2024 -- S 2782 | |
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LC005050 | |
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STATE OF RHODE ISLAND | |
IN GENERAL ASSEMBLY | |
JANUARY SESSION, A.D. 2024 | |
____________ | |
A N A C T | |
RELATING TO CORPORATIONS, ASSOCIATIONS AND PARTNERSHIPS -- THE RHODE | |
ISLAND LIMITED LIABILITY COMPANY ACT | |
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Introduced By: Senators LaMountain, Burke, McKenney, Tikoian, F. Lombardi, and | |
Date Introduced: March 08, 2024 | |
Referred To: Senate Judiciary | |
It is enacted by the General Assembly as follows: | |
1 | SECTION 1. Chapter 7-16 of the General Laws entitled "The Rhode Island Limited |
2 | Liability Company Act" is hereby repealed in its entirety. |
3 | CHAPTER 7-16 |
4 | The Rhode Island Limited Liability Company Act |
5 | 7-16-1. Short title. |
6 | This chapter shall be known and may be cited as the "Rhode Island Limited Liability |
7 | Company Act". |
8 | 7-16-2. Definitions. |
9 | As used in this chapter, unless the context otherwise requires: |
10 | (1) "Articles of organization" means documents filed under § 7-16-5 for the purpose of |
11 | forming a limited liability company. |
12 | (2) "Authorized person" means a person, whether or not a member, who or that is |
13 | authorized by the articles of organization, by an operating agreement, or otherwise, to act on behalf |
14 | of a limited liability company or foreign limited liability company as an officer, manager or |
15 | otherwise. |
16 | (3) "Bankruptcy" means a proceeding under the United States Bankruptcy Code or under |
17 | state insolvency or receivership law. |
18 | (4) "Business" means any trade, occupation or other commercial activity engaged in for |
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1 | gain, profit or livelihood for which a corporation can be organized under chapter 1.2 of this title. |
2 | (5) "Capital contribution" means any cash, property, services rendered, or a promissory |
3 | note or other binding obligation to contribute cash or property or to perform services that a member |
4 | contributes to a limited liability company in his or her capacity as a member. |
5 | (6) "Capital value" means the fair market value in each case as of the date contributed of a |
6 | member's capital contributions, including a contribution of services previously performed or a |
7 | contribution of a binding obligation to perform services, reduced by distributions made to the |
8 | member. |
9 | (7) "Constituent entity" means each limited liability company, limited partnership or |
10 | corporation that is a party to a plan of merger or consolidation. |
11 | (8) "Corporation" means a business corporation formed under chapter 1.2 of this title or a |
12 | foreign corporation. |
13 | (9) "Court" includes every court and judge having jurisdiction in the case. |
14 | (10) "Delivering/Delivered" means either physically transferring a paper document to the |
15 | secretary of state or transferring a document to the secretary of state by electronic transmission |
16 | through a medium provided and authorized by the secretary of state. |
17 | (11) "Electronic transmission" means any form of communication, not directly involving |
18 | the physical transmission of paper, that creates a record that may be retained, retrieved, and |
19 | reviewed by a recipient thereof, and that may be directly reproduced in paper form by such a |
20 | recipient through an automated process. |
21 | (12) "Filing" means delivered to the secretary of state in either paper format or electronic |
22 | transmission through a medium provided and authorized by the secretary of state. |
23 | (13) "Foreign corporation" means a business corporation formed under the laws of any |
24 | state other than this state or any foreign country. |
25 | (14) "Foreign limited liability company" means a limited liability company formed under |
26 | the laws of any state other than this state or any foreign country. |
27 | (15) "Foreign limited partnership" means a limited partnership formed under the laws of |
28 | any state other than this state or any foreign country. |
29 | (16) "Limited liability company" or "domestic limited liability company" means an entity |
30 | that is organized and existing under the laws of this state pursuant to this chapter. |
31 | (17) "Limited partnership" means a limited partnership formed under the laws of this state |
32 | or a foreign limited partnership. |
33 | (18) "L3C" or "low-profit limited liability company" means a limited liability company |
34 | that is organized and existing under the laws of this state under this chapter and that satisfies the |
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1 | requirements of § 7-16-76. |
2 | (19) "Manager" or "Managers" means a person or persons designated by the members of a |
3 | limited liability company to manage the limited liability company. |
4 | (20) "Member" means a person with an ownership interest in a limited liability company |
5 | with the rights and obligations specified under this chapter. |
6 | (21) "Membership interest", "ownership interest" or "interest" means a member's rights in |
7 | the limited liability company, collectively, including the member's share of the profits and losses |
8 | of the limited liability company, the right to receive distributions of the limited liability company's |
9 | assets, and any right to vote or participate in management of the limited liability company. |
10 | (22) "New entity" means the entity into which constituent entities consolidate, as identified |
11 | in the articles of consolidation provided for in § 7-16-62. |
12 | (23) "Operating agreement" means any agreement, written or oral, of the members as to |
13 | the affairs of a limited liability company and the conduct of its business. An operating agreement |
14 | also includes a document adopted by the sole member of a limited liability company that has only |
15 | one member and may include as a party one or more managers who are not members. |
16 | (24) "Person" means a natural person, partnership, limited partnership, domestic or foreign |
17 | limited liability company, trust, estate, corporation, non-business corporation or other association. |
18 | (25) "Signature" or "Signed" or "Executed" means an original signature, facsimile, or an |
19 | electronically transmitted signature submitted through a medium provided and authorized by the |
20 | secretary of state. |
21 | (26) "State" means a state, territory or possession of the United States, or the District of |
22 | Columbia. |
23 | (27) "Surviving entity" means the constituent entity surviving a merger, as identified in the |
24 | articles of merger provided for in § 7-16-62. |
25 | 7-16-3. Purpose and duration. |
26 | Every limited liability company organized under this chapter has the purpose of engaging |
27 | in any lawful business, and has perpetual existence until dissolved as terminated in accordance with |
28 | this chapter, unless a more limited purpose or duration is set forth in the articles of organization. |
29 | 7-16-3.1. Professional services. |
30 | A limited liability company may render professional services, as defined in § 7-5.1-2, as |
31 | and to the extent permitted under law or rules and regulations of the applicable regulatory agency |
32 | or agencies, as defined in § 7-5.1-2. Each regulatory agency as so defined is authorized to adopt, |
33 | subject to applicable law, rules and regulations regarding a domestic and foreign limited liability |
34 | company rendering professional services. The rules and regulations shall not be inconsistent with |
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1 | law or rules or regulations regarding the rendering of professional services through a professional |
2 | corporation. |
3 | 7-16-3.2. Liability in rendering professional services. |
4 | (a) The liability of an individual authorized to practice a profession for his or her own |
5 | negligence, wrongful acts or misconduct, or that of any person under his or her direct supervision |
6 | and control, other than in an administrative capacity, shall not be affected by the individual's |
7 | providing professional services in this state as a member or agent of a domestic or foreign limited |
8 | liability company. |
9 | (b) An individual authorized to practice a profession and who is a member of a domestic |
10 | or foreign limited liability company rendering professional services in this state is not liable solely |
11 | by reason of being a member for any negligence, wrongful acts or misconduct of another member |
12 | or agent of the limited liability company. A domestic or foreign limited liability company rendering |
13 | professional services in the state is liable for the negligence, wrongful acts or misconduct of its |
14 | members and agents providing professional services through the limited liability company within |
15 | the scope of their authority or apparent authority to act for the limited liability company. |
16 | (c) Notwithstanding any other provisions of this section, the personal liability of a member |
17 | in a limited liability company engaged in the rendering of professional services shall not be less |
18 | than or greater than the personal liability of a shareholder of a professional corporation organized |
19 | under chapter 5.1 of this title engaged in the rendering of the same professional services. |
20 | 7-16-3.3. Insurance or financial responsibility of limited liability company. |
21 | (a) A limited liability company that is to perform professional services, as defined in § 7- |
22 | 5.1-2, shall carry, if reasonably available, liability insurance of a kind that is designed to cover the |
23 | kinds of negligence, wrongful acts or misconduct for which liability is limited by § 7-16-3.2. The |
24 | insurance shall be in the aggregate amount of fifty thousand dollars ($50,000) multiplied by the |
25 | number of professional employees of the limited liability company as of the policy anniversary |
26 | date; provided, however, that in no case shall the coverage be less than one hundred thousand |
27 | dollars ($100,000) but in no event shall the necessary coverage exceed a maximum of five hundred |
28 | thousand dollars ($500,000); provided further, however, that any policy for insurance coverage |
29 | may include a deductible provision in any amount not to exceed twenty-five thousand dollars |
30 | ($25,000) for each claim multiplied by the number of professional employees of the limited liability |
31 | company as of the date of the issuance of the policy. The policy or policies of insurance may be |
32 | subject to any terms, conditions, exclusions and endorsements that are typically contained in |
33 | policies of this type. |
34 | (b) If, in any proceeding, compliance by a limited liability company with the requirements |
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1 | of subsection (a) of this section is disputed: |
2 | (1) That issue shall be determined by the court; and |
3 | (2) The burden of proof of compliance shall be on the person who claims the limitation of |
4 | liability in § 7-16-3.2. |
5 | (c) If a limited liability company is in compliance with the requirements of subsection (a) |
6 | of this section, the requirements of this section shall not be admissible or in any way be made |
7 | known to a jury in determining an issue of liability for or extent of the debt or obligation or damages |
8 | in question. |
9 | (d) Insurance is reasonably available for the purpose of subsection (a) of this section if, at |
10 | the time that the coverage would apply to the negligence, wrongful acts or misconduct in question, |
11 | it was reasonably available to similar types of limited liability companies through the admitted or |
12 | eligible surplus lines market. |
13 | (e) A limited liability company is considered to be in compliance with subsection (a) of |
14 | this section if the limited liability company provides five hundred thousand dollars ($500,000) of |
15 | funds specifically designated and segregated for the satisfaction of judgments against the limited |
16 | liability company based on the forms of negligence, wrongful acts and misconduct for which |
17 | liability is limited by § 7-16-3.2 by: |
18 | (1) Deposit in trust or in bank escrow of cash, bank certificate of deposit or United States |
19 | Treasury obligations; or |
20 | (2) A bank letter of credit or insurance company bonds. |
21 | (f) To the extent that a limited liability company maintains liability insurance or segregated |
22 | funds pursuant to the laws or regulations of another jurisdiction, the liability insurance or |
23 | segregated funds shall be deemed to satisfy this section if the amount of them is equal to or greater |
24 | than the amount specified in subsection (a) or subsection (e) of this section. |
25 | 7-16-4. Powers. |
26 | Each limited liability company has the power: |
27 | (1) To sue, be sued, complain and defend in its name in all courts; |
28 | (2) To transact its business, carry on its operations and have and exercise the powers |
29 | granted by this chapter in any state and in any foreign country; |
30 | (3) To make contracts and guarantees, incur liabilities and borrow money, although not in |
31 | furtherance of the limited liability company's purposes; |
32 | (4) To sell, lease, exchange, transfer, convey, mortgage, pledge and otherwise dispose of |
33 | all or any part of its property and assets although not in furtherance of the limited liability |
34 | company's purposes; |
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1 | (5) To acquire by purchase or in any other manner, take, receive, own, hold, improve, use |
2 | and otherwise deal in and with any interest in real or personal property, wherever situated; |
3 | (6) To issue notes, bonds and other obligations and secure any of them by mortgage or deed |
4 | of trust or security interest of any or all of its assets; |
5 | (7) To purchase, take, receive, subscribe for or otherwise acquire, own, hold, vote, use, |
6 | employ, sell, mortgage, lend, pledge or otherwise dispose of and otherwise use and deal in and with |
7 | stock or other interests in and obligations of corporations, associations, general or limited |
8 | partnerships, domestic or foreign limited liability companies, business trusts, and individuals or |
9 | direct or indirect obligations of the United States or of any other government, state, territory, |
10 | governmental district or municipality or of any of their instrumentalities; |
11 | (8) To invest its surplus funds, lend money from time to time in any manner that is |
12 | appropriate to enable it to carry on the operations or fulfill the purposes set forth in its articles of |
13 | organization and take and hold real property and personal property as security for the payment of |
14 | the funds loaned or invested; |
15 | (9) To elect or appoint agents and define their duties and fix their compensation; |
16 | (10) To be a promoter, stockholder, partner, member, associate or agent of any corporation, |
17 | general or limited partnership, domestic or foreign limited liability company, joint venture, trust or |
18 | other enterprise; |
19 | (11) To indemnify and advance expenses to any member, manager, agent or employee, past |
20 | or present, to the same extent as a corporation formed under chapter 1.2 of this title may indemnify |
21 | any of its directors, officers, employees or agents and subject to the standards and restrictions, if |
22 | any, set forth in the articles of organization or operating agreement, and to purchase and maintain |
23 | insurance on behalf of any member, manager, agent or employee against any liability asserted |
24 | against him and incurred by the member, manager, agent or employee in that capacity or arising |
25 | out of the member's, manager's, agent's or employee's status, whether or not the limited liability |
26 | company would have the power to indemnify under the provisions of this section, the articles of |
27 | organization or operating agreement; |
28 | (12) To make and alter operating agreements, not inconsistent with its articles of |
29 | organization or with the laws of this state, for the administration and regulation of the business and |
30 | affairs of the limited liability company; |
31 | (13) To lend money and to use its credit to assist its employees; |
32 | (14) To make donations for the public welfare or for charitable, scientific or educational |
33 | purposes; |
34 | (15) To pay pensions and establish pension plans, pension trusts, profit sharing plans and |
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1 | other incentive and benefit plans for any or all of its agents and employees; |
2 | (16) To provide insurance for its benefit on the life of any of its agents or employees or on |
3 | the life of any individual member for the purpose of acquiring at the member's death the |
4 | membership interest owned by the member; |
5 | (17) To cease its activities and dissolve; and |
6 | (18) To do every other act not inconsistent with law that is appropriate to promote and to |
7 | attain its purposes. |
8 | 7-16-5. Formation. |
9 | (a) One or more persons may form a limited liability company by delivering or causing to |
10 | be delivered executed articles of organization for filing with the secretary of state. |
11 | (b) When the secretary of state accepts the articles of organization for filing and issues the |
12 | certificate of organization, the limited liability company is formed under the name and subject to |
13 | the conditions and provisions stated in its articles of organization. |
14 | 7-16-5.1. Conversion of certain entities to a limited liability company. |
15 | (a) As used in this section, the term "other entity" means a corporation, a business trust, or |
16 | association, a real estate investment trust, a common-law trust, a sole proprietorship or any other |
17 | unincorporated business, or entity including a partnership, whether general or limited, (including a |
18 | registered limited liability partnership) or a foreign limited liability company. |
19 | (b) Any other entity may convert to a domestic limited liability company by complying |
20 | with subsection (h) of this section and filing in the office of the secretary of state in accordance |
21 | with § 7-16-8 articles of organization that comply with § 7-16-6 and have been executed by one or |
22 | more authorized persons in accordance with § 7-16-7, accompanied by a certificate of conversion |
23 | to a limited liability company duly executed by one or more persons authorized to act on behalf of |
24 | the other entity and one or more persons authorized to sign a certificate of conversion on behalf of |
25 | the limited liability company. |
26 | (c) The certificate of conversion to limited liability company shall state: |
27 | (1) The date on which and jurisdiction where the other entity was first created, formed, or |
28 | otherwise came into being and, if it has changed, its jurisdiction immediately prior to its conversion |
29 | to a domestic limited liability company; |
30 | (2) The name of the other entity immediately prior to the filing of the certificate of |
31 | conversion to limited liability company; |
32 | (3) The name of the limited liability company as set forth in its articles of organization filed |
33 | in accordance with subsection (b) of this section; and |
34 | (4) The future effective date or time (which is a date or time certain) of the conversion to |
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1 | a limited liability company if it is not to be effective upon the filing of the certificate of conversion |
2 | to limited liability company and the articles of organization. |
3 | (d) Upon the filing in the office of the secretary of state of the certificate of conversion to |
4 | limited liability company and the articles of organization or upon the future effective date or time |
5 | of the certificate of conversion to a limited liability company and the articles of organization, the |
6 | other entity shall be converted into a domestic limited liability company and the limited liability |
7 | company shall thereafter be subject to all of the provisions of this chapter, except that, |
8 | notwithstanding § 7-16-5, the existence of the limited liability company shall be deemed to have |
9 | commenced on the date the other entity commenced its existence in the jurisdiction in which the |
10 | other entity was first created, formed, or otherwise came into being. |
11 | (e) The conversion of any other entity into a domestic limited liability company shall not |
12 | be deemed to affect any obligations or liabilities of the other entity incurred prior to its conversion |
13 | to a domestic limited liability company or the personal liability of any person incurred prior to the |
14 | conversion. |
15 | (f) When any conversion shall have become effective under this section, for all purposes |
16 | of the laws of the state of Rhode Island, all of the rights, privileges, and powers of the other entity |
17 | that has converted, and all property, real, personal, and mixed, and all debts due to such other entity, |
18 | as well as all other things and causes of action belonging to the other entity, shall be vested in the |
19 | domestic limited liability company and shall thereafter be the property of the domestic limited |
20 | liability company as they were of the other entity that has converted, and the title to any real |
21 | property vested by deed or otherwise in the other entity shall not revert or be in any way impaired |
22 | by reason of this chapter, but all rights of creditors and all liens upon any property of such other |
23 | entity shall be preserved unimpaired, and all debts, liabilities, and duties of the other entity that has |
24 | converted shall thenceforth attach to the domestic limited liability company and may be enforced |
25 | against it to the same extent as if those debts, liabilities, and duties had been incurred or contracted |
26 | by it. |
27 | (g) Unless otherwise agreed, or as required under applicable non-Rhode Island law, the |
28 | converting other entity shall not be required to wind up its affairs or pay its liabilities and distribute |
29 | its assets, and the conversion shall not be deemed to constitute a dissolution of the other entity and |
30 | shall constitute a continuation of the existence of the converting other entity in the form of a |
31 | domestic limited liability company. |
32 | (h) Prior to filing a certificate of conversion to limited liability company with the office of |
33 | the secretary of state, the conversion shall be approved in the manner provided for by the document, |
34 | instrument, agreement, or other writing, as the case may be, governing the internal affairs of the |
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1 | other entity and the conduct of its business or by applicable law, as appropriate, and a limited |
2 | liability company agreement shall be approved by the same authorization required to approve the |
3 | conversion. |
4 | (i) In connection with a conversion hereunder, rights or securities of or interests in the other |
5 | entity that is to be converted to a domestic limited liability company may be exchanged for or |
6 | converted into cash, property, or rights or securities of or interests in such domestic limited liability |
7 | company or, in addition to or in lieu thereof, may be exchanged for or converted into cash, property, |
8 | or rights or securities of or interests in another domestic limited liability company or other entity |
9 | or may be cancelled. |
10 | (j) The provisions of this section shall not be construed to limit the accomplishment of a |
11 | change in the law governing, or the domicile of, an other entity to the state of Rhode Island by any |
12 | other means provided for in a limited liability company agreement or other agreement or as |
13 | otherwise permitted by law, including by the amendment of a limited liability company agreement |
14 | or other agreement. |
15 | 7-16-5.2. Approval of conversion of a limited liability company. |
16 | (a) A domestic limited liability company may convert to a corporation, a business trust, or |
17 | association, a real estate investment trust, a common law trust, a sole proprietorship, or any other |
18 | unincorporated business or entity including a partnership (whether general or limited, including a |
19 | registered limited liability partnership), or a foreign limited liability company upon the |
20 | authorization of the conversion in accordance with this section. |
21 | (b) If the limited liability company agreement specified the manner of authorizing a |
22 | conversion of the limited liability company, the conversion shall be authorized as specified in the |
23 | limited liability company agreement. If the limited liability company agreement does not specify |
24 | the manner of authorizing a conversion of the limited liability company and does not prohibit a |
25 | conversion of the limited liability company, the conversion shall be authorized in the same manner |
26 | as is specified in the limited liability company agreement for authorizing a merger or consolidation |
27 | that involves the limited liability company as a constituent party to the merger or consolidation. If |
28 | the limited liability company agreement does not specify the manner of authorizing a conversion |
29 | of the limited liability company or a merger or consolidation that involves the limited liability |
30 | company as a constituent party and does not prohibit a conversion of the limited liability company, |
31 | the conversion shall be authorized by the approval by the members or, if there is more than one |
32 | class or group of members, then by each class or group of members, in either case, by members |
33 | who own more than fifty percent (50%) of the then-current percentage or other interest in the profits |
34 | of the domestic limited liability company owned by all of the members or by the members in each |
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1 | class or group, as appropriate. |
2 | (c) Unless otherwise agreed, the conversion of a domestic limited liability company to |
3 | another entity or business form pursuant to this section shall not require the limited liability |
4 | company to wind up its affairs under § 7-16-45 or pay its liabilities and distribute its assets under |
5 | § 7-16-46, and the conversion shall not constitute a dissolution of the limited liability company. |
6 | When a limited liability company has converted to another entity or business form pursuant to this |
7 | section, for all purposes of the laws of the state of Rhode Island, the other entity or business form |
8 | shall be deemed to be the same entity as the converting limited liability company and conversion |
9 | shall constitute a continuation of the existence of the limited liability company in the form of such |
10 | other entity or business form. |
11 | (d) In connection with a conversion of a domestic limited liability company to another |
12 | entity or business form pursuant to this section, rights or securities of or interests in the domestic |
13 | limited liability company that is to be converted may be exchanged for or converted into cash, |
14 | property, rights, or securities of or interests in the entity or business form into which the domestic |
15 | limited liability company is being converted or, in addition to or in lieu thereof, may be exchanged |
16 | for or converted into cash, property, rights, or securities of or interests in another entity or business |
17 | form or may be cancelled. |
18 | (e) If a limited liability company shall convert in accordance with this section to another |
19 | entity or business form organized, formed, or created under the laws of a jurisdiction other than the |
20 | state of Rhode Island or to a Rhode Island unincorporated "other entity", a certificate of conversion |
21 | to non-Rhode Island entity shall be filed in the office of the secretary of state. The certificate of |
22 | conversion to non-Rhode Island entity shall state: |
23 | (1) The name of the limited liability company and, if it has been changed, the name under |
24 | which its certificate of formation was originally filed; |
25 | (2) The date of filing of its original certificate of formation with the secretary of state; |
26 | (3) The jurisdiction in which the entity or business form, to which the limited liability |
27 | company shall be converted, is organized, formed, or created, and the name and type of such entity |
28 | or business form; |
29 | (4) The future effective date or time (which shall be a date or time certain) of the conversion |
30 | if it is not to be effective upon the filing of the certificate of conversion to non-Rhode Island entity; |
31 | (5) That the conversion has been approved in accordance with this section; |
32 | (6) The agreement of the limited liability company that it may be served with process in |
33 | the state of Rhode Island in any action, suit, or proceeding for enforcement of any obligation of the |
34 | limited liability company arising while it was a limited liability company of the state of Rhode |
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1 | Island, and that it irrevocably appoints the secretary of state as its agent to accept service of process |
2 | in any such action, suit, or proceeding. |
3 | (f) Upon the filing in the office of the secretary of state of the certificate of conversion to |
4 | non-Rhode Island entity or upon the future effective date or time of the certificate of conversion to |
5 | non-Rhode Island entity and upon payment of all fees due by the limited liability company, the |
6 | secretary of state shall certify that the limited liability company has filed all documents and paid |
7 | all fees required by this chapter, and thereupon the limited liability company shall cease to exist as |
8 | a limited liability company of the state of Rhode Island. Such certificate of the secretary of state |
9 | shall be prima facie evidence of the conversion by the limited liability company out of the state of |
10 | Rhode Island. |
11 | (g) The conversion of a limited liability company out of the state of Rhode Island in |
12 | accordance with this section and the resulting cessation of its existence as a limited liability |
13 | company of the state of Rhode Island pursuant to a certificate of conversion to non-Rhode Island |
14 | entity shall not be deemed to affect any obligations or liabilities of the limited liability company |
15 | incurred prior to such conversion or the personal liability of any person incurred prior to such |
16 | conversion, nor shall it be deemed to affect the choice of laws applicable to the limited liability |
17 | company with respect to matters arising prior to such conversion. |
18 | (h) When a limited liability company has been converted to another entity or business form |
19 | pursuant to this section, the other entity or business form shall, for all purposes of the laws of the |
20 | state of Rhode Island, be deemed to be the same entity as the limited liability company. When any |
21 | conversion shall have become effective under this section, for all purposes of the laws of the state |
22 | of Rhode Island, all of the rights, privileges, and powers of the limited liability company that has |
23 | converted, and all property, real, personal, and mixed, and all such debts due to the limited liability |
24 | company, as well as all other things and causes of action belonging to the limited liability company, |
25 | shall remain vested in the other entity or business form to which the limited liability company has |
26 | converted and shall be the property of the other entity or business form, and the title to any real |
27 | property vested by deed or otherwise in the limited liability company shall not revert to the limited |
28 | liability company or be in any way impaired by reason of this chapter; but all rights of creditors |
29 | and all liens upon any property of the limited liability company shall be preserved unimpaired, and |
30 | all debts, liabilities, and duties of the limited liability company that has converted shall remain |
31 | attached to the other entity or business form to which the limited liability company has converted, |
32 | and may be enforced against it to the same extent as if said debts, liabilities, and duties had |
33 | originally been incurred or contracted by it in its capacity as the other entity or business form. The |
34 | rights, privileges, powers, and interests in property of the limited liability company that has |
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1 | converted, as well as the debts, liabilities, and duties of the limited liability company, shall not be |
2 | deemed, as a consequence of the conversion, to have been transferred to the other entity or business |
3 | form to which the limited liability company has converted for any purpose of the laws of the state |
4 | of Rhode Island. |
5 | 7-16-5.3, 7-16-5.4. [Repealed.] |
6 | 7-16-6. Articles of organization. |
7 | (a) The articles of organization shall set forth: |
8 | (1) The name of the limited liability company; |
9 | (2) The name and address of its resident agent in this state; |
10 | (3) A statement whether, under the articles of organization and any written operating |
11 | agreement made or intended to be made, the limited liability company is intended to be: |
12 | (i) Treated as a partnership, |
13 | (ii) As a corporation, or |
14 | (iii) Disregarded as an entity separate from its member for purposes of federal income |
15 | taxation; |
16 | (4) The address of the principal office of the limited liability company if it is determined |
17 | at the time of organization; |
18 | (5) Any other provision, not inconsistent with law, that the members elect to set out in the |
19 | articles, including, but not limited to, any limitation of the purposes or duration for which the |
20 | limited liability company is formed, and any other provision that may be included in an operating |
21 | agreement; |
22 | (6) A statement of whether the limited liability company is to be managed by its members |
23 | or by one or more managers, and if the limited liability company has managers at the time of its |
24 | formation, the name and address of each manager; |
25 | (7) The name and address of the person authorized to sign and who does sign the articles |
26 | of organization. |
27 | (b) It is not necessary to set out in the articles of organization any of the powers enumerated |
28 | in this chapter. |
29 | 7-16-7. Execution of articles. |
30 | (a) Articles required by this chapter to be filed with the secretary of state shall be executed |
31 | in the following manner: |
32 | (1) Articles of organization must be signed by at least one person who need not be a |
33 | member of the limited liability company and who is authorized to do so by the persons forming the |
34 | limited liability company; and |
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1 | (2) Articles of amendment, restated articles of organization, articles of merger or |
2 | consolidation and articles of dissolution must be signed by an authorized person. |
3 | (b) An attorney-in-fact may sign for any authorized person. Powers of attorney need not be |
4 | sworn to, verified or acknowledged, and need not be filed with the secretary of state. |
5 | (c) The execution of any articles under this chapter constitutes an affirmation that the facts |
6 | stated are true. |
7 | 7-16-8. Filing. |
8 | (a) The secretary of state may not accept for filing any document under this chapter that |
9 | does not conform with law. |
10 | (b) The secretary of state may not accept for filing any organizational document, |
11 | qualification, registration, change of resident agent report, service of process, notice, or other |
12 | document until all required filing and other fees have been paid to the secretary of state. |
13 | (c) The secretary of state may not accept for filing any article of dissolution, cancellation |
14 | of registration, or article of merger until all required filing and other fees have been paid to the |
15 | secretary of state and all fees and taxes have been paid. |
16 | (d) The secretary of state may not accept for filing the reinstatement of a limited liability |
17 | company's certificate of organization or registration until all required filing and other fees have |
18 | been paid to the secretary of state and all fees and taxes have been paid, as evidenced by an |
19 | appropriate certificate of good standing issued by the division of taxation. |
20 | (e) The secretary of state may not accept for filing a certificate of conversion to a non- |
21 | Rhode Island entity until all required filing and other fees have been paid to the secretary of state |
22 | and all fees and taxes have been paid. |
23 | (f) When the secretary of state accepts the articles of organization or a certificate of |
24 | registration or any other document filed under this chapter, the secretary of state shall: |
25 | (1) Endorse on the document the date and time of its acceptance for filing; |
26 | (2) Promptly file the document; and |
27 | (3) Issue a certificate or other evidence that establishes: |
28 | (i) That the document was accepted for filing by the secretary of state; and |
29 | (ii) The date and time of the acceptance for filing. |
30 | (g) The document becomes effective upon the issuance of the certificate or other evidence |
31 | or at any later date that is set forth within the document, not more than ninety (90) days after the |
32 | filing of such document. |
33 | 7-16-9. Name — Fictitious business names. |
34 | (a) The name of each limited liability company as set forth in its articles of organization: |
| LC005050 - Page 13 of 135 |
1 | (1) Shall end with either the words "limited liability company" or the upper or lower case |
2 | letters "l.l.c." with or without punctuation, or, if organized as a low-profit, limited liability |
3 | company, shall end with either the words "low-profit, limited liability company" or the abbreviation |
4 | "L3C" or "13c"; |
5 | (2) Shall be distinguishable upon the records of the secretary of state from: |
6 | (i) The name of any corporation, non-business corporation or other association, limited |
7 | partnership or domestic or foreign limited liability company organized under the laws of, or |
8 | registered or qualified to do business in, this state; or |
9 | (ii) Any name that is filed, reserved, or registered under this title, subject to the following: |
10 | (A) This provision shall not apply if the applicant files with the secretary of state a certified |
11 | copy of a final decree of a court of competent jurisdiction establishing the prior right of the |
12 | applicant to the use of the name in this state; and |
13 | (B) The name may be the same as the name of a corporation, non-business corporation, or |
14 | other association, the certificate of incorporation or organization of which has been revoked by the |
15 | secretary of state as permitted by law, and the revocation has not been withdrawn within one year |
16 | from the date of the revocation. |
17 | (C) Words or abbreviations that are required by statute to identify the particular type of |
18 | business entity shall be disregarded when determining if a name is distinguishable upon the records |
19 | of the secretary of state. |
20 | (D) The secretary of state shall promulgate rules and regulations defining the term |
21 | "distinguishable upon the record" for the administration of this chapter. |
22 | (b)(1) Any domestic or foreign limited liability company organized under the laws of, or |
23 | registered or qualified to do business in, this state may transact business in this state under a |
24 | fictitious name provided that it files a fictitious business name statement in accordance with this |
25 | subsection. |
26 | (2) A fictitious business name statement shall be filed with the secretary of state and shall |
27 | be executed by an authorized person of the domestic limited liability company or by a person with |
28 | authority to do so under the laws of the state or other jurisdiction of the organization of the foreign |
29 | limited liability company and shall set forth: |
30 | (i) The fictitious business name to be used; and |
31 | (ii) The name of the applicant limited liability company, the state or other jurisdiction in |
32 | which the limited liability company is organized and date of the limited liability company's |
33 | organization. |
34 | (3) The fictitious business name statement expires upon the filing of a statement of |
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1 | abandonment of use of a fictitious business name registered in accordance with this subsection or |
2 | upon the dissolution of the applicant domestic limited liability company or the cancellation of |
3 | registration of the applicant foreign limited liability company. |
4 | (4) The statement of abandonment of use of a fictitious business name under this subsection |
5 | shall be filed with the secretary of state, shall be executed in the same manner as provided in |
6 | subdivision (2) above, and shall set forth: |
7 | (i) The fictitious business name being abandoned; |
8 | (ii) The date on which the original fictitious business name statement being abandoned was |
9 | filed; and |
10 | (iii) The information set forth in subsection (a)(2)(ii). |
11 | (5) No domestic or foreign limited liability company transacting business under a fictitious |
12 | business name contrary to the provisions of this section, or its assignee, may maintain any action |
13 | upon or on account of any contract made, or transaction had, in the fictitious business name in any |
14 | court of the state until a fictitious business name statement has been filed in accordance with this |
15 | section. |
16 | (6) No limited liability company may be permitted to transact business under a fictitious |
17 | business name pursuant to this section that is the same as the name of any corporation, limited |
18 | partnership or domestic or foreign limited liability company organized under the laws of, or |
19 | registered or qualified to do business in, this state or any name that is filed, reserved, or registered |
20 | under this title, subject to the following: |
21 | (i) This provision does not apply if the applicant files with the secretary of state a certified |
22 | copy of a final decree of a court of competent jurisdiction establishing the prior right of the |
23 | applicant to the use of the name in this state; and |
24 | (ii) The name may be the same as the name of a corporation, non-business corporation, or |
25 | other association, the certificate of incorporation or organization of which has been revoked by the |
26 | secretary of state as permitted by law and the revocation has not been withdrawn within one year |
27 | from the date of revocation. |
28 | (iii) Words or abbreviations that are required by statute to identify the particular type of |
29 | business entity shall be disregarded when determining if a name is distinguishable upon the records |
30 | of the secretary of state. |
31 | (iv) The secretary of state shall promulgate rules and regulations defining the term |
32 | "distinguishable upon the record" for the administration of this chapter. |
33 | (7) A filing fee of fifty dollars ($50.00) shall be collected by the secretary of state for each |
34 | statement filed. |
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1 | 7-16-10. Reservation of name — Transfer of reserved name. |
2 | (a) The exclusive right to use a specified name for a domestic or foreign limited liability |
3 | company may be reserved by: |
4 | (1) A person who intends to organize a domestic limited liability company; |
5 | (2) A domestic limited liability company or foreign limited liability company registered in |
6 | this state which, in either case, proposes to change its name; |
7 | (3) A foreign limited liability company that intends to register in this state; or |
8 | (4) Any person intending to organize a foreign limited liability company and intending to |
9 | have it registered in this state and adopt that name. |
10 | (b) A person may reserve a specified name by filing a signed application with the secretary |
11 | of state and, if the secretary of state finds that the name is available, the secretary of state shall |
12 | reserve the name for one hundred twenty (120) days for the exclusive use of the applicant. |
13 | (c) The exclusive right to use a reserved name may be transferred to another person by |
14 | filing with the secretary of state a notice of the transfer which specifies the name and address of the |
15 | transferee and is signed by the applicant for whom the name was reserved. |
16 | 7-16-11. Resident agent. |
17 | (a) Each domestic or foreign registered limited liability company shall have a resident agent |
18 | for service of process on the limited liability company who shall be either: |
19 | (1) An individual resident of this state; or |
20 | (2) A corporation, limited partnership, or limited liability company, and in each case either |
21 | domestic or one authorized to transact business in this state. |
22 | (b)(1) A domestic or foreign registered limited liability company may change its resident |
23 | agent or the address of its resident agent by filing with the secretary of state a statement signed by |
24 | any authorized person that authorizes the change. |
25 | (2) A change of a resident agent or address of the resident agent for a domestic or foreign |
26 | registered limited liability company under this subsection is effective when the secretary of state |
27 | accepts the statement for filing. |
28 | (c)(1) A resident agent that changes address in the state shall file with the secretary of state |
29 | a statement of the change of address signed by the resident agent or on the resident agent's behalf. |
30 | (2) The statement shall include: |
31 | (i) The name of the limited liability company for which the change is effective; |
32 | (ii) The old and new addresses of the resident agent; and |
33 | (iii) The date on which the change is effective. |
34 | (3) The change of address of the resident agent is effective when the secretary of state |
| LC005050 - Page 16 of 135 |
1 | accepts the statement for filing. |
2 | (d)(1) A resident agent may resign by filing with the secretary of state a counterpart or |
3 | photocopy of the signed resignation, together with a statement that the resignation has been |
4 | delivered or sent to the limited liability company. |
5 | (2) Unless a later time is specified in the resignation, it is effective thirty (30) days after it |
6 | is filed. |
7 | (e) The secretary of state is appointed the agent of the domestic limited liability company |
8 | for service of process if no resident agent has been appointed, if the resident agent's authority has |
9 | been revoked, or if the resident agent cannot be found or served following the exercise of reasonable |
10 | diligence. |
11 | 7-16-12. Amendment and restatement of articles of organization. |
12 | (a) The articles of organization shall be amended when: |
13 | (1) There is a change in the name of the limited liability company; |
14 | (2) A company that did not previously have managers designates managers, or a company |
15 | that previously did have managers is to be managed by its members; or |
16 | (3) There is a change in the manager of record. |
17 | (b) The articles of organization may be amended at any time and in any respect that is |
18 | desired, as long as the articles of organization, as amended, contain only those provisions as are |
19 | lawful under this chapter. |
20 | (c) The articles of organization may be restated at any time. Any restatement may include |
21 | additional amendments. |
22 | 7-16-13. Certificates of correction. |
23 | (a) If any document filed with the secretary of state under this chapter contains any |
24 | typographical error, error of transcription or other technical error or has been defectively executed, |
25 | the document may be corrected by filing a certificate of correction. |
26 | (b) A certificate of correction shall set forth: |
27 | (1) The title of the document being corrected; |
28 | (2) The name of each party to the document being corrected; |
29 | (3) The date that the document being corrected was filed; and |
30 | (4) The provision in the document as previously filed and as corrected and, if execution of |
31 | the document was defective, the manner in which it was defective. |
32 | (c) A certificate of correction may not make any other change or amendment that would |
33 | not have complied in all respects with the requirements of this chapter at the time the document |
34 | being corrected was filed. |
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1 | (d) A certificate of correction shall be executed in the same manner in which the document |
2 | being corrected was required to be executed. |
3 | (e) A certificate of correction may not: |
4 | (1) Change the effective date of the document being corrected; or |
5 | (2) Affect any right or liability accrued or incurred before its filing, except that any right |
6 | or liability accrued or incurred by reason of the error or defect being corrected shall be extinguished |
7 | by the filing if the person having the right or liability has not detrimentally relied on the original |
8 | document. |
9 | 7-16-14. Management by members. |
10 | Unless the articles of organization or a written operating agreement provide for |
11 | management by or under the authority of one or more managers in accordance with § 7-16-15, the |
12 | business and affairs of the limited liability company shall be managed by the members. If |
13 | management is vested in the members: |
14 | (1) The members are deemed to be managers for purposes of applying the provisions of |
15 | this chapter unless the context clearly requires otherwise; and |
16 | (2) Each of the members has the power and authority and is subject to all duties and |
17 | liabilities of managers. |
18 | 7-16-15. Managers. |
19 | (a) The articles of organization or a written operating agreement may deny, restrict or |
20 | enlarge the management rights and duties of any member or group or class of member and may |
21 | provide that the business and affairs of the limited liability company shall be managed by or under |
22 | the authority of one or more managers who may, but need not be, members. |
23 | (b) The articles of organization or written operating agreement may prescribe qualifications |
24 | for managers. |
25 | (c) The number of managers may be specified in or fixed in accordance with the articles of |
26 | organization or written operating agreement. |
27 | 7-16-16. Election and removal of managers. |
28 | Unless otherwise provided in the articles of organization or operating agreement: |
29 | (1) Election of managers to fill initial positions or vacancies shall be by majority vote of |
30 | the members. |
31 | (2) Any or all managers may be removed, with or without cause, by majority vote of the |
32 | members. |
33 | 7-16-17. Duties of managers. |
34 | (a) A manager shall discharge his or her managerial duties in good faith, with the care that |
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1 | an ordinarily prudent person in a similar position would use under the circumstances, and in the |
2 | manner the manager reasonably believes to be in the best interests of the limited liability company. |
3 | (b) In discharging his or her duties, a manager is entitled to rely on information, opinions, |
4 | reports or statements, including financial statements and other financial data, if prepared or |
5 | presented by: |
6 | (1) One or more employees of the limited liability company who the manager reasonably |
7 | believes to be reliable and competent in the matters presented; |
8 | (2) Legal counsel, public accountants or other persons as to matters the manager reasonably |
9 | believes are within the person's professional or expert competence; or |
10 | (3) A committee of managers of which the manager is not a member if the manager |
11 | reasonably believes the committee merits confidence. |
12 | (c) A manager is not acting in good faith if the manager has knowledge concerning the |
13 | matter in question that makes reliance otherwise permitted by subsection (b) unwarranted. |
14 | (d) A manager is not liable for any action taken as a manager, or any failure to take any |
15 | action, if the manager performed the duties of his or her office in compliance with this section. |
16 | (e) Except as otherwise provided in the articles of organization or operating agreement, |
17 | every manager must account to the limited liability company and hold as trustee for the limited |
18 | liability company any profit or benefit he or she derived without the informed consent of the |
19 | members or a majority of the disinterested managers from any transaction connected with the |
20 | conduct or winding up of the limited liability company or from any personal use by the manager of |
21 | the limited liability company's property. |
22 | 7-16-18. Limitation of liability of managers. |
23 | (a) Subject to subsection (b), the articles of organization or operating agreement may |
24 | eliminate or limit the personal liability of a manager to the limited liability company or to its |
25 | members for monetary damages for breach of any duty provided for in § 7-16-17. |
26 | (b) No provision permitted under subsection (a) limits or eliminates the liability of a |
27 | manager for: |
28 | (1) Breach of the manager's duty of loyalty to the limited liability company or its members; |
29 | (2) Acts or omissions not in good faith or that involve intentional misconduct or a knowing |
30 | violation of law; |
31 | (3) The liability imposed pursuant to the provisions of § 7-16-32; or |
32 | (4) Any transaction from which the manager derived an improper personal benefit, unless |
33 | the transaction was with the informed consent of the members or a majority of the disinterested |
34 | managers. No provision eliminating or limiting the personal liability of a manager will be effective |
| LC005050 - Page 19 of 135 |
1 | with respect to causes of action arising prior to the inclusion of the provision in the articles of |
2 | organization or operating agreement. |
3 | 7-16-19. Action by managers. |
4 | If the business and affairs of the limited liability company is managed by or under the |
5 | authority of more than one manager under § 7-16-15, except as otherwise provided in this chapter, |
6 | the articles of organization or operating agreement, the managers shall act by majority vote, with |
7 | each manager being entitled to one vote. |
8 | 7-16-20. Agency power of managers. |
9 | (a) Every manager is an agent of the limited liability company for the purpose of its |
10 | business and affairs, and the act of every manager, including the execution in the limited liability |
11 | company's name of any instrument for apparently carrying on in the usual way the business and |
12 | affairs of the limited liability company that the manager manages, binds the limited liability |
13 | company unless: |
14 | (1) The act is in contravention of the articles of organization or this chapter, or |
15 | (2) The manager acting otherwise lacks the authority to act for the limited liability company |
16 | and the person with whom the manager is dealing has knowledge of the fact that the manager has |
17 | no authority. |
18 | (b) Unless otherwise provided in the articles of organization, members of a limited liability |
19 | company whose business and affairs is managed by or under the authority of one (1) or more |
20 | managers pursuant to § 7-16-15 are not agents of the limited liability company and have no |
21 | authority to bind the limited liability company unless they are also managers. |
22 | 7-16-21. Voting rights of members. |
23 | (a) Unless otherwise provided in the articles of organization or operating agreement, the |
24 | members of a limited liability company, to the extent their membership interests have not been |
25 | assigned, are entitled to vote in proportion to the capital value of the membership interests that have |
26 | not been assigned. |
27 | (b) Unless otherwise provided in the articles of organization or operating agreement, the |
28 | affirmative vote of members entitled to vote, representing a majority of the capital values of all |
29 | membership interests that have not been assigned, are required to approve the following matters: |
30 | (1) The dissolution and winding up of the limited liability company; |
31 | (2) The sale, exchange, lease, mortgage, pledge or other transfer of all or substantially all |
32 | of the assets of the limited liability company; |
33 | (3) The merger or consolidation of the limited liability company with another person; and |
34 | (4) A transaction involving an actual or potential conflict of interest between a manager |
| LC005050 - Page 20 of 135 |
1 | and the limited liability company; |
2 | (5) An amendment to the articles of organization or operating agreement; and |
3 | (6) Any restatement of the articles of organization that includes an additional amendment. |
4 | (c) Any action required or permitted to be taken by the members or managers by this |
5 | chapter, the articles of organization or operating agreement may be taken without a meeting if all |
6 | the members entitled to vote or all the managers consent to it in writing. |
7 | (d)(1) Except as otherwise provided in the articles of organization or operating agreement |
8 | and except for actions pursuant to subsections (b)(1), (2), and (3) of this section, any action required |
9 | or permitted to be taken by vote of the members may be taken without a meeting on the written |
10 | consent of less than all the members entitled to vote on it, if the members who consent would be |
11 | entitled to cast at least the minimum number of votes that would be required to take the action at a |
12 | meeting at which all members entitled to vote on it are present. |
13 | (2) Prompt notice of the action shall be given to all members who would have been entitled |
14 | to vote on the action if the meeting were held. |
15 | (e) Any action taken pursuant to this section has the same effect for all purposes as if the |
16 | action had been taken at a meeting of the members. |
17 | (f) The articles of organization or operating agreement may provide for any other voting |
18 | rights of members. |
19 | 7-16-22. Records and information. |
20 | (a) Each limited liability company shall keep at its principal office the following: |
21 | (1) A current list of the full name and last known business address of each member and |
22 | manager; |
23 | (2) Copies of records that would enable a member to determine the capital values and the |
24 | relative voting rights of the members; |
25 | (3) A copy of the articles of organization and any restatements of the articles and |
26 | amendments; |
27 | (4) Executed copies of any powers of attorney pursuant to which any certificate has been |
28 | executed; |
29 | (5) Copies of the limited liability company's federal, state and local income tax returns and |
30 | reports, if any, for the five most recent years; |
31 | (6) A copy of any written operating agreement; |
32 | (7) Any written records of proceedings of the members or managers; and |
33 | (8) Copies of any financial statements of the limited liability company for the five most |
34 | recent years. |
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1 | (b) A member may: |
2 | (1) At the member's own expense, inspect and copy any limited liability company records |
3 | required to be kept under this section upon reasonable request during ordinary business hours; and |
4 | (2) Obtain from time to time, upon reasonable request, information regarding the state of |
5 | the business and financial condition of the limited liability company. |
6 | (c) The current list of names and addresses of the members shall be made available to the |
7 | secretary of state, the director of the department of business regulation, or the attorney general, as |
8 | applicable, within five (5) business days of receipt of a written request by the secretary, director, |
9 | or attorney general stating that the information is required in connection with an investigatory or |
10 | enforcement proceeding. |
11 | 7-16-23. Liability of members and managers. |
12 | A member or manager of a limited liability company is not liable for the obligations of the |
13 | limited liability company solely by reason of being a member or manager. |
14 | 7-16-24. Contributions to capital. |
15 | The contribution of a member to a limited liability company must be a capital contribution. |
16 | 7-16-25. Liability for contribution. |
17 | (a) A promise by a member to make a capital contribution to the limited liability company |
18 | is not enforceable unless set out in a writing signed by the member. |
19 | (b) Except as provided in the operating agreement, a member's obligation to make his or |
20 | her capital contribution is not excused because of death, disability or other reason. |
21 | (c) If a member does not make a capital contribution of property or services as and when |
22 | promised, the member is obligated, at the option of the limited liability company, to contribute cash |
23 | equal to that portion of the value of the capital contribution that has not been made. |
24 | (d)(1) Unless otherwise provided in the operating agreement, the obligation of a member |
25 | to make a capital contribution may be compromised only with the unanimous consent of the |
26 | members. |
27 | (2) Notwithstanding the compromise, a creditor of a limited liability company who extends |
28 | credit or otherwise acts in reliance on that obligation after the member signs a writing that reflects |
29 | the obligation and before the compromise may enforce the original obligation. |
30 | 7-16-26. Sharing of profits and losses. |
31 | Unless otherwise provided in the articles of organization or the operating agreement, the |
32 | profits and losses of a limited liability company shall be allocated to each member on the basis of |
33 | the member's capital value. |
34 | 7-16-27. Sharing of distributions. |
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1 | Unless otherwise provided in the articles of organization or operating agreement, |
2 | distributions of cash or other assets of a limited liability company shall be allocated to each member |
3 | on the basis of the member's capital value. |
4 | 7-16-28. Interim distributions. |
5 | Except as provided in this chapter, a member is entitled to receive distributions from a |
6 | limited liability company before the withdrawal of the member from the limited liability company |
7 | and before the dissolution and winding up of the limited liability company to the extent and at the |
8 | times or upon the happening of the events upon which the members unanimously agree or as |
9 | provided in the operating agreement. |
10 | 7-16-29. Distributions upon withdrawal. |
11 | Upon the withdrawal of a member, except as otherwise provided in writing in an operating |
12 | agreement, the withdrawn member and his or her legal representatives, successors and assigns do |
13 | not have the right to receive any distribution by reason of the withdrawal but have only the rights |
14 | of an assignee to receive distributions as to the withdrawn member's interest during any |
15 | continuation of the business of the limited liability company and upon completion of winding up |
16 | less any damages recoverable against the withdrawn member if the event of withdrawal violated |
17 | the limited liability company's operating agreement. |
18 | 7-16-30. Distribution in kind. |
19 | Except as provided in the operating agreement: |
20 | (1) A member has no right to demand and receive any distribution from a limited liability |
21 | company in any form other than cash; and |
22 | (2) No member may be compelled to accept from a limited liability company a distribution |
23 | of any asset in kind to the extent that the percentage of the asset distributed to the member exceeds |
24 | the percentage of that asset which is equal to the percentage in which the member shares |
25 | distributions from the limited liability company. |
26 | 7-16-31. Restrictions on making distributions. |
27 | (a) No distribution may be made to a member if, after giving effect to the distribution: |
28 | (1) The limited liability company would not be able to pay its debts as they become due in |
29 | the usual course of business; or |
30 | (2) The limited liability company's total assets would be less than the sum of its total |
31 | liabilities plus, unless the operating agreement provides otherwise, the amount that would be |
32 | needed, if the limited liability company were to be dissolved at the time of the distribution, to satisfy |
33 | the preferential rights of other members upon dissolution that are superior to the rights of the |
34 | member receiving the distribution. |
| LC005050 - Page 23 of 135 |
1 | (b) The limited liability company may base a determination that a distribution is not |
2 | prohibited under subsection (a) on: |
3 | (1) Financial statements prepared on the basis of accounting practices and principles that |
4 | are reasonable under the circumstances; or |
5 | (2) A fair valuation or other method that is reasonable under the circumstances. |
6 | (c) The effect of a distribution under subsection (a) is measured as of: |
7 | (1) The date the distribution is authorized if the payment occurs within one hundred and |
8 | twenty (120) days after the date of authorization; or |
9 | (2) The date payment is made if it occurs more than one hundred and twenty (120) days |
10 | after the date of authorization. |
11 | 7-16-32. Liability upon wrongful distribution. |
12 | (a) A member or manager who votes for or assents to a distribution in violation of the |
13 | operating agreement or of § 7-16-31 is personally liable to the limited liability company for the |
14 | amount of the distribution that exceeds what could have been distributed without violating the |
15 | operating agreement or § 7-16-31. |
16 | (b) Each member or manager held liable under subsection (a) for an unlawful distribution |
17 | is entitled to contribution: |
18 | (1) From each other member or manager who could be held liable under subsection (a) for |
19 | the unlawful distribution; and |
20 | (2) From each member for the amount the member received knowing that the distribution |
21 | was made in violation of the operating agreement or § 7-16-31. |
22 | (c) A proceeding under this section is barred unless it is commenced within two (2) years |
23 | after the date on which the effect of the distribution is measured under § 7-16-31. |
24 | 7-16-33. Right to distribution. |
25 | Unless otherwise provided in the operating agreement, at the time a member becomes |
26 | entitled to receive a distribution, the member has the status of, and is entitled to all remedies |
27 | available to, a creditor of the limited liability company with respect to the distribution. |
28 | 7-16-34. Nature of membership interest. |
29 | A membership interest is personal property. A member has no interest in specific limited |
30 | liability company property. |
31 | 7-16-35. Assignment of membership interest. |
32 | (a) Unless otherwise provided in the articles of organization or a written operating |
33 | agreement: |
34 | (1) A membership interest is assignable in whole or in part; |
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1 | (2) An assignment of a membership interest does not of itself dissolve a limited liability |
2 | company or entitle the assignee to participate in the management and affairs of the limited liability |
3 | company or to become a member or to exercise any rights or powers of a member; |
4 | (3) An assignment entitles the assignee to receive, to the extent assigned, only the |
5 | distributions to which the assignor would be entitled; and |
6 | (4) A member ceases to be a member and to have the power to exercise any rights or powers |
7 | of a member on assignment of all of the member's membership interest. |
8 | (b) Unless otherwise provided in the articles of organization or an operating agreement, the |
9 | pledge of or granting of a security interest, lien or other encumbrance in or against any or all of the |
10 | membership interest of a member is not deemed an assignment of a membership interest. |
11 | (c) Unless otherwise provided in the articles of organization or an operating agreement and |
12 | except to the extent provided in a written agreement signed by an assignee, until an assignee of a |
13 | membership interest becomes a member, the assignee has no liability as a member solely as a result |
14 | of the assignment. |
15 | 7-16-36. Right of assignee to become a member. |
16 | (a) Except as otherwise provided in a written operating agreement, an assignee of an |
17 | interest in a limited liability company may become a member only if the other members |
18 | unanimously consent. The consent of a member may be evidenced in any manner specified in an |
19 | operating agreement, but in the absence of specification, consent is evidenced by a written |
20 | instrument, dated and signed by the member, or evidenced by a vote taken at a meeting of the |
21 | members called in accordance with the operating agreement and maintained with the records of the |
22 | limited liability company. |
23 | (b) An assignee who becomes a member has, to the extent assigned, the rights and powers, |
24 | and is subject to the restrictions and liabilities, of a member under the articles of organization, any |
25 | operating agreement and this chapter. |
26 | (c) An assignee who becomes a member is liable for any obligations of the assignor to |
27 | make contributions and to return distributions under this chapter. |
28 | (d) Whether or not an assignee of a membership interest becomes a member, the assignor |
29 | is not released from the assignor's liability to the limited liability company under § 7-16-25 and § |
30 | 7-16-32. |
31 | 7-16-37. Rights of judgment creditor. |
32 | On application to a court of competent jurisdiction by any judgment creditor of a member, |
33 | the court may charge the membership interest of the member with payment of the unsatisfied |
34 | amount of judgment with interest. To the extent charged, the judgment creditor has only the rights |
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1 | of an assignee of the membership interest. This chapter does not deprive any member of the benefit |
2 | of any exemption laws applicable to that member's membership interest. |
3 | 7-16-38. Powers of estate of a member. |
4 | (a) If a member who is an individual dies or a court of competent jurisdiction adjudges the |
5 | member to be incompetent to manage the member's person or property, the member's executor, |
6 | administrator, guardian, conservator or other legal representative may exercise all of the member's |
7 | rights for the purpose of settling the estate or administering property, including any power under |
8 | the articles of organization or a written operating agreement permitting an assignee to become a |
9 | member. |
10 | (b) If a member is a corporation, partnership, limited partnership, domestic or foreign |
11 | limited liability company, trust, estate, association or other entity and is dissolved or terminated, |
12 | the powers of that member may be exercised by its legal representative or successor. |
13 | 7-16-39. Dissolution. |
14 | A limited liability company is dissolved and its affairs shall be wound up upon the |
15 | happening of the first to occur of the following: |
16 | (1) At any time specified in the articles of organization; |
17 | (2) An event specified in the articles of organization or a written operating agreement to |
18 | cause dissolution; |
19 | (3) By action of members taken pursuant to § 7-16-21(b)(1); |
20 | (4) On the written consent of a majority of the capital values of the remaining members |
21 | after the death, withdrawal, expulsion, bankruptcy, or dissolution of a member, or the occurrence |
22 | of any other event that terminates the continued membership of a member in the limited liability |
23 | company, unless otherwise provided in the articles of organization or a written operating |
24 | agreement; |
25 | (5) Unless otherwise provided in the articles of incorporation or a written operating |
26 | agreement, on the death, withdrawal, expulsion, bankruptcy or dissolution of the last remaining |
27 | member or any other event that terminates the continued membership of the last remaining member, |
28 | unless within ninety (90) days the successor(s) in interest of the last remaining member and any |
29 | assignees of the member's interest and of any other member's interest agree in writing to admit at |
30 | least one (1) member to continue the business of the limited liability company; or |
31 | (6) Entry of a decree of judicial dissolution under § 7-16-40. |
32 | 7-16-40. Judicial dissolution. |
33 | On application by or on behalf of a member, the superior court may decree dissolution of |
34 | a limited liability company whenever it is not reasonably practicable to carry on the business in |
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1 | conformity with the articles of organization or operating agreement. |
2 | 7-16-41. Revocation of certificate of organization or certificate of registration. |
3 | (a) The certificate of organization or certificate of registration of a limited liability |
4 | company may be revoked by the secretary of state under the conditions prescribed in this section |
5 | when it is established that: |
6 | (1) The limited liability company procured its articles of organization through fraud; |
7 | (2) The limited liability company has continued to exceed or abuse the authority conferred |
8 | upon it by law; |
9 | (3) The limited liability company has failed to file its annual report within the time required |
10 | by this chapter, or with respect to any limited liability company in good company standing on the |
11 | records of the secretary of state on or after July 1, 2019, has failed to pay any required fees to the |
12 | secretary of state when they have become due and payable, or the secretary of state has received |
13 | notice from the division of taxation, in accordance with § 7-16-67.1, that the limited liability |
14 | company has failed to pay any fees or taxes due this state; |
15 | (4) The limited liability company has failed for thirty (30) days to appoint and maintain a |
16 | resident agent in this state as required by this chapter; |
17 | (5) The limited liability company has failed, after change of its resident agent, to file in the |
18 | office of the secretary of state a statement of the change as required by this chapter; |
19 | (6) The limited liability company has failed to file in the office of the secretary of state any |
20 | amendment to its articles of organization or certificate of registration or any articles of dissolution, |
21 | cancellation of registration, merger, or consolidation as prescribed by this chapter; or |
22 | (7) A misrepresentation has been made of any material matter in any application, report, |
23 | affidavit, or other document submitted by the limited liability company pursuant to this chapter. |
24 | (b) No certificate of organization or certificate of registration of a limited liability company |
25 | shall be revoked by the secretary of state unless: |
26 | (1) The secretary of state shall have given the limited liability company notice thereof not |
27 | less than sixty (60) days prior to such revocation by regular mail addressed to the resident agent in |
28 | this state on file with the secretary of state's office, which notice shall specify the basis for the |
29 | revocation; provided, however, that if a prior mailing addressed to the address of the resident agent |
30 | of the limited liability company in this state currently on file with the secretary of state's office has |
31 | been returned as undeliverable by the United States Postal Service for any reason, or if the |
32 | revocation notice is returned as undeliverable by the United States Postal Service for any reason, |
33 | the secretary of state shall give notice as follows: |
34 | (i) To the limited liability company, domestic or foreign, at its principal office of record as |
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1 | shown in its most recent annual report, and no further notice shall be required; or |
2 | (ii) In the case of a limited liability company that has not yet filed an annual report, then to |
3 | the domestic limited liability company at the principal office in the articles of organization or to |
4 | the authorized person listed on the articles of organization, or to the foreign limited liability |
5 | company at the office required to be maintained by the limited liability company in its state of |
6 | organization, and no further notice shall be required; and |
7 | (2) The limited liability company fails prior to revocation to file the annual report, pay the |
8 | fees or taxes, file the required statement of change of resident agent, file the articles of amendment |
9 | or amendment to its registration or articles of dissolution, cancellation of registration, merger, or |
10 | consolidation, or correct the misrepresentation. |
11 | 7-16-42. Issuance of certificates of revocation. |
12 | (a) Upon revoking any such certificate of organization or certificate of registration of the |
13 | limited liability company, the secretary of state shall: |
14 | (1) Issue a certificate of revocation in duplicate; |
15 | (2) File one of the certificates in the secretary of state's office; |
16 | (3) Send to the limited liability company by regular mail a certificate of revocation, |
17 | addressed to the resident agent of the limited liability company in this state on file with the secretary |
18 | of state's office; provided, however, that if a prior mailing addressed to the address of the resident |
19 | agent of the limited liability company in this state currently on file with the secretary of state's |
20 | office has been returned to the secretary of state as undeliverable by the United States Postal Service |
21 | for any reason, or if the revocation certificate is returned as undeliverable to the secretary of state's |
22 | office by the United States Postal Service for any reason, the secretary of state shall give notice as |
23 | follows: |
24 | (i) To the limited liability company, domestic or foreign, at its principal office of record as |
25 | shown in its most recent annual report, and no further notice shall be required; or |
26 | (ii) In the case of a limited liability company that has not yet filed an annual report, then to |
27 | the domestic limited liability company at the principal office in the articles of organization or to |
28 | the authorized person listed on the articles of organization, or to the foreign limited liability |
29 | company at the office required to be maintained by the limited liability company in its state of |
30 | organization, and no further notice shall be required. |
31 | (b) Upon the issuance of the certificate of revocation, the authority of the limited liability |
32 | company to transact business in this state ceases. |
33 | 7-16-43. Withdrawal of certificate of revocation. |
34 | (a) Within twenty (20) years after issuing a certificate of revocation as provided in § 7-16- |
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1 | 42, the secretary of state may withdraw the certificate of revocation and retroactively reinstate the |
2 | limited liability company in good standing as if its certificate of organization or certificate of |
3 | registration had not been revoked except as subsequently provided: |
4 | (1) On the filing by the limited liability company of the documents it had previously failed |
5 | to file as set forth in subdivisions (3) — (6) of § 7-16-41(a); |
6 | (2) On the payment by the limited liability company of a penalty in the amount of fifty |
7 | dollars ($50.00) for each year or part of year that has elapsed since the issuance of the certificate |
8 | of revocation; and |
9 | (3) Upon the filing by the limited liability company of a certificate of good standing from |
10 | the Rhode Island division of taxation. |
11 | (b) If, as permitted by the provisions of this chapter or chapters 1.2, 6, 12, or 13 of this title, |
12 | another limited liability company, business or nonprofit corporation, registered limited liability |
13 | partnership or a limited partnership, or in each case domestic or foreign, authorized and qualified |
14 | to transact business in this state, bears or has filed a fictitious business name statement as to or |
15 | reserved or registered a name that is the same as, the name of the limited liability company with |
16 | respect to which the certificate of revocation is proposed to be withdrawn, then the secretary of |
17 | state shall condition the withdrawal of the certificate of revocation on the reinstated limited liability |
18 | company's amending its articles of organization or certificate of registration so as to designate a |
19 | name that is not the same as its former name. |
20 | 7-16-44. Appeal from revocation of certificate of organization. |
21 | (a) Any limited liability company aggrieved by the action of the secretary of state in |
22 | revoking its articles of organization may appeal from the revocation to the superior court by filing |
23 | with the clerk of the court a petition setting forth the action of the secretary of state. |
24 | (b) The matter shall be tried de novo by the superior court, which shall either sustain the |
25 | action of the secretary of state or direct the secretary of state to take any action that the superior |
26 | court deems proper. |
27 | (c) Appeals from all final orders and judgments entered by the superior court under this |
28 | section in review of action of the secretary of state may be taken as in other civil actions. |
29 | 7-16-45. Winding up. |
30 | (a) Except as otherwise provided in the articles of organization or operating agreement, the |
31 | members who have not wrongfully dissolved a limited liability company may wind up the limited |
32 | liability company's business and affairs. |
33 | (b) On application by or on behalf of a member, the member's legal representative or |
34 | assignee, the superior court may wind up the limited liability company's business and affairs. |
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1 | 7-16-46. Distribution of assets. |
2 | On the winding up of a limited liability company, the assets shall be distributed as follows: |
3 | (1) To creditors, including members who are creditors, to the extent permitted by law, in |
4 | satisfaction of liabilities of the limited liability company other than liabilities for distributions to |
5 | members under § 7-16-28 or § 7-16-29; |
6 | (2) Except as provided in the articles of organization or written operating agreement, to |
7 | members or former members in satisfaction of liabilities for distributions under § 7-16-28 or § 7- |
8 | 16-29; and |
9 | (3) Except as provided in the articles of organization or a written operating agreement, to |
10 | members and former members first to return their capital values and second in proportions in which |
11 | the members share in distributions. |
12 | 7-16-47. Articles of dissolution. |
13 | Not later than thirty (30) days following the dissolution and winding up of the limited |
14 | liability company for any cause other than that set forth in § 7-16-39(1), articles of dissolution shall |
15 | be filed in the office of the secretary of state and set forth: |
16 | (1) The name of the limited liability company; |
17 | (2) The date of filing of the original articles of organization; |
18 | (3) The date of filing of all amendments to the original articles of organization or the most |
19 | recent restatement, if any, and all subsequent amendments to the articles of organization; |
20 | (4) The reason for filing the articles of dissolution; |
21 | (5) The effective date, which shall be a date certain, of the dissolution; and |
22 | (6) Any other information or provision, not inconsistent with law, that the members or |
23 | authorized person signing the articles of dissolution elect to set forth. |
24 | 7-16-48. Law governing foreign limited liability companies. |
25 | (a) Subject to the constitution of this state: |
26 | (1) The laws of the state or other jurisdiction under which a foreign limited liability |
27 | company is organized govern its organization and internal affairs and the liability of its members; |
28 | and |
29 | (2) A foreign limited liability company may not be denied registration by reason of any |
30 | difference between those laws and the laws of this state. |
31 | (b) A foreign limited liability company holding a valid registration in this state has no |
32 | greater rights and privileges than a domestic limited liability company. The registration shall not |
33 | be deemed to authorize the foreign limited liability company to exercise any of its powers or |
34 | conduct any business that a domestic limited liability company is not permitted by law to exercise |
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1 | or conduct in this state. |
2 | 7-16-49. Registration of foreign limited liability company. |
3 | (a) Before transacting business in this state, a foreign limited liability company shall |
4 | register with the secretary of state. |
5 | (b) In order to register, a foreign limited liability company shall submit to the secretary of |
6 | state, in duplicate, an application for registration as a foreign limited liability company, signed by |
7 | a person with authority to do so under the laws of the state or other jurisdiction of its organization |
8 | and setting forth: |
9 | (1) The name of the foreign limited liability company and, if different, the name under |
10 | which it proposes to register and transact business in this state; |
11 | (2) The state or other jurisdiction in which the foreign limited liability company is |
12 | organized and date of the foreign limited liability company's organization; |
13 | (3) The name and address of the resident agent required by § 7-16-11; |
14 | (4) A statement that the secretary of state is appointed the agent of the foreign limited |
15 | liability company for service of process if at any time there is no resident agent or if the resident |
16 | agent cannot be found or served following the exercise of reasonable diligence; |
17 | (5) The address of any office required to be maintained in the state or other jurisdiction of |
18 | its organization by the laws of that state or jurisdiction; |
19 | (6) A mailing address for the foreign limited liability company; |
20 | (7) A statement of whether the limited liability company is to be managed by its members |
21 | or by one or more managers, and if the limited liability company has managers at the time of its |
22 | application, the name and address of each manager; |
23 | (8) Any additional information that may be necessary or appropriate in order to enable the |
24 | secretary of state to determine whether the foreign limited liability company is entitled to transact |
25 | business in this state; and |
26 | (9) A statement indicating whether the company has been duly organized in its state of |
27 | formation as a low-profit limited liability company. |
28 | 7-16-50. Issuance of registration of foreign limited liability company. |
29 | If the secretary of state accepts the application for filing under § 7-16-8, the secretary of |
30 | state shall issue a certificate of registration to the foreign limited liability company. Upon the |
31 | issuance of a certificate of registration by the secretary of state, the company is authorized to |
32 | transact business in this state, subject, however, to the right of this state to suspend or revoke the |
33 | authority as provided in this chapter. |
34 | 7-16-50.1. Service of process on foreign limited liability company. |
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1 | (a) The resident agent appointed by a foreign limited liability company authorized to |
2 | transact business in this state is an agent of the limited liability company upon whom any process, |
3 | notice, or demand required or permitted by law to be served upon the corporation may be served. |
4 | (b) Whenever a foreign limited liability company authorized to transact business in this |
5 | state fails to appoint or maintain a resident agent in this state; or whenever any resident agent cannot |
6 | with reasonable diligence be found at the registered office; or whenever the certificate of authority |
7 | of a foreign limited liability company is suspended or revoked, the secretary of state is an agent of |
8 | the foreign limited liability company upon whom any process, notice, or demand may be served. |
9 | Service on the secretary of state of any process, notice, or demand must be made by delivering to |
10 | and leaving with him or her, or with any clerk having charge of the corporation department of his |
11 | or her office, duplicate copies of the process, notice, or demand. In the event any process, notice, |
12 | or demand is served on the secretary of state, the secretary of state shall immediately forward one |
13 | of the copies by registered mail, addressed to the foreign limited liability company at its principal |
14 | office if known to him or her, in the state or country under the laws of which it was organized. Any |
15 | service had in this manner on the secretary of state is returnable in not less than thirty (30) days. |
16 | (c) Every foreign limited liability company as a condition precedent to carrying on business |
17 | in this state must, and by so carrying on business in this state does, consent that any process, |
18 | including the process of garnishment, may be served upon the secretary of state in the manner |
19 | provided by this section, except that notice of the service must be given by the plaintiff or his or |
20 | her attorney in the manner as the court in which the action is commenced or pending orders as |
21 | affording the corporation reasonable opportunity to defend the action or to learn of the garnishment. |
22 | Notwithstanding the preceding requirements, however, once service has been made on the secretary |
23 | of state as provided, the court has the authority in the event of failure to comply with the |
24 | requirement of notice to the foreign limited liability company to order notice that is sufficient to |
25 | apprise it of the pendency of the action against it, and additionally, may extend the time for |
26 | answering by the foreign limited liability company. |
27 | (d) The secretary of state shall keep a record of all processes, notices, and demands served |
28 | upon him or her under this section, and record in the record the time of the service and his or her |
29 | action on it. The secretary of state shall not be required to retain such information for a period |
30 | longer than five (5) years from receipt of the service of process. |
31 | (e) Nothing contained in these provisions limits or affects the right to serve any process, |
32 | notice or demand, required or permitted by law to be served upon a foreign limited liability |
33 | company in any manner now or subsequently permitted by law. |
34 | 7-16-51. Name registration by foreign limited liability company. |
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1 | A foreign limited liability company may register with the secretary of state under any name |
2 | permitted under § 7-16-9, whether or not it is the name under which it is registered in its state or |
3 | other jurisdiction of organization. |
4 | 7-16-52. Amendments to registration of foreign limited liability company. |
5 | If any statement in the application for registration of a foreign limited liability company |
6 | was inaccurate when made or a change has occurred, other than a change of mailing address or a |
7 | change of the name and/or address of the resident agent, the foreign limited liability company shall |
8 | promptly file in the office of the secretary of state a certificate signed by a person with authority to |
9 | do so under the laws of the state or other jurisdiction of its organization correcting the inaccuracy |
10 | or indicating the change. |
11 | 7-16-52.1. Foreign application for transfer of authority. |
12 | (a) A duly authorized foreign limited liability company in the state of Rhode Island that |
13 | converts into any other form of foreign entity subject to the provisions of title 7 and the resulting |
14 | entity is required to file for authority to transact business in this state may apply for a transfer of |
15 | authority in the office of the secretary of state by filing: |
16 | (1) An application of transfer of authority that has been executed and filed in accordance |
17 | with § 7-16-8; |
18 | (2) An application for authority to transact business in the state of Rhode Island for the |
19 | resulting entity type; and |
20 | (3) A certificate of legal existence or good standing issued by the proper officer of the state |
21 | or country under the laws of which the resulting entity has been formed. |
22 | (b) The application for transfer of authority shall state: |
23 | (1) The name of the limited liability company; |
24 | (2) The type of other entity into which it has been converted; and |
25 | (3) The jurisdiction whose laws govern its internal affairs. |
26 | (c) Upon the effective time and date of the application for transfer of authority, the authority |
27 | of the limited liability company authorized to transact business under this chapter shall be |
28 | transferred without interruption to the other entity which shall thereafter hold such authority subject |
29 | to the provisions of the Rhode Island general laws which apply to that type of resulting entity. |
30 | 7-16-53. Cancellation of registration of foreign limited liability company. |
31 | A foreign limited liability company may cancel its registration by filing with the secretary |
32 | of state a certificate of cancellation signed by a person with authority to do so under the laws of the |
33 | state or other jurisdiction of its organization, or, if the foreign limited liability company is under |
34 | the supervision of a receiver or trustee, by the receiver or trustee on behalf of the foreign limited |
| LC005050 - Page 33 of 135 |
1 | liability company. In filing a certificate of cancellation, the foreign limited liability company |
2 | revokes the authority of its resident agent to accept service of process and consents that service of |
3 | process in any action, suit, or proceeding based upon any cause of action arising in this state during |
4 | the time the foreign limited liability company was authorized to transact business in this state may |
5 | subsequently be made on the foreign limited liability company by service on the secretary of state. |
6 | The certificate of cancellation must include the post office address to which the secretary of state |
7 | may mail a copy of any process against the foreign limited liability company that is served on the |
8 | secretary of state. |
9 | 7-16-54. Transaction of business by foreign limited liability company without |
10 | registration. |
11 | (a) A foreign limited liability company transacting business in this state may not maintain |
12 | any action, suit, or proceeding in any court of this state until it has registered in this state. |
13 | (b) The failure of a foreign limited liability company to register in this state does not impair |
14 | the validity of any contract or act of the foreign limited liability company or prevent the foreign |
15 | limited liability company from defending any action, suit or proceeding in any court of this state. |
16 | (c) A foreign limited liability company, by transacting business in this state without |
17 | registration, appoints the secretary of state as its agent for service of process as to claims for relief |
18 | or causes of action arising out of the transaction of business in this state. |
19 | (d) A member of a foreign limited liability company is not liable for the debts and |
20 | obligations of the limited liability company solely by reason of the company's having transacted |
21 | business in this state without a valid certificate of registration. |
22 | (e) Without excluding other activities that may not constitute transacting business in this |
23 | state, a foreign limited liability company is not considered to be transacting business in this state, |
24 | for the purposes of this chapter, by reason of carrying on in this state any one or more of the |
25 | following activities: |
26 | (1) Maintaining or defending any action or suit or any administrative or arbitration |
27 | proceeding or effecting its settlement or the settlement of claims or disputes; |
28 | (2) Holding meetings of its members or carrying on any other activities concerning its |
29 | internal affairs; |
30 | (3) Maintaining bank accounts; |
31 | (4) Maintaining offices or agencies for the transfer, exchange and registration of the foreign |
32 | limited liability company's own securities or maintaining trustees or depositories with respect to |
33 | those securities; |
34 | (5) Effecting sales through independent contractors; |
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1 | (6) Soliciting or obtaining orders, whether by mail or through employees or agents or |
2 | otherwise, where the orders require acceptance outside this state before becoming binding |
3 | contracts; |
4 | (7) Creating as borrower or lender or acquiring evidences of debt, mortgages, security |
5 | interests or liens on real or personal property; |
6 | (8) Securing or collecting debts or enforcing any rights in property securing the debts; |
7 | (9) Transacting any business in interstate commerce; |
8 | (10) Conducting an isolated transaction completed within a period of thirty (30) days and |
9 | not in the course of a number of repeated transactions of like nature; |
10 | (11) Acting as a general partner of a limited partnership that has filed a certificate of |
11 | limited-partnership as provided in § 7-13-8 or has registered with the secretary of state as provided |
12 | in § 7-13-49; and |
13 | (12) Acting as a member of a limited liability company or of a foreign limited liability |
14 | company that has registered with the secretary of state as provided in § 7-16-49. |
15 | 7-16-55. Action to restrain foreign limited liability company. |
16 | The attorney general of this state may maintain an action in the superior court to restrain |
17 | any foreign limited liability company or any of its agents from transacting any business in this state |
18 | in violation of this chapter or if the limited liability company has failed to comply with any section |
19 | of this chapter applicable to it or if the limited liability company has secured a certificate of the |
20 | secretary of state under § 7-16-50 on the basis of an inaccurate statement. |
21 | 7-16-56. Right of member to bring derivative action. |
22 | A member may bring an action on behalf of the limited liability company to recover a |
23 | judgment in its favor if all of the following conditions are met: |
24 | (1) The member does not have the authority to cause the limited liability company to sue |
25 | in its own right under the provisions of an operating agreement; |
26 | (2) The members or managers with this authority have wrongfully refused to bring the |
27 | action or, after adequate time to consider the demand, have failed to respond to the demand or if an |
28 | effort to cause those members or managers to bring the action is not likely to succeed; |
29 | (3) The plaintiff: |
30 | (i) Is a member of the limited liability company at the time of bringing the action; and |
31 | (ii) Was a member of the limited liability company at the time of the transaction |
32 | complained of, or the plaintiff's status as a member of the limited liability company subsequently |
33 | devolved to the plaintiff pursuant to the terms of the operating agreement from a person who was |
34 | a member at that time; and |
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1 | (4) The plaintiff fairly and adequately represents the interests of the members in enforcing |
2 | the right of the limited liability company. |
3 | 7-16-57. Pleading in derivative action. |
4 | In a derivative action, the complaint shall set forth with particularity the effort of the |
5 | plaintiff to secure initiation of the action by the managers or the members who would otherwise |
6 | have the authority to cause the limited liability company to sue in its own right or why such effort |
7 | was not likely to succeed. |
8 | 7-16-58. Expenses in derivative action. |
9 | (a) If a derivative action is successful, in whole or in part, or if anything is received by the |
10 | plaintiff as a result of a judgment, compromise or settlement of an action or claim, the court may |
11 | award the plaintiff reasonable expenses, including legal fees, and shall direct him or her to remit to |
12 | the limited liability company the remainder of those proceeds received by him or her. |
13 | (b) In any action subsequently instituted on behalf of any limited liability company by a |
14 | member or members of the company, the court having jurisdiction, upon final judgment and a |
15 | finding that the action was brought without reasonable cause, may require the plaintiff or plaintiffs |
16 | to pay to the parties named as defendants the reasonable expenses, including legal fees, incurred |
17 | by them in the defense of the action. |
18 | 7-16-59. Merger or consolidation. |
19 | Any provision of chapters 1.2 and 13 of this title to the contrary notwithstanding: |
20 | (1) Any one or more domestic or foreign limited liability companies may merge or |
21 | consolidate with or into any one or more domestic or foreign limited liability companies, limited |
22 | partnerships or corporations; and |
23 | (2) Any one or more limited partnerships or corporations may merge or consolidate with |
24 | or into any one or more domestic or foreign limited liability companies. |
25 | 7-16-60. Plan of merger or consolidation. |
26 | (a) Each constituent entity shall enter into a written plan of merger or consolidation, which |
27 | shall be approved by each domestic constituent entity in accordance with § 7-16-61. |
28 | (b) The plan of merger or consolidation shall set forth: |
29 | (1) The name of each limited liability company, corporation and limited partnership that is |
30 | a constituent entity in the merger or consolidation and the name of the surviving entity into which |
31 | each other constituent entity proposes to merge or the new entity into which each constituent entity |
32 | proposes to consolidate; |
33 | (2) The terms and conditions of the proposed merger or consolidation; |
34 | (3) The manner and basis of converting the interests in each limited liability company, the |
| LC005050 - Page 36 of 135 |
1 | shares of stock or other interests in each corporation and the interests in each limited partnership |
2 | that is a constituent entity in the merger or consolidation, other than those, in the case of a merger, |
3 | held by the surviving entity into interests, shares, or other securities or obligations of the surviving |
4 | entity or the new entity, or of any other limited liability company, corporation, limited partnership, |
5 | or other entity, or, in whole or in part, into cash or other property; |
6 | (4) In the case of a merger where the surviving entity is domestic, any amendments to the |
7 | articles of organization of a limited liability company, articles of incorporation of a corporation or |
8 | certificate of limited partnership of a limited partnership of the surviving entity that are to be |
9 | effected by the merger, or that no changes are desired; |
10 | (5) In the case of a consolidation where the new entity is domestic, all of the statements |
11 | required to be set forth in articles of organization of any new entity that is a limited liability |
12 | company, articles of incorporation of any new entity that is a corporation, or certificate of limited |
13 | partnership of any new entity that is a limited partnership; and |
14 | (6) Any other provisions relating to the proposed merger or consolidation that are deemed |
15 | necessary or desirable. |
16 | 7-16-61. Approval of merger or consolidation. |
17 | (a) A proposed plan of merger or consolidation complying with the requirements of § 7- |
18 | 16-60 shall be approved by the domestic constituent entities in the manner provided by this section: |
19 | (1) A limited liability company party to a proposed merger or consolidation shall have the |
20 | plan of merger or consolidation authorized and approved in the manner and by the vote required |
21 | by § 7-16-21; |
22 | (2) A domestic corporation party to a proposed merger or consolidation shall have the plan |
23 | of merger or consolidation authorized and approved in the manner and by the vote required by the |
24 | laws of this state for mergers of corporations with other corporations; |
25 | (3) A domestic limited partnership party to a proposed merger or consolidation shall have |
26 | the plan of merger or consolidation, unless otherwise provided in the limited partnership agreement, |
27 | authorized and approved in the manner and by the vote required by the laws of this state for mergers |
28 | or consolidations of a domestic limited partnership with other limited partnerships or other business |
29 | entities. |
30 | (b) After a merger or consolidation is authorized, unless the plan of merger or consolidation |
31 | provides otherwise, and at any time before articles of merger or consolidation are filed under § 7- |
32 | 16-62, the plan of merger or consolidation may be abandoned, subject to any contractual rights, in |
33 | accordance with the procedure set forth in the plan of merger or consolidation or, if none is set |
34 | forth, as follows: |
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1 | (1) By the unanimous consent of the members of each limited liability company that is a |
2 | constituent entity, unless the operating agreement of the limited liability company provides |
3 | otherwise; |
4 | (2) By the vote of the board of directors of any corporation that is a constituent entity; |
5 | (3) By the approval of all general partners and all limited partners of any limited partnership |
6 | that is a constituent entity unless the limited partnership agreement provides otherwise. |
7 | 7-16-62. Articles of merger or consolidation. |
8 | (a) After a plan of merger or consolidation is approved by all domestic constituent entities |
9 | as provided in § 7-16-61, the surviving entity or the new entity shall deliver in duplicate to the |
10 | secretary of state for filing articles of merger or consolidation duly executed by each constituent |
11 | entity setting forth: |
12 | (1) The identity of each constituent entity by name, type and state or other jurisdiction |
13 | under whose laws it is organized or formed; |
14 | (2) The plan of merger or consolidation; |
15 | (3) The effective date of the merger or consolidation if later than the date of filing of the |
16 | articles of merger or consolidation; |
17 | (4) The identity of the surviving entity or the new entity by name, type and state or other |
18 | jurisdiction under whose laws it is organized or formed; and |
19 | (5) A statement that the plan of merger was authorized and approved by each constituent |
20 | entity. |
21 | (b) A merger or consolidation takes effect on the later of the effective date of the filing of |
22 | the articles of merger or consolidation or the date set forth in the plan of merger or consolidation. |
23 | (c) Articles of merger or consolidation shall act as a certificate of cancellation for each |
24 | domestic limited partnership party to the merger or consolidation that is not the surviving entity or |
25 | the new entity. |
26 | 7-16-63. Effects of merger or consolidation. |
27 | Following the consummation of a merger or consolidation in which the surviving entity or |
28 | the new entity is to be governed by the laws of this state: |
29 | (1) The constituent entities party to the plan of merger or consolidation shall be a single |
30 | entity, which, in the case of a merger shall be the entity designated in the plan of merger as the |
31 | surviving entity, and, in the case of a consolidation, shall be the new entity provided for in the plan |
32 | of consolidation. |
33 | (2) The separate existence of each constituent entity party to the plan of merger or |
34 | consolidation, except the surviving entity or the new entity, shall cease. |
| LC005050 - Page 38 of 135 |
1 | (3) The surviving entity or the new entity shall at that time and subsequently possess all |
2 | the rights, privileges, immunities, powers, and franchises, of a public as well as a private nature, of |
3 | each constituent entity and is subject to all the restrictions, disabilities, and duties of each of the |
4 | constituent entities to the extent the rights, privileges, immunities, powers, franchises, restrictions, |
5 | disabilities, and duties are applicable to the form of existence of the surviving entity or the new |
6 | entity. |
7 | (4) All property, real, personal and mixed, and all debts due on whatever account, including |
8 | promises to make capital contributions and subscriptions for shares, and all other choices in action, |
9 | and all and every other interest of or belonging to or due to each of the constituent entities are |
10 | vested in the surviving entity or the new entity without further act or deed. |
11 | (5) The title to all real estate and any interest in real estate vested in any constituent entity |
12 | does not revert or become in any way impaired because of the merger or consolidation. |
13 | (6) The surviving entity or the new entity is responsible and liable for all liabilities and |
14 | obligations of each of the merged or consolidated constituent entities, and any claim existing or |
15 | action or proceeding pending by or against any constituent entity may be prosecuted as if the merger |
16 | or consolidation had not taken place, or the surviving entity or the new entity may be substituted in |
17 | the action. |
18 | (7) Neither the rights of creditors nor any liens on the property of any constituent entity are |
19 | impaired by the merger or consolidation. |
20 | (8) In the case of a merger, depending upon whether the surviving entity is a limited |
21 | liability company, a domestic corporation, or a domestic limited partnership, the articles of |
22 | organization of the limited liability company, articles of incorporation of the corporation, or |
23 | certificate of limited partnership of the limited partnership shall be amended to the extent provided |
24 | in the articles of merger. |
25 | (9) In the case of a consolidation where the new entity is domestic, the statements set forth |
26 | in the articles of consolidation and that are required or permitted to be set forth in the articles of |
27 | organization, articles of incorporation, or certificate of limited partnership of the new domestic |
28 | entity, are deemed to be the original articles of organization, articles of incorporation, or certificate |
29 | of limited partnership of the new domestic entity. |
30 | (10) Unless otherwise agreed in the partnership agreement of a domestic limited |
31 | partnership, a merger or consolidation in which a domestic limited partnership is a constituent |
32 | entity, including a merger or consolidation in which a domestic limited partnership is not the |
33 | surviving entity or the new entity, does not require the domestic limited partnership to wind up its |
34 | affairs under § 7-13-46 or pay its liabilities and distribute its assets under § 7-13-47. |
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1 | (11) The membership or other interests in a limited liability company, shares or other |
2 | interests in a corporation, partnership or other interests in a limited partnership that is a constituent |
3 | entity that are to be converted or exchanged into interests, shares or other securities, cash, |
4 | obligations or other property under the terms of the articles of merger or consolidation are |
5 | converted, and their former holders are entitled only to the rights provided in the articles of merger |
6 | or consolidation or the rights otherwise provided by law. |
7 | (12) Nothing in this chapter abridges or impairs any rights that may otherwise be available |
8 | to the members or shareholders or other holders of an interest in any constituent entity under |
9 | applicable law. |
10 | 7-16-64. Merger or consolidation with foreign entity. |
11 | (a) Any merger or consolidation that includes a foreign limited liability company, foreign |
12 | corporation or foreign limited partnership as a constituent entity is subject to the additional |
13 | requirements that the merger or consolidation is permitted by the law of the state or jurisdiction |
14 | under whose laws each foreign constituent entity is organized or formed and each foreign |
15 | constituent entity complies with that law in effecting the merger or consolidation. |
16 | (b) If the surviving entity or the new entity is to be governed by the laws of any jurisdiction |
17 | other than this state, then the articles of merger or consolidation required by § 7-16-62 shall also |
18 | set forth: |
19 | (1) The agreement of the surviving entity or the new entity that it may be served with |
20 | process in this state in any proceeding for enforcement of any obligation of any constituent entity |
21 | party to the merger or consolidation that was organized under the laws of this state, as well as for |
22 | enforcement of any obligation of the surviving entity or the new entity arising from the merger or |
23 | consolidation; and |
24 | (2) The irrevocable appointment of the secretary of state as an agent for service of process |
25 | in the proceeding, and the surviving entity or the new entity shall specify the address to which a |
26 | copy of the process shall be mailed to it by the secretary of state. |
27 | (c) The effect of the merger or consolidation in which the surviving entity or the new entity |
28 | is to be governed by the laws of any jurisdiction other than this state, shall be the same as provided |
29 | in § 7-16-63, except insofar as the laws of the other jurisdiction provide otherwise. |
30 | 7-16-65. Filing, service, and copying fees. |
31 | The secretary of state shall charge and collect: |
32 | (1) For filing the original articles of organization, a fee of one hundred fifty dollars ($150); |
33 | (2) For amending, restating, or amending and restating the articles of organization, a fee of |
34 | fifty dollars ($50.00); |
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1 | (3) For filing articles of merger or consolidation and issuing a certificate, a fee of one |
2 | hundred dollars ($100); |
3 | (4) For filing articles of dissolution, a fee of fifty dollars ($50.00); |
4 | (5) For issuing a certificate of good standing/letter of status, a fee of twenty dollars |
5 | ($20.00); |
6 | (6) For issuing a certificate of fact, a fee of thirty dollars ($30.00); |
7 | (7) For furnishing a certified copy of any document, instrument, or paper relating to a |
8 | domestic or foreign limited liability company, a fee of fifteen cents ($.15) per page and ten dollars |
9 | ($10.00) for the certificate and affirming the seal to it; |
10 | (8) For accepting an application for reservation of a name, or for filing a notice of the |
11 | transfer or cancellation of any name reservation, a fee of fifty dollars ($50.00); |
12 | (9) For filing a fictitious business name statement or abandonment of use of a fictitious |
13 | business name, a fee of fifty dollars ($50.00); |
14 | (10) For filing a statement of change of resident agent and address of registered agent, a |
15 | fee of twenty dollars ($20.00); |
16 | (11) For filing a statement of change of address only for a resident agent, no fee; |
17 | (12) For any service of notice, demand, or process on the registered agent of a foreign or |
18 | domestic limited liability company, a fee of fifteen dollars ($15.00), which amount may be |
19 | recovered as taxable costs by the party to the suit, action, or proceeding causing the service to be |
20 | made if the party prevails in the suit; |
21 | (13) For filing an annual report, a fee of fifty dollars ($50.00); |
22 | (14) For filing a certificate of correction, a fee of fifty dollars ($50.00); |
23 | (15) For filing an application for registration as a foreign limited liability company, a fee |
24 | of one hundred fifty dollars ($150); |
25 | (16) For filing a certificate of amendment to the registration of a foreign limited liability |
26 | company, a fee of fifty dollars ($50.00); |
27 | (17) For filing a certificate of cancellation of a foreign limited liability company, a fee of |
28 | seventy-five dollars ($75.00); |
29 | (18) At the time of any service of process upon the secretary of state as a resident agent of |
30 | a limited liability company, fifteen dollars ($15.00), which amount may be recovered as a taxable |
31 | cost by the party to the suit or action making the service if the party prevails in the suit or action; |
32 | (19) For filing any other statement or report, except an annual report, of a domestic or |
33 | foreign limited liability company, a fee of ten dollars ($10.00); and |
34 | (20) For filing a certificate of conversion to a non-Rhode Island entity, a fee of fifty dollars |
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1 | ($50.00). |
2 | 7-16-66. Annual report of domestic and foreign limited liability companies. |
3 | (a) Each domestic limited liability company and each foreign limited liability company |
4 | authorized to transact business in this state, shall file, between the first day of February and the first |
5 | day of May in each year following the calendar year in which its original articles of organization |
6 | or application for registration were filed with the secretary of state, an annual report setting forth: |
7 | (1) The name and address of the principal office of the limited liability company; |
8 | (2) The state or other jurisdiction under the laws of which it is formed; |
9 | (3) [Deleted by P.L. 2021, ch. 137, § 3 and P.L. 2021, ch. 138, § 3.] |
10 | (4) The current mailing address of the limited liability company and the name or title of a |
11 | person to whom communications may be directed; |
12 | (5) A brief statement of the character of the business in which the limited liability company |
13 | is actually engaged in this state; and |
14 | (6) Any additional information required by the secretary of state. |
15 | (7) [Deleted by P.L. 2021, ch. 137, § 3 and P.L. 2021, ch. 138, § 3.] |
16 | (b) The information in the annual report shall be given as of the date of the execution of |
17 | the report. It shall be executed by an authorized person of the domestic limited liability company |
18 | and by a person with authority to do so under the laws of the state or other jurisdiction of |
19 | organization of a foreign limited liability company. Proof to the satisfaction of the secretary of state |
20 | that prior to May 1 the report was deposited in the United States mail in a sealed envelope, properly |
21 | addressed, with postage prepaid, is deemed to be timely filed. |
22 | (c) If the secretary of state finds that the annual report conforms to the requirements of this |
23 | chapter, the secretary of state shall file the report. If the secretary of state finds that it does not |
24 | conform, the secretary of state shall promptly return the report to the limited liability company for |
25 | any necessary corrections, in which event the penalties subsequently prescribed for failure to file |
26 | the report within the time previously provided do not apply if the report is corrected to conform to |
27 | the requirements of this chapter and returned to the secretary of state within thirty (30) days from |
28 | the date on which it was mailed to the limited liability company by the secretary of state. |
29 | (d) Each limited liability company, domestic or foreign, that fails or refuses to file its |
30 | annual report for any year within thirty (30) days after the time prescribed by this chapter is subject |
31 | to a penalty of twenty-five dollars ($25.00) per year. |
32 | 7-16-67. Filing of returns with the tax administrator — Annual charge. |
33 | (a) A return, in the form and containing the information as the tax administrator may |
34 | prescribe, shall be filed with the tax administrator by the limited liability company: |
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1 | (1) In case the fiscal year of the limited liability company is the calendar year, on or before |
2 | the fifteenth day of March in the year following the close of the fiscal year; and |
3 | (2) In case the fiscal year of the limited liability company is not a calendar year, on or |
4 | before the fifteenth day of the third month following the close of the fiscal year. |
5 | (b) For tax years on or after January 1, 2016, a return, in the form and containing the |
6 | information as the tax administrator may prescribe, shall be filed with the tax administrator by the |
7 | limited liability company and shall be filed on or before the date a federal tax return is due to be |
8 | filed, without regard to extension. |
9 | (c) An annual charge shall be due on the filing of the limited liability company's return |
10 | filed with the tax administrator and shall be paid to the division of taxation as follows: |
11 | (1) If the limited liability company is treated as a corporation for purposes of federal |
12 | income taxation, it shall pay the taxes as provided in chapters 11 and 12 [repealed] of title 44; or |
13 | (2) If the limited liability company is not treated as a corporation for purposes of federal |
14 | income taxation, it shall pay a fee in an amount equal to the minimum tax imposed upon a |
15 | corporation under § 44-11-2(e). The due date for a limited liability company that is not treated as a |
16 | corporation for purposes of federal income taxation shall be on or before the fifteenth day of the |
17 | fourth month following the close of the fiscal year. |
18 | (d) For tax years on or after January 1, 2016, a return, in the form and containing the |
19 | information as the tax administrator may prescribe, shall be filed with the tax administrator by the |
20 | limited liability company and shall be filed on or before the date a federal tax return is due to be |
21 | filed, without regard to extension. |
22 | (e) The annual charge is delinquent if not paid by the due date for the filing of the return |
23 | and an addition of one hundred dollars ($100) to the charge is then due. |
24 | 7-16-67.1. Revocation of articles or authority to transact business for nonpayment of |
25 | fee. |
26 | (a) The tax administrator may, after July 15 of each year, make up a list of all limited |
27 | liability companies that have failed to pay the fee defined in § 7-16-67 for one year after the fee |
28 | became due and payable, and the failure is not the subject of a pending appeal. The tax administrator |
29 | shall certify to the correctness of the list. Upon receipt of the certified list, the secretary of state |
30 | may initiate revocation proceedings as defined in § 7-16-41. |
31 | (b) With respect to any information provided by the division of taxation to the secretary of |
32 | state pursuant to this chapter, the secretary of state, together with the employees or agents thereof, |
33 | shall be subject to all state and federal tax confidentiality laws applying to the division of taxation |
34 | and the officers, agents, and employees thereof, and which restrict the acquisition, use, storage, |
| LC005050 - Page 43 of 135 |
1 | dissemination, or publication of confidential taxpayer data. |
2 | 7-16-68. Limited liability company property. |
3 | Real and personal property owned, purchased, or leased by a limited liability company |
4 | shall be held, owned, and conveyed in the limited liability company name. Instruments and |
5 | documents providing for the acquisition, mortgage or disposition of property of the limited liability |
6 | company are valid and binding on the limited liability company if executed by one or more |
7 | managers of a limited liability company having a manager or managers or one or more members |
8 | of a limited liability company in which management has been retained in the members. |
9 | 7-16-69. Certificates and certified copies to be received in evidence. |
10 | All certificates issued by the secretary of state in accordance with the provisions of this |
11 | chapter, and all copies of documents filed in the secretary of state's office in accordance with the |
12 | provisions of this chapter when certified by the secretary of state, shall be taken and received in all |
13 | courts. |
14 | 7-16-70. Parties to actions. |
15 | A member of a limited iability company is not a proper party to proceedings by or against |
16 | a limited iability company, except for an action brought under § 7-16-56 and except where the |
17 | object is to enforce a member's right against or liability to the limited iability company. |
18 | 7-16-71. Unauthorized assumption of powers. |
19 | All persons who assume to act as a limited lability company without authority to do so are |
20 | jointly and severally liable for all debts and liabilities. |
21 | 7-16-72. Severability. |
22 | If any provision of this chapter or its application to any person or circumstance is held |
23 | invalid, the invalidity does not affect other provisions or applications of this chapter that can be |
24 | given effect without the invalid provision or application. To this end, the provisions of this chapter |
25 | are severable. |
26 | 7-16-73. Construction with other laws. |
27 | (a) Unless the provisions of this chapter or the context indicate otherwise, each reference |
28 | in the general laws to a "person" is deemed to include a limited liability company, and each |
29 | reference to a "corporation", except for references in the Rhode Island Business and Nonprofit |
30 | Corporation Acts, and except with respect to taxation, is deemed to include a limited liability |
31 | company. |
32 | (b) As to taxation, a domestic or foreign limited liability company shall be treated in the |
33 | same manner as it is treated under federal income tax law. |
34 | (c) If a domestic or foreign limited liability company is treated as a partnership for purposes |
| LC005050 - Page 44 of 135 |
1 | of federal income taxation: |
2 | (1) Any member of the limited liability company during any part of the limited liability |
3 | company's taxable year shall file a Rhode Island income tax return and shall include in Rhode |
4 | Island gross income that portion of the limited liability company's Rhode Island income allocable |
5 | to the member's interest in the limited liability company. |
6 | (2) Any member of the limited liability company who is a non-resident shall execute and |
7 | forward to the limited liability company before the original due date of the Rhode Island limited |
8 | liability company return an agreement that states that the member will file a Rhode Island income |
9 | tax return and pay income tax on the non-resident member's share of the limited liability company's |
10 | income that was derived from or attributable to sources within this state, and the agreement shall |
11 | be attached to the limited liability company's Rhode Island return for the taxable year. |
12 | (3) In the event that the non-resident member's executed agreement is not attached to the |
13 | Rhode Island limited liability company return or the agreement set forth above is attached to the |
14 | limited liability company return and subsequently the non-resident member fails to file a timely |
15 | income tax return, then within thirty (30) days of the date of notice by the Tax Administrator to the |
16 | limited liability company, the limited liability company shall remit to the Tax Administrator the |
17 | non-resident member's tax on the member's share of the limited liability company's income that |
18 | was derived from or attributable to sources within this state, which tax shall be computed at the |
19 | statutory rate applicable to corporations. |
20 | (4) A non-resident member is required to file a Rhode Island income tax return even though |
21 | the member's only source of Rhode Island income was that member's share of the limited liability |
22 | company's income that was derived from or attributable to sources within this state, and the amount |
23 | of remittance by the limited liability company on behalf of the non-resident member shall be |
24 | allowed as a credit against that member's Rhode Island income tax liability. |
25 | 7-16-74. Forms to be furnished by secretary of state. |
26 | All documents required by this chapter to be filed in the office of the secretary of state shall |
27 | be made on forms that shall be prescribed by the secretary of state. Forms for all documents to be |
28 | filed in the office of the secretary of state may be furnished by the secretary of state upon request, |
29 | but their use, unless otherwise specifically prescribed in this chapter, is not mandatory. |
30 | 7-16-75. Reservation of power. |
31 | The general assembly shall at all times have power to prescribe any regulations, provisions |
32 | and limitations that it deems advisable, which regulations, provisions and limitations are binding |
33 | on any limited liability companies subject to the provisions of this chapter, and the general |
34 | assembly has power to amend, repeal or modify this chapter at pleasure. |
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1 | 7-16-76. Low-profit limited liability company. |
2 | (a) A low-profit limited liability company shall at all times significantly further the |
3 | accomplishment of one or more charitable or educational purposes within the meaning of § |
4 | 170(c)(2)(B) of the Internal Revenue Code of 1986, 26 U.S.C. § 170(c)(2)(B), or its successor, and |
5 | would not have been formed but for the entity's relationship to the accomplishment of charitable or |
6 | educational purposes. |
7 | (b) A limited liability company that intends to qualify as a low-profit limited liability |
8 | company pursuant to the provisions of this section shall so indicate in its articles of organization, |
9 | shall organize under the provisions of § 7-16-6, and shall further state that: |
10 | (1) No significant purpose of the entity is the production of income or the appreciation of |
11 | property; provided, however, that the fact that an entity produces significant income or capital |
12 | appreciation shall not, in the absence of other factors, be conclusive evidence of a significant |
13 | purpose involving the production of income or the appreciation of property. |
14 | (2) No purpose of the entity is to accomplish one or more political or legislative purposes |
15 | within the meaning of § 170(c)(2)(D) of the Internal Revenue Code of 1986, 26 U.S.C. § |
16 | 170(c)(2)(D), or its successor. |
17 | (c) If an entity that met the requirements of this section at its formation at any time ceases |
18 | to satisfy any one of the requirements, it shall immediately cease to be a low-profit limited liability |
19 | company, but by continuing to meet all the other requirements of this chapter, will continue to exist |
20 | as a limited liability company. The name of the entity must be changed to be in conformance with |
21 | § 7-16-9. |
22 | (d) Nothing in this section shall prevent a limited liability company that is not organized |
23 | under it from electing a charitable or educational purpose in whole or in part for doing business |
24 | under this chapter. |
25 | (e) Except as otherwise provided in this section, all provisions of the Rhode Island Limited |
26 | Liability Act, chapter 16 of this title, applicable to domestic limited liability companies are |
27 | applicable to low-profit limited liability companies. |
28 | SECTION 2. Title 7 of the General Laws entitled "CORPORATIONS, ASSOCIATIONS, |
29 | AND PARTNERSHIPS" is hereby amended by adding thereto the following chapter: |
30 | CHAPTER 16.1 |
31 | THE RHODE ISLAND LIMITED LIABILITY COMPANY ACT |
32 | ARTICLE 1 |
33 | GENERAL PROVISIONS |
34 | 7-16.1-101. Short title. |
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1 | This chapter shall be known and may be cited as the "Uniform Limited Liability Company |
2 | Act". |
3 | 7-16.1-102. Definitions. |
4 | As used in this chapter: |
5 | (1) "Certificate of organization" means the certificate required by § 7-16.1-201. The term |
6 | includes the certificate as amended or restated. |
7 | (2) "Contribution" except in the phrase "right of contribution", means property or a benefit |
8 | described in § 7-16.1-402 which is provided by a person to a limited liability company to become |
9 | a member or in the person's capacity as a member. |
10 | (3) "Debtor in bankruptcy" means a person that is the subject of: |
11 | (i) An order for relief under Title 11 of the United States Code or a comparable order under |
12 | a successor statute of general application; or |
13 | (ii) A comparable order under federal, state, or foreign law governing insolvency. |
14 | (4) "Distribution" means a transfer of money or other property from a limited liability |
15 | company to a person on account of a transferable interest or in the person's capacity as a member. |
16 | The term: |
17 | (i) Includes: |
18 | (A) A redemption or other purchase by a limited liability company of a transferable |
19 | interest; and |
20 | (B) A transfer to a member in return for the member's relinquishment of any right to |
21 | participate as a member in the management or conduct of the company's activities and affairs or to |
22 | have access to records or other information concerning the company's activities and affairs; and |
23 | (ii) Does not include amounts constituting reasonable compensation for present or past |
24 | service or payments made in the ordinary course of business under a bona fide retirement plan or |
25 | other bona fide benefits program. |
26 | (5) "Foreign limited liability company" means an unincorporated entity formed under the |
27 | law of a jurisdiction other than this state which would be a limited liability company if formed |
28 | under the law of this state. |
29 | (6) "Jurisdiction" used to refer to a political entity, means the United States, a state, a |
30 | foreign county, or a political subdivision of a foreign country. |
31 | (7) "Jurisdiction of formation" means the jurisdiction whose law governs the internal |
32 | affairs of an entity. |
33 | (8) "Limited liability company" except in the phrase "foreign limited liability company", |
34 | and in Article 10, means an entity formed under this chapter or which becomes subject to this |
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1 | chapter under Article 10 or § 7-16.1-110. |
2 | (9) "Manager" means a person that under the operating agreement of a manager-managed |
3 | limited liability company is responsible, alone or in concert with others, for performing the |
4 | management functions stated in § 7-16.1-407(c). |
5 | (10) "Manager-managed limited liability company" means a limited liability company that |
6 | qualifies under § 7-16.1-407(a). |
7 | (11) "Member" means a person that: |
8 | (i) Has become a member of a limited liability company under § 7-16.1-401 or was a |
9 | member in a company when the company became subject to this chapter under § 7-16.1-110; and |
10 | (ii) Has not dissociated under § 7-16.1-602. |
11 | (12) "Member-managed limited liability company" means a limited liability company that |
12 | is not a manager-managed limited liability company. |
13 | (13) "Operating agreement" means the agreement, whether or not referred to as an |
14 | operating agreement and whether oral, implied, in a record, or in any combination thereof, of all |
15 | the members of a limited liability company, including a sole member, concerning the matters |
16 | described in § 7-16.1-105(a). The term includes the agreement as amended or restated. |
17 | (14) "Organizer" means a person that acts under § 7-16.1-201 to form a limited liability |
18 | company. |
19 | (15) "Person" means an individual, business corporation, nonprofit corporation, |
20 | partnership, limited partnership, limited liability company, general cooperative association, limited |
21 | cooperative association, unincorporated nonprofit association, statutory trust, business trust, |
22 | common-law business trust, estate, trust, association, joint venture, public corporation, government |
23 | or governmental subdivision, agency, or instrumentality, or any other legal or commercial entity. |
24 | (16) "Principal office" means the principal executive office of a limited liability company |
25 | or foreign limited liability company, whether or not the office is located in this state. |
26 | (17) "Property" means all property, whether real, personal, or mixed or tangible or |
27 | intangible, or any right or interest therein. |
28 | (18) "Record" used as a noun, means information that is inscribed on a tangible medium or |
29 | that is stored in an electronic or other medium and is retrievable in perceivable form. |
30 | (19) "Registered agent" means an agent of a limited liability company or foreign limited |
31 | liability company which is authorized to receive service of any process, notice, or demand required |
32 | or permitted by law to be served on the company. |
33 | (20) "Registered foreign limited liability company" means a foreign limited liability |
34 | company that is registered to do business in this state pursuant to a statement of registration filed |
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1 | by the secretary of state. |
2 | (21) "Sign "and "execute" means, with present intent to authenticate or adopt a record: |
3 | (i) To execute or adopt a tangible symbol; or |
4 | (ii) To attach to or logically associate with the record an electronic symbol, sound, or |
5 | process. "Signed", "signing" and "executed" have corresponding meanings. |
6 | (22) "State" means a state of the United States, the District of Columbia, Puerto Rico, the |
7 | United States Virgin Islands, or any territory or insular possession subject to the jurisdiction of the |
8 | United States. |
9 | (23) "Transfer" includes: |
10 | (i) An assignment; |
11 | (ii) A conveyance; |
12 | (iii) A sale; |
13 | (iv) A lease; |
14 | (v) An encumbrance, including a mortgage or security interest; |
15 | (vi) A gift; and |
16 | (vii) A transfer by operation of law. |
17 | (24) "Transferable interest" means the right, as initially owned by a person in the person's |
18 | capacity as a member, to receive distributions from a limited liability company, whether or not the |
19 | person remains a member or continues to own any part of the right. The term applies to any fraction |
20 | of the interest, by whomever owned. |
21 | (25) "Transferee" means a person to which all or part of a transferable interest has been |
22 | transferred, whether or not the transferor is a member. The term includes a person that owns a |
23 | transferable interest under § 7-16.1-603(a)(3). |
24 | 7-16.1-103. Knowledge -- Notice. |
25 | (a) A person knows a fact if the person: |
26 | (1) Has actual knowledge of it; or |
27 | (2) Is deemed to know it under subsection (d)(1) of this section or law other than this |
28 | chapter. |
29 | (b) A person has notice of a fact if the person: |
30 | (1) Has reason to know the fact from all the facts known to the person at the time in |
31 | question; or |
32 | (2) Is deemed to have notice of the fact under subsection (d)(2) of this section. |
33 | (c) Subject to § 7-16.1-210(f), a person notifies another person of a fact by taking steps |
34 | reasonably required to inform the other person in ordinary course, whether or not those steps cause |
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1 | the other person to know the fact. |
2 | (d) A person not a member is deemed: |
3 | (1) To know of a limitation on authority to transfer real property as provided in § 7-16.1- |
4 | 302(g); and |
5 | (2) To have notice of a limited liability company's: |
6 | (i) Dissolution ninety (90) days after a statement of dissolution under § 7-16.1-702(b)(2)(i) |
7 | becomes effective; |
8 | (ii) Termination ninety (90) days after a statement of termination under § 7-16.1- |
9 | 702(b)(2)(vi) becomes effective; and |
10 | (iii) Participation in a merger, interest exchange, conversion, or domestication, ninety (90) |
11 | days after articles of merger, interest exchange, conversion, or domestication under Article 10 |
12 | become effective. |
13 | 7-16.1-104. Governing law. |
14 | The law of this state governs: |
15 | (1) The internal affairs of a limited liability company; and |
16 | (2) The liability of a member as member and a manager as manager for a debt, obligation, |
17 | or other liability of a limited liability company. |
18 | 7-16.1-105. Operating agreement -- Scope, function and limitations. |
19 | (a) Except as otherwise provided in subsections (c) and (d) of this section, the operating |
20 | agreement governs: |
21 | (1) Relations among the members as members and between the members and the limited |
22 | liability company; |
23 | (2) The rights and duties under this chapter of a person in the capacity of manager; |
24 | (3) The activities and affairs of the company and the conduct of those activities and affairs; |
25 | and |
26 | (4) The means and conditions for amending the operating agreement. |
27 | (b) To the extent the operating agreement does not provide for a matter described in |
28 | subsection (a) of this section, this chapter governs the matter. |
29 | (c) An operating agreement may not: |
30 | (1) Vary the law applicable under § 7-16.1-104; |
31 | (2) Vary a limited liability company's capacity under § 7-16.1-109 to sue and be sued in its |
32 | own name; |
33 | (3) Vary any requirement, procedure, or other provision of this chapter pertaining to: |
34 | (i) Registered agents; or |
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1 | (ii) The secretary of state, including provisions pertaining to records authorized or required |
2 | to be delivered to the secretary of state for filing under this chapter; |
3 | (4) Vary the provisions of § 7-16.1-204; |
4 | (5) Alter or eliminate the duty of loyalty or the duty of care, except as otherwise provided |
5 | in subsection (d) of this section; |
6 | (6) Eliminate the contractual obligation of good faith and fair dealing under § 7-16.1- |
7 | 409(d), but the operating agreement may prescribe the standards, if not manifestly unreasonable, |
8 | by which the performance of the obligation is to be measured; |
9 | (7) Relieve or exonerate a person from liability for conduct involving bad faith, willful or |
10 | intentional misconduct, or knowing violation of law; |
11 | (8) Unreasonably restrict the duties and rights under § 7-16.1-410, but the operating |
12 | agreement may impose reasonable restrictions on the availability and use of information obtained |
13 | under that section and may define appropriate remedies, including liquidated damages, for a breach |
14 | of any reasonable restriction on use; |
15 | (9) Vary the causes of dissolution specified in § 7-16.1-701(b)(1); |
16 | (10) Vary the requirement to wind up the company's activities and affairs as specified in |
17 | §§ 7-16.1-702(a), (b)(1), and (e); |
18 | (11) Unreasonably restrict the right of a member to maintain an action under Article 8; |
19 | (12) Vary the provisions of § 7-16.1-805, but the operating agreement may provide that the |
20 | company may not have a special litigation committee; |
21 | (13) Vary the right of a member to approve a merger, interest exchange, conversion, or |
22 | domestication under §§ 7-16.1-1023(a)(2), 7-16.1-1033(a)(2), 7-16.1-1043(a)(2), or 7-16.1- |
23 | 1053(a)(2); |
24 | (14) Vary the required contents of a plan of merger under § 7-16.1-1022(a), plan of interest |
25 | exchange under § 7-16.1-1032(a), plan of conversion under § 7-16.1-1042(a), or plan of |
26 | domestication under § 7-16.1-1052(a); or |
27 | (15) Except as otherwise provided in §§ 7-16.1-106 and 7-16.1-107(b), restrict the rights |
28 | under this chapter of a person other than a member or manager. |
29 | (d) Subject to subsection (c)(7) of this section, without limiting other terms that may be |
30 | included in an operating agreement, the following rules apply: |
31 | (1) The operating agreement may: |
32 | (i) Specify the method by which a specific act or transaction that would otherwise violate |
33 | the duty of loyalty may be authorized or ratified by one or more disinterested and independent |
34 | persons after full disclosure of all material facts; and |
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1 | (ii) Alter the prohibition in § 7-16.1-405(a)(2) in order that the prohibition requires only |
2 | that the company's total assets not be less than the sum of its total liabilities. |
3 | (2) To the extent the operating agreement of a member-managed limited liability company |
4 | expressly relieves a member of a responsibility that the member otherwise would have under this |
5 | chapter and imposes the responsibility on one or more other members, the agreement also may |
6 | eliminate or limit any fiduciary duty of the member relieved of the responsibility which would have |
7 | pertained to the responsibility. |
8 | (3) If not manifestly unreasonable, the operating agreement may: |
9 | (i) Alter or eliminate the aspects of the duty of loyalty stated in §§ 7-16.1-409(b) and (i); |
10 | (ii) Identify specific types or categories of activities that do not violate the duty of loyalty; |
11 | (iii) Alter the duty of care, but may not authorize conduct involving bad faith, willful or |
12 | intentional misconduct, or knowing violation of law; and |
13 | (iv) Alter or eliminate any other fiduciary duty. |
14 | (e) The court shall decide as a matter of law whether a term of an operating agreement is |
15 | manifestly unreasonable under subsections (c)(6) or (d)(3) of this section. The court: |
16 | (1) Shall make its determination as of the time the challenged term became part of the |
17 | operating agreement and by considering only circumstances existing at that time; and |
18 | (2) May invalidate the term only if, in light of the purposes, activities, and affairs of the |
19 | limited liability company, it is readily apparent that: |
20 | (i) The objective of the term is unreasonable; or |
21 | (ii) The term is an unreasonable means to achieve the term's objective. |
22 | 7-16.1-106. Operating agreement -- Effect on limited liability company and person |
23 | becoming member -- Preformation agreement. |
24 | (a) A limited liability company is bound by and may enforce the operating agreement, |
25 | whether or not the company has itself manifested assent to the operating agreement. |
26 | (b) A person that becomes a member is deemed to assent to the operating agreement. |
27 | (c) Two (2) or more persons intending to become the initial members of a limited liability |
28 | company may make an agreement providing that upon the formation of the company, the agreement |
29 | will become the operating agreement. One person intending to become the initial member of a |
30 | limited liability company may assent to terms providing that upon the formation of the company |
31 | the terms will become the operating agreement. |
32 | 7-16.1-107. Operating agreement -- Effect on third parties and relationship to records |
33 | effective on behalf of limited liability company. |
34 | (a) An operating agreement may specify that its amendment requires the approval of a |
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1 | person that is not a party to the agreement or the satisfaction of a condition. An amendment is |
2 | ineffective if its adoption does not include the required approval or satisfy the specified condition. |
3 | (b) The obligations of a limited liability company and its members to a person in the |
4 | person's capacity as a transferee or a person dissociated as a member are governed by the operating |
5 | agreement. Subject only to a court order issued under § 7-16.1-503(b)(2) to effectuate a charging |
6 | order, an amendment to the operating agreement made after a person becomes a transferee or is |
7 | dissociated as a member: |
8 | (1) Is effective with regard to any debt, obligation, or other liability of the limited liability |
9 | company or its members to the person in the person's capacity as a transferee or person dissociated |
10 | as a member; and |
11 | (2) Is not effective to the extent the amendment imposes a new debt, obligation, or other |
12 | liability on the transferee or person dissociated as a member. |
13 | (c) If a record delivered by a limited liability company to the secretary of state for filing |
14 | becomes effective and contains a provision that would be ineffective under §§ 7-16.1-105(c) or |
15 | (d)(3) if contained in the operating agreement, the provision is ineffective in the record. |
16 | (d) Subject to subsection (c) of this section, if a record delivered by a limited liability |
17 | company to the secretary of state for filing becomes effective and conflicts with a provision of the |
18 | operating agreement: |
19 | (1) The agreement prevails as to members, persons dissociated as members, transferees, |
20 | and managers; and |
21 | (2) The record prevails as to other persons to the extent they reasonably rely on the record. |
22 | 7-16.1-108. Nature, purpose, and duration of limited liability company. |
23 | (a) A limited liability company is an entity distinct from its member or members. |
24 | (b) A limited liability company may have any lawful purpose, regardless of whether for |
25 | profit. |
26 | (c) A limited liability company has perpetual duration. |
27 | 7-16.1-108.1. Professional services. |
28 | A limited liability company may render professional services, as defined in § 7-5.1-2, as |
29 | and to the extent permitted under law or rules and regulations of the applicable regulatory agency |
30 | or agencies, as defined in § 7-5.1-2. Each regulatory agency as so defined is authorized to adopt, |
31 | subject to applicable law, rules and regulations regarding a domestic and foreign limited liability |
32 | company rendering professional services. The rules and regulations shall not be inconsistent with |
33 | law or rules or regulations regarding the rendering of professional services through a professional |
34 | corporation. |
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1 | 7-16.1-108.2. Liability in rendering professional services. |
2 | (a) The liability of an individual authorized to practice a profession for the person's own |
3 | negligence, wrongful acts or misconduct, or that of any person under the person's direct supervision |
4 | and control, other than in an administrative capacity, shall not be affected by the individual's |
5 | providing professional services in this state as a member or agent of a domestic or foreign limited |
6 | liability company. |
7 | (b) An individual authorized to practice a profession and who is a member of a domestic |
8 | or foreign limited liability company rendering professional services in this state is not liable solely |
9 | by reason of being a member for any negligence, wrongful acts or misconduct of another member |
10 | or agent of the limited liability company. A domestic or foreign limited liability company rendering |
11 | professional services in the state is liable for the negligence, wrongful acts or misconduct of its |
12 | members and agents providing professional services through the limited liability company within |
13 | the scope of their authority or apparent authority to act for the limited liability company. |
14 | (c) Notwithstanding any other provisions of this section, the personal liability of a member |
15 | in a limited liability company engaged in the rendering of professional services shall not be less |
16 | than or greater than the personal liability of a shareholder of a professional corporation organized |
17 | under chapter 5.1 of this title engaged in the rendering of the same professional services. |
18 | 7-16.1-108.3. Insurance or financial responsibility of limited liability company. |
19 | (a) A limited liability company that is to perform professional services, as defined in § 7- |
20 | 5.1-2, shall carry, if reasonably available, liability insurance of a kind that is designed to cover the |
21 | kinds of negligence, wrongful acts or misconduct for which liability is limited by § 7-16.1-108.2. |
22 | The insurance shall be in the aggregate amount of fifty thousand dollars ($50,000) multiplied by |
23 | the number of professional employees of the limited liability company as of the policy anniversary |
24 | date; provided, however, that in no case shall the coverage be less than one hundred thousand |
25 | dollars ($100,000) but in no event shall the necessary coverage exceed a maximum of five hundred |
26 | thousand dollars ($500,000); provided further, however, that any policy for insurance coverage |
27 | may include a deductible provision in any amount not to exceed twenty-five thousand dollars |
28 | ($25,000) for each claim multiplied by the number of professional employees of the limited liability |
29 | company as of the date of the issuance of the policy. The policy or policies of insurance may be |
30 | subject to any terms, conditions, exclusions and endorsements that are typically contained in |
31 | policies of this type. |
32 | (b) If, in any proceeding, compliance by a limited liability company with the requirements |
33 | of subsection (a) of this section is disputed: |
34 | (1) That issue shall be determined by the court; and |
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1 | (2) The burden of proof of compliance shall be on the person who claims the limitation of |
2 | liability in § 7-16.1-108.2. |
3 | (c) If a limited liability company is in compliance with the requirements of subsection (a) |
4 | of this section, the requirements of this section shall not be admissible or in any way be made |
5 | known to a jury in determining an issue of liability for or extent of the debt or obligation or damages |
6 | in question. |
7 | (d) Insurance is reasonably available for the purpose of subsection (a) of this section if, at |
8 | the time that the coverage would apply to the negligence, wrongful acts or misconduct in question, |
9 | it was reasonably available to similar types of limited liability companies through the admitted or |
10 | eligible surplus lines market. |
11 | (e) A limited liability company is considered to be in compliance with subsection (a) of |
12 | this section if the limited liability company provides five hundred thousand dollars ($500,000) of |
13 | funds specifically designated and segregated for the satisfaction of judgments against the limited |
14 | liability company based on the forms of negligence, wrongful acts and misconduct for which |
15 | liability is limited by § 7-16.1-108.2 by: |
16 | (1) Deposit in trust or in bank escrow of cash, bank certificate of deposit or United States |
17 | Treasury obligations; or |
18 | (2) A bank letter of credit or insurance company bonds. |
19 | (f) To the extent that a limited liability company maintains liability insurance or segregated |
20 | funds pursuant to the laws or regulations of another jurisdiction, the liability insurance or |
21 | segregated funds shall be deemed to satisfy this section if the amount of them is equal to or greater |
22 | than the amount specified in subsections (a) or (e) of this section. |
23 | 7-16.1-108.4. Low-profit limited liability company. |
24 | (a) A domestic limited liability company may be formed as a low-profit limited liability |
25 | company. A low-profit limited liability company shall at all times significantly further the |
26 | accomplishment of one or more charitable or educational purposes within the meaning of § |
27 | 170(c)(2)(B) of the Internal Revenue Code of 1986, 26 U.S.C. § 170(c)(2)(B), or its successor, and |
28 | would not have been formed but for the entity's relationship to the accomplishment of charitable or |
29 | educational purposes. |
30 | (b) A limited liability company that intends to qualify as a low-profit limited liability |
31 | company pursuant to the provisions of this section shall so indicate in its articles of organization, |
32 | shall organize under the provisions of § 7-16.1-201, and shall further state that: |
33 | (1) No significant purpose of the entity is the production of income or the appreciation of |
34 | property; provided, however, that the fact that an entity produces significant income or capital |
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1 | appreciation shall not, in the absence of other factors, be conclusive evidence of a significant |
2 | purpose involving the production of income or the appreciation of property. |
3 | (2) No purpose of the entity is to accomplish one or more political or legislative purposes |
4 | within the meaning of § 170(c)(2)(D) of the Internal Revenue Code of 1986, 26 U.S.C. § |
5 | 170(c)(2)(D), or its successor. |
6 | (c) If an entity that met the requirements of this section at its formation at any time ceases |
7 | to satisfy any one of the requirements, it shall immediately cease to be a low-profit limited liability |
8 | company, but by continuing to meet all the other requirements of this chapter, will continue to exist |
9 | as a limited liability company. The name of the entity shall be changed to be in conformance with |
10 | § 7-16.1-112. |
11 | (d) Nothing in this section shall prevent a limited liability company that is not organized |
12 | under it from electing a charitable or educational purpose, in whole or in part, for doing business |
13 | under this chapter. |
14 | (e) Except as otherwise provided in this section, all provisions of the Rhode Island Limited |
15 | Liability Act, chapter 16.1 of this title, applicable to domestic limited liability companies are |
16 | applicable to low-profit limited liability companies. |
17 | 7-16.1-109. Powers. |
18 | A limited liability company has the capacity to sue and be sued in its own name and the |
19 | power to do all things necessary or convenient to carry on its activities and affairs. |
20 | 7-16.1-110. Application to existing relationships. |
21 | (a) Before January 1, 2025, this chapter governs only: |
22 | (1) A limited liability company formed on or after the effective date of this chapter; and |
23 | (2) Except as otherwise provided in subsection (c) of this section, a limited liability |
24 | company formed before the effective date of this chapter which elects, in the manner provided in |
25 | its operating agreement or by law for amending the operating agreement, to be subject to this |
26 | chapter. |
27 | (b) Except as otherwise provided in subsection (c) of this section, on and after January 1, |
28 | 2025, this chapter governs all limited liability companies. |
29 | (c) For purposes of applying this chapter to a limited liability company formed before the |
30 | effective date of this chapter: |
31 | (1) The company's articles of organization are deemed to be the company's certificate of |
32 | organization; and |
33 | (2) For purposes of applying § 7-16.1-102(10) and subject to § 7-16.1-107(d), language in |
34 | the company's articles of organization designating the company's management structure operates |
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1 | as if that language were in the operating agreement. |
2 | 7-16.1-111. Supplemental principles of law. |
3 | Unless displaced by particular provisions of this chapter, the principles of law and equity |
4 | supplement this chapter. |
5 | 7-16.1-112. Permitted names. |
6 | (a) The name of a limited liability company shall contain the phrase "limited liability |
7 | company" or the abbreviation "L.L.C.", "LLC", or , if organized as a low-profit limited liability |
8 | company, shall end with either the words "low-profit, limited liability company" or the abbreviation |
9 | "L3C", "13c" or, if organized to render professional services as defined in § 7-5.1-2, the name of |
10 | the limited liability company shall end with either the words "professional limited liability |
11 | company", "PLLC" or "pllc". |
12 | (b) Except as otherwise provided in subsection (c) of this section, the name of a limited |
13 | liability company, and the name under which a foreign limited liability company may register to |
14 | do business in this state, shall be distinguishable on the records of the secretary of state from any: |
15 | (1) Name of an existing person whose formation required the filing of a record by the |
16 | secretary of state and which is not at the time administratively dissolved; |
17 | (2) Name of a limited liability partnership whose statement of qualification is in effect; |
18 | (3) Name under which a person is registered to do business in this state by the filing of a |
19 | record by the secretary of state; |
20 | (4) Name reserved under § 7-16.1-113 or other law of this state providing for the |
21 | reservation of a name by the filing of a record by the secretary of state; and |
22 | (5) Name registered under § 7-16.1-114 or other law of this state providing for the |
23 | registration of a name by the filing of a record by the secretary of state. |
24 | (c) This provision shall not apply if the applicant files with the secretary of state: |
25 | (1) A certified copy of a final decree of a court of competent jurisdiction establishing the |
26 | prior right of the applicant to the use of the name in this state; or |
27 | (2) The name may be the same as the name of a corporation, non-business corporation, or |
28 | other association, the certificate of incorporation or organization of which has been revoked by the |
29 | secretary of state as permitted by law, and the revocation has not been withdrawn within one year |
30 | from the date of the revocation. |
31 | (d) Words or abbreviations that are required by statute to identify the particular type of |
32 | business entity shall be disregarded when determining if a name is distinguishable upon the records |
33 | of the secretary of state. |
34 | (e) A limited liability company formed prior to the effective date of this chapter and |
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1 | organized to render professional services, is not required to adopt "professional limited liability |
2 | company", "PLLC" or "pllc" as an entity ending. After the effective date of this chapter, all newly |
3 | formed limited liability companies rendering professional services shall include either |
4 | "professional limited liability company", "PLLC" or "pllc" as an entity ending. |
5 | (f) The secretary of state shall promulgate rules and regulations defining the term |
6 | "distinguishable upon the record" for the administration of this chapter. |
7 | 7-16.1-112.1. Fictitious business name. |
8 | (a) Any domestic or foreign limited liability company organized under the laws of, or |
9 | registered or qualified to do business in, this state may transact business in this state under a |
10 | fictitious name; provided that, it files a fictitious business name statement in accordance with this |
11 | section. |
12 | (b) A fictitious business name statement shall be filed with the secretary of state and shall |
13 | be executed by an authorized person of the domestic limited liability company or by a person with |
14 | authority to do so under the laws of the state or other jurisdiction of the organization of the foreign |
15 | limited liability company and shall set forth: |
16 | (1) The fictitious business name to be used; |
17 | (2) The name of the applicant limited liability company; |
18 | (3) The state or other jurisdiction in which the limited liability company is organized; and |
19 | (4) Date of the limited liability company's organization. |
20 | (c) The fictitious business name statement expires upon the filing of a statement of |
21 | abandonment of use of a fictitious business name registered in accordance with this section or upon |
22 | the dissolution of the applicant domestic limited liability company or the cancellation of registration |
23 | of the applicant foreign limited liability company. |
24 | (d) The statement of abandonment of use of a fictitious business name under this section |
25 | shall be filed with the secretary of state, shall be executed in the same manner as provided in |
26 | subsection (b) of this section, and shall set forth: |
27 | (1) The fictitious business name being abandoned; |
28 | (2) The date on which the original fictitious business name statement being abandoned was |
29 | filed; and |
30 | (3) The information set forth in section (b)(2) of this section. |
31 | (e) No domestic or foreign limited liability company transacting business under a fictitious |
32 | business name contrary to the provisions of this section, or its assignee, shall maintain any action |
33 | upon or on account of any contract made, or transaction had, in the fictitious business name in any |
34 | court of the state until a fictitious business name statement has been filed in accordance with this |
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1 | section. |
2 | (f) No limited liability company shall be permitted to transact business under a fictitious |
3 | business name pursuant to this section that is the same as the name of any corporation, limited |
4 | partnership or domestic or foreign limited liability company organized under the laws of, or |
5 | registered or qualified to do business in, this state or any name that is filed, reserved, or registered |
6 | under this chapter, subject to the following: |
7 | (1) This subsection does not apply if the applicant files with the secretary of state a certified |
8 | copy of a final decree of a court of competent jurisdiction establishing the prior right of the |
9 | applicant to the use of the name in this state; and |
10 | (2) The name may be the same as the name of a corporation, non-business corporation, or |
11 | other entity, the certificate of incorporation or organization of which has been revoked by the |
12 | secretary of state as permitted by law and the revocation has not been withdrawn within one year |
13 | from the date of revocation. |
14 | (3) Words or abbreviations that are required by statute to identify the particular type of |
15 | entity shall be disregarded when determining if a name is distinguishable upon the records of the |
16 | secretary of state. |
17 | (g) The secretary of state shall promulgate rules and regulations defining the term |
18 | "distinguishable upon the record" for the administration of this chapter. |
19 | (h) A filing fee of fifty dollars ($50.00) shall be collected by the secretary of state for each |
20 | statement filed. |
21 | 7-16.1-113. Reservation of name. |
22 | (a) A person may reserve the exclusive use of a name that complies with § 7-16.1-112 by |
23 | delivering an application to the secretary of state for filing. The application shall state the name and |
24 | address of the applicant and the name to be reserved. If the secretary of state finds that the name is |
25 | available, the secretary of state shall reserve the name for the applicant's exclusive use for one |
26 | hundred twenty (120) days. |
27 | (b) The owner of a reserved name may transfer the reservation to another person by |
28 | delivering to the secretary of state a signed notice in a record of the transfer which states the name |
29 | and address of the person to which the reservation is being transferred. |
30 | 7-16.1-114. Registration of name. |
31 | (a) A foreign limited liability company not registered to do business in this state under |
32 | Article 9 may register its name, or an alternate name adopted pursuant to § 7-16.1-906, if the name |
33 | is distinguishable on the records of the secretary of state from the names that are not available under |
34 | § 7-16.1-112. |
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1 | (b) To register its name or an alternate name adopted pursuant to § 7-16.1-906, a foreign |
2 | limited liability company shall deliver to the secretary of state for filing an application stating the |
3 | company's name, the jurisdiction and date of its formation, and any alternate name adopted pursuant |
4 | to § 7-16.1-906. If the secretary of state finds that the name applied for is available, the secretary |
5 | of state shall register the name for the applicant's exclusive use. |
6 | (c) The registration of a name under this section is effective for one year after the date of |
7 | registration. |
8 | (d) A foreign limited liability company whose name registration is effective may renew the |
9 | registration for successive one-year periods by delivering, not earlier than three (3) months before |
10 | the expiration of the registration, to the secretary of state for filing a renewal application that |
11 | complies with this section. When filed, the renewal application renews the registration for a |
12 | succeeding one-year period. |
13 | (e) A foreign limited liability company whose name registration is effective may register |
14 | as a foreign limited liability company under the registered name or consent in a signed record to |
15 | the use of that name by another person that is not an individual. |
16 | 7-16.1-115. Registered agent. |
17 | (a) Each limited liability company and each registered foreign limited liability company |
18 | shall designate and maintain a registered agent in this state. The designation of a registered agent |
19 | is an affirmation of fact by the limited liability company or registered foreign limited liability |
20 | company that the agent has consented to serve. |
21 | (b) A registered agent for a limited liability company or registered foreign limited liability |
22 | company shall have a place of business in this state. |
23 | (c) The only duties under this chapter of a registered agent that has complied with this |
24 | chapter are: |
25 | (1) To forward to the limited liability company or registered foreign limited liability |
26 | company at the address most recently supplied to the agent by the company or foreign company |
27 | any process, notice, or demand pertaining to the company or foreign company which is served on |
28 | or received by the agent; |
29 | (2) If the registered agent resigns, to provide the notice required by § 7-16.1-117(c) to the |
30 | company or foreign company at the address most recently supplied to the agent by the company or |
31 | foreign company; and |
32 | (3) To keep current the information with respect to the agent in the records of the secretary |
33 | of state. |
34 | 7-16.1-116. Change of registered agent or address for registered agent by limited |
| LC005050 - Page 60 of 135 |
1 | liability company. |
2 | (a) A limited liability company or registered foreign limited liability company may change |
3 | its registered agent or the address of its registered agent by delivering to the secretary of state for |
4 | filing a statement of change that states: |
5 | (1) The name of the company or foreign company; and |
6 | (2) The information that is to be in effect as a result of the filing of the statement of change. |
7 | (b) The members or managers of a limited liability company need not approve the delivery |
8 | to the secretary of state filing of: |
9 | (1) A statement of change under this section; or |
10 | (2) A similar filing changing the registered agent or registered office, if any, of the |
11 | company in any other jurisdiction. |
12 | (c) A statement of change under this section designating a new registered agent is an |
13 | affirmation of fact by the limited liability company or registered foreign limited liability company |
14 | that the agent has consented to serve. |
15 | (d) Any person who designates a registered agent without the registered agent's authority |
16 | is guilty of a misdemeanor and, upon conviction, may be punished by a fine of not more than one |
17 | thousand dollars ($1,000) or by imprisonment of not more than one year, or both. |
18 | 7-16.1-117. Resignation of registered agent. |
19 | (a) A registered agent may resign as an agent for a limited liability company or registered |
20 | foreign limited liability company by delivering to the secretary of state for filing a statement of |
21 | resignation that states: |
22 | (1) The name of the company or foreign company; |
23 | (2) The name of the agent; |
24 | (3) That the agent resigns from serving as registered agent for the company or foreign |
25 | company; and |
26 | (4) The address of the company or foreign company to which the agent will send the notice |
27 | required by subsection (c) of this section. |
28 | (b) A statement of resignation takes effect on the earlier of: |
29 | (1) The thirty-first day after the day on which it is filed by the secretary of state; or |
30 | (2) The designation of a new registered agent for the limited liability company or registered |
31 | foreign limited liability company. |
32 | (c) A registered agent promptly shall furnish to the limited liability company or registered |
33 | foreign limited liability company notice in a record of the date on which a statement of resignation |
34 | was filed. |
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1 | (d) When a statement of resignation takes effect, the registered agent ceases to have |
2 | responsibility under this chapter for any matter thereafter tendered to it as agent for the limited |
3 | liability company or registered foreign limited liability company. The resignation does not affect |
4 | any contractual rights the company or foreign company has against the agent or that the agent has |
5 | against the company or foreign company. |
6 | (e) A registered agent may resign with respect to a limited liability company or registered |
7 | foreign limited liability company whether or not the company or foreign company is in good |
8 | standing. |
9 | 7-16.1-118. Change of address by registered agent. |
10 | (a) If a registered agent changes its address, the agent may deliver to the secretary of state |
11 | for filing a statement of change that states: |
12 | (1) The name of the limited liability company or registered foreign limited liability |
13 | company represented by the registered agent; |
14 | (2) The name of the agent as currently shown in the records of the secretary of state for the |
15 | company or foreign company; and |
16 | (3) If the address of the agent has changed, its new address. |
17 | (b) A registered agent promptly shall furnish notice to the represented limited liability |
18 | company or registered foreign limited liability company of the filing by the secretary of state of the |
19 | statement of change and the changes made by the statement. |
20 | 7-16.1-119. Service of process, notice, or demand. |
21 | (a) A limited liability company or registered foreign limited liability company may be |
22 | served with any process, notice, or demand required or permitted by law by serving its registered |
23 | agent. |
24 | (b) If a limited liability company or registered foreign limited liability company fails to |
25 | appoint or maintain a registered agent, in this state, or whenever its registered agent cannot with |
26 | reasonable diligence be found at the registered office, then the secretary of state is an agent of the |
27 | limited liability company, upon whom any process, notice, or demand may be served. Service on |
28 | the secretary of state of any process, notice or demand is made by delivering to and leaving with |
29 | the secretary, or with any clerk within the corporations department of the secretary's office, |
30 | duplicate copies of the process, notice or demand. In the event any process, notice, or demand is |
31 | served on the secretary of state, the secretary of state shall immediately forward one of the copies |
32 | by certified mail, addressed to the limited liability company at its registered office. Any service |
33 | upon the secretary of state is returnable in not less than thirty (30) days. |
34 | (c) The secretary of state shall maintain a record of any such service setting forth the name |
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1 | of the plaintiff and defendant, the title, docket number and nature of the proceeding in which |
2 | process has been served upon the secretary of state, the fact that service has been effected pursuant |
3 | to this subsection, the return date thereof, and the day and hour when the service was made. The |
4 | secretary of state shall not be required to retain such information for a period longer than five (5) |
5 | years from receipt of the service of process. |
6 | (d) Service of process, notice, or demand on a registered agent shall be in a written record. |
7 | (e) Service of process, notice, or demand may be made by other means under law other |
8 | than this chapter. |
9 | 7-16.1-120. Delivery of record. |
10 | (a) Except as otherwise provided in this chapter, permissible means of delivery of a record |
11 | include delivery by hand, mail, conventional commercial practice, and electronic transmission. |
12 | (b) Delivery to the secretary of state is effective only when a record is received by the |
13 | secretary of state. |
14 | 7-16.1-121. Reservation of power to amend or repeal. |
15 | The general assembly of this state has power to amend or repeal all or part of this chapter |
16 | at any time, and all limited liability companies and foreign limited liability companies subject to |
17 | this chapter are governed by the amendment or repeal. |
18 | 7-16.1-122. Fees for filing documents and issuing certificates. |
19 | The secretary of state shall charge and collect: |
20 | (1) For filing the original articles of organization, a fee of one hundred fifty dollars ($150); |
21 | (2) For amending, restating, or amending and restating the articles of organization, a fee of |
22 | fifty dollars ($50.00); |
23 | (3) For filing articles of merger or consolidation and issuing a certificate, a fee of one |
24 | hundred dollars ($100); |
25 | (4) For filing articles of dissolution, a fee of fifty dollars ($50.00); |
26 | (5) For issuing a certificate of good standing/letter of status, a fee of twenty dollars |
27 | ($20.00); |
28 | (6) For issuing a certificate of fact, a fee of thirty dollars ($30.00); |
29 | (7) For furnishing a certified copy of any document, instrument, or paper relating to a |
30 | domestic or foreign limited liability company, a fee of fifteen cents ($.15) per page and ten dollars |
31 | ($10.00) for the certificate and affirming the seal to it; |
32 | (8) For accepting an application for reservation of a name, or for filing a notice of the |
33 | transfer or cancellation of any name reservation, a fee of fifty dollars ($50.00); |
34 | (9) For filing a fictitious business name statement or abandonment of use of a fictitious |
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1 | business name, a fee of fifty dollars ($50.00); |
2 | (10) For filing a statement of change of resident agent and address of registered agent, a |
3 | fee of twenty dollars ($20.00); |
4 | (11) For filing a statement of change of address only for a resident agent, no fee; |
5 | (12) For any service of notice, demand, or process on the registered agent of a foreign or |
6 | domestic limited liability company, a fee of fifteen dollars ($15.00), which amount may be |
7 | recovered as taxable costs by the party to the suit, action, or proceeding causing the service to be |
8 | made if the party prevails in the suit; |
9 | (13) For filing an annual report, a fee of fifty dollars ($50.00); |
10 | (14) For filing a certificate of correction, a fee of fifty dollars ($50.00); |
11 | (15) For filing an application for registration as a foreign limited liability company, a fee |
12 | of one hundred fifty dollars ($150); |
13 | (16) For filing a certificate of amendment to the registration of a foreign limited liability |
14 | company, a fee of fifty dollars ($50.00); |
15 | (17) For filing a certificate of cancellation of a foreign limited liability company, a fee of |
16 | seventy-five dollars ($75.00); |
17 | (18) At the time of any service of process upon the secretary of state as a resident agent of |
18 | a limited liability company, fifteen dollars ($15.00), which amount may be recovered as a taxable |
19 | cost by the party to the suit or action making the service if the party prevails in the suit or action; |
20 | (19) For filing any other statement or report, except an annual report, of a domestic or |
21 | foreign limited liability company, a fee of ten dollars ($10.00); and |
22 | (20) For filing a certificate of conversion to a non-Rhode Island entity, a fee of fifty dollars |
23 | ($50.00). |
24 | ARTICLE 2 |
25 | FORMATION -- CERTIFICATE OF ORGANIZATION AND OTHER FILINGS |
26 | 7-16.1-201. Formation of limited liability company - Certificate of organization. |
27 | (a) One or more persons may act as organizers to form a limited liability company by |
28 | delivering to the secretary of state for filing a certificate of organization. |
29 | (b) A certificate of organization shall state: |
30 | (1) The name of the limited liability company, which shall comply with § 7-16.1-112; |
31 | (2) The address of the company's principal office; and |
32 | (3) The name and address in this state of the company's registered agent. |
33 | (c) A certificate of organization may contain statements as to matters other than those |
34 | required by subsection (b) of this section, but may not vary or otherwise affect the provisions |
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1 | specified in §§ 7-16.1-105(c) and (d) in a manner inconsistent with that section. However, a |
2 | statement in a certificate of organization is not effective as a statement of authority. |
3 | (d) A limited liability company is formed when the certificate of organization becomes |
4 | effective and at least one person has become a member. |
5 | 7-16.1-202. Amendment or restatement of certificate of organization. |
6 | (a) A certificate of organization may be amended or restated at any time. |
7 | (b) To amend its certificate of organization, a limited liability company shall deliver to the |
8 | secretary of state for filing an amendment stating: |
9 | (1) The name of the company; |
10 | (2) The date of filing of its initial certificate; and |
11 | (3) The text of the amendment. |
12 | (c) To restate its certificate of organization, a limited liability company shall deliver to the |
13 | secretary of state for filing a restatement, designated as such in its heading. Any restatement may |
14 | include additional amendments. |
15 | (d) If a member of a member-managed limited liability company, or a manager of a |
16 | manager-managed limited liability company, knows that any information in a filed certificate of |
17 | organization was inaccurate when the certificate was filed or has become inaccurate due to changed |
18 | circumstances, the member or manager shall promptly: |
19 | (1) Cause the certificate to be amended; or |
20 | (2) If appropriate, deliver to the secretary of state for filing a statement of change under § |
21 | 7-16.1-116 or a statement of correction under § 7-16.1-209. |
22 | 7-16.1-203. Signing of records to be delivered for filing to secretary of state. |
23 | (a) A record delivered to the secretary of state for filing pursuant to this chapter shall be |
24 | signed as follows: |
25 | (1) Except as otherwise provided in subsections (a)(2) and (a)(3) of this section, a record |
26 | signed by a limited liability company shall be signed by a person authorized by the company. |
27 | (2) A company's initial certificate of organization shall be signed by at least one person |
28 | acting as an organizer. |
29 | (3) A record delivered on behalf of a dissolved company that has no member shall be signed |
30 | by the person winding up the company's activities and affairs under § 7-16.1-702(c) or a person |
31 | appointed under § 7-16.1-702(d) to wind up the activities and affairs. |
32 | (4) A statement of denial by a person under § 7-16.1-303 shall be signed by that person. |
33 | (5) Any other record delivered on behalf of a person to the secretary of state for filing shall |
34 | be signed by that person. |
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1 | (b) A record delivered for filing under this chapter may be signed by an agent. Whenever |
2 | this chapter requires a particular individual to sign a record and the individual is deceased or |
3 | incompetent, the record may be signed by a legal representative of the individual. |
4 | (c) A person that signs a record as an agent or legal representative affirms as a fact that the |
5 | person is authorized to sign the record. |
6 | 7-16.1-204. Signing and filing pursuant to judicial order. |
7 | (a) If a person required by this chapter to sign a record or deliver a record to the secretary |
8 | of state for filing under this chapter does not do so, any other person that is aggrieved may petition |
9 | the superior court to order: |
10 | (1) The person to sign the record; |
11 | (2) The person to deliver the record to the secretary of state for filing; or |
12 | (3) The secretary of state to file the record unsigned. |
13 | (b) If a petitioner under subsection (a) of this section is not the limited liability company |
14 | or foreign limited liability company to which the record pertains, the petitioner shall make the |
15 | company or foreign company a party to the action. |
16 | (c) A record filed under subsection (a)(3) of this section is effective without being signed. |
17 | 7-16.1-205. Liability for inaccurate information in filed record. |
18 | (a) If a record delivered to the secretary of state for filing under this chapter and filed by |
19 | the secretary of state contains inaccurate information, a person that suffers loss by reliance on the |
20 | information may recover damages for the loss from: |
21 | (1) A person that signed the record, or caused another to sign it on the person's behalf, and |
22 | knew the information to be inaccurate at the time the record was signed; and |
23 | (2) Subject to subsection (b) of this section, a member of a member-managed limited |
24 | liability company or a manager of a manager-managed limited liability company if: |
25 | (i) The record was delivered for filing on behalf of the company; and |
26 | (ii) The member or manager knew or had notice of the inaccuracy for a reasonably |
27 | sufficient time before the information was relied upon in order that, before the reliance, the member |
28 | or manager reasonably could have: |
29 | (A) Effected an amendment under § 7-16.1-202; |
30 | (B) Filed a petition under § 7-16.1-204; or |
31 | (C) Delivered to the secretary of state for filing a statement of change under § 7-16.1-116 |
32 | or a statement of correction under § 7-16.1-209. |
33 | (b) To the extent the operating agreement of a member-managed limited liability company |
34 | expressly relieves a member of responsibility for maintaining the accuracy of information |
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1 | contained in records delivered on behalf of the company to the secretary of state for filing under |
2 | this chapter and imposes that responsibility on one or more other members, the liability stated in |
3 | subsection (a)(2) of this section applies to those other members and not to the member that the |
4 | operating agreement relieves of the responsibility. |
5 | (c) An individual who signs a record authorized or required to be filed under this chapter |
6 | affirms under penalty of perjury that the information stated in the record is accurate. |
7 | 7-16.1-206. Filing requirements. |
8 | (a) To be filed by the secretary of state pursuant to this chapter, a record shall be received |
9 | by the secretary of state, comply with this chapter, and satisfy the following: |
10 | (1) The filing of the record shall be required or permitted by this chapter. |
11 | (2) The record shall be physically delivered in written form unless and to the extent the |
12 | secretary of state permits electronic delivery of records. |
13 | (3) The words in the record shall be in English, and numbers shall be in Arabic or Roman |
14 | numerals, but the name of an entity need not be in English if written in English letters or Arabic or |
15 | Roman numerals. |
16 | (4) The record shall be signed, under the pain and penalties of perjury, by a person |
17 | authorized or required under this chapter to sign the record. |
18 | (5) The record shall state the name and capacity, if any, of each individual who signed it, |
19 | either on behalf of the individual or the person authorized or required to sign the record, but need |
20 | not contain a seal, attestation, acknowledgment, or verification. |
21 | (b) If law other than this chapter prohibits the disclosure by the secretary of state of |
22 | information contained in a record delivered to the secretary of state for filing, the secretary of state |
23 | shall file the record if the record otherwise complies with this chapter but may redact the |
24 | information. |
25 | (c) When a record is delivered to the secretary of state for filing, any fee required under |
26 | this chapter and any fee, tax, interest, or penalty required to be paid under this chapter or law other |
27 | than this chapter shall be paid in a manner permitted by the secretary of state or by that law. |
28 | (d) The secretary of state shall require that a record delivered in written form be |
29 | accompanied by an identical or conformed copy. |
30 | (e) The secretary of state shall provide forms for filings required or permitted to be made |
31 | by this chapter, but, except as otherwise provided in subsection (f) of this section, and § 7-16.1- |
32 | 212. their use is not required. |
33 | (f) The secretary of state shall require that a cover sheet for a filing be on a form prescribed |
34 | by the secretary of state. |
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1 | 7-16.1-207. Effective date and time. |
2 | Except as otherwise provided in § 7-16.1-208 and subject to § 7-16.1-209(d), a record filed |
3 | under this chapter is effective: |
4 | (1) On the date and at the time of its filing by the secretary of state, as provided in § 7- |
5 | 16.1-210(b); |
6 | (2) On the date of filing and at the time specified in the record as its effective time, if later |
7 | than the time under subsection (1) of this section; |
8 | (3) At a specified delayed effective date and time, which may not be more than ninety (90) |
9 | days after the date of filing; or |
10 | (4) If a delayed effective date is specified, but no time is specified, at 12:01 a.m. on the |
11 | date specified, which shall not be more than ninety (90) days after the date of filing. |
12 | 7-16.1-208. Withdrawal of filed record before effectiveness. |
13 | (a) Except as otherwise provided in §§ 7-16.1-1024, 7-16.1-1034, 7-16.1-1044, and 7-16.1- |
14 | 1054, a record delivered to the secretary of state for filing may be withdrawn before it takes effect |
15 | by delivering to the secretary of state for filing a statement of withdrawal. |
16 | (b) A statement of withdrawal shall: |
17 | (1) Be signed by each person that signed the record being withdrawn, except as otherwise |
18 | agreed by those persons; |
19 | (2) Identify the record to be withdrawn; and |
20 | (3) If signed by fewer than all the persons that signed the record being withdrawn, state |
21 | that the record is withdrawn in accordance with the agreement of all the persons that signed the |
22 | record. |
23 | (c) On filing by the secretary of state of a statement of withdrawal, the action or transaction |
24 | evidenced by the original record does not take effect. |
25 | 7-16.1-209. Correcting filed record. |
26 | (a) A person on whose behalf a filed record was delivered to the secretary of state for filing |
27 | may correct the record if: |
28 | (1) The record at the time of filing was inaccurate; |
29 | (2) The record was defectively signed; or |
30 | (3) The electronic transmission of the record to the secretary of state was defective. |
31 | (b) To correct a filed record, a person on whose behalf the record was delivered to the |
32 | secretary of state shall deliver to the secretary of state for filing a statement of correction. |
33 | (c) A statement of correction: |
34 | (1) Shall not state a delayed effective date; |
| LC005050 - Page 68 of 135 |
1 | (2) Shall be signed by the person correcting the filed record; |
2 | (3) Shall identify the filed record to be corrected; |
3 | (4) Shall specify the inaccuracy or defect to be corrected; and |
4 | (5) Shall correct the inaccuracy or defect. |
5 | (d) A statement of correction is effective as of the effective date of the filed record that it |
6 | corrects except for purposes of § 7-16.1-103(d) and as to persons relying on the uncorrected filed |
7 | record and adversely affected by the correction. For those purposes and as to those persons, the |
8 | statement of correction is effective when filed. |
9 | 7-16.1-210. Duty of secretary of state to file -- Review of refusal to file -- Delivery of |
10 | record by secretary of state. |
11 | (a) The secretary of state shall file a record delivered to the secretary of state for filing |
12 | which satisfies this chapter. The duty of the secretary of state under this section is ministerial. |
13 | (b) When the secretary of state files a record, the secretary of state shall record it as filed |
14 | on the date and at the time of its delivery. After filing a record, the secretary of state shall deliver |
15 | to the person that submitted the record a copy of the record with an acknowledgment of the date |
16 | and time of filing and, in the case of a statement of denial, also to the limited liability company to |
17 | which the statement pertains. |
18 | (c) If the secretary of state refuses to file a record, the secretary of state shall, not later than |
19 | ten (10) business days after the record is delivered: |
20 | (1) Return the record or notify the person that submitted the record of the refusal; and |
21 | (2) Provide a brief explanation in a record of the reason for the refusal. |
22 | (d) If the secretary of state refuses to file a record, the person that submitted the record may |
23 | petition the superior court to compel filing of the record. The record and the explanation of the |
24 | secretary of state of the refusal to file shall be attached to the petition. The court may decide the |
25 | matter in a summary proceeding. |
26 | (e) The filing of or refusal to file a record does not: |
27 | (1) Affect the validity or invalidity of the record, in whole or in part; or |
28 | (2) Create a presumption that the information contained in the record is correct or incorrect. |
29 | (f) Except as otherwise provided by § 7-16.1-119 or by law other than this chapter, the |
30 | secretary of state may deliver any record to a person by delivering it: |
31 | (1) In person to the person that submitted it; |
32 | (2) To the address of the person's registered agent; |
33 | (3) To the principal office of the person; or |
34 | (4) To another address the person provides to the secretary of state for delivery or at no |
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1 | cost to the filer, or access to a downloadable copy of the record from an online database. |
2 | (g) Notwithstanding that any instrument authorized to be filed with the secretary of state |
3 | under this chapter is when filed inaccurately, defectively or erroneously executed, sealed or |
4 | acknowledged, or otherwise defective in any respect, the secretary of state has no liability to any |
5 | individual for the preclearance for filing, the acceptance for filing or the filing and indexing of such |
6 | instrument by the secretary of state. |
7 | 7-16.1-211. Certificate of good standing or registration. |
8 | On request of any person, the secretary of state shall issue a certificate of good standing |
9 | for a limited liability company or a certificate of registration for a registered foreign limited liability |
10 | company. The format of the certificate will be prescribed by the secretary of state. |
11 | 7-16.1-212. Annual report for secretary of state. |
12 | (a) A limited liability company or registered foreign limited liability company shall deliver |
13 | to the secretary of state for filing an annual report that states: |
14 | (1) The name of the company or foreign company; |
15 | (2) The address of its principal office; |
16 | (3) The current mailing addresses of the limited liability company and the name and title |
17 | of the person to whom communications may be directed; |
18 | (4) In the case of a foreign company, its jurisdiction of formation; |
19 | (5) A brief statement of the character of the business in which the company or foreign |
20 | company is actually engaged in this state; and |
21 | (6) Any additional information that is required by the secretary of state. |
22 | (b) The annual report shall be made on forms prescribed and furnished by the secretary of |
23 | state, and the information in the annual report shall be current as of the date the report is signed by |
24 | the limited liability company or registered foreign limited liability company. |
25 | (c) The first annual report shall be delivered to the secretary of state for filing between the |
26 | first day of February and the first day of May of the year following the calendar year in which the |
27 | limited liability company's certificate of organization became effective or the registered foreign |
28 | limited liability company registered to do business in this state. Subsequent annual reports must be |
29 | delivered to the secretary of state for filing between the first day of February and the first day of |
30 | May of each calendar year thereafter. Proof to the satisfaction of the secretary of state that prior to |
31 | May 1 the report was deposited in the United States mail in a sealed envelope, properly addressed, |
32 | with postage prepaid, is deemed to be a compliance with this requirement. |
33 | (d) If the secretary of state finds that the annual report conforms to the requirements of this |
34 | chapter, the secretary of state shall file the report. If an annual report does not contain the |
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1 | information required by this section, the secretary of state promptly shall notify the reporting |
2 | limited liability company or registered foreign limited liability company in a record and return the |
3 | report for correction in which event the penalties subsequently prescribed for failure to file the |
4 | report within the time previously provided do not apply if the report is corrected to conform to the |
5 | requirements of this chapter and returned to the secretary of state within thirty (30) days from the |
6 | date on which it was mailed to the limited liability company by the secretary of state. |
7 | (e) Each company, domestic or foreign, that fails or refuses to file its annual report for any |
8 | year within thirty (30) days after the time prescribed by this chapter is subject to a penalty of twenty- |
9 | five dollars ($25.00) per year. |
10 | 7-16.1-213. Filing of returns with the tax administrator -- Annual charge. |
11 | (a) A return, in the form and containing the information as the tax administrator may |
12 | prescribe, shall be filed with the tax administrator by the domestic or foreign limited liability |
13 | company: |
14 | (1) In case the fiscal year of the limited liability company is the calendar year, on or before |
15 | the fifteenth day of March in the year following the close of the fiscal year; and |
16 | (2) In case the fiscal year of the limited liability company is not a calendar year, on or |
17 | before the fifteenth day of the third month following the close of the fiscal year. |
18 | (b) For tax years on or after January 1, 2025, a return, in the form and containing the |
19 | information as the tax administrator may prescribe, shall be filed with the tax administrator by the |
20 | limited liability company and shall be filed on or before the date a federal tax return is due to be |
21 | filed, without regard to extension. |
22 | (c) An annual charge shall be due on the filing of the limited liability company's return |
23 | filed with the tax administrator and shall be paid to the division of taxation as follows: |
24 | (1) If the limited liability company is treated as a corporation for purposes of federal |
25 | income taxation, it shall pay the taxes as provided in chapter 11 of title 44; or |
26 | (2) If the limited liability company is not treated as a corporation for purposes of federal |
27 | income taxation, it shall pay a fee in an amount equal to the minimum tax imposed upon a |
28 | corporation under § 44-11-2(e). The due date for a limited liability company that is not treated as a |
29 | corporation for purposes of federal income taxation shall be on or before the fifteenth day of the |
30 | fourth month following the close of the fiscal year. |
31 | (d) For tax years on or after January 1, 2025, a return, in the form and containing the |
32 | information as the tax administrator may prescribe, shall be filed with the tax administrator by the |
33 | limited liability company and shall be filed on or before the date a federal tax return is due to be |
34 | filed, without regard to extension. |
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1 | (e) The annual charge is delinquent if not paid by the due date for the filing of the return |
2 | and an addition of one hundred dollars ($100) to the charge is then due. |
3 | 7-16.1-214. Confirmation of state fees and taxes. |
4 | (a) Notwithstanding any other provisions of the Rhode Island general laws, when any |
5 | section of this chapter refers to state fees and/or taxes paid, the division of taxation is authorized to |
6 | respond and share tax information with the secretary of state's office in response to a request from |
7 | that office regarding an entity's tax status as compliant or noncompliant. |
8 | (b) If the secretary of state's office receives notice from the division of taxation that the |
9 | limited liability company has failed to pay any fees or taxes due this state, the secretary of state |
10 | shall begin revocation proceedings in accordance with the provisions of § 7-16.1-708. |
11 | (c) The notice of revocation may state as the basis for revocation that the taxpayer failed |
12 | to pay state fees and/or taxes to the division of taxation; provided, however, the secretary of state's |
13 | office shall otherwise protect all state and federal tax information in its custody as required by § 7- |
14 | 16.1-215 and refrain from disclosing any other specific tax information. |
15 | (d) For filings remitted and recorded in accordance with any section of this chapter between |
16 | July 1, 2024, and the effective date of this chapter that refers to state fees and/or taxes paid, the |
17 | secretary of state's office may request from the division of taxation a tax status check as outlined |
18 | in subsection (a) of this section. If the secretary of state's office receives notice from the division |
19 | of taxation that the limited liability company has failed to pay any fees or taxes due this state, the |
20 | secretary of state shall begin revocation proceedings in accordance with subsections (b) and (c) of |
21 | this section. |
22 | 7-16.1-215. Revocation of articles or authority to transact business for nonpayment |
23 | of fee. |
24 | (a) The tax administrator may, after July 15 of each year, compile a list of all limited |
25 | liability companies that have failed to pay any state fees and/or taxes for one year after the fees |
26 | and/or taxes became due and payable, and the failure is not the subject of a pending appeal. The |
27 | tax administrator shall certify to the correctness of the list. Upon receipt of the certified list, the |
28 | secretary of state may initiate revocation proceedings as defined in § 7-16.1-708. |
29 | (b) With respect to any information provided by the division of taxation to the secretary of |
30 | state's office pursuant to this chapter, the secretary of state, together with the employees or agents |
31 | thereof, shall be subject to all state and federal tax confidentiality laws applying to the division of |
32 | taxation and the officers, agents, and employees thereof, and which restrict the acquisition, use, |
33 | storage, dissemination, or publication of confidential taxpayer data. |
34 | (c) Notwithstanding the foregoing, the notice of revocation may state as the basis for |
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1 | revocation that the taxpayer has failed to pay state fees and/or taxes to the division of taxation; |
2 | provided, however, the secretary of state's office shall otherwise protect all state and federal tax |
3 | information in its custody as required by subsection (b) of this section and refrain from disclosing |
4 | any other specific tax information. |
5 | ARTICLE 3 |
6 | RELATIONS OF MEMBERS AND MANAGERS TO PERSONS DEALING WITH LIMITED |
7 | LIABILITY COMPANY |
8 | 7-16.1-301. No agency power of member as member. |
9 | (a) A member is not an agent of a limited liability company solely by reason of being a |
10 | member. |
11 | (b) A person's status as a member does not prevent or restrict law other than this chapter |
12 | from imposing liability on a limited liability company because of the person's conduct. |
13 | 7-16.1-302. Statement of limited liability company authority. |
14 | (a) A limited liability company may deliver to the secretary of state for filing a statement |
15 | of authority. The statement: |
16 | (1) Shall include the name of the company and the name and street and mailing addresses |
17 | of its registered agent; |
18 | (2) With respect to any position that exists in or with respect to the company, shall state |
19 | the authority, or limitations on the authority, of all persons holding the position to: |
20 | (i) Sign an instrument transferring real property held in the name of the company; or |
21 | (ii) Enter into other transactions on behalf of, or otherwise act for or bind, the company; |
22 | and |
23 | (3) Shall state the authority, or limitations on the authority, of a specific person to: |
24 | (i) Sign an instrument transferring real property held in the name of the company; or |
25 | (ii) Enter into other transactions on behalf of, or otherwise act for or bind, the company. |
26 | (b) To amend or cancel a statement of authority filed by the secretary of state, a limited |
27 | liability company shall deliver to the secretary of state for filing an amendment or cancellation |
28 | stating: |
29 | (1) The name of the company; |
30 | (2) The name and street and mailing addresses of the company's registered agent; |
31 | (3) The date the statement being affected became effective; and |
32 | (4) The contents of the amendment or a declaration that the statement is canceled. |
33 | (c) A statement of authority affects only the power of a person to bind a limited liability |
34 | company to persons that are not members. |
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1 | (d) Subject to subsection (c) of this section and § 7-16.1-103(d), and except as otherwise |
2 | provided in subsections (f), (g), and (h) of this section, a limitation on the authority of a person or |
3 | a position contained in an effective statement of authority is not by itself evidence of any person's |
4 | knowledge or notice of the limitation. |
5 | (e) Subject to subsection (c) of this section, a grant of authority not pertaining to transfers |
6 | of real property and contained in an effective statement of authority is conclusive in favor of a |
7 | person that gives value in reliance on the grant, except to the extent that when the person gives |
8 | value: |
9 | (1) The person has knowledge to the contrary; |
10 | (2) The statement has been canceled or restrictively amended under subsection (b) of this |
11 | section; or |
12 | (3) A limitation on the grant is contained in another statement of authority that became |
13 | effective after the statement containing the grant became effective. |
14 | (f) Subject to subsection (c) of this section, an effective statement of authority that grants |
15 | authority to transfer real property held in the name of the limited liability company, a certified copy |
16 | of which statement is recorded in the office for recording transfers of the real property, is conclusive |
17 | in favor of a person that gives value in reliance on the grant without knowledge to the contrary, |
18 | except to the extent that when the person gives value: |
19 | (1) The statement has been canceled or restrictively amended under subsection (b) of this |
20 | section, and a certified copy of the cancellation or restrictive amendment has been recorded in the |
21 | office for recording transfers of the real property; or |
22 | (2) A limitation on the grant is contained in another statement of authority that became |
23 | effective after the statement containing the grant became effective, and a certified copy of the later- |
24 | effective statement is recorded in the office for recording transfers of the real property. |
25 | (g) Subject to subsection (c) of this section, if a certified copy of an effective statement |
26 | containing a limitation on the authority to transfer real property held in the name of a limited |
27 | liability company is recorded in the office for recording transfers of that real property, all persons |
28 | are deemed to know of the limitation. |
29 | (h) Subject to subsection (i) of this section, an effective statement of dissolution or |
30 | termination is a cancellation of any filed statement of authority for the purposes of subsection (f) |
31 | of this section and is a limitation on authority for the purposes of subsection (g) of this section. |
32 | (i) After a statement of dissolution becomes effective, a limited liability company shall |
33 | deliver to the secretary of state for filing and, if appropriate, shall record a statement of authority |
34 | that is designated as a post-dissolution statement of authority. The statement operates as provided |
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1 | in subsections (f) and (g) of this section. |
2 | (j) Unless earlier canceled, an effective statement of authority is canceled by operation of |
3 | law five (5) years after the date on which the statement, or its most recent amendment, becomes |
4 | effective. This cancellation operates without need for any recording under subsections (f) or (g) of |
5 | this section. |
6 | (k) An effective statement of denial operates as a restrictive amendment under this section |
7 | and shall be recorded by certified copy for purposes of subsection (f)(1) of this section. |
8 | 7-16.1-303. Statement of denial. |
9 | A person named in a filed statement of authority granting that person authority shall deliver |
10 | to the secretary of state for filing a statement of denial that: |
11 | (1) Provides the name of the limited liability company and the caption of the statement of |
12 | authority to which the statement of denial pertains; and |
13 | (2) Denies the grant of authority. |
14 | 7-16.1-304. Liability of members and managers. |
15 | (a) A debt, obligation, or other liability of a limited liability company is solely the debt, |
16 | obligation, or other liability of the company. A member or manager is not personally liable, directly |
17 | or indirectly, by way of contribution or otherwise, for a debt, obligation, or other liability of the |
18 | company solely by reason of being or acting as a member or manager. This subsection applies |
19 | regardless of the dissolution of the company. |
20 | (b) The failure of a limited liability company to observe formalities relating to the exercise |
21 | of its powers or management of its activities and affairs is not a ground for imposing liability on a |
22 | member or manager for a debt, obligation, or other liability of the company. |
23 | ARTICLE 4 |
24 | RELATIONS OF MEMBERS TO EACH OTHER AND TO LIMITED LIABILITY COMPANY |
25 | 7-16.1-401. Becoming a member. |
26 | (a) If a limited liability company is to have only one member upon formation, the person |
27 | becomes a member as agreed by that person and the organizer of the company. That person and the |
28 | organizer may be, but need not be, different persons. If different, the organizer acts on behalf of |
29 | the initial member. |
30 | (b) If a limited liability company is to have more than one member upon formation, those |
31 | persons become members as agreed by the persons before the formation of the company. The |
32 | organizer acts on behalf of the persons in forming the company and may be, but need not be, one |
33 | of the persons. |
34 | (c) After formation of a limited liability company, a person becomes a member: |
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1 | (1) As provided in the operating agreement; |
2 | (2) As the result of a transaction effective under Article 10; |
3 | (3) With the affirmative vote or consent of all the members; or |
4 | (4) As provided in § 7-16.1-701(a)(3). |
5 | (d) A person may become a member without: |
6 | (1) Acquiring a transferable interest; or |
7 | (2) Making or being obligated to make a contribution to the limited liability company. |
8 | 7-16.1-402. Form of contribution. |
9 | A contribution may consist of property transferred to, services performed for, or another |
10 | benefit provided to the limited liability company or an agreement to transfer property to, perform |
11 | services for, or provide another benefit to the company. |
12 | 7-16.1-403. Liability for contributions. |
13 | (a) A person's obligation to make a contribution to a limited liability company is not |
14 | excused by the person's death, disability, termination, or other inability to perform personally. |
15 | (b) If a person does not fulfill an obligation to make a contribution other than money, the |
16 | person is obligated at the option of the limited liability company to contribute money equal to the |
17 | value of the part of the contribution which has not been made. |
18 | (c) The obligation of a person to make a contribution may be compromised only by the |
19 | affirmative vote or consent of all the members. If a creditor of a limited liability company extends |
20 | credit or otherwise acts in reliance on an obligation described in subsection (a) of this section |
21 | without knowledge or notice of a compromise under this subsection, the creditor may enforce the |
22 | obligation. |
23 | 7-16.1-404. Sharing of and right to distributions before dissolution. |
24 | (a) Any distribution made by a limited liability company before its dissolution and winding |
25 | up shall be in equal shares among members and persons dissociated as members, except to the |
26 | extent necessary to comply with a transfer effective under § 7-16.1-502 or charging order in effect |
27 | under § 7-16.1-503. |
28 | (b) A person has a right to a distribution before the dissolution and winding up of a limited |
29 | liability company only if the company decides to make an interim distribution. A person's |
30 | dissociation does not entitle the person to a distribution. |
31 | (c) A person does not have a right to demand or receive a distribution from a limited |
32 | liability company in any form other than money. Except as otherwise provided in § 7-16.1-707(d), |
33 | a company may distribute an asset in kind only if each part of the asset is fungible with each other |
34 | part and each person receives a percentage of the asset equal in value to the person's share of |
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1 | distributions. |
2 | (d) If a member or transferee becomes entitled to receive a distribution, the member or |
3 | transferee has the status of, and is entitled to all remedies available to, a creditor of the limited |
4 | liability company with respect to the distribution; provided, however, the company's obligation to |
5 | make a distribution is subject to offset for any amount owed to the company by the member or a |
6 | person dissociated as a member on whose account the distribution is made. |
7 | 7-16.1-405. Limitations on distributions. |
8 | (a) A limited liability company shall not make a distribution, including a distribution under |
9 | § 7-16.1-707, if after the distribution: |
10 | (1) The company would not be able to pay its debts as they become due in the ordinary |
11 | course of the company's activities and affairs; or |
12 | (2) The company's total assets would be less than the sum of its total liabilities plus the |
13 | amount that would be needed, if the company were to be dissolved and wound up at the time of the |
14 | distribution, to satisfy the preferential rights upon dissolution and winding up of members and |
15 | transferees whose preferential rights are superior to the rights of persons receiving the distribution. |
16 | (b) A limited liability company may base a determination that a distribution is not |
17 | prohibited under subsection (a) of this section on: |
18 | (1) Financial statements prepared on the basis of accounting practices and principles that |
19 | are reasonable in the circumstances; or |
20 | (2) A fair valuation or other method that is reasonable under the circumstances. |
21 | (c) Except as otherwise provided in subsection (e) of this section, the effect of a distribution |
22 | under subsection (a) of this section is measured: |
23 | (1) In the case of a distribution as defined in § 7-16.1-102(4)(A), as of the earlier of: |
24 | (i) The date money or other property is transferred or debt is incurred by the limited liability |
25 | company; or |
26 | (ii) The date the person entitled to the distribution ceases to own the interest or right being |
27 | acquired by the company in return for the distribution; |
28 | (2) In the case of any other distribution of indebtedness, as of the date the indebtedness is |
29 | distributed; and |
30 | (3) In all other cases, as of the date: |
31 | (i) The distribution is authorized, if the payment occurs not later than one hundred twenty |
32 | (120) days after that date; or |
33 | (ii) The payment is made, if the payment occurs more than one hundred twenty (120) days |
34 | after the distribution is authorized. |
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1 | (d) A limited liability company's indebtedness to a member or transferee incurred by reason |
2 | of a distribution made in accordance with this section is at parity with the company's indebtedness |
3 | to its general, unsecured creditors, except to the extent subordinated by agreement. |
4 | (e) A limited liability company's indebtedness, including indebtedness issued as a |
5 | distribution, is not a liability for purposes of subsection (a) of this section if the terms of the |
6 | indebtedness provide that payment of principal and interest is made only if and to the extent that |
7 | payment of a distribution could then be made under this section. If the indebtedness is issued as a |
8 | distribution, each payment of principal or interest is treated as a distribution, the effect of which is |
9 | measured on the date the payment is made. |
10 | (f) In measuring the effect of a distribution under § 7-16.1-707, the liabilities of a dissolved |
11 | limited liability company do not include any claim that has been disposed of under §§ 7-16.1-704, |
12 | 7-16.1-705, or 7-16.1-706. |
13 | 7-16.1-406. Liability for improper distributions. |
14 | (a) Except as otherwise provided in subsection (b) of this section, if a member of a member- |
15 | managed limited liability company or manager of a manager-managed limited liability company |
16 | consents to a distribution made in violation of § 7-16.1-405 and in consenting to the distribution |
17 | fails to comply with § 7-16.1-409, the member or manager is personally liable to the company for |
18 | the amount of the distribution which exceeds the amount that could have been distributed without |
19 | the violation of § 7-16.1-405. |
20 | (b) To the extent the operating agreement of a member-managed limited liability company |
21 | expressly relieves a member of the authority and responsibility to consent to distributions and |
22 | imposes that authority and responsibility on one or more other members, the liability stated in |
23 | subsection (a) of this section applies to the other members and not the member that the operating |
24 | agreement relieves of the authority and responsibility. |
25 | (c) A person that receives a distribution knowing that the distribution violated § 7-16.1- |
26 | 405 is personally liable to the limited liability company but only to the extent that the distribution |
27 | received by the person exceeded the amount that could have been properly paid under § 7-16.1- |
28 | 405. |
29 | (d) A person against which an action is commenced because the person is liable under |
30 | subsection (a) of this section may: |
31 | (1) Implead any other person that is liable under subsection (a) of this section and seek to |
32 | enforce a right of contribution from the person; and |
33 | (2) Implead any person that received a distribution in violation of subsection (c) of this |
34 | section and seek to enforce a right of contribution from the person in the amount the person received |
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1 | in violation of subsection (c) of this section. |
2 | (e) An action under this section is barred unless commenced not later than two (2) years |
3 | after the distribution. |
4 | 7-16.1-407. Management of limited liability company. |
5 | (a) A limited liability company is a member-managed limited liability company unless the |
6 | certificate of formation: |
7 | (1) Expressly provides that: |
8 | (i) The company is or will be "manager-managed"; |
9 | (ii) The company is or will be "managed by managers"; or |
10 | (iii) Management of the company is or will be "vested in managers"; or |
11 | (2) Includes words of similar import. |
12 | (b) In a member-managed limited liability company, the following rules apply: |
13 | (1) Except as expressly provided in this chapter, the management and conduct of the |
14 | company are vested in the members. |
15 | (2) Each member has equal rights in the management and conduct of the company's |
16 | activities and affairs. |
17 | (3) A difference arising among members as to a matter in the ordinary course of the |
18 | activities and affairs of the company may be decided by a majority of the members. |
19 | (4) The affirmative vote or consent of all the members is required to: |
20 | (i) Undertake an act outside the ordinary course of the activities and affairs of the company; |
21 | or |
22 | (ii) Amend the operating agreement. |
23 | (c) In a manager-managed limited liability company, the following rules apply: |
24 | (1) Except as expressly provided in this chapter, any matter relating to the activities and |
25 | affairs of the company is decided exclusively by the manager, or, if there is more than one manager, |
26 | by a majority of the managers. |
27 | (2) Each manager has equal rights in the management and conduct of the company's |
28 | activities and affairs. |
29 | (3) The affirmative vote or consent of all members is required to: |
30 | (i) Undertake an act outside the ordinary course of the company's activities and affairs; or |
31 | (ii) Amend the operating agreement. |
32 | (4) A manager may be chosen at any time by the affirmative vote or consent of a majority |
33 | of the members and remains a manager until a successor has been chosen, unless the manager at an |
34 | earlier time resigns, is removed, or dies, or, in the case of a manager that is not an individual, |
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1 | terminates. A manager may be removed at any time by the affirmative vote or consent of a majority |
2 | of the members without notice or cause. |
3 | (5) A person need not be a member to be a manager, but the dissociation of a member that |
4 | is also a manager removes the person as a manager. If a person that is both a manager and a member |
5 | ceases to be a manager, that cessation does not by itself dissociate the person as a member. |
6 | (6) A person's ceasing to be a manager does not discharge any debt, obligation, or other |
7 | liability to the limited liability company or members which the person incurred while a manager. |
8 | (d) An action requiring the vote or consent of members under this chapter may be taken |
9 | without a meeting, and a member may appoint a proxy or other agent to vote, consent, or otherwise |
10 | act for the member by signing an appointing record, personally or by the member's agent. |
11 | (e) The dissolution of a limited liability company does not affect the applicability of this |
12 | section; provided, however, a person that wrongfully causes dissolution of the company loses the |
13 | right to participate in management as a member and a manager. |
14 | (f) A limited liability company shall reimburse a member for an advance to the company |
15 | beyond the amount of capital the member agreed to contribute. |
16 | (g) A payment or advance made by a member which gives rise to a limited liability |
17 | company obligation under subsection (f) of this section or § 7-16.1-408(a) constitutes a loan to the |
18 | company which accrues interest from the date of the payment or advance. |
19 | (h) A member is not entitled to remuneration for services performed for a member- |
20 | managed limited liability company, except for reasonable compensation for services rendered in |
21 | winding up the activities of the company. |
22 | 7-16.1-408. Reimbursement -- Indemnification -- Advancement -- Insurance. |
23 | (a) A limited liability company shall reimburse a member of a member-managed company |
24 | or the manager of a manager-managed company for any payment made by the member or manager |
25 | in the course of the member's or manager's activities on behalf of the company, if the member or |
26 | manager complied with §§ 7-16.1-405, 7-16.1-407, and 7-16.1-409 in making the payment. |
27 | (b) A limited liability company shall indemnify and hold harmless a person with respect to |
28 | any claim or demand against the person and any debt, obligation, or other liability incurred by the |
29 | person by reason of the person's former or present capacity as a member or manager, if the claim, |
30 | demand, debt, obligation, or other liability does not arise from the person's breach of §§ 7-16.1- |
31 | 405, 7-16.1-407, or 7-16.1-409. |
32 | (c) In the ordinary course of its activities and affairs, a limited liability company may |
33 | advance reasonable expenses, including attorneys' fees and costs, incurred by a person in |
34 | connection with a claim or demand against the person by reason of the person's former or present |
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1 | capacity as a member or manager, if the person promises to repay the company if the person |
2 | ultimately is determined not to be entitled to be indemnified under subsection (b) of this section. |
3 | (d) A limited liability company may purchase and maintain insurance on behalf of a |
4 | member or manager against liability asserted against or incurred by the member or manager in that |
5 | capacity or arising from that status even if, under § 7-16.1-105(c)(7), the operating agreement could |
6 | not eliminate or limit the person's liability to the company for the conduct giving rise to the liability. |
7 | 7-16.1-409. Standards of conduct for members and managers. |
8 | (a) A member of a member-managed limited liability company owes to the company and, |
9 | subject to § 7-16.1-801, the other members the duties of loyalty and care stated in subsections (b) |
10 | and (c) of this section. |
11 | (b) The fiduciary duty of loyalty of a member in a member-managed limited liability |
12 | company includes the duties: |
13 | (1) To account to the company and hold as trustee for it any property, profit, or benefit |
14 | derived by the member: |
15 | (i) In the conduct or winding up of the company's activities and affairs; |
16 | (ii) From a use by the member of the company's property; or |
17 | (iii) From the appropriation of a company opportunity; |
18 | (2) To refrain from dealing with the company in the conduct or winding up of the |
19 | company's activities and affairs as or on behalf of a person having an interest adverse to the |
20 | company; and |
21 | (3) To refrain from competing with the company in the conduct of the company's activities |
22 | and affairs before the dissolution of the company. |
23 | (c) The duty of care of a member of a member-managed limited liability company in the |
24 | conduct or winding up of the company's activities and affairs is to refrain from engaging in grossly |
25 | negligent or reckless conduct, willful or intentional misconduct, or knowing violation of law. |
26 | (d) A member shall discharge the duties and obligations under this chapter or under the |
27 | operating agreement and exercise any rights consistently with the contractual obligation of good |
28 | faith and fair dealing. |
29 | (e) A member does not violate a duty or obligation under this chapter or under the operating |
30 | agreement solely because the member's conduct furthers the member's own interest. |
31 | (f) All the members of a member-managed limited liability company or a manager- |
32 | managed limited liability company may authorize or ratify, after full disclosure of all material facts, |
33 | a specific act or transaction that otherwise would violate the duty of loyalty. |
34 | (g) It is a defense to a claim under subsection (b)(2) of this section and any comparable |
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1 | claim in equity or at common law that the transaction was fair to the limited liability company. |
2 | (h) If, as permitted by subsections (f) or (i)(6) of this section or the operating agreement, a |
3 | member enters into a transaction with the limited liability company which otherwise would be |
4 | prohibited by subsection (b)(2) of this section, the member's rights and obligations arising from the |
5 | transaction are the same as those of a person that is not a member. |
6 | (i) In a manager-managed limited liability company, the following rules apply: |
7 | (1) Subsections (a), (b), (c), and (g) of this section apply to the manager or managers and |
8 | not the members. |
9 | (2) The duty stated under subsection (b)(3) of this section continues until winding up is |
10 | completed. |
11 | (3) Subsection (d) of this section applies to managers and members. |
12 | (4) Subsection (e) of this section applies only to members. |
13 | (5) The power to ratify under subsection (f) of this section applies only to the members. |
14 | (6) Subject to subsection (d) of this section, a member does not have any duty to the |
15 | company or to any other member solely by reason of being a member. |
16 | 7-16.1-410. Rights to information of member, manager, and person dissociated as |
17 | member. |
18 | (a) In a member-managed limited liability company, the following rules apply: |
19 | (1) On reasonable notice, a member shall inspect and copy during regular business hours, |
20 | at a reasonable location specified by the company, any record maintained by the company regarding |
21 | the company's activities, affairs, financial condition, and other circumstances, to the extent the |
22 | information is material to the member's rights and duties under the operating agreement or this |
23 | chapter. |
24 | (2) The company shall furnish to each member: |
25 | (i) Without demand, any information concerning the company's activities, affairs, financial |
26 | condition, and other circumstances which the company knows and is material to the proper exercise |
27 | of the member's rights and duties under the operating agreement or this chapter, except to the extent |
28 | the company can establish that it reasonably believes the member already knows the information; |
29 | and |
30 | (ii) On demand, any other information concerning the company's activities, affairs, |
31 | financial condition, and other circumstances, except to the extent the demand for the information |
32 | demanded is unreasonable or otherwise improper under the circumstances. |
33 | (3) The duty to furnish information under subsection (a)(2) of this section also applies to |
34 | each member to the extent the member knows any of the information described in subsection (a)(2) |
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1 | of this section. |
2 | (b) In a manager-managed limited liability company, the following rules apply: |
3 | (1) The informational rights stated in subsection (a) of this section and the duty stated in |
4 | subsection (a)(3) of this section apply to the managers and not the members. |
5 | (2) During regular business hours and at a reasonable location specified by the company, a |
6 | member shall inspect and copy information regarding the activities, affairs, financial condition, and |
7 | other circumstances of the company as is just and reasonable if: |
8 | (i) The member seeks the information for a purpose reasonably related to the member's |
9 | interest as a member; |
10 | (ii) The member makes a demand in a record received by the company, describing with |
11 | reasonable particularity the information sought and the purpose for seeking the information; and |
12 | (iii) The information sought is directly connected to the member's purpose. |
13 | (3) Not later than ten (10) days after receiving a demand pursuant to subsection (b)(2)(ii) |
14 | of this section, the company shall inform in a record the member that made the demand of: |
15 | (i) What information the company will provide in response to the demand and when and |
16 | where the company will provide the information; and |
17 | (ii) The company's reasons for declining, if the company declines to provide any demanded |
18 | information. |
19 | (4) Whenever this chapter or an operating agreement provides for a member to vote on or |
20 | give or withhold consent to a matter, before the vote is cast or consent is given or withheld, the |
21 | company shall, without demand, provide the member with all information that is known to the |
22 | company and is material to the member's decision. |
23 | (c) Subject to subsection (h) of this section, on ten (10) days' demand made in a record |
24 | received by a limited liability company, a person dissociated as a member shall have access to the |
25 | information to which the person was entitled while a member if: |
26 | (1) The information pertains to the period during which the person was a member; |
27 | (2) The person seeks the information in good faith; and |
28 | (3) The person satisfies the requirements imposed on a member by subsection (b)(2) of this |
29 | section. |
30 | (d) A limited liability company shall respond to a demand made pursuant to subsection (c) |
31 | of this section in the manner provided in subsection (b)(3) of this section. |
32 | (e) A limited liability company may charge a person that makes a demand under this section |
33 | the reasonable costs of copying, limited to the costs of labor and material. |
34 | (f) A member or person dissociated as a member may exercise the rights under this section |
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1 | through an agent or, in the case of an individual under legal disability, a legal representative. Any |
2 | restriction or condition imposed by the operating agreement or under subsection (h) of this section |
3 | applies both to the agent or legal representative and to the member or person dissociated as a |
4 | member. |
5 | (g) Subject to § 7-16.1-504, the rights under this section do not extend to a person as |
6 | transferee. |
7 | (h) In addition to any restriction or condition stated in its operating agreement, a limited |
8 | liability company, as a matter within the ordinary course of its activities and affairs, may impose |
9 | reasonable restrictions and conditions on access to and use of information to be furnished under |
10 | this section, including designating information confidential and imposing nondisclosure and |
11 | safeguarding obligations on the recipient. In a dispute concerning the reasonableness of a restriction |
12 | under this subsection, the company has the burden of proving reasonableness. |
13 | ARTICLE 5 |
14 | TRANSFERABLE INTERESTS AND RIGHTS OF TRANSFEREES AND CREDITORS |
15 | 7-16.1-501. Nature of transferable interest. |
16 | A transferable interest is personal property. |
17 | 7-16.1-502. Transfer of transferable interest. |
18 | (a) Subject to § 7-16.1-503(f), a transfer, in whole or in part, of a transferable interest: |
19 | (1) Is permissible; |
20 | (2) Does not by itself cause a person's dissociation as a member or a dissolution and |
21 | winding up of the limited liability company's activities and affairs; and |
22 | (3) Subject to § 7-16.1-504, does not entitle the transferee to: |
23 | (i) Participate in the management or conduct of the company's activities and affairs; or |
24 | (ii) Except as otherwise provided in subsection (c) of this section, have access to records |
25 | or other information concerning the company's activities and affairs. |
26 | (b) A transferee has the right to receive, in accordance with the transfer, distributions to |
27 | which the transferor would otherwise be entitled. |
28 | (c) In a dissolution and winding up of a limited liability company, a transferee is entitled |
29 | to an account of the company's transactions only from the date of dissolution. |
30 | (d) A transferable interest may be evidenced by a certificate of the interest issued by a |
31 | limited liability company in a record, and, subject to this section, the interest represented by the |
32 | certificate may be transferred by a transfer of the certificate. |
33 | (e) A limited liability company need not give effect to a transferee's rights under this section |
34 | until the company knows or has notice of the transfer. |
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1 | (f) A transfer of a transferable interest in violation of a restriction on transfer contained in |
2 | the operating agreement is ineffective if the intended transferee has knowledge or notice of the |
3 | restriction at the time of transfer. |
4 | (g) Except as otherwise provided in § 7-16.1-602(5)(ii), if a member transfers a transferable |
5 | interest, the transferor retains the rights of a member other than the transferable interest transferred |
6 | and retains all the duties and obligations of a member. |
7 | (h) If a member transfers a transferable interest to a person that becomes a member with |
8 | respect to the transferred interest, the transferee is liable for the member's obligations under §§ 7- |
9 | 16.1-403 and 17-16.1-406 known to the transferee when the transferee becomes a member. |
10 | 7-16.1-503. Charging order. |
11 | (a) On application by a judgment creditor of a member or transferee, a court may enter a |
12 | charging order against the transferable interest of the judgment debtor for the unsatisfied amount |
13 | of the judgment. Except as otherwise provided in subsection (f) of this section, a charging order |
14 | constitutes a lien on a judgment debtor's transferable interest and requires the limited liability |
15 | company to pay over to the person to which the charging order was issued any distribution that |
16 | otherwise would be paid to the judgment debtor. |
17 | (b) To the extent necessary to effectuate the collection of distributions pursuant to a |
18 | charging order in effect under subsection (a) of this section, the court may: |
19 | (1) Appoint a receiver of the distributions subject to the charging order, with the power to |
20 | make all inquiries the judgment debtor might have made; and |
21 | (2) Make all other orders necessary to give effect to the charging order. |
22 | (c) Upon a showing that distributions under a charging order will not pay the judgment |
23 | debt within a reasonable time, the court may foreclose the lien and order the sale of the transferable |
24 | interest. Except as otherwise provided in subsection (f) of this section, the purchaser at the |
25 | foreclosure sale obtains only the transferable interest, does not thereby become a member, and is |
26 | subject to § 7-16.1-502. |
27 | (d) At any time before foreclosure under subsection (c) of this section, the member or |
28 | transferee whose transferable interest is subject to a charging order under subsection (a) of this |
29 | section may extinguish the charging order by satisfying the judgment and filing a certified copy of |
30 | the satisfaction with the court that issued the charging order. |
31 | (e) At any time before foreclosure under subsection (c) of this section, a limited liability |
32 | company or one or more members whose transferable interests are not subject to the charging order |
33 | may pay to the judgment creditor the full amount due under the judgment and thereby succeed to |
34 | the rights of the judgment creditor, including the charging order. |
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1 | (f) If a court orders foreclosure of a charging order lien against the sole member of a limited |
2 | liability company: |
3 | (1) The court shall confirm the sale; |
4 | (2) The purchaser at the sale obtains the member's entire interest, not only the member's |
5 | transferable interest; |
6 | (3) The purchaser thereby becomes a member; and |
7 | (4) The person whose interest was subject to the foreclosed charging order is dissociated |
8 | as a member. |
9 | (g) This chapter does not deprive any member or transferee of the benefit of any exemption |
10 | law applicable to the transferable interest of the member or transferee. |
11 | (h) This section provides the exclusive remedy by which a person, seeking in the capacity |
12 | of judgment creditor to enforce a judgment against a member or transferee, may satisfy the |
13 | judgment from the judgment debtor's transferable interest. |
14 | 7-16.1-504. Power of legal representative of deceased member. |
15 | If a member dies, the deceased member's legal representative may exercise: |
16 | (1) The rights of a transferee provided in § 7-16.1-502(c); and |
17 | (2) For the purposes of settling the estate, the rights the deceased member had under § 7- |
18 | 16.1-410. |
19 | ARTICLE 6 |
20 | DISSOCIATION |
21 | 7-16.1-601. Power to dissociate as member - Wrongful dissociation. |
22 | (a) A person has the power to dissociate as a member at any time, rightfully or wrongfully, |
23 | by withdrawing as a member by express will under § 7-16.1-602(1). |
24 | (b) A person's dissociation as a member is wrongful only if the dissociation: |
25 | (1) Is in breach of an express provision of the operating agreement; or |
26 | (2) Occurs before the completion of the winding up of the limited liability company and: |
27 | (i) The person withdraws as a member by express will; |
28 | (ii) The person is expelled as a member by judicial order under § 7-16.1-602(6); |
29 | (iii) The person is dissociated under § 7-16.1-602(8); or |
30 | (iv) In the case of a person that is not a trust other than a business trust, an estate, or an |
31 | individual, the person is expelled or otherwise dissociated as a member because it willfully |
32 | dissolved or terminated. |
33 | (c) A person that wrongfully dissociates as a member is liable to the limited liability |
34 | company and, subject to § 7-16.1-801, to the other members for damages caused by the |
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1 | dissociation. The liability is in addition to any debt, obligation, or other liability of the member to |
2 | the company or the other members. |
3 | 7-16.1-602. Events causing dissociation. |
4 | A person is dissociated as a member when: |
5 | (1) The limited liability company knows or has notice of the person's express will to |
6 | withdraw as a member, but, if the person has specified a withdrawal date later than the date the |
7 | company knew or had notice, on that later date; |
8 | (2) An event stated in the operating agreement as causing the person's dissociation occurs; |
9 | (3) The person's entire interest is transferred in a foreclosure sale under § 7-16.1-503(f); |
10 | (4) The person is expelled as a member pursuant to the operating agreement; |
11 | (5) The person is expelled as a member by the affirmative vote or consent of all the other |
12 | members if: |
13 | (i) It is unlawful to carry on the limited liability company's activities and affairs with the |
14 | person as a member; |
15 | (ii) There has been a transfer of all the person's transferable interest in the company, other |
16 | than: |
17 | (A) A transfer for security purposes; or |
18 | (B) A charging order in effect under § 7-16.1-503 which has not been foreclosed; |
19 | (C) The person is an entity and: |
20 | (I) The company notifies the person that it will be expelled as a member because the person |
21 | has filed a statement of dissolution or the equivalent, the person has been administratively |
22 | dissolved, the person's charter or the equivalent has been revoked, or the person's right to conduct |
23 | business has been suspended by the person's jurisdiction of formation; and |
24 | (II) Not later than ninety (90) days after the notification, the statement of dissolution or the |
25 | equivalent has not been withdrawn, rescinded, or revoked, the person has not been reinstated, or |
26 | the person's charter or the equivalent or right to conduct business has not been reinstated; or |
27 | (D) The person is an unincorporated entity that has been dissolved and whose activities |
28 | and affairs are being wound up; |
29 | (6) On application by the limited liability company or a member in a direct action under § |
30 | 7-16.1-801, the person is expelled as a member by judicial order because the person: |
31 | (i) Has engaged or is engaging in wrongful conduct that has affected adversely and |
32 | materially, or will affect adversely and materially, the company's activities and affairs; |
33 | (ii) Has committed willfully or persistently, or is committing willfully or persistently, a |
34 | material breach of the operating agreement or a duty or obligation under § 7-16.1-409; or |
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1 | (iii) Has engaged or is engaging in conduct relating to the company's activities and affairs |
2 | which makes it not reasonably practicable to carry on the activities and affairs with the person as a |
3 | member; |
4 | (7) In the case of an individual: |
5 | (i) The individual dies; or |
6 | (ii) In a member-managed limited liability company: |
7 | (A) A guardian or general conservator for the individual is appointed; or |
8 | (B) A court orders that the individual has otherwise become incapable of performing the |
9 | individual's duties as a member under this chapter or the operating agreement; |
10 | (8) In a member-managed limited liability company, the person: |
11 | (i) Becomes a debtor in bankruptcy; |
12 | (ii) Signs an assignment for the benefit of creditors; or |
13 | (iii) Seeks, consents to, or acquiesces in the appointment of a trustee, receiver, or liquidator |
14 | of the person or of all or substantially all the person's property; |
15 | (9) In the case of a person that is a testamentary or inter vivos trust or is acting as a member |
16 | by virtue of being a trustee of such a trust, the trust's entire transferable interest in the limited |
17 | liability company is distributed; |
18 | (10) In the case of a person that is an estate or is acting as a member by virtue of being a |
19 | personal representative of an estate, the estate's entire transferable interest in the limited liability |
20 | company is distributed; |
21 | (11) In the case of a person that is not an individual, the existence of the person terminates; |
22 | (12) The limited liability company participates in a merger under Article 10 and: |
23 | (i) The company is not the surviving entity; or |
24 | (ii) Otherwise as a result of the merger, the person ceases to be a member; |
25 | (13) The limited liability company participates in an interest exchange under Article 10 |
26 | and, as a result of the interest exchange, the person ceases to be a member; |
27 | (14) The limited liability company participates in a conversion under Article 10; |
28 | (15) The limited liability company participates in a domestication under Article 10 and, as |
29 | a result of the domestication, the person ceases to be a member; or |
30 | (16) The limited liability company dissolves and completes winding up. |
31 | 7-16.1-603. Effect of dissociation. |
32 | (a) If a person is dissociated as a member: |
33 | (1) The person's right to participate as a member in the management and conduct of the |
34 | limited liability company's activities and affairs terminates; |
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1 | (2) The person's duties and obligations under § 7-16.1-409 as a member end with regard to |
2 | matters arising and events occurring after the person's dissociation; and |
3 | (3) Subject to § 7-16.1-504 and Article 10, any transferable interest owned by the person |
4 | in the person's capacity as a member immediately before dissociation is owned by the person solely |
5 | as a transferee. |
6 | (b) A person's dissociation as a member does not of itself discharge the person from any |
7 | debt, obligation, or other liability to the limited liability company or the other members which the |
8 | person incurred while a member. |
9 | ARTICLE 7 |
10 | DISSOLUTION AND WINDING UP |
11 | 7-16.1-701. Events causing dissolution. |
12 | (a) A limited liability company is dissolved, and its activities and affairs shall be wound |
13 | up, upon the occurrence of any of the following: |
14 | (1) An event or circumstance that the operating agreement states causes dissolution; |
15 | (2) The affirmative vote or consent of all the members; |
16 | (3) The passage of ninety (90) consecutive days during which the company has no members |
17 | unless before the end of the period: |
18 | (i) Consent to admit at least one specified person as a member is given by transferees |
19 | owning the rights to receive a majority of distributions as transferees at the time the consent is to |
20 | be effective; and |
21 | (ii) At least one person becomes a member in accordance with the consent; |
22 | (b) The superior court has full power to liquidate the assets and business of a limited |
23 | liability company and to dissolve the company: |
24 | (1) In an action by a member when it is established that, whether or not the company's |
25 | business has been or could be operated at a profit, dissolution would be beneficial to the members |
26 | because: |
27 | (i) The managers or those members in control of the company are deadlocked in the |
28 | management of the company's affairs and the members are unable to break the deadlock; |
29 | (ii) The acts of the managers or those members in control of the company are illegal, |
30 | oppressive, or fraudulent; |
31 | (iii) Two (2) or more factions of members are divided and there is such internal dissension |
32 | that serious harm to the business and affairs of the company is threatened; or |
33 | (iv) The assets of the company are being misapplied or are in danger of being wasted or |
34 | lost. |
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1 | (2) In an action by a creditor when it is established that: |
2 | (i) The company is not able to pay its debts as they become due in the usual course of its |
3 | business; or |
4 | (ii) The assets of the company are being misapplied or are in danger of being wasted or |
5 | lost; |
6 | (c) In a proceeding brought under subsection (b)(1) of this section, the court may order a |
7 | remedy other than dissolution. |
8 | (d) The following constitute prima facie evidence that the company is not able to pay its |
9 | debts as they become due in the usual course of its business: |
10 | (1) The petitioning creditor's claim has been reduced to judgment and an execution on the |
11 | judgment has been returned unsatisfied; or |
12 | (2) The limited liability company has admitted in a signed record that that the petitioning |
13 | creditor's claim is due and owing. |
14 | (e) Every petition filed by a creditor for the liquidation of the assets and business of a |
15 | limited liability company shall contain a statement as to whether the creditor is or is not a manager, |
16 | officer, director, or member of the company. Every petition for the liquidation of the assets and |
17 | business of a limited liability company filed by a manager, officer, director, or member of the |
18 | company or by a creditor who is a manager, officer, director or member, shall contain, to the best |
19 | of petitioner's knowledge, information, and belief, the names and addresses of all known creditors |
20 | of any class of the company. |
21 | (f) It is not necessary to make members parties to any action or proceeding unless relief is |
22 | sought against them personally. |
23 | 7-16.1-701.1. Avoidance of dissolution through buyout. |
24 | (a) In this section, "membership interest" means a member's rights in a limited liability |
25 | company, including the member's right to share profits and loses, the member's right to |
26 | distributions, and the right to vote or otherwise participate in management of the company. |
27 | (b) Whenever a petition for dissolution of a limited liability company is filed by one or |
28 | more members pursuant to §§ 7-16.1-701(b)(1) or 10-21-6(a)(3), one or more of its other members |
29 | may avoid the dissolution by filing with the court prior to the commencement of the hearing, or, in |
30 | the discretion of the court, at any time prior to a sale or other disposition of the assets of the |
31 | company, an election to purchase the membership interest owned by each petitioning member at a |
32 | price equal to their fair value. |
33 | (c) Notice shall be sent to all members of the company other than the petitioning members, |
34 | giving them an opportunity to join in the election to purchase the membership interests. If the |
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1 | parties are unable to reach an agreement as to the fair value of the membership interests, the court |
2 | shall, upon the giving of a bond or other security sufficient to assure to each petitioning member |
3 | payment of the value of each petitioning member's membership interest, stay the proceeding and |
4 | determine the value of the membership interests as of the close of business on the day on which the |
5 | petition for dissolution was filed. |
6 | (d) Upon determining the fair value of the membership interests, the court shall state in its |
7 | order directing that the membership interests be purchased, the purchase price and the time within |
8 | which the payment is to be made, and may decree any other terms and conditions of sale that it |
9 | determines to be appropriate, including payment of the purchase price in installments extending |
10 | over a period of time, and, if the membership interests are to be purchased by more than one other |
11 | member, the allocation of membership interests among members electing to purchase them, which, |
12 | so far as practicable, are to be proportional to the membership interests previously owned. |
13 | (e) Each petitioning member is entitled to interest, at the rate on judgments in civil actions, |
14 | on the purchase price of the membership interests from the date of the filing of the election to |
15 | purchase the membership interests, and all other rights of each petitioning member as owner of the |
16 | membership interests terminate on that date. The costs of the proceeding, which include reasonable |
17 | compensation and expenses of appraisers but not fees and expenses of counsel or of experts retained |
18 | by a party, will be allocated between or among the parties as the court determines. Upon full |
19 | payment of the purchase price, under the terms and conditions specified by the court, or at any other |
20 | time that is ordered by the court, each petitioning member shall transfer the membership interests |
21 | to the purchaser. |
22 | (f) Avoidance of dissolution through buyout under this section is not the exclusive means |
23 | of avoiding the dissolution of a limited liability company, and the absence or failure of the buyout |
24 | in accordance with this section does not, of itself, affect the validity or effectiveness of any |
25 | alternative action permitted under this chapter, under common law or otherwise, nor does it create |
26 | a presumption that the failure of the buyout restricts or prevents any alternative action for avoidance |
27 | of the dissolution. |
28 | 7-16.1-702. Winding up. |
29 | (a) A dissolved limited liability company shall wind up its activities and affairs and, except |
30 | as otherwise provided in § 7-16.1-703, the company continues after dissolution only for the purpose |
31 | of winding up. |
32 | (b) In winding up its activities and affairs, a limited liability company: |
33 | (1) Shall discharge the company's debts, obligations, and other liabilities, settle and close |
34 | the company's activities and affairs, and marshal and distribute the assets of the company; and |
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1 | (2) May: |
2 | (i) Preserve the company activities, affairs, and property as a going concern for a reasonable |
3 | time; |
4 | (ii) Prosecute and defend actions and proceedings, whether civil, criminal, or |
5 | administrative; |
6 | (iii) Transfer the company's property; |
7 | (iv) Settle disputes by mediation or arbitration; |
8 | (v) Deliver to the secretary of state for filing a statement of dissolution stating the name of |
9 | the company and that the company is dissolved; and |
10 | (vi) Perform other acts necessary or appropriate to the winding up. |
11 | (c) If a dissolved limited liability company has no members, the legal representative of the |
12 | last person to have been a member may wind up the activities and affairs of the company. If the |
13 | person does so, the person has the powers of a sole manager under § 7-16.1-407(c) and is deemed |
14 | to be a manager for the purposes of § 7-16.1-304(a). |
15 | (d) If the legal representative under subsection (c) of this section declines or fails to wind |
16 | up the limited liability company's activities and affairs, a person may be appointed to do so by the |
17 | consent of transferees owning a majority of the rights to receive distributions as transferees at the |
18 | time the consent is to be effective. A person appointed under this subsection: |
19 | (1) Has the powers of a sole manager under § 7-16.1-407(c) and is deemed to be a manager |
20 | for the purposes of § 7-16.1-304(a); and |
21 | (2) Shall deliver promptly to the secretary of state for filing an amendment to the company's |
22 | certificate of organization stating: |
23 | (i) That the company has no members; |
24 | (ii) The name and addresses of the person; and |
25 | (iii) That the person has been appointed pursuant to this subsection (d) to wind up the |
26 | company. |
27 | (e) The superior court may order judicial supervision of the winding up of a dissolved |
28 | limited liability company, including the appointment of a receiver to wind up the company's |
29 | activities and affairs: |
30 | (1) On the application of a member, if the applicant establishes good cause; |
31 | (2) On the application of a transferee, if: |
32 | (i) The company does not have any members; |
33 | (ii) The legal representative of the last person to have been a member declines or fails to |
34 | wind up the company's activities; and |
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1 | (iii) Within a reasonable time following the dissolution, a person has not been appointed |
2 | pursuant to subsection (c) of this section; or |
3 | (3) In connection with a proceeding under § 7-16.1-701(b). |
4 | 7-16.1-703. Rescinding dissolution. |
5 | (a) A limited liability company may, within one hundred twenty (120) days of its effective |
6 | date of the statement of dissolution rescind its dissolution, unless a statement of termination |
7 | applicable to the company has become effective or the superior court has entered an order under § |
8 | 7-16.1-701(b) dissolving the company. |
9 | (b) Rescinding dissolution under this section requires: |
10 | (1) The affirmative vote or consent of each member; and |
11 | (2) If the limited liability company has delivered to the secretary of state for filing a |
12 | statement of dissolution and: |
13 | (i) The statement has not become effective, delivery to the secretary of state for filing of a |
14 | statement of withdrawal under § 7-16.1-208 applicable to the statement of dissolution; or |
15 | (ii) If the statement of dissolution has become effective, delivery to the secretary of state |
16 | for filing of a statement of rescission stating the name of the company and that dissolution has been |
17 | rescinded under this section. |
18 | (c) If a limited liability company rescinds its dissolution: |
19 | (1) The company resumes carrying on its activities and affairs as if dissolution had never |
20 | occurred; |
21 | (2) Subject to subsection (c)(3) of this section, any liability incurred by the company after |
22 | the dissolution and before the rescission has becomes effective is determined as if dissolution had |
23 | never occurred; and |
24 | (3) The rights of a third party arising out of conduct in reliance on the dissolution before |
25 | the third party knew or had notice of the rescission may not be adversely affected. |
26 | 7-16.1-704. Known claims against dissolved limited liability company. |
27 | (a) Except as otherwise provided in subsection (d) of this section, a dissolved limited |
28 | liability company may give notice of a known claim under subsection (b) of this section, which has |
29 | the effect provided in subsection (c) of this section. |
30 | (b) A dissolved limited liability company may in a record notify its known claimants of the |
31 | dissolution. The notice shall: |
32 | (1) Specify the information required to be included in a claim; |
33 | (2) State that a claim shall be in writing and provide a mailing address to which the claim |
34 | is to be sent; |
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1 | (3) State the deadline for receipt of a claim, which may not be less than one hundred twenty |
2 | (120) days after the date the notice is received by the claimant; and |
3 | (4) State that the claim will be barred if not received by the deadline. |
4 | (c) A claim against a dissolved limited liability company is barred if the requirements of |
5 | subsection (b) of this section are met and: |
6 | (1) The claim is not received by the specified deadline; or |
7 | (2) If the claim is timely received but rejected by the company: |
8 | (i) The company causes the claimant to receive a notice in a record stating that the claim is |
9 | rejected and will be barred unless the claimant commences an action against the company to enforce |
10 | the claim not later than ninety (90) days after the claimant receives the notice; and |
11 | (ii) The claimant does not commence the required action not later than ninety (90) days |
12 | after the claimant receives the notice. |
13 | (d) This section does not apply to a claim based on an event occurring after the date of |
14 | dissolution or a liability that on that date is contingent. |
15 | 7-16.1-705. Other claims against dissolved limited liability company. |
16 | (a) A dissolved limited liability company may publish notice of its dissolution and request |
17 | persons having claims against the company to present them in accordance with the notice. |
18 | (b) A notice under subsection (a) of this section shall: |
19 | (1) Be published at least once in a newspaper of general circulation in this state whether or |
20 | not the dissolved limited liability company's principal office is located in this state; |
21 | (2) Describe the information required to be contained in a claim, state that the claim shall |
22 | be in writing, and provide a mailing address to which the claim is to be sent; and |
23 | (3) State that a claim against the company is barred unless an action to enforce the claim is |
24 | commenced not later than three (3) years after publication of the notice. |
25 | (c) If a dissolved limited liability company publishes a notice in accordance with subsection |
26 | (b) of this section, the claim of each of the following claimants is barred unless the claimant |
27 | commences an action to enforce the claim against the company not later than three (3) years after |
28 | the publication date of the notice: |
29 | (1) A claimant that did not receive notice in a record under § 7-16.1-704; |
30 | (2) A claimant whose claim was timely sent to the company but not acted on; and |
31 | (3) A claimant whose claim is contingent on, or based on an event occurring after, the date |
32 | of dissolution. |
33 | (d) A claim not barred under this section or § 7-16.1-704 may be enforced: |
34 | (1) Against a dissolved limited liability company, to the extent of its undistributed assets; |
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1 | and |
2 | (2) Except as otherwise provided in § 7-16.1-706, if assets of the company have been |
3 | distributed after dissolution, against a member or transferee to the extent of that person's |
4 | proportionate share of the claim or of the company's assets distributed to the member or transferee |
5 | after dissolution, whichever is less, but a person's total liability for all claims under this subsection |
6 | shall not exceed the total amount of assets distributed to the person after dissolution. |
7 | 7-16.1-706. Court proceedings. |
8 | (a) A dissolved limited liability company that has published a notice under § 7-16.1-705 |
9 | may file an application with the Providence county superior court for a determination of the amount |
10 | and form of security to be provided for payment of claims that are reasonably expected to arise |
11 | after the date of dissolution based on facts known to the company and: |
12 | (1) At the time of application: |
13 | (i) Are contingent; or |
14 | (ii) Have not been made known to the company; or |
15 | (2) Are based on an event occurring after the date of dissolution. |
16 | (b) Security is not required for any claim that is or is reasonably anticipated to be barred |
17 | under § 7-16.1-705. |
18 | (c) Not later than ten (10) days after the filing of an application under subsection (a) of this |
19 | section, the dissolved limited liability company shall give notice of the proceeding to each claimant |
20 | holding a contingent claim known to the company. |
21 | (d) In a proceeding under this section, the court may appoint a guardian ad litem to |
22 | represent all claimants whose identities are unknown. The reasonable fees and expenses of the |
23 | guardian, including all reasonable expert witness fees, shall be paid by the dissolved limited |
24 | liability company. |
25 | (e) A dissolved limited liability company that provides security in the amount and form |
26 | ordered by the court under subsection (a) of this section satisfies the company's obligations with |
27 | respect to claims that are contingent, have not been made known to the company, or are based on |
28 | an event occurring after the date of dissolution, and such claims may not be enforced against a |
29 | member or transferee on account of assets received in liquidation. |
30 | 7-16.1-707. Disposition of assets in winding up. |
31 | (a) In winding up its activities and affairs, a limited liability company shall apply its assets |
32 | to discharge the company's obligations to creditors, including members that are creditors. |
33 | (b) After a limited liability company complies with subsection (a) of this section, any |
34 | surplus shall be distributed in the following order, subject to any charging order in effect under § |
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1 | 7-16.1-503: |
2 | (1) To each person owning a transferable interest that reflects contributions made and not |
3 | previously returned, an amount equal to the value of the unreturned contributions; and |
4 | (2) Among persons owning transferable interests in proportion to their respective rights to |
5 | share in distributions immediately before the dissolution of the company. |
6 | (c) If a limited liability company does not have sufficient surplus to comply with subsection |
7 | (b)(1) of this section, any surplus shall be distributed among the owners of transferable interests in |
8 | proportion to the value of the respective unreturned contributions. |
9 | (d) All distributions made under subsections (b) and (c) of this section shall be paid in |
10 | money. |
11 | 7-16.1-708. Revocation. |
12 | (a) The certificate of formation of a limited liability company may be revoked by the |
13 | secretary of state under the conditions prescribed in this section when it is established that: |
14 | (1) The limited liability company procured its certificate of formation through fraud; |
15 | (2) The limited liability company has continued to exceed or abuse the authority conferred |
16 | upon it by law; |
17 | (3) The limited liability company has failed to file its annual report within the time required |
18 | by this chapter; |
19 | (4) The limited liability company has failed to pay any required fees to the secretary of |
20 | state when they have become due and payable; |
21 | (5) The secretary of state has received notice from the division of taxation, in accordance |
22 | with § 7-16.1-215, that the limited liability company has failed to pay any fees or taxes due this |
23 | state; |
24 | (6) The limited liability company has failed for thirty (30) days to appoint and maintain a |
25 | registered agent in this state as required by this chapter; |
26 | (7) The limited liability company has failed, after change of its registered agent, to file in |
27 | the office of the secretary of state a statement of the change as required by this chapter; |
28 | (8) The limited liability company has failed to file in the office of the secretary of state any |
29 | amendment to its certificate of formation or any articles of dissolution, merger, or consolidation as |
30 | prescribed by this chapter; or |
31 | (9) A misrepresentation has been made of any material matter in any application, report, |
32 | affidavit, or other document submitted by the limited liability company pursuant to this chapter. |
33 | (b) No certificate of formation of a limited liability company shall be revoked by the |
34 | secretary of state unless: |
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1 | (1) The secretary of state shall have given the limited liability company notice thereof not |
2 | less than sixty (60) days prior to such revocation by regular mail addressed to the registered agent |
3 | in this state on file with the secretary of state's office, which notice shall specify the basis for the |
4 | revocation; provided, however, that if a prior mailing addressed to the address of the registered |
5 | agent of the limited liability company in this state currently on file with the secretary of state's |
6 | office has been returned as undeliverable by the United States Postal Service for any reason, or if |
7 | the revocation notice is returned as undeliverable by the United States Postal Service for any reason, |
8 | the secretary of state shall give notice as follows: |
9 | (i) To the limited liability company at its principal office of record as shown in its most |
10 | recent annual report, and no further notice shall be required; or |
11 | (ii) In the case of a limited liability company that has not yet filed an annual report, then to |
12 | the limited liability company at the principal office in the certificate of formation or to the |
13 | authorized person listed on the certificate of formation and no further notice shall be required; and |
14 | (2) The limited liability company fails prior to revocation to file the annual report, pay the |
15 | fees or taxes, file the required statement of change of registered agent, file the articles of amendment |
16 | or amendment to its formation or articles of dissolution, cancellation of registration, merger, or |
17 | consolidation, or correct the misrepresentation. |
18 | 7-16.1-709. Issuance of certificate of revocation. |
19 | (a) Upon revoking any such certificate of formation of a limited liability company, the |
20 | secretary of state shall: |
21 | (1) Issue a certificate of revocation in duplicate; |
22 | (2) File one of the certificates in the secretary of state's office; |
23 | (3) Send to the limited liability company by regular mail a certificate of revocation, |
24 | addressed to the registered agent of the limited liability company in this state on file with the |
25 | secretary of state's office; provided, however, that if a prior mailing addressed to the address of the |
26 | registered agent of the limited liability company in this state currently on file with the secretary of |
27 | state's office has been returned to the secretary of state as undeliverable by the United States Postal |
28 | Service for any reason, or if the revocation certificate is returned as undeliverable to the secretary |
29 | of state's office by the United States Postal Service for any reason, the secretary of state shall give |
30 | notice as follows: |
31 | (i) To the limited liability company at its principal office of record as shown in its most |
32 | recent annual report, and no further notice shall be required; or |
33 | (ii) In the case of a limited liability company that has not yet filed an annual report, then to |
34 | the domestic limited liability company at the principal office in the articles of organization or to |
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1 | the authorized person listed on the articles of organization, and no further notice shall be required. |
2 | (b) A limited liability company that is revoked continues in existence as an entity but may |
3 | not carry on any activities except as necessary to wind up its activities and affairs and liquidate its |
4 | assets under §§ 7-16.1-702, 7-16.1-704, 7-16.1-705, 7-16.1-706, and 7-16.1-707, or to apply for |
5 | reinstatement under § 7-16.1-710. |
6 | (c) The revocation of a limited liability company does not terminate the authority of its |
7 | registered agent. |
8 | 7-16.1-710. Reinstatement. |
9 | (a) Within twenty (20) years after issuing a certificate of revocation as provided in § 7- |
10 | 16.1-709, the secretary of state may withdraw the certificate of revocation and retroactively |
11 | reinstate the limited liability company in good standing as if its certificate of formation had not |
12 | been revoked except as subsequently provided: |
13 | (1) On the filing by the limited liability company of the documents it had previously failed |
14 | to file as set forth in § 7-16.1-708(a)(3) through (a)(8); |
15 | (2) On the payment by the limited liability company of a penalty in the amount of fifty |
16 | dollars ($50.00) for each year or part of year that has elapsed since the issuance of the certificate |
17 | of revocation; and |
18 | (3) Upon the filing by the limited liability company of a letter of good standing from the |
19 | Rhode Island division of taxation. |
20 | (b) If, as permitted by the provisions of this chapter or chapters 1.2, 6, 12.1, or 13.1 of this |
21 | title, another limited liability company, business or nonprofit corporation, registered limited |
22 | liability partnership or a limited partnership, or in each case domestic or foreign, authorized and |
23 | qualified to transact business in this state, bears or has filed a fictitious business name statement as |
24 | to or reserved or registered a name that is the same as, the name of the limited liability company |
25 | with respect to which the certificate of revocation is proposed to be withdrawn, then the secretary |
26 | of state shall condition the withdrawal of the certificate of revocation on the reinstated limited |
27 | liability company amending its certificate of formation in order to designate a name that is not the |
28 | same as its former name. |
29 | (c) When reinstatement under this section has become effective, the following rules apply: |
30 | (1) The reinstatement relates back to and takes effect as of the effective date of the |
31 | certificate of revocation. |
32 | (2) The limited liability company resumes carrying on its activities and affairs as if the |
33 | revocation had not occurred. |
34 | (3) The rights of a person arising out of an act or omission in reliance on the revocation |
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1 | before the person knew or had notice of the reinstatement are not affected. |
2 | 7-16.1-711. Judicial review of denial of reinstatement. |
3 | (a) If the secretary of state denies a limited liability company's application for reinstatement |
4 | following administrative dissolution, the secretary of state shall serve the company with a notice in |
5 | a record that explains the reasons for the denial. |
6 | (b) A limited liability company may seek judicial review of denial of reinstatement in the |
7 | superior court not later than thirty (30) days after service of the notice of denial. |
8 | ARTICLE 8 |
9 | ACTIONS BY MEMBERS |
10 | 7-16.1-801. Direct action by member. |
11 | (a) Subject to subsection (b) of this section, a member may maintain a direct action against |
12 | another member, a manager, or the limited liability company to enforce the member's rights and |
13 | protect the member's interests, including rights and interests under the operating agreement or this |
14 | chapter or arising independently of the membership relationship. |
15 | (b) A member maintaining a direct action under this section shall plead and prove an actual |
16 | or threatened injury that is not solely the result of an injury suffered or threatened to be suffered by |
17 | the limited liability company. |
18 | 7-16.1-802. Derivative action. |
19 | A member may maintain a derivative action to enforce a right of a limited liability company |
20 | if: |
21 | (1) The member first makes a demand on the other members in a member-managed limited |
22 | liability company, or the managers of a manager-managed limited liability company, requesting |
23 | that they cause the company to bring an action to enforce the right, and the managers or other |
24 | members do not bring the action within a reasonable time; or |
25 | (2) A demand under subsection (1) of this section would be futile. |
26 | 7-16.1-803. Proper plaintiff. |
27 | A derivative action to enforce a right of a limited liability company may be maintained |
28 | only by a person that is a member at the time the action is commenced and: |
29 | (1) Was a member when the conduct giving rise to the action occurred; or |
30 | (2) Whose status as a member devolved on the person by operation of law or pursuant to |
31 | the terms of the operating agreement from a person that was a member at the time of the conduct. |
32 | 7-16.1-804. Pleading. |
33 | In a derivative action, the complaint shall state with particularity: |
34 | (1) The date and content of the plaintiff's demand and the response to the demand by the |
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1 | managers or other members; or |
2 | (2) Why demand should be excused as futile. |
3 | 7-16.1-805. Special litigation committee. |
4 | (a) If a limited liability company is named as or made a party in a derivative proceeding, |
5 | the company may appoint a special litigation committee to investigate the claims asserted in the |
6 | proceeding and determine whether pursuing the action is in the best interests of the company. If the |
7 | company appoints a special litigation committee, on motion by the committee made in the name of |
8 | the company, except for good cause shown, the court shall stay discovery for the time reasonably |
9 | necessary to permit the committee to make its investigation. This subsection does not prevent the |
10 | court from: |
11 | (1) Enforcing a person's right to information under § 7-16.1-410; or |
12 | (2) Granting extraordinary relief in the form of a temporary restraining order or preliminary |
13 | injunction. |
14 | (b) A special litigation committee shall be composed of one or more disinterested and |
15 | independent individuals, who may be members. |
16 | (c) A special litigation committee may be appointed: |
17 | (1) In a member-managed limited liability company: |
18 | (i) By the affirmative vote or consent of a majority of the members not named as parties in |
19 | the proceeding; or |
20 | (ii) If all members are named as parties in the proceeding, by a majority of the members |
21 | named as defendants; or |
22 | (2) In a manager-managed limited liability company: |
23 | (i) By a majority of the managers not named as parties in the proceeding; or |
24 | (ii) If all managers are named as parties in the proceeding, by a majority of the managers |
25 | named as defendants. |
26 | (d) After appropriate investigation, a special litigation committee may determine that it is |
27 | in the best interests of the limited liability company that the proceeding: |
28 | (1) Continue under the control of the plaintiff; |
29 | (2) Continue under the control of the committee; |
30 | (3) Be settled on terms approved by the committee; or |
31 | (4) Be dismissed. |
32 | (e) After making a determination under subsection (d) of this section, a special litigation |
33 | committee shall file with the court a statement of its determination and its report supporting its |
34 | determination and shall serve each party with a copy of the determination and report. The court |
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1 | shall determine whether the members of the committee were disinterested and independent and |
2 | whether the committee conducted its investigation and made its recommendation in good faith, |
3 | independently, and with reasonable care, with the committee having the burden of proof. If the |
4 | court finds that the members of the committee were disinterested and independent and that the |
5 | committee acted in good faith, independently, and with reasonable care, the court shall enforce the |
6 | determination of the committee. Otherwise, the court shall dissolve the stay of discovery entered |
7 | under subsection (a) of this section and allow the action to continue under the control of the |
8 | plaintiff. |
9 | 7-16.1-806. Proceeds and expenses. |
10 | (a) Except as otherwise provided in subsection (b) of this section: |
11 | (1) Any proceeds or other benefits of a derivative action, whether by judgment, |
12 | compromise, or settlement, belong to the limited liability company and not to the plaintiff; and |
13 | (2) If the plaintiff receives any proceeds, the plaintiff shall remit them immediately to the |
14 | company. |
15 | (b) If a derivative action is successful, in whole or in part, the court may award the plaintiff |
16 | reasonable expenses, including reasonable attorneys' fees and costs, from the recovery of the |
17 | limited liability company. |
18 | (c) A derivative action on behalf of a limited liability company may not be voluntarily |
19 | dismissed or settled without the court's approval. |
20 | ARTICLE 9 |
21 | FOREIGN LIMITED LIABILITY COMPANIES |
22 | 7-16.1-901. Governing law. |
23 | (a) The law of the jurisdiction of formation of a foreign limited liability company governs: |
24 | (1) The internal affairs of the company; |
25 | (2) The liability of a member as member and a manager as manager for a debt, obligation, |
26 | or other liability of the company; and |
27 | (3) The liability of a series of the company. |
28 | (b) A foreign limited liability company is not precluded from registering to do business in |
29 | this state because of any difference between the law of its jurisdiction of formation and the law of |
30 | this state. |
31 | (c) Registration of a foreign limited liability company to do business in this state does not |
32 | authorize the foreign company to engage in any activities and affairs or exercise any power that a |
33 | limited liability company shall not engage in or exercise in this state. |
34 | 7-16.1-902. Registration to do business in this state. |
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1 | (a) A foreign limited liability company shall not do business in this state until it registers |
2 | with the secretary of state under this chapter. |
3 | (b) A foreign limited liability company doing business in this state shall not maintain an |
4 | action or proceeding in this state unless it is registered to do business in this state. |
5 | (c) The failure of a foreign limited liability company to register to do business in this state |
6 | does not impair the validity of a contract or act of the company or preclude it from defending an |
7 | action or proceeding in this state. |
8 | (d) A limitation on the liability of a member or manager of a foreign limited liability |
9 | company is not waived solely because the company does business in this state without registering |
10 | to do business in this state. |
11 | (e) Sections 7-16.1-901(a) and (b) applies even if a foreign limited liability company fails |
12 | to register under this chapter. |
13 | 7-16.1-903. Foreign registration statement. |
14 | To register to do business in this state, a foreign limited liability company shall deliver a |
15 | foreign registration statement to the secretary of state for filing. The statement shall state: |
16 | (1) The name of the company and, if the name does not comply with § 7-16.1-112, an |
17 | alternate name adopted pursuant to § 7-16.1-906(a); |
18 | (2) That the company is a foreign limited liability company; |
19 | (3) The company's jurisdiction of formation; |
20 | (4) The company's general character of the business it proposes to transact in this state; |
21 | (5) The addresses of the company's principal office and, if the law of the company's |
22 | jurisdiction of formation requires the company to maintain an office in that jurisdiction, the mailing |
23 | addresses of the required office; and |
24 | (6) The name and address of the company's registered agent in this state. |
25 | (7) A statement that the secretary of state is appointed the agent of a foreign limited liability |
26 | company for service of process if no agent has been appointed, or, if appointed, the agent's authority |
27 | has been revoked or if the agent cannot be found or served with the exercise of reasonable diligence; |
28 | and |
29 | (8) Additional information as may be necessary or appropriate in order to enable the |
30 | secretary of state to determine whether the foreign limited liability company is entitled to a |
31 | certificate of authority to transact business in this state. |
32 | 7-16.1-904. Amendment of foreign registration statement. |
33 | A registered foreign limited liability company shall deliver to the secretary of state for |
34 | filing an amendment to its foreign registration statement if there is a change in: |
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1 | (1) The name of the company; or |
2 | (2) The alternate name adopted pursuant to § 7-16.1-906(a). |
3 | 7-16.1-905. Activities not constituting doing business. |
4 | (a) Activities of a foreign limited liability company which do not constitute doing business |
5 | in this state under this chapter include: |
6 | (1) Maintaining, defending, mediating, arbitrating, or settling an action or proceeding; |
7 | (2) Carrying on any activity concerning its internal affairs, including holding meetings of |
8 | its members or managers; |
9 | (3) Maintaining accounts in financial institutions; |
10 | (4) Maintaining offices or agencies for the transfer, exchange, and registration of securities |
11 | of the company or maintaining trustees or depositories with respect to those securities; |
12 | (5) Selling through independent contractors; |
13 | (6) Soliciting or obtaining orders by any means if the orders require acceptance outside this |
14 | state before they become contracts; |
15 | (7) Creating or acquiring indebtedness, mortgages, or security interests in property; |
16 | (8) Securing or collecting debts or enforcing mortgages or security interests in property |
17 | securing the debts and holding, protecting, or maintaining property; |
18 | (9) Conducting an isolated transaction that is not in the course of similar transactions; |
19 | (10) Owning, without more, property; and |
20 | (11) Doing business in interstate commerce. |
21 | (b) A person does not do business in this state solely by being a member or manager of a |
22 | foreign limited liability company that does business in this state or by being a general partner of a |
23 | foreign limited partnership that does business in this state. |
24 | (c) This section does not apply in determining the contacts or activities that may subject a |
25 | foreign limited liability company to service of process, taxation, or regulation under law of this |
26 | state other than this chapter. |
27 | d) If this chapter requires a foreign limited liability company to register to do business in |
28 | this state and the company fails to register, then by doing business in this state the company appoints |
29 | the secretary of state as its agent for service of process as to claims for relief or causes of action |
30 | arising out of doing business in this state. |
31 | 7-16.1-906. Noncomplying name of foreign limited liability company. |
32 | (a) A foreign limited liability company whose name does not comply with § 7-16.1-112 |
33 | shall not register to do business in this state until it adopts, for the purpose of doing business in this |
34 | state, an alternate name that complies with § 7-16.1-112. A company that registers under an |
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1 | alternate name under this subsection need not comply with § 7-16.1-112.1. After registering to do |
2 | business in this state with an alternate name, a company shall do business in this state under: |
3 | (1) The alternate name; |
4 | (2) The company's name, with the addition of its jurisdiction of formation; or |
5 | (3) A name the company is authorized to use under § 7-16.1-112.1. |
6 | (b) If a registered foreign limited liability company changes its name to one that does not |
7 | comply with § 7-16.1-112, it shall not do business in this state until it complies with subsection (a) |
8 | of this section by amending its registration to adopt an alternate name that complies with § 7-16.1- |
9 | 112. |
10 | 7-16.1-907. Withdrawal deemed on conversion to domestic filing entity or domestic |
11 | limited liability partnership. |
12 | A registered foreign limited liability company that converts to a domestic limited liability |
13 | partnership or to a domestic entity whose formation requires delivery of a record to the secretary |
14 | of state for filing is deemed to have withdrawn its registration on the effective date of the |
15 | conversion. |
16 | 7-16.1-908. Withdrawal on dissolution or conversion to nonfiling entity other than |
17 | limited liability partnership. |
18 | (a) A registered foreign limited liability company that has dissolved and completed |
19 | winding up or has converted to a domestic or foreign entity whose formation does not require the |
20 | public filing of a record, other than a limited liability partnership, shall deliver a statement of |
21 | withdrawal to the secretary of state for filing. The statement shall state: |
22 | (1) In the case of a company that has completed winding up: |
23 | (i) Its name and jurisdiction of formation; |
24 | (ii) That the company surrenders its registration to do business in this state; and |
25 | (iii) That the limited liability company revokes the authority of its registered agent in this |
26 | state to accept service of process and consents that service of process in any action, suit, or |
27 | proceeding based upon any cause of action arising in this state during the time the limited liability |
28 | company was authorized to transact business in this state may subsequently be made on the limited |
29 | liability company by service on the secretary of state in accordance with subsection (a)(1)(iv) of |
30 | this section; |
31 | (iv) The post office address to which the secretary of state may mail a copy of any process |
32 | against the limited liability company that is served on the secretary of state; and |
33 | (v) A statement that the limited liability company certifies that it has no outstanding tax |
34 | obligations. As required by § 7-16.1-213, the limited liability company has paid all fees and taxes. |
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1 | (2) In the case of a company that has converted: |
2 | (i) The name of the converting company and its jurisdiction of formation; |
3 | (ii) The type of entity to which the company has converted and its jurisdiction of formation; |
4 | (iii) That the converted entity surrenders the converting company's registration to do |
5 | business in this state and revokes the authority of the converting company's registered agent to act |
6 | as registered agent in this state on behalf of the company or the converted entity; |
7 | (iv) A mailing address to which service of process may be made under subsection (a)(1)(iv) |
8 | of this section; and |
9 | (v) A statement that the limited liability company certifies that it has no outstanding tax |
10 | obligations. As required by § 7-16.1-213, the limited liability company has paid all fees and taxes. |
11 | (b) After a withdrawal under this section has become effective, service of process in any |
12 | action or proceeding based on a cause of action arising during the time the foreign limited liability |
13 | company was registered to do business in this state may be made pursuant to § 7-16.1-119. |
14 | 7-16.1-909. Transfer of registration. |
15 | (a) When a registered foreign limited liability company has merged into a foreign entity |
16 | that is not registered to do business in this state or has converted to a foreign entity required to |
17 | register with the secretary of state to do business in this state, the foreign entity shall deliver to the |
18 | secretary of state for filing an application for transfer of registration. The application shall state: |
19 | (1) The name of the registered foreign limited liability company before the merger or |
20 | conversion; |
21 | (2) That before the merger or conversion the registration pertained to a foreign limited |
22 | liability company; |
23 | (3) The name of the applicant foreign entity into which the foreign limited liability |
24 | company has merged or to which it has been converted and, if the name does not comply with § 7- |
25 | 16.1-112, an alternate name adopted pursuant to § 7-16.1-906(a); |
26 | (4) The type of entity of the applicant foreign entity and its jurisdiction of formation; |
27 | (5) The address of the principal office of the applicant foreign entity and, if the law of the |
28 | entity's jurisdiction of formation requires the entity to maintain an office in that jurisdiction, the |
29 | mailing addresses of that office; and |
30 | (6) The name and address of the applicant foreign entity's registered agent in this state. |
31 | (b) When an application for transfer of registration takes effect, the registration of the |
32 | foreign limited liability company to do business in this state is transferred without interruption to |
33 | the foreign entity into which the company has merged or to which it has been converted. |
34 | 7-16.1-910. Revocation of registration. |
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1 | (a) The registration of a foreign limited liability company may be revoked by the secretary |
2 | of state under the conditions prescribed in this section when it is established that: |
3 | (1) The limited liability company procured its certificate of registration through fraud; |
4 | (2) The limited liability company has continued to exceed or abuse the authority conferred |
5 | upon it by law; |
6 | (3) The limited liability company has failed to file its annual report within the time required |
7 | by this chapter; |
8 | (4) The limited liability company has failed to pay any required fees to the secretary of |
9 | state when they have become due and payable; |
10 | (5) The secretary of state has received notice from the division of taxation, in accordance |
11 | with § 7-16.1-214, that the limited liability company has failed to pay any fees or taxes due this |
12 | state; |
13 | (6) The limited liability company has failed for thirty (30) days to appoint and maintain a |
14 | registered agent in this state as required by this chapter; |
15 | (7) The limited liability company has failed, after change of its registered agent, to file in |
16 | the office of the secretary of state a statement of the change as required by this chapter; |
17 | (8) The limited liability company has failed to file in the office of the secretary of state any |
18 | amendment to its certificate of registration or any articles of dissolution, merger, or consolidation |
19 | as prescribed by this chapter; or |
20 | (9) A misrepresentation has been made of any material matter in any application, report, |
21 | affidavit, or other document submitted by the limited liability company pursuant to this chapter. |
22 | (b) No certificate of registration of a limited liability company shall be revoked by the |
23 | secretary of state unless: |
24 | (1) The secretary of state shall have given the limited liability company notice thereof not |
25 | less than sixty (60) days prior to such revocation by regular mail addressed to the registered agent |
26 | in this state on file with the secretary of state's office, which notice shall specify the basis for the |
27 | revocation; provided, however, that if a prior mailing addressed to the address of the registered |
28 | agent of the limited liability company in this state currently on file with the secretary of state's |
29 | office has been returned as undeliverable by the United States Postal Service for any reason, or if |
30 | the revocation notice is returned as undeliverable by the United States Postal Service for any reason, |
31 | the secretary of state shall give notice as follows: |
32 | (i) To the limited liability company at its principal office of record as shown in its most |
33 | recent annual report, and no further notice shall be required; or |
34 | (ii) In the case of a limited liability company that has not yet filed an annual report, then to |
| LC005050 - Page 106 of 135 |
1 | the limited liability company at the principal office in the certificate of registration of the limited |
2 | liability company and no further notice shall be required; and |
3 | (2) The limited liability company fails prior to revocation to file the annual report, pay the |
4 | fees or taxes, file the required statement of change of registered agent, file the amendment to its |
5 | registration or certificate of withdrawal of registration, merger, or consolidation, or correct the |
6 | misrepresentation. |
7 | (c) The authority of a registered foreign limited liability company to do business in this |
8 | state ceases on the effective date of the notice of revocation), unless before that date the company |
9 | cures each ground for revocation stated in the notice. |
10 | 7-16.1-911. Issuance of certificates of revocation. |
11 | (a) Upon revoking any such certificate of registration of a limited liability company, the |
12 | secretary of state shall: |
13 | (1) Issue a certificate of revocation in duplicate; |
14 | (2) File one of the certificates in the secretary of state's office; |
15 | (3) Send to the limited liability company by regular mail a certificate of revocation, |
16 | addressed to the registered agent of the limited liability company in this state on file with the |
17 | secretary of state's office; provided, however, that if a prior mailing addressed to the address of the |
18 | registered agent of the limited liability company in this state currently on file with the secretary of |
19 | state's office has been returned to the secretary of state as undeliverable by the United States Postal |
20 | Service for any reason, or if the revocation certificate is returned as undeliverable to the secretary |
21 | of state's office by the United States Postal Service for any reason, the secretary of state shall give |
22 | notice as follows: |
23 | (i) To the limited liability company at its principal office of record as shown in its most |
24 | recent annual report, and no further notice shall be required; or |
25 | (ii) In the case of a limited liability company that has not yet filed an annual report, then to |
26 | the principal office listed in the certificate of registration, and no further notice shall be required. |
27 | (b) The authority of the registered foreign limited liability company to do business in this |
28 | state ceases on the effective date of the certificate of revocation, or to apply for reinstatement under |
29 | § 7-6.1 912. |
30 | (c) The revocation of a limited liability company does not terminate the authority of its |
31 | registered agent. |
32 | 7-16.1-912. Reinstatement. |
33 | (a) Within twenty (20) years after issuing a certificate of revocation as provided in § 7- |
34 | 16.1-911, the secretary of state shall withdraw the certificate of revocation and retroactively |
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1 | reinstate the limited liability company in good standing as if its certificate of registration of limited |
2 | liability company had not been revoked except as subsequently provided: |
3 | (1) On the filing by the limited liability company of the documents it had previously failed |
4 | to file as set forth in § 7-16.1-910(a)(3) through (a)(6); |
5 | (2) On the payment by the limited liability company of a penalty in the amount of fifty |
6 | dollars ($50.00) for each year or part of year that has elapsed since the issuance of the certificate |
7 | of revocation; and |
8 | (3) Upon the filing by the limited liability company of a letter of good standing from the |
9 | Rhode Island division of taxation. |
10 | (b) If, as permitted by the provisions of this chapter or chapters 1.2, 6, 12.1, or 13.1 of this |
11 | title, another limited liability company, business or nonprofit corporation, registered limited |
12 | liability partnership or a limited partnership, or in each case domestic or foreign, authorized and |
13 | qualified to transact business in this state, bears or has filed a fictitious business name statement as |
14 | to or reserved or registered a name that is the same as, the name of the limited liability company |
15 | with respect to which the certificate of revocation is proposed to be withdrawn, then the secretary |
16 | of state shall condition the withdrawal of the certificate of revocation on the reinstated limited |
17 | liability company amending its certificate of registration in order to designate a name that meets |
18 | the requirements of § 7-16.1-112 by adopting an alternate name pursuant to § 7-16.1-906(a). |
19 | (c) When reinstatement under this section has become effective, the following rules apply: |
20 | (1) The reinstatement relates back to and takes effect as of the effective date of the |
21 | certificate of revocation. |
22 | (2) The limited liability company resumes carrying on its activities and affairs as if the |
23 | revocation had not occurred. |
24 | (3) The rights of a person arising out of an act or omission in reliance on the revocation |
25 | before the person knew or had notice of the reinstatement are not affected. |
26 | 7-16.1-913. Withdrawal of registration of registered foreign limited liability company. |
27 | (a) A registered foreign limited liability company may withdraw its registration by |
28 | delivering a statement of withdrawal to the secretary of state for filing. The statement of withdrawal |
29 | shall state: |
30 | (1) The name of the company and its jurisdiction of formation; |
31 | (2) That the company is not doing business in this state and that it withdraws its registration |
32 | to do business in this state; |
33 | (3) That the limited liability company revokes the authority of its registered agent in this |
34 | state to accept service of process and consents that service of process in any action, suit, or |
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1 | proceeding based upon any cause of action arising in this state during the time the limited liability |
2 | company was authorized to transact business in this state may subsequently be made on the limited |
3 | liability company by service on the secretary of state in accordance with subsection (b) of this |
4 | section; |
5 | (4) The post office address to which the secretary of state may mail a copy of any process |
6 | against the limited liability company that is served on the secretary of state; and. |
7 | (5) A statement that the limited liability company certifies that it has no outstanding tax |
8 | obligations. As required by § 7-16.1-213, the limited liability company has paid all fees and taxes. |
9 | (b) After the withdrawal of the registration of a foreign limited liability company, service |
10 | of process in any action or proceeding based on a cause of action arising during the time the |
11 | company was registered to do business in this state may be made pursuant to § 7-16.1-119. |
12 | 7-16.1-914. Action by attorney general. |
13 | The attorney general may maintain an action to enjoin a foreign limited liability company |
14 | from doing business in this state in violation of this chapter. |
15 | ARTICLE 10 |
16 | MERGER, INTEREST EXCHANGE, CONVERSION, AND DOMESTICATION |
17 | PART 1 |
18 | GENERAL PROVISIONS |
19 | 7-16.1-1001. Definitions. |
20 | In this chapter: |
21 | (1) "Acquired entity" means the entity, all of one or more classes or series of interests of |
22 | which are acquired in an interest exchange. |
23 | (2) "Acquiring entity" means the entity that acquires all of one or more classes or series of |
24 | interests of the acquired entity in an interest exchange. |
25 | (3) "Conversion" means a transaction authorized by § 7-16.1-1041. |
26 | (4) "Converted entity" means the converting entity as it continues in existence after a |
27 | conversion. |
28 | (5) "Converting entity" means the domestic entity that approves a plan of conversion |
29 | pursuant to § 7-16.1-1043 or the foreign entity that approves a conversion pursuant to the law of |
30 | its jurisdiction of formation. |
31 | (6) "Distributional interest" means the right under an unincorporated entity's organic law |
32 | and organic rules to receive distributions from the entity. |
33 | (7) "Domestic" with respect to an entity, means governed as to its internal affairs by the |
34 | law of this state. |
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1 | (8) "Domesticated limited liability company" means the domesticating limited liability |
2 | company as it continues in existence after a domestication. |
3 | (9) "Domesticating limited liability company" means the domestic limited liability |
4 | company that approves a plan of domestication pursuant to § 7-16.1-1053 or the foreign limited |
5 | liability company that approves a domestication pursuant to the law of its jurisdiction of formation. |
6 | (10) "Domestication" means a transaction authorized by § 7-16.1-1051. |
7 | (11) "Entity": |
8 | (i) means: |
9 | (A) A business corporation; |
10 | (B) A nonprofit corporation; |
11 | (C) A general partnership, including a limited liability partnership; |
12 | (D) A limited partnership, including a limited liability limited partnership; |
13 | (E) A limited liability company; |
14 | (F) A general cooperative association; |
15 | (G) A limited cooperative association; |
16 | (H) An unincorporated nonprofit association; |
17 | (I) A statutory trust, business trust, or common-law business trust; or |
18 | (J) Any other person that has: |
19 | (I) A legal existence separate from any interest holder of that person; or |
20 | (II) The power to acquire an interest in real property in its own name; and |
21 | (ii) Does not include: |
22 | (A) An individual; |
23 | (B) A trust with a predominantly donative purpose or a charitable trust; |
24 | (C) An association or relationship that is not an entity listed in subsection (i) of this section |
25 | and is not a partnership under the rules stated under chapter 12.1 of title 7, or a similar provision of |
26 | the law of another jurisdiction; |
27 | (D) A decedent's estate; or |
28 | (E) A government or a governmental subdivision, agency, or instrumentality. |
29 | (12) "Filing entity" means an entity whose formation requires the filing of a public organic |
30 | record. The term does not include a limited liability partnership. |
31 | (13) "Foreign" with respect to an entity, means an entity governed as to its internal affairs |
32 | by the law of a jurisdiction other than this state. |
33 | (14) "Governance interest" means a right under the organic law or organic rules of an |
34 | unincorporated entity, other than as a governor, agent, assignee, or proxy, to: |
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1 | (i) Receive or demand access to information concerning, or the books and records of, the |
2 | entity; |
3 | (ii) Vote for or consent to the election of the governors of the entity; or |
4 | (iii) Receive notice of or vote on or consent to an issue involving the internal affairs of the |
5 | entity. |
6 | (15) "Governor" means: |
7 | (i) A director of a business corporation; |
8 | (ii) A director or trustee of a nonprofit corporation; |
9 | (iii) A general partner of a general partnership; |
10 | (iv) A general partner of a limited partnership; |
11 | (v) A manager of a manager-managed limited liability company; |
12 | (vi) A member of a member-managed limited liability company; |
13 | (vii) A director of a general cooperative association; |
14 | (viii) A director of a limited cooperative association; |
15 | (ix) A manager of an unincorporated nonprofit association; |
16 | (x) A trustee of a statutory trust, business trust, or common-law business trust; or |
17 | (xi) Any other person under whose authority the powers of an entity are exercised and |
18 | under whose direction the activities and affairs of the entity are managed pursuant to the organic |
19 | law and organic rules of the entity. |
20 | (16) "Interest" means: |
21 | (i) A share in a business corporation; |
22 | (ii) A membership in a nonprofit corporation; |
23 | (iii) A partnership interest in a general partnership; |
24 | (iv) A partnership interest in a limited partnership; |
25 | (v) A membership interest in a limited liability company; |
26 | (vi) A share in a general cooperative association; |
27 | (vii) A member's interest in a limited cooperative association; |
28 | (viii) A membership in an unincorporated nonprofit association; |
29 | (ix) A beneficial interest in a statutory trust, business trust, or common-law business trust; |
30 | or |
31 | (x) A governance interest or distributional interest in any other type of unincorporated |
32 | entity. |
33 | (17) "Interest exchange" means a transaction authorized by § 7-16.1-1031. |
34 | (18) "Interest holder" means: |
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1 | (i) A shareholder of a business corporation; |
2 | (ii) A member of a nonprofit corporation; |
3 | (iii) A general partner of a general partnership; |
4 | (iv) A general partner of a limited partnership; |
5 | (v) A limited partner of a limited partnership; |
6 | (vi) A member of a limited liability company; |
7 | (vii) A shareholder of a general cooperative association; |
8 | (viii) A member of a limited cooperative association; |
9 | (ix) A member of an unincorporated nonprofit association; |
10 | (x) A beneficiary or beneficial owner of a statutory trust, business trust, or common-law |
11 | business trust; or |
12 | (xi) Any other direct holder of an interest. |
13 | (19) "Interest holder liability" means: |
14 | (i) Personal liability for a liability of an entity which is imposed on a person: |
15 | (A) Solely by reason of the status of the person as an interest holder; or |
16 | (ii) By the organic rules of the entity which make one or more specified interest holders or |
17 | categories of interest holders liable in their capacity as interest holders for all or specified liabilities |
18 | of the entity; or |
19 | (iii) An obligation of an interest holder under the organic rules of an entity to contribute to |
20 | the entity. |
21 | (20) "Merger" means a transaction authorized by § 7-16.1-1021. |
22 | (21) "Merging entity" means an entity that is a party to a merger and exists immediately |
23 | before the merger becomes effective. |
24 | (22) "Organic law" means the law of an entity's jurisdiction of formation governing the |
25 | internal affairs of the entity. |
26 | (23) "Organic rules" means the public organic record and private organic rules of an entity. |
27 | (24) "Plan" means a plan of merger, plan of interest exchange, plan of conversion, or plan |
28 | of domestication. |
29 | (25) "Plan of conversion" means a plan under § 7-16.1-1042. |
30 | (26) "Plan of domestication" means a plan under § 7-16.1-1052. |
31 | (27) "Plan of interest exchange" means a plan under § 7-16.1-1032. |
32 | (28) "Plan of merger" means a plan under § 7-16.1-1022. |
33 | (29) "Private organic rules" means the rules, whether or not in a record, that govern the |
34 | internal affairs of an entity, are binding on all its interest holders, and are not part of its public |
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1 | organic record, if any. The term includes: |
2 | (i) The bylaws of a business corporation; |
3 | (ii) The bylaws of a nonprofit corporation; |
4 | (iii) The partnership agreement of a general partnership; |
5 | (iv) The partnership agreement of a limited partnership; |
6 | (v) The operating agreement of a limited liability company; |
7 | (vi) The bylaws of a general cooperative association; |
8 | (vii) The bylaws of a limited cooperative association; |
9 | (viii) The governing principles of an unincorporated nonprofit association; and |
10 | (ix) The trust instrument of a statutory trust or similar rules of a business trust or common- |
11 | law business trust. |
12 | (30) "Protected agreement" means: |
13 | (i) A record evidencing indebtedness and any related agreement in effect on the effective |
14 | date of this chapter; |
15 | (ii) An agreement that is binding on an entity on the effective date of this chapter; |
16 | (iii) The organic rules of an entity in effect on the effective date of this chapter; or |
17 | (iv) An agreement that is binding on any of the governors or interest holders of an entity |
18 | on the effective date of this chapter. |
19 | (31) "Public organic record" means the record the filing of which by the secretary of state |
20 | is required to form an entity and any amendment to or restatement of that record. The term includes: |
21 | (i) The articles of incorporation of a business corporation; |
22 | (ii) The articles of incorporation of a nonprofit corporation; |
23 | (iii) The certificate of limited partnership of a limited partnership; |
24 | (iv) The certificate of organization of a limited liability company; |
25 | (v) The articles of incorporation of a general cooperative association; |
26 | (vi) The articles of organization of a limited cooperative association; and |
27 | (vii) The certificate of trust of a statutory trust or similar record of a business trust. |
28 | (32) "Registered foreign entity" means a foreign entity that is registered to do business in |
29 | this state pursuant to a record filed by the secretary of state. |
30 | (33) "Statement of conversion" means a statement under § 7-16.1-1045. |
31 | (34) "Statement of domestication" means a statement under § 7-16.1-1055. |
32 | (35) "Statement of interest exchange" means a statement under § 7-16.1-1035. |
33 | (36) "Statement of merger" means a statement under § 7-16.1-1025. |
34 | (37) "Surviving entity" means the entity that continues in existence after or is created by a |
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1 | merger. |
2 | (38) "Type of entity" means a generic form of entity: |
3 | (i) Recognized at common law; or |
4 | (ii) Formed under an organic law, whether or not some entities formed under that organic |
5 | law are subject to provisions of that law that create different categories of the form of entity. |
6 | 7-16.1-1002. Relationship of chapter to other laws. |
7 | (a) This chapter does not authorize an act prohibited by, and does not affect the application |
8 | or requirements of, law other than this chapter. |
9 | (b) A transaction effected under this chapter shall not create or impair a right, duty or |
10 | obligation of a person under the statutory law of this state other than this chapter relating to a change |
11 | in control, takeover, business combination, control-share acquisition, or similar transaction |
12 | involving a domestic merging, acquired, converting, or domesticating business corporation unless: |
13 | (1) If the corporation does not survive the transaction, the transaction satisfies any |
14 | requirements of the law; or |
15 | (2) If the corporation survives the transaction, the approval of the plan is by a vote of the |
16 | shareholders or directors which would be sufficient to create or impair the right, duty, or obligation |
17 | directly under the law. |
18 | 7-16.1-1003. Required notice or approval. |
19 | (a) A domestic or foreign entity that is required to give notice to, or obtain the approval of, |
20 | a governmental agency or officer of this state to be a party to a merger shall give the notice or |
21 | obtain the approval to be a party to an interest exchange, conversion, or domestication. |
22 | (b) Property held for a charitable purpose under the law of this state by a domestic or |
23 | foreign entity immediately before a transaction under this chapter becomes effective shall not, as a |
24 | result of the transaction, be diverted from the objects for which it was donated, granted, devised, |
25 | or otherwise transferred unless, to the extent required by or pursuant to the law of this state |
26 | concerning cy pres or other law dealing with non-diversion of charitable assets, the entity obtains |
27 | an appropriate order of the superior court by the attorney general specifying the disposition of the |
28 | property. |
29 | (c) A bequest, devise, gift, grant, or promise contained in a will or other instrument of |
30 | donation, subscription, or conveyance which is made to a merging entity that is not the surviving |
31 | entity and which takes effect or remains payable after the merger inures to the surviving entity. |
32 | (d) A trust obligation that would govern property if transferred to a non-surviving entity |
33 | applies to property that is transferred to the surviving entity under this section. |
34 | 7-16.1-1004. Nonexclusivity. |
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1 | The fact that a transaction under this chapter produces a certain result does not preclude |
2 | the same result from being accomplished in any other manner permitted by law other than this |
3 | chapter. |
4 | 7-16.1-1005. Reference to external facts. |
5 | A plan may refer to facts ascertainable outside the plan if the manner in which the facts |
6 | will operate upon the plan is specified in the plan. The facts may include the occurrence of an event |
7 | or a determination or action by a person, whether or not the event, determination, or action is within |
8 | the control of a party to the transaction. |
9 | 7-16.1-1006. Appraisal rights. |
10 | An interest holder of a domestic merging, acquired, converting, or domesticating limited |
11 | liability company is entitled to contractual appraisal rights in connection with a transaction under |
12 | this chapter to the extent provided in: |
13 | (1) The operating agreement; or |
14 | (2) The plan. |
15 | 7-16.1-1007. Excluded entities and transactions -- Other applicable law. |
16 | (a) This chapter may not be used to effect a transaction that is prohibited by law of this |
17 | state other than this chapter. |
18 | (b) If law of this state other than this chapter applies to a transaction that is otherwise within |
19 | the scope of this chapter, the transaction is still subject to such other law. |
20 | ARTICLE 10 |
21 | PART 2 |
22 | MERGER |
23 | 7-16.1-1021. Merger authorized. |
24 | (a) By complying with this chapter: |
25 | (1) One or more domestic limited liability companies may merge with one or more |
26 | domestic or foreign entities into a domestic or foreign surviving entity; and |
27 | (2) Two (2) or more foreign entities may merge into a domestic limited liability company. |
28 | (b) By complying with the provisions of this chapter applicable to foreign entities, a foreign |
29 | entity may be a party to a merger under this chapter or may be the surviving entity in such a merger |
30 | if the merger is authorized by the law of the foreign entity's jurisdiction of formation. |
31 | 7-16.1-1022. Plan of merger. |
32 | (a) A domestic limited liability company may become a party to a merger under this chapter |
33 | by approving a plan of merger. The plan shall be in a record and contain: |
34 | (1) As to each merging entity, its name, jurisdiction of formation, and type of entity; |
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1 | (2) If the surviving entity is to be created in the merger, a statement to that effect and the |
2 | entity's name, jurisdiction of formation, and type of entity; |
3 | (3) The manner of converting the interests in each party to the merger into interests, |
4 | securities, obligations, money, other property, rights to acquire interests or securities, or any |
5 | combination of the foregoing; |
6 | (4) If the surviving entity exists before the merger, any proposed amendments to: |
7 | (i) Its public organic record, if any; and |
8 | (ii) Its private organic rules that are, or are proposed to be, in a record; |
9 | (5) If the surviving entity is to be created in the merger: |
10 | (i) Its proposed public organic record, if any; and |
11 | (ii) The full text of its private organic rules that are proposed to be in a record; |
12 | (6) The other terms and conditions of the merger; and |
13 | (7) Any other provision required by the law of a merging entity's jurisdiction of formation |
14 | or the organic rules of a merging entity. |
15 | (b) In addition to the requirements of subsection (a) of this section, a plan of merger may |
16 | contain any other provision not prohibited by law. |
17 | 7-16.1-1023. Approval of merger. |
18 | (a) A plan of merger is not effective unless it has been approved: |
19 | (1) By a domestic merging limited liability company, by all the members of the company |
20 | entitled to vote on or consent to any matter; and |
21 | (2) In a record, by each member of a domestic merging limited liability company which |
22 | will have interest holder liability for debts, obligations, and other liabilities that are incurred after |
23 | the merger becomes effective, unless: |
24 | (i) The operating agreement of the company provides in a record for the approval of a |
25 | merger in which some or all of its members become subject to interest holder liability by the |
26 | affirmative vote or consent of fewer than all the members; and |
27 | (ii) The member consented in a record to or voted for that provision of the operating |
28 | agreement or became a member after the adoption of that provision. |
29 | (b) A merger involving a domestic merging entity that is not a limited liability company is |
30 | not effective unless the merger is approved by that entity in accordance with its organic law. |
31 | (c) A merger involving a foreign merging entity is not effective unless the merger is |
32 | approved by the foreign entity in accordance with the law of the foreign entity's jurisdiction of |
33 | formation. |
34 | 7-16.1-1024. Amendment or abandonment of plan of merger. |
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1 | (a) A plan of merger may be amended only with the consent of each party to the plan, |
2 | except as otherwise provided in the plan. |
3 | (b) A domestic merging limited liability company may approve an amendment of a plan of |
4 | merger: |
5 | (1) In the same manner as the plan was approved, if the plan does not provide for the |
6 | manner in which it may be amended; or |
7 | (2) By its managers or members in the manner provided in the plan; provided, however, |
8 | that a member that was entitled to vote on or consent to approval of the merger is entitled to vote |
9 | on or consent to any amendment of the plan that will change: |
10 | (i) The amount or kind of interests, securities, obligations, money, other property, rights to |
11 | acquire interests or securities, or any combination of the foregoing, to be received by the interest |
12 | holders of any party to the plan; |
13 | (ii) The public organic record, if any, or private organic rules of the surviving entity that |
14 | will be in effect immediately after the merger becomes effective, except for changes that do not |
15 | require approval of the interest holders of the surviving entity under its organic law or organic rules; |
16 | or |
17 | (iii) Any other terms or conditions of the plan, if the change would adversely affect the |
18 | member in any material respect. |
19 | (c) After a plan of merger has been approved and before a statement of merger becomes |
20 | effective, the plan may be abandoned as provided in the plan. Unless prohibited by the plan, a |
21 | domestic merging limited liability company may abandon the plan in the same manner as the plan |
22 | was approved. |
23 | (d) If a plan of merger is abandoned after a statement of merger has been delivered to the |
24 | secretary of state for filing and before the statement becomes effective, a statement of |
25 | abandonment, signed by a party to the plan, shall be delivered to the secretary of state for filing |
26 | before the statement of merger becomes effective. The statement of abandonment takes effect on |
27 | filing, and the merger is abandoned and does not become effective. The statement of abandonment |
28 | shall contain: |
29 | (1) The name of each party to the plan of merger; |
30 | (2) The date on which the statement of merger was filed by the secretary of state; and |
31 | (3) A statement that the merger has been abandoned in accordance with this section. |
32 | 7-16.1-1025. Articles of merger -- Effective date of merger. |
33 | (a) Articles of merger shall be signed by each merging entity and delivered to the secretary |
34 | of state for filing. |
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1 | (b) Articles of merger shall contain: |
2 | (1) The name, jurisdiction of formation, and type of entity of each merging entity that is |
3 | not the surviving entity; |
4 | (2) The name, jurisdiction of formation, and type of entity of the surviving entity; |
5 | (3) A statement that the merger was approved by each domestic merging entity, if any, in |
6 | accordance with this chapter and by each foreign merging entity, if any, in accordance with the law |
7 | of its jurisdiction of formation; |
8 | (4) If the surviving entity exists before the merger and is a domestic filing entity, any |
9 | amendment to its public organic record approved as part of the plan of merger; |
10 | (5) If the surviving entity is created by the merger and is a domestic filing entity, its public |
11 | organic record, as an attachment; and |
12 | (6) If the surviving entity is created by the merger and is a domestic limited liability |
13 | partnership, its statement of qualification, as an attachment. |
14 | (c) In addition to the requirements of subsection (b) of this section, a statement of merger |
15 | may contain any other provision not prohibited by law. |
16 | (d) If the surviving entity is a domestic entity, its public organic record, if any, shall satisfy |
17 | the requirements of the law of this state, except that the public organic record does not need to be |
18 | signed. |
19 | (e) If the surviving or resulting entity is not a domestic limited liability company or another |
20 | filing entity of record in the office of the secretary of state, a statement that the surviving or resulting |
21 | other entity agrees that it may be served with process in Rhode Island in any action, suit or |
22 | proceeding for the enforcement of any obligation of any domestic limited liability company that is |
23 | to merge, irrevocably appointing the secretary of state as its agent to accept service of process in |
24 | the action, suit or proceeding and specifying the address to which a copy of the process is to be |
25 | mailed to it by the secretary of state. In the event of service under this section on the secretary of |
26 | state, the procedures set forth in § 7-16.1-119 are applicable, except that the plaintiff in any action, |
27 | suit or proceeding shall furnish the secretary of state with the address specified in the articles of |
28 | merger provided for in this section and any other address that the plaintiff elects to furnish, together |
29 | with copies of the process as required by the secretary of state, and the secretary of state shall notify |
30 | the surviving or resulting other business entity at all addresses furnished by the plaintiff in |
31 | accordance with the procedures set forth in § 7-16.1-119. |
32 | (f) A statement that the merging entity certifies that it has no outstanding tax obligations, |
33 | as required by §§ 7-13.1-213, 44-11-26.1, and 7-16.1-213 and the merging entity has paid all fees |
34 | and taxes. |
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1 | (g) If the surviving entity is a domestic limited liability company, the merger becomes |
2 | effective when the articles of merger is effective. In all other cases, the merger becomes effective |
3 | on the later of: |
4 | (1) The date and time provided by the organic law of the surviving entity; and |
5 | (2) When the articles of merger is effective. |
6 | 7-16.1-1026. Effect of merger. |
7 | (a) When a merger becomes effective: |
8 | (1) The surviving entity continues or comes into existence; |
9 | (2) Each merging entity that is not the surviving entity ceases to exist; |
10 | (3) All property of each merging entity vests in the surviving entity without transfer, |
11 | reversion, or impairment; |
12 | (4) All debts, obligations, and other liabilities of each merging entity are debts, obligations, |
13 | and other liabilities of the surviving entity; |
14 | (5) Except as otherwise provided by law or the plan of merger, all the rights, privileges, |
15 | immunities, powers, and purposes of each merging entity vest in the surviving entity; |
16 | (6) If the surviving entity exists before the merger: |
17 | (i) All its property continues to be vested in it without transfer, reversion, or impairment; |
18 | (ii) It remains subject to all its debts, obligations, and other liabilities; and |
19 | (iii) All its rights, privileges, immunities, powers, and purposes continue to be vested in it; |
20 | (7) The name of the surviving entity may be substituted for the name of any merging entity |
21 | that is a party to any pending action or proceeding; |
22 | (8) If the surviving entity exists before the merger: |
23 | (i) Its public organic record, if any, is amended to the extent provided in the statement of |
24 | merger; and |
25 | (ii) Its private organic rules that are to be in a record, if any, are amended to the extent |
26 | provided in the plan of merger; |
27 | (9) If the surviving entity is created by the merger, its private organic rules are effective: |
28 | (i) If it is a filing entity, its public organic record becomes effective; and |
29 | (ii) If it is a limited liability partnership, its statement of qualification becomes effective; |
30 | and |
31 | (10) The interests in each merging entity which are to be converted in the merger are |
32 | converted, and the interest holders of those interests are entitled only to the rights provided to them |
33 | under the plan of merger and to any appraisal rights they have under § 7-16.1-1006 and the merging |
34 | entity's organic law. |
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1 | (b) Except as otherwise provided in the organic law or organic rules of a merging entity, |
2 | the merger does not give rise to any rights that an interest holder, governor, or third party would |
3 | have upon a dissolution, liquidation, or winding up of the merging entity. |
4 | (c) When a merger becomes effective, a person that did not have interest holder liability |
5 | with respect to any of the merging entities and becomes subject to interest holder liability with |
6 | respect to a domestic entity as a result of the merger has interest holder liability only to the extent |
7 | provided by the organic law of that entity and only for those debts, obligations, and other liabilities |
8 | that are incurred after the merger becomes effective. |
9 | (d) When a merger becomes effective, the interest holder liability of a person that ceases |
10 | to hold an interest in a domestic merging limited liability company with respect to which the person |
11 | had interest holder liability is subject to the following rules: |
12 | (1) The merger does not discharge any interest holder liability under this chapter to the |
13 | extent the interest holder liability was incurred before the merger became effective. |
14 | (2) The person does not have interest holder liability under this chapter for any debt, |
15 | obligation, or other liability that is incurred after the merger becomes effective. |
16 | (3) This chapter continues to apply to the release, collection, or discharge of any interest |
17 | holder liability preserved under subsection (d)(1) of this section as if the merger had not occurred. |
18 | (4) The person has whatever rights of contribution from any other person as are provided |
19 | by this chapter, law other than this chapter, or the operating agreement of the domestic merging |
20 | limited liability company with respect to any interest holder liability preserved under subsection |
21 | (d)(1) of this section as if the merger had not occurred. |
22 | (e) When a merger becomes effective, a foreign entity that is the surviving entity may be |
23 | served with process in this state for the collection and enforcement of any debts, obligations, or |
24 | other liabilities of a domestic merging limited liability company as provided in § 7-16.1-119. |
25 | (f) When a merger becomes effective, the registration to do business in this state of any |
26 | foreign merging entity that is not the surviving entity is canceled. |
27 | PART 3 |
28 | INTEREST EXCHANGE |
29 | 7-16.1-1031. Interest exchange authorized. |
30 | (a) By complying with this chapter: |
31 | (1) A domestic limited liability company may acquire all of one or more classes or series |
32 | of interests of another domestic entity or a foreign entity in exchange for interests, securities, |
33 | obligations, money, other property, rights to acquire interests or securities, or any combination of |
34 | the foregoing; or |
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1 | (2) All of one or more classes or series of interests of a domestic limited liability company |
2 | may be acquired by another domestic entity or a foreign entity in exchange for interests, securities, |
3 | obligations, money, other property, rights to acquire interests or securities, or any combination of |
4 | the foregoing. |
5 | (b) By complying with the provisions of this chapter applicable to foreign entities, a foreign |
6 | entity may be the acquiring or acquired entity in an interest exchange under this chapter if the |
7 | interest exchange is authorized by the law of the foreign entity's jurisdiction of formation. |
8 | (c) If a protected agreement contains a provision that applies to a merger of a domestic |
9 | limited liability company but does not refer to an interest exchange, the provision applies to an |
10 | interest exchange in which the domestic limited liability company is the acquired entity as if the |
11 | interest exchange were a merger until the provision is amended after the effective date of this |
12 | chapter. |
13 | 7-16.1-1032. Plan of interest exchange. |
14 | (a) A domestic limited liability company may be the acquired entity in an interest exchange |
15 | under this chapter by approving a plan of interest exchange. The plan shall be in a record and |
16 | contain: |
17 | (1) The name of the acquired entity; |
18 | (2) The name, jurisdiction of formation, and type of entity of the acquiring entity; |
19 | (3) The manner of converting the interests in the acquired entity into interests, securities, |
20 | obligations, money, other property, rights to acquire interests or securities, or any combination of |
21 | the foregoing; |
22 | (4) Any proposed amendments to: |
23 | (i) The certificate of organization of the acquired entity; and |
24 | (ii) The operating agreement of the acquired entity that are, or are proposed to be, in a |
25 | record; |
26 | (5) The other terms and conditions of the interest exchange; and |
27 | (6) Any other provision required by the law of this state or the operating agreement of the |
28 | acquired entity. |
29 | (b) In addition to the requirements of subsection (a) of this section, a plan of interest |
30 | exchange may contain any other provision not prohibited by law. |
31 | 7-16.1-1033. Approval of interest exchange. |
32 | (a) A plan of interest exchange is not effective unless it has been approved: |
33 | (1) By all the members of a domestic acquired limited liability company entitled to vote on |
34 | or consent to any matter; and |
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1 | (2) In a record, by each member of the domestic acquired limited liability company that |
2 | will have interest holder liability for debts, obligations, and other liabilities that are incurred after |
3 | the interest exchange becomes effective, unless: |
4 | (i) The operating agreement of the company provides in a record for the approval of an |
5 | interest exchange or a merger in which some or all of its members become subject to interest holder |
6 | liability by the affirmative vote or consent of fewer than all the members; and |
7 | (ii) The member consented in a record to or voted for that provision of the operating |
8 | agreement or became a member after the adoption of that provision. |
9 | (b) An interest exchange involving a domestic acquired entity that is not a limited liability |
10 | company is not effective unless it is approved by the domestic entity in accordance with its organic |
11 | law. |
12 | (c) An interest exchange involving a foreign acquired entity is not effective unless it is |
13 | approved by the foreign entity in accordance with the law of the foreign entity's jurisdiction of |
14 | formation. |
15 | (d) Except as otherwise provided in its organic law or organic rules, the interest holders of |
16 | the acquiring entity are not required to approve the interest exchange. |
17 | 7-16.1-1034. Amendment or abandonment of plan of interest exchange. |
18 | (a) A plan of interest exchange shall be amended only with the consent of each party to the |
19 | plan, except as otherwise provided in the plan. |
20 | (b) A domestic acquired limited liability company may approve an amendment of a plan |
21 | of interest exchange: |
22 | (1) In the same manner as the plan was approved, if the plan does not provide for the |
23 | manner in which it may be amended; or |
24 | (2) By its managers or members in the manner provided in the plan; provided, however, |
25 | that a member that was entitled to vote on or consent to approval of the interest exchange is entitled |
26 | to vote on or consent to any amendment of the plan that will change: |
27 | (i) The amount or kind of interests, securities, obligations, money, other property, rights to |
28 | acquire interests or securities, or any combination of the foregoing, to be received by any of the |
29 | members of the acquired company under the plan; |
30 | (ii) The certificate of organization or operating agreement of the acquired company that |
31 | will be in effect immediately after the interest exchange becomes effective, except for changes that |
32 | do not require approval of the members of the acquired company under this chapter or the operating |
33 | agreement; or |
34 | (iii) Any other terms or conditions of the plan, if the change would adversely affect the |
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1 | member in any material respect. |
2 | (c) After a plan of interest exchange has been approved and before a statement of interest |
3 | exchange becomes effective, the plan may be abandoned as provided in the plan. Unless prohibited |
4 | by the plan, a domestic acquired limited liability company may abandon the plan in the same |
5 | manner as the plan was approved. |
6 | (d) If a plan of interest exchange is abandoned after a statement of interest exchange has |
7 | been delivered to the secretary of state for filing and before the statement becomes effective, a |
8 | statement of abandonment, signed by the acquired limited liability company, shall be delivered to |
9 | the secretary of state for filing before the statement of interest exchange becomes effective. The |
10 | statement of abandonment takes effect on filing, and the interest exchange is abandoned and does |
11 | not become effective. The statement of abandonment shall contain: |
12 | (1) The name of the acquired company; |
13 | (2) The date on which the statement of interest exchange was filed by the secretary of state; |
14 | and |
15 | (3) A statement that the interest exchange has been abandoned in accordance with this |
16 | section. |
17 | 7-16.1-1035. Statement of interest exchange - Effective date of interest exchange. |
18 | (a) A statement of interest exchange shall be signed by a domestic acquired limited liability |
19 | company and delivered to the secretary of state for filing. |
20 | (b) A statement of interest exchange shall contain: |
21 | (1) The name of the acquired limited liability company; |
22 | (2) The name, jurisdiction of formation, and type of entity of the acquiring entity; |
23 | (3) A statement that the plan of interest exchange was approved by the acquired company |
24 | in accordance with this chapter; and |
25 | (4) Any amendments to the acquired company's certificate of organization approved as part |
26 | of the plan of interest exchange. |
27 | (c) In addition to the requirements of subsection (b) of this section, a statement of interest |
28 | exchange may contain any other provision not prohibited by law. |
29 | (d) An interest exchange becomes effective when the statement of interest exchange is |
30 | effective. |
31 | 7-16.1-1036. Effect of interest exchange. |
32 | (a) When an interest exchange in which the acquired entity is a domestic limited liability |
33 | company becomes effective: |
34 | (1) The interests in the acquired company which are the subject of the interest exchange |
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1 | are converted, and the members holding those interests are entitled only to the rights provided to |
2 | them under the plan of interest exchange and to any appraisal rights they have under § 7-16.1-1006; |
3 | (2) The acquiring entity becomes the interest holder of the interests in the acquired |
4 | company stated in the plan of interest exchange to be acquired by the acquiring entity; |
5 | (3) The certificate of organization of the acquired company is amended to the extent |
6 | provided in the statement of interest exchange; and |
7 | (4) The provisions of the operating agreement of the acquired company that are to be in a |
8 | record, if any, are amended to the extent provided in the plan of interest exchange. |
9 | (b) Except as otherwise provided in the operating agreement of a domestic acquired limited |
10 | liability company, the interest exchange does not give rise to any rights that a member, manager, |
11 | or third party would have upon a dissolution, liquidation, or winding up of the acquired company. |
12 | (c) When an interest exchange becomes effective, a person that did not have interest holder |
13 | liability with respect to a domestic acquired limited liability company and becomes subject to |
14 | interest holder liability with respect to a domestic entity as a result of the interest exchange has |
15 | interest holder liability only to the extent provided by the organic law of the entity and only for |
16 | those debts, obligations, and other liabilities that are incurred after the interest exchange becomes |
17 | effective. |
18 | (d) When an interest exchange becomes effective, the interest holder liability of a person |
19 | that ceases to hold an interest in a domestic acquired limited liability company with respect to |
20 | which the person had interest holder liability is subject to the following rules: |
21 | (1) The interest exchange does not discharge any interest holder liability under this chapter |
22 | to the extent the interest holder liability was incurred before the interest exchange became effective. |
23 | (2) The person does not have interest holder liability under this chapter for any debt, |
24 | obligation, or other liability that is incurred after the interest exchange becomes effective. |
25 | (3) This chapter continues to apply to the release, collection, or discharge of any interest |
26 | holder liability preserved under subsection (d)(1) of this section as if the interest exchange had not |
27 | occurred. |
28 | (4) The person has whatever rights of contribution from any other person as are provided |
29 | by this chapter, law other than this chapter, or the operating agreement of the acquired company |
30 | with respect to any interest holder liability preserved under subsection (d)(1) of this section as if |
31 | the interest exchange had not occurred. |
32 | PART 4 |
33 | CONVERSION |
34 | 7-16.1-1041. Conversion authorized. |
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1 | (a) By complying with this chapter, a domestic limited liability company may become: |
2 | (1) A domestic entity that is a different type of entity; or |
3 | (2) A foreign entity that is a different type of entity, if the conversion is authorized by the |
4 | law of the foreign entity's jurisdiction of formation. |
5 | (b) By complying with the provisions of this chapter applicable to foreign entities, a foreign |
6 | entity that is not a foreign limited liability company may become a domestic limited liability |
7 | company if the conversion is authorized by the law of the foreign entity's jurisdiction of formation. |
8 | (c) If a protected agreement contains a provision that applies to a merger of a domestic |
9 | limited liability company but does not refer to a conversion, the provision applies to a conversion |
10 | of the company as if the conversion were a merger until the provision is amended after the effective |
11 | date of this chapter. |
12 | 7-16.1-1042. Plan of conversion. |
13 | (a) A domestic limited liability company may convert to a different type of entity under |
14 | this chapter by approving a plan of conversion. The plan shall be in a record and contain: |
15 | (1) The name of the converting limited liability company; |
16 | (2) The name, jurisdiction of formation, and type of entity of the converted entity; |
17 | (3) The manner of converting the interests in the converting limited liability company into |
18 | interests, securities, obligations, money, other property, rights to acquire interests or securities, or |
19 | any combination of the foregoing; |
20 | (4) The proposed public organic record of the converted entity if it will be a filing entity; |
21 | (5) The full text of the private organic rules of the converted entity which are proposed to |
22 | be in a record; |
23 | (6) The other terms and conditions of the conversion; and |
24 | (7) Any other provision required by the law of this state or the operating agreement of the |
25 | converting limited liability company. |
26 | (b) In addition to the requirements of subsection (a) of this section, a plan of conversion |
27 | may contain any other provision not prohibited by law. |
28 | 7-16.1-1043. Approval of conversion. |
29 | (a) A plan of conversion is not effective unless it has been approved: |
30 | (1) By a domestic converting limited liability company, by all the members of the limited |
31 | liability company entitled to vote on or consent to any matter; and |
32 | (2) In a record, by each member of a domestic converting limited liability company which |
33 | will have interest holder liability for debts, obligations, and other liabilities that are incurred after |
34 | the conversion becomes effective, unless: |
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1 | (i) The operating agreement of the company provides in a record for the approval of a |
2 | conversion or a merger in which some or all of its members become subject to interest holder |
3 | liability by the affirmative vote or consent of fewer than all the members; and |
4 | (ii) The member voted for or consented in a record to that provision of the operating |
5 | agreement or became a member after the adoption of that provision. |
6 | (b) A conversion involving a domestic converting entity that is not a limited liability |
7 | company is not effective unless it is approved by the domestic converting entity in accordance with |
8 | its organic law. |
9 | (c) A conversion of a foreign converting entity is not effective unless it is approved by the |
10 | foreign entity in accordance with the law of the foreign entity's jurisdiction of formation. |
11 | 7-16.1-1044. Amendment or abandonment of plan of conversion. |
12 | (a) A plan of conversion of a domestic converting limited liability company may be |
13 | amended: |
14 | (1) In the same manner as the plan was approved, if the plan does not provide for the |
15 | manner in which it may be amended; or |
16 | (2) By its managers or members in the manner provided in the plan; provided, however, |
17 | that a member that was entitled to vote on or consent to approval of the conversion is entitled to |
18 | vote on or consent to any amendment of the plan that will change: |
19 | (i) The amount or kind of interests, securities, obligations, money, other property, rights to |
20 | acquire interests or securities, or any combination of the foregoing, to be received by any of the |
21 | members of the converting company under the plan; |
22 | (ii) The public organic record, if any, or private organic rules of the converted entity which |
23 | will be in effect immediately after the conversion becomes effective, except for changes that do not |
24 | require approval of the interest holders of the converted entity under its organic law or organic |
25 | rules; or |