

(c) An obligation of a limited partnership incurred while the limited partnership is a limited liability limited partnership, whether arising in contract, tort or otherwise, is solely the obligation of the limited partnership. A general partner is not personally liable,
directly or indirectly, by way of contribution or otherwise, for such an obligation solely by reason of being or acting as a general partner of a limited liability limited partnership. This subsection applies despite anything inconsistent in the partnership agreement that
existed immediately before the election by all the partners to become a limited liability limited partnership.

17-14-1002. Registration.

(a) Before transacting business in this state, a foreign limited partnership shall register with the secretary of state. In order to register, a foreign limited partnership shall submit to the secretary of state, in duplicate, an application for registration as a foreign limited partnership, signed by a general partner and setting forth:

(ix) Whether the foreign limited partnership is a foreign limited liability limited partnership; and

(ix)(x) The address of the office at which is kept a list of the names and addresses of the limited partners and their capital contributions, together with an undertaking by the foreign limited partnership to keep those records until the foreign limited partnership's
registration in this state is cancelled or withdrawn.

Section 2. This act is effective July 1, 2007.

HD 56

Limited liability companies.

A BILL for AN ACT relating to limited liability companies; providing for series limited liability companies as specified; providing for governing law; providing definitions;
providing for electronic signatures; providing duration for limited liability companies; providing requirements for operating agreements; providing for mail delivery of
articles of organization; limiting liability of limited liability companies to creditors obtaining an interest from members; providing for annual fees; and providing for an 9
effective date.

Be It Enacted by the Legislature of the State of Wyoming:

Section 1. W.S. 17-15-148 and 17-15-149 are created to read:

17-15-148. Governing law.

(a) With respect to any limited liability company organized under the laws of Wyoming, the laws of Wyoming shall govern its organization, internal affairs and the liability of its members, managers and transferees.

(b) The laws of the state, territory, possession or other jurisdiction or country under which a foreign limited liability company is organized shall govern its organization, internal affairs and the liability of its members, managers and transferees.

17-15-149. Series of members, managers or limited liability company interests.

(a) A series limited liability company is a limited liability company whose articles of organization contain a statement that the company is a series limited liability
company. The articles of organization shall include the name of each series in the limited liability company and the name and address of the manager or the managing member
or members of each series in the limited liability company.

(b) A limited liability company formed under Wyoming law may convert to a series limited liability company by amending its articles of organization to include a statement required by subsection (a) of this section.

(c) The operating agreement of a limited liability company may establish or provide for the establishment of one (1) or more designated series of members, managers, or limited liability company interests having separate rights, powers or duties with respect to specified property or obligations of the limited liability company or profits and losses associated with specified property or obligations and any such series may have a separate business purpose or investment objective.

(d) With respect to debts, liabilities, obligations and expenses incurred by a limited liability company or its series:

(i) Notwithstanding anything to the contrary set forth in this chapter or other applicable law, the debts, liabilities, obligations and expenses incurred, contracted for or otherwise existing with respect to a particular series shall be enforceable against the assets of that
series only, and not against the assets of the limited liability company generally or any other series thereof if:

(A) The operating agreement establishes or provides for the establishment of one (1) or more series;

(B) Separate and distinct records are maintained for each series and the assets associated with each series are held in separate and distinct records, directly or indirectly, including through a nominee or otherwise and accounted for in separate and distinct records separately from the other assets of the limited liability company, or any other series thereof;

(C) The operating agreement of the limited liability company provides for series limited liability companies; and

(D) Notice of the limitation on liabilities of a series as provided in this subsection is set forth in the articles of organization of the limited liability company.

(ii) Unless otherwise provided in the operating agreement, none of the debts, liabilities, obligations and expenses incurred, contracted for or otherwise existing with respect to the limited liability company generally or any other series thereof shall be enforceable against the assets of the new series;

(iii) Notice in the articles of organization of the limitation on liabilities of a series as provided in paragraph (i) of this subsection shall be sufficient for all purposes of this subsection, whether or not the limited liability company has established any series when the notice is included in the articles of organization. There shall be no requirement that any specific series of the limited liability company be referenced in the notice. The fact that the articles of organization that contain the foregoing notice of the limitation on liabilities of a series is on file in the office of the secretary of state shall constitute notice of the limitation on liabilities of a series.

(e) Notwithstanding W.S. 17-15-113, under the operating agreement or under another agreement, a member or manager may agree to be obligated personally for any or all
of the debts, obligations and liabilities of one (1) or more series.

(f) The operating agreement of the limited liability company may provide for classes or groups of members or managers associated with a series having the relative rights, powers and duties that the operating agreement may provide. The operating agreement may provide for the future creation of additional classes or groups of members or managers associated with the series having the relative rights, powers and duties as may from time to time be established, including rights, powers and duties senior to existing classes and groups of members or managers associated with the series. The operating agreement may provide for the taking of an action, including the amendment of the limited liability company operating agreement, without the vote or approval of any member or manager or class or group of members or managers, including an action to create under the provisions of the operating agreement a class or group of the series of limited liability company interests that was not previously outstanding. The operating agreement may provide that any member or class or group of members associated with a
series shall have no voting rights.

(g) The operating agreement of the limited liability company may grant to all or certain identified members or managers or a specified class or group of the members or managers associated with a series the right to vote separately or with all or any class or group of the members or managers associated with the series on any matter. Voting by members or managers associated with a series may be on a per capita, number, financial interest, class, group or any other basis.

(h) Unless otherwise provided in an operating agreement, the management of a series shall be vested in the members associated with that series in proportion to their contribution to capital of the series, as adjusted from time to time to properly reflect any additional contributions or withdrawals by the members of the series. However, if provision is made in the operating agreement, management of the series may be vested in a manager who shall be elected by the members of the series in the manner prescribed by the operating agreement. If the operating agreement provides for the management of the series by a manager, unless the operating agreement expressly dispenses with or substitutes for the requirement of annual elections, the manager shall be elected annually by the members in a manner provided in the operating agreement. The manager or persons appointed by the manager shall also hold the offices and have the responsibilities accorded to them by the members and set out in the operating agreement. A manager shall cease to be a manager with respect to a series as provided in the operating agreement. Except as otherwise provided in the operating agreement, any event
under this chapter or in the operating agreement that causes a manager to cease to be a manager with respect to a series shall not, in itself, cause such manager to cease to be a manager of the limited liability company or with respect to any other series thereof.

(j) Unless otherwise provided in the operating agreement, a member shall cease to be associated with a series and to have the power to exercise any rights or powers of a member with respect to that series upon the assignment of all of the member's limited liability company interest with respect to that series. Except as otherwise provided in an operating agreement, any event under this chapter or an operating agreement that causes a member to cease to be associated with a series, shall not, in itself, cause such member to cease to be associated with any other series or terminate the continued membership of a member in the limited liability company or cause the termination of the series, regardless of whether the member was the last remaining member associated with the series.

(k) Subject to W.S. 17-15-123 through 17-15-129, except to the extent otherwise provided in the operating agreement, a series may be terminated and its affairs wound
up without causing the dissolution of the limited liability company. The termination of a series established in accordance with subsection (b) of this section shall not affect the limitation on liabilities of the series provided by subsection (c) of this section. A series shall be terminated and its affairs shall be wound up upon the occurrence of the same events as provided in this chapter for the dissolution of a limited liability company. A series shall also be terminated and its affairs shall be wound up upon the dissolution of the limited liability company pursuant to W.S. 17-15-123 through 17-15-129. 21

(m) A foreign limited liability company that applies for a certificate of authority to transact business in this state pursuant to W.S. 17-16-1533 which is governed by an
operating agreement that establishes or provides for the establishment of designated series of members, managers or limited liability company interests having separate rights,
powers or duties with respect to specified property or obligations of the foreign limited liability company, or profits and losses associated with specified property or obligations, shall indicate that fact on the application for a certificate of authority. In addition, the foreign limited liability company shall state on the application whether the debts, liabilities and obligations incurred, contracted for or otherwise existing with respect to a
particular series, if any, shall be enforceable against the assets of that series only, and not against the assets of the foreign limited liability company generally or any other series thereof, and, unless otherwise provided in the operating agreement, none of the debts, liabilities, obligations and expenses incurred, contracted for or otherwise existing with respect to the foreign limited liability company generally or any other series thereof shall be enforceable against the assets of the series. (n) Except to the extent modified in this section, the provisions of this chapter which are generally applicable to limited liability companies, their managers, members and transferees shall be applicable to each particular series with respect to the operation of that series.

Section 2. W.S. 17-15-102(a) by creating new paragraphs (vi) through (ix) and renumbering (vi) as (x), 17-15-106, 17-15-107(a)(ii), (c) and by creating new subsections (d) through (f), 17-15-110(a)(ii), 17-15-114(b), 17-15-122, 17-15-132(a)(vi) and 17-15-145 are amended to read:

17-15-102. Definitions.

(a) As used in this act:

(vii) "Delivery", unless otherwise specified, means delivery by hand, mail, facsimile or electronic transfer;

(viii) "Operating agreement" means any written agreement, whether referred to as a limited liability company agreement, operating agreement or otherwise, of the member or members of a limited liability company as to affairs of a limited liability company and the conduct of its business;

(ix) "Transferee" and "assignee" means any person or entity who obtains an interest in units of a limited liability company but is not a member of the limited liability company.

(vi)(x) "This act" means W.S. 17-15-101 through 17-15-144 17-15-149;

17-15-106. Formation.

Any person may form a limited liability company which shall have two (2) or more members by manually or electronically signing and delivering one (1) original and one (1) exact or conformed copy of the articles of organization to the secretary of state for filing. The person forming the company need not be a member of the limited liability
company.

17-15-107. Articles of organization.

(a) The articles of organization shall set forth:

(ii) The period of its duration, which may be perpetual if so provided in the articles of organization. The period of duration shall be thirty (30) years from the date of filing with the secretary of state if no period of duration is specifically set forth in the articles of organization;

(iv) The name and address of its registered agent in the state, and for all limited liability companies created after July 1, 2007, the name and address of the manager or managing member or members;

(c) The articles of organization shall include or be accompanied by a written consent to appointment manually or electronically signed by the registered agent.

(d) A limited liability company is not required to execute an operating agreement, however the company is bound by an operating agreement whether or not the limited
liability company has executed the agreement if the individual members have executed the agreement.

(e) A transferee or assignee of a member's interest in the limited liability company is bound by all of the terms of the operating agreement whether or not the transferee or assignee executes the operating agreement.

17-15-110. Registered office and registered agent to be maintained.

(a) Each limited liability company shall have and continuously maintain in this state:

(ii) A registered agent, which agent may be either an individual resident in this state whose business office is identical with such registered office, a domestic limited liability company or a domestic corporation, or a foreign corporation or foreign limited liability company authorized to transact business in this state, having a business office identical with such registered office.

17-15-114. Service of process.

(b) Whenever a limited liability company shall fail to appoint or maintain a registered agent in this state, or whenever its registered agent cannot with reasonable diligence be found at the registered office, then the secretary of state shall be an agent of the company upon whom any process, notice or demand may be served. Service on the secretary of state of any process, notice or demand shall be made by registered mail or in person, by
delivering to and leaving with him, or with any clerk of his office, duplicate copies of such process, notice or demand. In the event any such process, notice or demand is
served on the secretary of state, he shall immediately cause one (1) of the copies thereof to be forwarded by registered mail addressed to the limited liability company at its principal mailing address as defined and prescribed by the secretary of state. Any service so had on the secretary of state shall be returnable in not less than thirty (30) days.

17-15-122. Interest in company; transferability of interest.

The interest of all members in a limited liability company constitutes the personal estate of the member, and may be transferred or assigned as provided in the operating agreement. However, if all of the other members of the limited liability company other than the member proposing to dispose of his or its interest do not approve of the proposed transfer or assignment by unanimous written consent, the transferee of the member's interest shall have no right to participate in the management of the business and affairs of the limited liability company or to become a member. A creditor who becomes a transferee by virtue of receiving a charging order pursuant to W.S. 17-15-145 shall have no right to participate in the management of the business or affairs of the limited liability company or to become a member. The transferee shall only be entitled to receive the share of profits or other compensation by way of income and the return of contributions, to which that member would otherwise be entitled.

17-15-132. Fees; annual tax.

(a) The secretary of state shall charge and collect fees from limited liability companies and foreign limited liability companies for:

(vi) An annual fee provided by W.S. 17-16-1630(a) as if the company were a corporation of fifty dollars ($50.00), due and payable on or before the first day of the month of registration from every limited liability company organized under the laws of this state and from every foreign limited liability company which obtains the right to transact business in this state;

17-15-145. Rights of creditor.

On application to a court of competent jurisdiction by a judgment creditor of a member of a limited liability company or a member's transferee, the court may charge the member's distributional interest in the limited liability company with payment of the unsatisfied amount of the judgment with interest. To the extent so charged, the judgment creditor has only the rights of a transferee of the member's interest as provided in W.S. 17-15-122. The charging order is the exclusive remedy by which a judgment creditor of the member or transferee may satisfy a judgment against the member's interest in a limited liability
company. A creditor of a member or of a member's transferee shall not have any right to place a lien on the property of the limited liability company or to obtain possession of or otherwise exercise any other legal or equitable remedies with respect to the property of the limited liability company. This section does not deprive any member of a limited liability company of the benefit of any exemption laws applicable to the member's interest.

*** Staff note: This would limit the ability of a creditor to satisfy a claim to the instance where a LLC decides to make a distribution. If the LLC does not decide to make a distribution, the creditor is limited to holding onto the member's interest perpetually. ***

Section 2. This act is effective July 1, 2007.

HD 155

WORKING DRAFT

HOUSE BILL NO.

Corporations-bearer shares.

A BILL for AN ACT relating to corporations; prohibiting the issuance of bearer shares; and providing for an effective date.

Be It Enacted by the Legislature of the State of Wyoming:

Section 1. W.S. 17-16-625 by creating a new subsection (f) is amended to read:

17-16-625. Form and content of certificates.

(f) In no case shall a corporation issue share certificates in bearer form. For purposes of this subsection "bearer form" means a form in which the certificate is payable to the bearer of the certificate according to its terms but not by reason of an endorsement.

Section 2. This act is effective July 1, 2007.

For an archive of NRAI Legislative Updates, visit www.nrai.com and select Research Center.

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