09 HB 308/AP
House
Bill 308 (AS PASSED HOUSE AND SENATE)
By:
Representatives Ralston of the
7th,
Willard of the
49th,
Oliver of the
83rd,
and Dobbs of the
53rd
A
BILL TO BE ENTITLED
AN ACT
AN ACT
To
amend Chapter 11 of Title 14 of the Official Code of Georgia Annotated, relating
to limited liability companies, so as to amend the "Georgia Limited Liability
Company Act"; to provide certain technical corrections to previously enacted
legislation; to clarify certain provisions in the existing statute; to make
certain provisions consistent with parallel provisions in the Georgia Business
Corporations Code; to clarify the provisions governing the operating agreement
of a limited liability company and its binding effect; to provide for automatic
resignation of a registered agent following the dissolution of a limited
liability company; to provide that statutory liability for wrongful
distributions is based solely on violations of the statutory limitations on
distributions; to reduce the risk of an unintended dissolution of the limited
liability company; to limit the rights of judgment creditors of a member to
interfere with management or force the dissolution of a limited liability
company; to provide for related matters; to repeal conflicting laws; and for
other purposes.
BE
IT ENACTED BY THE GENERAL ASSEMBLY OF GEORGIA:
SECTION
1.
Chapter
11 of Title 14 of the Official Code of Georgia Annotated, relating to limited
liability companies, is amended in Code Section 14-11-101, relating to
definitions relative to limited liability companies, by revising paragraphs (12)
and (18) as follows:
"(12)
'Limited liability company' means a limited liability company formed under this
chapter by
one or more members."
"(18)
'Operating agreement' means any agreement, written or oral,
of the member
or members as to the conduct of the
business and affairs of a limited liability company
that is
binding upon all of the members. A written operating agreement may provide that
a person shall be admitted as a member of a limited liability company, or shall
become an assignee of a limited liability company interest or other rights or
powers of a member to the extent assigned, and shall become bound by the
operating agreement and the provisions of the articles of organization (A) if
such person (or a representative authorized by such person orally, in writing,
or by other action such as payment for a limited liability company interest)
executes the operating agreement or any other writing evidencing the intent of
such person to become a member or assignee, or (B) without such execution, if
such person (or a representative authorized by such person orally, in writing,
or by other action such as payment for a limited liability company interest)
complies with the conditions for becoming a member or assignee as set forth in
the written operating agreement or any other writing and such person or
representative requests in writing that the records of the limited liability
company reflect such admission or
assignment. In the case of a limited
liability company with only one member, a writing signed by that member stating
that it is intended to be a written operating agreement shall constitute a
written operating agreement
and shall not
be unenforceable by reason of there being only one person who is a party to the
operating agreement. A limited liability company is not required to execute its
operating agreement and, except as otherwise provided in the operating
agreement, is bound by its operating agreement whether or not the limited
liability company executes the operating agreement. An operating agreement may
provide enforceable rights to any person, including a person who is not a party
to the operating agreement, to the extent set forth
therein."
SECTION
2.
Said
chapter is further amended in Code Section 14-11-203, relating to formation of
limited liability companies, by adding a new subsection to read as
follows:
"(e)
During any period when a limited liability company has any members it may have
one or more members."
SECTION
3.
Said
chapter is further amended in Code Section 14-11-212, relating to conversion to
a limited liability company, by revising subsection (a), paragraph (6) of
subsection (b), and paragraph (2) of subsection (c), as follows:
"(a)
A corporation, foreign corporation, foreign limited liability company, limited
partnership, foreign limited partnership, general partnership, or foreign
general partnership may elect to become a limited liability company. Such
election shall require (1) compliance with Code Section 14-2-1109.1 in the case
of a Georgia corporation, or (2) the approval of all of its partners, members or
shareholders (or such other approval or compliance as may be sufficient under
applicable law or the governing documents of the electing entity to authorize
such election) in the case of a foreign corporation, foreign limited liability
company, limited partnership, foreign limited partnership,
general
partnership, or foreign general
partnership."
"(6)
A statement setting forth either (A) the manner and basis for converting the
ownership interests in the entity making the election into interests as members
of the limited liability company formed pursuant to such election
or canceling
them, or (B)(i) that a written operating
agreement has been entered into among the persons who will be the members of the
limited liability company formed pursuant to such election, (ii) that such
operating agreement will be effective immediately upon the effectiveness of such
election, and (iii) that such operating agreement provides for the manner and
basis of such conversion
or
cancellation."
"(2)
The ownership interests in the entity making the election shall be converted
or
canceled on the basis stated or referred
to in the certificate of conversion in accordance with paragraph (6) of
subsection (b) of this Code section;"
SECTION
4.
Said
chapter is further amended in Code Section 14-11-303, relating to liability to
third parties, by revising subsection (a) as follows:
"(a)
A person who is a member, manager, agent, or employee of a limited liability
company is not liable, solely by reason of being a member, manager, agent, or
employee of the limited liability company, under a judgment, decree, or order of
a court, or in any other manner, for a debt, obligation, or liability of the
limited liability company,
including
liabilities and obligations of the limited liability company to any member or
assignee, whether arising in contract,
tort, or otherwise, or for the acts or omissions of any other member, manager,
agent, or employee of the limited liability company, whether arising in
contract, tort, or otherwise. Notwithstanding the provisions of this subsection,
a member, manager, or employee may be personally liable for tax liabilities
arising from the operation of the limited liability company as provided in Code
Section 48-2-52."
SECTION
5.
Said
chapter is further amended in Code Section 14-11-311, relating to notice, by
revising paragraph (2) as follows:
"(2)
Notice may be communicated in person; by telephone,
telegraph,
teletype,
electronic
transmission, or other form of wire or
wireless communication; or by mail or private carrier. If these forms of
personal notice are impracticable, notice may be communicated by a newspaper of
general circulation in the area where published or by radio, television, or
other form of public broadcast communication;"
SECTION
6.
Said
chapter is further amended in Code Section 14-11-408, relating to liability upon
wrongful distribution, by revising subsection (a) and paragraph (2) of
subsection (b) as follows:
"(a)
A member or manager who votes for or expressly consents to a distribution that
is made in violation of
the
articles of organization, a written operating agreement,
or Code Section 14-11-407 is personally
liable to the limited liability company for the amount of the distribution that
exceeds what could have been distributed without violating
the
articles of organization, written operating agreement,
or Code Section 14-11-407, if it is
established that such member or manager did not act in compliance with Code
Section 14-11-407 and violated a duty owed under Code Section 14-11-305 (without
regard to any limitation on such duty permitted by paragraph (4) of Code Section
14-11-305)."
"(2)
From each member for the amount the member received knowing that the
distribution was made in violation of
the
articles of organization, written operating agreement,
or Code Section
14-11-407."
SECTION
7.
Said
chapter is further amended in Code Section 14-11-504, relating to rights of a
judgment creditor, by revising subsection (b) as follows:
"(b)
The remedy conferred by this Code section shall not be deemed exclusive of
others which may exist, including, without limitation, the right of a judgment
creditor to reach the limited liability company interest of the member by
process of garnishment served on the limited liability
company,
provided that, except as otherwise provided in the articles of organization or a
written operating agreement, a judgment creditor shall have no right under this
chapter or any other state law to interfere with the management or force
dissolution of a limited liability company or to seek an order of the court
requiring a foreclosure sale of the limited liability company
interest."
SECTION
8.
Said
chapter is further amended in Code Section 14-11-505, relating to admission of
members, by revising said Code section as follows:
"14-11-505.
(a)
In connection with the formation of a limited liability company, a person
acquiring a
limited liability company interest is
admitted as a member of the limited liability company upon the later to occur
of:
(1)
The formation of the limited liability company; or
(2)
The time provided in and upon compliance with the articles of organization or a
written operating agreement or, if the articles of organization and any written
operating agreement do not so provide, when the person's admission is reflected
in the records of the limited liability company.
(b)
After the formation of a limited liability company, a person
acquiring a
limited liability company interest directly from the limited liability
company is admitted as a member of the
limited liability company at the time provided in and upon compliance with the
articles of organization and any written operating agreement or, if the articles
of organization or a written operating agreement does not so provide, upon the
consent of all members and when the person's admission is reflected in the
records of the limited liability company.
(c)
An assignee
of a
limited liability company interest is
admitted as a member of the limited liability company upon compliance with
paragraph (1) of Code Section 14-11-503 and at the time provided in and upon
compliance with the articles of organization and any written operating agreement
or, if the articles of organization or a written operating agreement does not so
provide, when any such person's permitted admission is reflected in the records
of the limited liability company; provided, however, that an assignee shall not
be admitted as a member of the limited liability company until such assignee has
consented to such admission.
(d)
A written operating agreement may provide that a person shall be admitted as a
member of a limited liability company, or shall become an assignee of a limited
liability company interest or other rights or powers of a member to the extent
assigned, and shall become bound by the operating agreement and the provisions
of the articles of organization (A) if such person (or a representative
authorized by such person) executes the operating agreement or any other writing
evidencing the intent of such person to become a member or assignee, or (B)
without such execution, if such person (or a representative authorized by such
person) complies with the conditions for becoming a member or assignee as set
forth in the written operating agreement or any other writing and such person or
representative requests in writing that the records of the limited liability
company reflect such admission or assignment.
(e)
A person may be admitted to a limited liability company as a member of the
limited liability company and may receive a limited liability company interest
in the limited liability company without making a contribution or being
obligated to make a contribution to the limited liability company. Unless
otherwise provided in a written operating agreement, a person may be admitted to
a limited liability company as a member of the limited liability company without
acquiring a limited liability company interest in the limited liability company.
Unless otherwise provided in a written operating agreement, a person may be
admitted as the sole member of a limited liability company without making a
contribution or being obligated to make a contribution to the limited liability
company or without acquiring a limited liability company interest in the limited
liability company.
(f)
In the case of a person being admitted as a member of a surviving limited
liability company pursuant to a merger in accordance with Article 9 of this
chapter, a person is admitted as a member of the limited liability company as
provided in the operating agreement of the surviving limited liability company
or in the agreement of merger, and in the event of any inconsistency, the terms
of the agreement of merger shall control. In connection with the conversion into
a limited liability company in accordance with Code Section 14-11-212, a person
is admitted as a member of the limited liability company as provided in the
limited liability company
agreement."
SECTION
9.
Said
chapter is further amended in Code Section 14-11-506, relating to powers of the
estate of a deceased or incompetent member, by revising said Code section as
follows:
"14-11-506.
Except
as otherwise provided in the articles of organization or a written operating
agreement, if a member who is an individual dies or a court of competent
jurisdiction adjudges him or her to be incompetent to manage his or her person
or his or her property, the member's executor, administrator, guardian,
conservator, or other legal representative has all of the rights of an assignee
of all of the member's limited liability company interest.
Except as
otherwise provided in the articles of organization or a written operating
agreement, if the last member of a limited liability company dies or a court of
competent jurisdiction adjudges him or her to be incompetent to manage his or
her person or his or her property, the member's executor, administrator,
guardian, conservator, or other legal representative shall become a member of
the limited liability company, unless such executor, administrator, guardian,
conservator, or other legal representative elects not to become a member by
written notice given to the limited liability company within 90 days of such
death or adjudication (or within such other period as is provided for in a
written operating
agreement)."
SECTION
10.
Said
chapter is further amended in Code Section 14-11-602, relating to dissolution,
by revising said Code section as follows:
"14-11-602.
(a)
Effective for limited liability companies formed prior to July 1, 1999, a
limited liability company is dissolved and its affairs shall be wound up upon
the first to occur of the following:
(1)
At the time specified in the articles of organization or a written operating
agreement;
(2)
Upon the happening of events specified in the articles of organization or a
written operating agreement;
(3)
Subject to
contrary provision in the articles of organization or a written operating
agreement, at
At
a time approved by all the members;
(4)
Subject to contrary provision in the articles of organization or a written
operating agreement, 90 days after any event of dissociation with respect to any
member (other than an event specified in paragraph (1) of subsection (b) of Code
Section 14-11-601), unless within such 90 day period the limited liability
company is continued by the written consent of all other members or as otherwise
provided in the articles of organization or a written operating agreement;
or
(5)
Entry of a decree of judicial dissolution under subsection (a) of Code Section
14-11-603.
(b)
Effective for limited liability companies formed on or after July 1, 1999, a
limited liability company is dissolved and its affairs shall be wound up upon
the first to occur of the following:
(1)
At the time specified in the articles of organization or a written operating
agreement;
(2)
Upon the happening of events specified in the articles of organization or a
written operating agreement;
(3)
Subject to
contrary provision in the articles of organization or a written operating
agreement, at
At
a time approved by all the members;
(4)
Subject to contrary provision in the articles of organization or a written
operating agreement, 90 days after an event of dissociation with respect to the
last remaining member, unless otherwise provided in the articles of organization
or a written operating agreement; or
(5)
Entry of a decree of judicial dissolution under subsection (a) of Code Section
14-11-603.
(c)
Notwithstanding paragraphs (1), (2), (3), and (4) of subsections (a) and (b) of
this Code section, the limited liability company shall not be dissolved and its
affairs shall not be wound up if, prior to the filing of a certificate of
termination in the office of the Secretary of State, either:
(1)
The limited liability company's articles of organization or operating agreement,
or both, are amended such that, after giving effect to such amendment, such
event does not result in dissolution of the limited liability company pursuant
to subsection (a) or (b) of this Code section; or
(2)
If the limited liability company then has at least one member, a decision to
continue the limited liability is taken by all of the members of the limited
liability company (and all other persons, if any, with power to require
dissolution of the limited liability company under its articles of organization
or written operating agreement).
Any
amendment or other action contemplated by paragraph (1) or (2) of this
subsection shall, to the extent necessary to achieve the purposes of this
subsection, be effective as of and from and after the applicable event described
in subsection (a) or (b) of this Code
section."
SECTION
11.
Said
chapter is further amended in Code Section 14-11-610, relating to certificate of
termination, by revising said Code section as follows:
"14-11-610.
A
dissolved limited liability company
shall
may
deliver to the Secretary of State for filing a certificate of termination when
the statements required to be included therein can be truthfully made. Such a
certificate of termination shall set forth:
(1)
The name of the limited liability company;
(2)
That all known debts, liabilities, and obligations of the limited liability
company have been paid, discharged, or barred or that adequate provision has
been made therefor; and
(3)
That there are no actions pending against the limited liability company in any
court, or that adequate provision has been made for the satisfaction of any
judgment, order, or decree that may be entered against it in any pending
action."
SECTION
12.
Said
chapter is further amended in Code Section 14-11-901, relating to mergers, by
revising subsection (a) as follows:
"(a)
Pursuant to a written
agreement,
which, unless otherwise provided therein, will constitute the plan of merger
required by Code Section 14-11-902 if it contains the provisions required by
that Code section, a limited liability
company may merge with or into one or more business entities with such limited
liability company or other business entity as the agreement shall provide being
the surviving limited liability company or other business
entity."
SECTION
13.
Said
chapter is further amended in Code Section 14-11-905, relating to effects of
merger, by revising paragraphs (7) and (8) of subsection (a) as
follows:
"(7)
The articles of organization of the surviving limited liability company shall be
amended to the extent provided in the
plan
articles
of merger; and
(8)
The interests or shares in each merging constituent business entity that are to
be converted into interests of the surviving limited liability company, or into
cash or other property under the terms of the plan of merger,
or
cancelled, are so converted
or
cancelled, and the former holders thereof
are entitled only to the rights provided in the plan of merger or their rights
otherwise provided by law."
SECTION
14.
All
laws and parts of laws in conflict with this Act are repealed.