2nd Engrossment - 79th Legislature (1995 - 1996) Posted on 12/15/2009 12:00am
1.1 A bill for an act 1.2 relating to commerce; making various technical and 1.3 conforming changes related to limited liability 1.4 companies; regulating investment securities; amending 1.5 Minnesota Statutes 1994, sections 322B.105; 322B.115, 1.6 subdivisions 2, 3, and 4; 322B.125, subdivision 1; 1.7 322B.135, subdivision 3; 322B.145; 322B.15, 1.8 subdivisions 1, 3, and 4; 322B.155; 322B.175; 322B.20, 1.9 subdivision 2; 322B.30, subdivision 3; 322B.313, 1.10 subdivision 2; 322B.33, subdivisions 4 and 9; 322B.34, 1.11 subdivisions 1 and 3; 322B.346, subdivision 2; 1.12 322B.36, subdivisions 2 and 3; 322B.363, subdivision 1.13 1; 322B.373, subdivision 2; 322B.376; 322B.383, 1.14 subdivision 1; 322B.386, subdivisions 4 and 7; 1.15 322B.40, subdivision 6; 322B.42, subdivisions 2 and 4; 1.16 322B.54, subdivision 1; 322B.56, subdivision 1; 1.17 322B.60, subdivision 2; 322B.643, subdivision 3; 1.18 322B.646; 322B.653; 322B.666, subdivision 2; 322B.693, 1.19 subdivision 1; 322B.699, subdivision 6; 322B.72, 1.20 subdivisions 2 and 3; 322B.75, subdivision 1; 322B.77, 1.21 subdivision 1; 322B.803, subdivisions 1 and 2; 1.22 322B.813, subdivision 5; 322B.833, subdivisions 1, 2, 1.23 and 4; 323.14, subdivision 4; Minnesota Statutes 1995 1.24 Supplement, sections 322B.12, subdivision 1; 1.25 336.8-103; and 336.8-603. 1.26 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 1.27 Section 1. Minnesota Statutes 1994, section 322B.105, is 1.28 amended to read: 1.29 322B.105 [ORGANIZERS.] 1.30 One or more natural persons of
fullat least 18 years of 1.31 age may act as organizers of a limited liability company by 1.32 filing with the secretary of state articles of organization for 1.33 the limited liability company. 1.34 Sec. 2. Minnesota Statutes 1994, section 322B.115, 1.35 subdivision 2, is amended to read: 2.1 Subd. 2. [STATUTORY PROVISIONS THAT MAY BE MODIFIED ONLY 2.2 IN ARTICLES OF ORGANIZATION.] The following provisions govern a 2.3 limited liability company unless modified in the articles of 2.4 organization or a member control agreement under section 322B.37: 2.5 (1) a limited liability company has general business 2.6 purposes (section 322B.10); 2.7 (2) a limited liability company has certain powers (section 2.8 322B.20); 2.9 (3) the power to adopt, amend, or repeal the operating 2.10 agreement is vested in the board of governors (section 2.11 322B.603); 2.12 (4) a limited liability company must allow cumulative 2.13 voting for governors (section 322B.63); 2.14 (5) the affirmative vote of a majority of governors present 2.15 is required for an action of the board of governors (section 2.16 322B.653); 2.17 (6) a written action by the board of governors taken 2.18 without a meeting must be signed by all governors (section 2.19 322B.656); 2.20 (7) the board may accept contributions, make contribution 2.21 agreements, and make contribution allowance agreements (sections 2.22 322B.40, subdivision 1; 322B.42; and 322B.43); 2.23 (8) all membership interests are ordinary membership 2.24 interests entitled to vote and are of one class with no series 2.25 (section 322B.40, subdivision 5, clauses (1) and (2)); 2.26 (9) all membership interests have equal rights and 2.27 preferences in all matters not otherwise provided for by the 2.28 board of governors (section 322B.40, subdivision 5, clause (2)); 2.29 (10) the restatement of value of previous contributions is 2.30 to be determined according to a specified process (section 2.31 322B.41, subdivisions 3 and 4); 2.32 (11) a member has certain preemptive rights, unless 2.33 otherwise provided by the board of governors (section 322B.33); 2.34 (12) the affirmative vote of the owners of a majority of 2.35 the voting power of the membership interests present and 2.36 entitled to vote at a duly held meeting is required for an 3.1 action of the members, except where this chapter requires the 3.2 affirmative vote of a majority of the voting power of all 3.3 membership interests entitled to vote (section 322B.35, 3.4 subdivision 1); 3.5 (13) the voting power of each membership interest is in 3.6 proportion to the value reflected in the required records of the 3.7 contributions of the members (section 322B.356); 3.8 (14) members share in distributions in proportion to the 3.9 value reflected in the required records of the contributions of 3.10 members (section 322B.50); 3.11 (15) members share profits and losses in proportion to the 3.12 value reflected in the required records of the contributions of 3.13 members (section 322B.326); 3.14 (16) a written action by the members taken without a 3.15 meeting must be signed by all members (section 322B.35); 3.16 (17) members have no right to receive distributions in kind 3.17 and the limited liability company has only limited rights to 3.18 make distributions in kind (section 322B.52); 3.19 (18) a member is not subject to expulsion (section 3.20 322B.306, subdivision 2); 3.21 (19) unanimous consent is required for the transfer of 3.22 governance rights to a person not already a member (section 3.23 322B.313, subdivision 2); and 3.24 (20) unanimous consent is required to avoid dissolution 3.25 (section 322B.80, subdivision 1, clause (5)(B)). 3.26 Sec. 3. Minnesota Statutes 1994, section 322B.115, 3.27 subdivision 3, is amended to read: 3.28 Subd. 3. [STATUTORY PROVISIONS THAT MAY BE MODIFIED EITHER 3.29 IN ARTICLES OF ORGANIZATION OR IN THE OPERATING AGREEMENT.] The 3.30 following provisions govern a limited liability company unless 3.31 modified eitherin the articles of organization, a member 3.32 control agreement under section 322B.37 or in the operating 3.33 agreement: 3.34 (1) governors serve for an indefinite term that expires at 3.35 the next regular meeting of members (section 322B.616); 3.36 (2) the compensation of governors is fixed by the board of 4.1 governors (section 322B.623); 4.2 (3) a certain method must be used for removal of governors 4.3 (section 322B.636); 4.4 (4) a certain method must be used for filling board of 4.5 governor vacancies (section 322B.64); 4.6 (5) if the board of governors fails to select a place for a 4.7 board meeting, it must be held at the principal executive office 4.8 (section 322B.643, subdivision 1); 4.9 (6) a governor may call a board of governors meeting, and4.10 the notice of thea board of governors meeting need not state 4.11 the purpose of the meeting (section 322B.643, subdivision 3); 4.12 (7) a majority of the board of governors is a quorum for a 4.13 board meeting (section 322B.65); 4.14 (8) a committee consists of one or more persons, who need 4.15 not be governors, appointed by affirmative vote of a majority of 4.16 the governors present (section 322B.66, subdivision 2); 4.17 (9) the board may establish a special litigation committee 4.18 (section 322B.66); 4.19 (10) the chief manager and treasurer have specified duties, 4.20 until the board of governors determines otherwise (section 4.21 322B.673); 4.22 (11) managers may delegate some or all of their duties and 4.23 powers, if not prohibited by the board of governors from doing 4.24 so (section 322B.689); 4.25 (12) regular meetings of members need not be held, unless 4.26 demanded by a member under certain conditions (section 4.27 322B.333); 4.28 (13) in all instances where a specific minimum notice 4.29 period has not otherwise been fixed by law, not less than ten 4.30 days' notice is required for a meeting of members (section 4.31 322B.34, subdivision 2); 4.32 (14) for a quorum at a members' meeting there is required a 4.33 majority of the voting power of the membership interests 4.34 entitled to vote at the meeting (section 322B.353); 4.35 (15) the board of governors may fix a date up to 60 days 4.36 before the date of a members' meeting as the date for the 5.1 determination of the members entitled to notice of and entitled 5.2 to vote at the meeting (section 322B.356, subdivision 1); 5.3 (16) indemnification of certain persons is required 5.4 (section 322B.699); 5.5 (17) the board of governors may authorize, and the limited 5.6 liability company may make, distributions not prohibited, 5.7 limited, or restricted by an agreement (section 322B.54, 5.8 subdivision 1); and 5.9 (18) members have no right to interim distributions except 5.10 as provided through the operating agreement or an act of the 5.11 board of governors (section 322B.51). 5.12 Sec. 4. Minnesota Statutes 1994, section 322B.115, 5.13 subdivision 4, is amended to read: 5.14 Subd. 4. [OPTIONAL PROVISIONS AND SPECIFIC SUBJECTS.] The 5.15 following provisions relating to the management of the business 5.16 or the regulation of the affairs of a limited liability company 5.17 may be included eitherin the articles of organization, a member 5.18 control agreement under section 322B.37 or, except for naming 5.19 persons to serve as the first board of governors, fixing a 5.20 greater than majority governor or member vote, establishing the 5.21 rights and priorities for distributions and the rights to share 5.22 in profits and losses, or giving or prescribing the manner of 5.23 giving voting rights to persons other than members otherwise 5.24 than pursuant to the articles of organization, or eliminating or 5.25 limiting a governor's personal liability, in the operating 5.26 agreement: 5.27 (1) the persons to serve as the first board of governors 5.28 may be named in the articles of organization (section 322B.606, 5.29 subdivision 1); 5.30 (2) a manner for increasing or decreasing the number of 5.31 governors may be provided (section 322B.61); 5.32 (3) additional qualifications for governors may be imposed 5.33 (section 322B.613); 5.34 (4) governors may be classified (section 322B.626); 5.35 (5) the day or date, time, and place of board of governors 5.36 meetings may be fixed (section 322B.643, subdivision 1); 6.1 (6) absent governors may be permitted to give written 6.2 consent or opposition to a proposal (section 322B.646); 6.3 (7) a larger than majority vote may be required for board 6.4 of governor action (section 322B.653); 6.5 (8) authority to sign and deliver certain documents may be 6.6 delegated to a manager or agent of the limited liability company 6.7 other than the chief manager (section 322B.673, subdivision 2); 6.8 (9) additional managers may be designated (section 6.9 322B.676); 6.10 (10) additional powers, rights, duties, and 6.11 responsibilities may be given to managers (section 322B.6796.12 322B.676); 6.13 (11) a method for filling vacant offices may be specified 6.14 (section 322B.686, subdivision 3); 6.15 (12) the day or date, time, and place of regular member 6.16 meetings may be fixed (section 322B.333, subdivision 3); 6.17 (13) certain persons may be authorized to call special 6.18 meetings of members (section 322B.336, subdivision 1); 6.19 (14) notices of member meetings may be required to contain 6.20 certain information (section 322B.34, subdivision 3); 6.21 (15) a larger than majority vote may be required for member 6.22 action (section 322B.346); 6.23 (16) voting rights may be granted in or pursuant to the 6.24 articles of organization to persons who are not members (section 6.25 322B.356, subdivision 3); 6.26 (17) limited liability company actions giving rise to 6.27 dissenter rights may be designated (section 322B.386, 6.28 subdivision 1, paragraph (e)); and 6.29 (18) a governor's personal liability to the limited 6.30 liability company or its members for monetary damages for breach 6.31 of fiduciary duty as a governor may be eliminated or limited in 6.32 the articles (section 322B.663, subdivision 4). 6.33 Sec. 5. Minnesota Statutes 1995 Supplement, section 6.34 322B.12, subdivision 1, is amended to read: 6.35 Subdivision 1. [REQUIREMENTS AND PROHIBITIONS.] The 6.36 limited liability company name must: 7.1 (1) be in the English language or in any other language 7.2 expressed in English letters or characters; 7.3 (2) contain the words "limited liability company," or must 7.4 contain the abbreviation "LLC" or, in the case of an 7.5 organization formed pursuant to section 319A.03, must meet the 7.6 requirements of section 319A.07 applicable to a limited 7.7 liability company; 7.8 (3) not contain the word corporation or incorporated and 7.9 must not contain the abbreviation of either or both of these 7.10 words; 7.11 (4) not contain a word or phrase that indicates or implies 7.12 that it is organized for a purpose other than a legal business 7.13 purpose; and 7.14 (5) be distinguishable upon the records in the office of 7.15 the secretary of state from the name of aeach domestic limited 7.16 liability company, limited liability partnership, corporation, 7.17 orand limited partnership, whether profit or nonprofit, or a7.18 and each foreign limited liability company, limited liability 7.19 partnership, corporation, orand limited partnership authorized 7.20 or registered to do business in this state, whether profit or 7.21 nonprofit, or aand each name the right to which is, at the time 7.22 of organization, reserved oras provided for in sections 7.23 302A.117, 317A.117, 322A.03, 322B.125, or 333.001 to 333.54, 7.24 unless there is filed with the articles of organization one of 7.25 the following: 7.26 (i) the written consent of the domestic limited liability 7.27 company, limited liability partnership, corporation, or limited 7.28 partnership or the foreign limited liability company, limited 7.29 liability partnership, corporation, or limited partnership 7.30 authorized or registered to do business in this state or the 7.31 holder of a reserved name or a name filed by or registered with 7.32 the secretary of state under sections 333.001 to 333.54 having a 7.33 name that is not distinguishable; 7.34 (ii) a certified copy of a final decree of a court in this 7.35 state establishing the prior right of the applicant to the use 7.36 of the name in this state; or 8.1 (iii) the applicant's affidavit that the limited liability 8.2 company, corporation, or limited partnership with the name that 8.3 is not distinguishable has been organized, incorporated, or on 8.4 file in this state for at least three years prior to the 8.5 affidavit, if it is a domestic limited liability company, 8.6 corporation, or limited partnership, or has been authorized or 8.7 registered to do business in this state for at least three years 8.8 prior to the affidavit, if it is a foreign limited liability 8.9 company, corporation, or limited partnership, or that the holder 8.10 of a name filed or registered with the secretary of state under 8.11 sections 333.001 to 333.54 filed or registered that name at 8.12 least three years prior to the affidavit, andthat the limited 8.13 liability company, corporation, or limited partnership or holder 8.14 has not during the three-year period filed any document with the 8.15 secretary of state; that the applicant has mailed written notice 8.16 to the limited liability company, corporation, or limited 8.17 partnership or the holder of a name filed or registered with the 8.18 secretary of state under sections 333.001 to 333.54 by certified 8.19 mail, return receipt requested, properly addressed to the 8.20 registered office of the limited liability company or 8.21 corporation or in care of the agent of the limited partnership, 8.22 or the address of the holder of a name filed or registered with 8.23 the secretary of state under sections 333.001 to 333.54, shown 8.24 in the records of the secretary of state, stating that the 8.25 applicant intends to use a name that is not distinguishable and 8.26 the notice has been returned to the applicant as undeliverable 8.27 to the addressee limited liability company, corporation, or 8.28 limited partnership or holder of a name filed or registered with 8.29 the secretary of state under sections 333.001 to 333.54; that 8.30 the applicant, after diligent inquiry, has been unable to find 8.31 any telephone listing for the limited liability company, 8.32 corporation, or limited partnership with the name that is not 8.33 distinguishable in the county in which is located the registered 8.34 office of the limited liability company or, corporation, or 8.35 limited partnership shown in the records of the secretary of 8.36 state or has been unable to find any telephone listing for the 9.1 holder of a name filed or registered with the secretary of state 9.2 under sections 333.001 to 333.54 in the county in which is 9.3 located the address of the holder shown in the records of the 9.4 secretary of state; and that the applicant has no knowledge that 9.5 the limited liability company, corporation, or limited 9.6 partnership or holder of a name filed or registered with the 9.7 secretary of state under sections 333.001 to 333.54 is currently 9.8 engaged in business in this state. 9.9 Sec. 6. Minnesota Statutes 1994, section 322B.125, 9.10 subdivision 1, is amended to read: 9.11 Subdivision 1. [WHO MAY RESERVE.] The exclusive right to 9.12 the use of a limited liability company name otherwise permitted 9.13 by section 322B.12 may be reserved by: 9.14 (1) a person doing business in this state under that name; 9.15 (2) a person intending to organize under this chapter; 9.16 (3) a domestic limited liability company intending to 9.17 change its name; 9.18 (4) a foreign limited liability company intending to make 9.19 application for a certificate of authority to transact business 9.20 in this state; 9.21 (5) a foreign limited liability company authorized to 9.22 transact business in this state and intending to change its 9.23 name; 9.24 (6) a person intending to organize a foreign limited 9.25 liability company and intending to have the foreign limited 9.26 liability company make application for a certificate of 9.27 authority to transact business in this state; or 9.28 (7) a foreign limited liability company doing business 9.29 under that name or a name deceptively similar tonot 9.30 distinguishable from that name in one or more states other than 9.31 this state and not described in clause (4), (5), or (6). 9.32 Sec. 7. Minnesota Statutes 1994, section 322B.135, 9.33 subdivision 3, is amended to read: 9.34 Subd. 3. [CHANGE OF BUSINESS ADDRESS OR NAME OF AGENT.] If 9.35 the business address or name of a registered agent changes, the 9.36 agent shall change the address of the registered office or the 10.1 name of the registered agent, as the case may be, of each 10.2 limited liability company represented by that agent by filing 10.3 with the secretary of state a statement as required in 10.4 subdivision 1, except that it need be signed only by the 10.5 registered agent, need not be responsive to clause (3) or(6), 10.6 and must state that a copy of the statement has been mailed to 10.7 each of those limited liability companies or to the legal 10.8 representative of each of those limited liability companies. 10.9 Sec. 8. Minnesota Statutes 1994, section 322B.145, is 10.10 amended to read: 10.11 322B.145 [PROCEDURE FOR AMENDMENT BEFORE CONTRIBUTION.] 10.12 Before any contribution is reflected in the required 10.13 records of a limited liability company, the articles of 10.14 organization may be amended pursuant to section 322B.60 by the 10.15 organizers or by the board of governors. The articles of 10.16 organization may also be amended by the board of governors to 10.17 change or cancel a statement pursuant to section 322B.40, 10.18 subdivision 6, establishing or fixing the rights and preferences 10.19 of a class or series of membership interests before any 10.20 contribution pertaining to that class or series is reflected in 10.21 the required records of the limited liability company by filing 10.22 articles of amendment or a statement of cancellation, as 10.23 appropriate, with the secretary of state. 10.24 Sec. 9. Minnesota Statutes 1994, section 322B.15, 10.25 subdivision 1, is amended to read: 10.26 Subdivision 1. [MANNER OF AMENDMENT.] Except as otherwise 10.27 set forth in section 322B.145, after any contribution has been 10.28 reflected in the required records of a limited liability 10.29 company, the articles of organization may be amended in the 10.30 manner set forth in this section. 10.31 Sec. 10. Minnesota Statutes 1994, section 322B.15, 10.32 subdivision 3, is amended to read: 10.33 Subd. 3. [NOTICE.] Written notice of the members' meeting 10.34 setting forth the substance of the proposed amendment must be 10.35 given to each member entitled to vote in the manner provided in 10.36 section 322B.34 for the giving of notice of meetings of members. 11.1 Sec. 11. Minnesota Statutes 1994, section 322B.15, 11.2 subdivision 4, is amended to read: 11.3 Subd. 4. [APPROVAL BY MEMBERS.] (a) The proposed amendment 11.4 is adopted when approved by the affirmative vote of the owners11.5 of a majority of the voting power of the members present and11.6 entitled to votemembers required by section 322B.346, except as 11.7 provided in paragraphs (b) and (c), and subdivision 5. 11.8 (b) For a closely held limited liability company, if the 11.9 articles of organization provide for a specified proportion 11.10 equal to or larger than the majority necessary to transact a 11.11 specified type of business at a meeting, or if it is proposed to 11.12 amend the articles to provide for a specified proportion equal 11.13 to or larger than the majority necessary to transact a specified 11.14 type of business at a meeting, the affirmative vote necessary to 11.15 add the provision to, or to amend an existing provision in, the 11.16 articles of organization is the larger of: 11.17 (1) the specified proportion or, in the absence of a 11.18 specific provision, the affirmative vote necessary to transact 11.19 the type of business described in the proposed amendment at a 11.20 meeting immediately before the effectiveness of the proposed 11.21 amendment; or 11.22 (2) the specified proportion that would, upon effectiveness 11.23 of the proposed amendment, be necessary to transact the 11.24 specified type of business at a meeting. 11.25 (c) For limited liability companies other than closely held 11.26 limited liability companies, if the articles provide for a 11.27 larger proportion to transact a specified type of business at a 11.28 meeting, the affirmative vote of that larger proportion is 11.29 necessary to amend the articles to decrease the proportion 11.30 necessary to transact the business. 11.31 Sec. 12. Minnesota Statutes 1994, section 322B.155, is 11.32 amended to read: 11.33 322B.155 [CLASS OR SERIES VOTING ON AMENDMENTS.] 11.34 The owners of the outstanding membership interests of a 11.35 class or series are entitled to vote as a class or series upon a 11.36 proposed amendment, whether or not entitled to vote on the 12.1 amendment by the provisions of the articles of organization, if 12.2 the amendment would: 12.3 (1) effect an exchange, reclassification, or cancellation 12.4 of all or part of the membership interests of the class or 12.5 series; 12.6 (2) effect an exchange, or create a right of exchange, of 12.7 all or any part of the membership interests of another class or 12.8 series for the membership interests of the class or series; 12.9 (3) change the rights or preferences of the membership 12.10 interests of the class or series; 12.11 (4) change the membership interests of the class or series 12.12 into the same or a different number of membership interests of 12.13 the same oranother class or series; 12.14 (5) create a new class or series of membership interests 12.15 having rights and preferences prior and superior to the 12.16 membership interests of that class or series, or increase the 12.17 rights and preferences or the number of membership interests, of 12.18 a class or series having rights and preferences prior or 12.19 superior to the membership interests of that class or series; 12.20 (6) divide the membership interests of the class into 12.21 series and determine the designation of each series and the 12.22 variations in the relative rights and preferences between the 12.23 membership interests of each series or authorize the board of 12.24 governors to do so; 12.25 (7) limit or deny any existing preemptive rights of the 12.26 membership interests of the class or series; or 12.27 (8) cancel or otherwise affect distributions on the 12.28 membership interests of the class or series. 12.29 Sec. 13. Minnesota Statutes 1994, section 322B.175, is 12.30 amended to read: 12.31 322B.175 [EFFECTIVE DATE OF ARTICLES OF ORGANIZATION.] 12.32 Articles of organization are effective and limited 12.33 liability company existence begins when the articles of 12.34 organization are filed with the secretary of state accompanied 12.35 by a payment of $135, which includes a $100 organization fee in 12.36 addition to the $35 filing fee required by section 322B.03, 13.1 subdivision 18. Articles of amendment and articles of merger13.2 are effective when filed with the secretary of state or at 13.3 another time within 30 days after filing if the articles of 13.4 amendment so provide. Articles of merger must be accompanied by 13.5 a fee of $60, which includes a $25 merger fee in addition to the 13.6 $35 filing fee required by section 322B.03, subdivision 18. 13.7 Sec. 14. Minnesota Statutes 1994, section 322B.20, 13.8 subdivision 2, is amended to read: 13.9 Subd. 2. [DURATION.] A limited liability company has a 13.10 limited duration of 30 years from the date the articles of 13.11 organization are filed with the secretary of state, unless the 13.12 articles of organization state a shorter or longer period of 13.13 duration. 13.14 Sec. 15. Minnesota Statutes 1994, section 322B.30, 13.15 subdivision 3, is amended to read: 13.16 Subd. 3. [GRANT OF A SECURITY INTEREST.] Notwithstanding13.17 any law to the contrary,For the purpose of any law relating to 13.18 security interests, a membership interest, governance rights, 13.19 and financial rights are each a general intangible, as defined13.20 in section 336.9-106, and not a certificated security as defined13.21 in section 336.8-102(1)(a) and not an uncertificated security as13.22 defined in section 336.8-102(1)(b) and not chattel paper as13.23 defined in section 336.9-105(1)(b) and not an instrument as13.24 defined in section 336.9-105(1)(i) and not an account as defined13.25 in section 336.9-106to be characterized as provided in section 13.26 336.8-103, paragraph (c). 13.27 Sec. 16. Minnesota Statutes 1994, section 322B.313, 13.28 subdivision 2, is amended to read: 13.29 Subd. 2. [WHEN UNANIMOUS CONSENT REQUIRED.] Subject to 13.30 subdivision 6, a member may, without the consent of any other 13.31 member, assign governance rights, in whole or in part, to 13.32 another person already a member at the time of the 13.33 assignment. Except as otherwise set forth in the articles of 13.34 organization, any other assignment of any governance rights is 13.35 effective only if all the members, other than the member seeking 13.36 to make the assignment, approve the assignment by unanimous 14.1 written consent , unless the articles of organization provide for14.2 written consent by fewer than all members. Subject to 14.3 subdivision 6, a member may grant a security interest in a 14.4 complete membership interest or governance rights without 14.5 obtaining the consent required by this subdivision. However, a 14.6 secured party may not take or assign ownership of governance 14.7 rights without first obtaining the consent required by this 14.8 subdivision. If a secured party has a security interest in both 14.9 a member's financial rights and governance rights, including a 14.10 security interest in a complete membership interest, this 14.11 subdivision's requirement that the secured party obtain consent 14.12 applies only to taking or assigning ownership of the governance 14.13 rights and does not apply to taking or assigning ownership of 14.14 the financial rights. 14.15 Sec. 17. Minnesota Statutes 1994, section 322B.33, 14.16 subdivision 4, is amended to read: 14.17 Subd. 4. [EXEMPTIONS.] Unless otherwise provided in the 14.18 articles of organization, no preemptive rights according to this 14.19 section arise as to contributions to be accepted from others or 14.20 as to contribution allowance agreements to be made with others 14.21 when the contribution is: 14.22 (1) to be made in a form other than money; 14.23 (2) to be made or reflected pursuant to a plan of merger or 14.24 exchange; 14.25 (3) to be made or reflected pursuant to an employee or 14.26 incentive benefit plan approved at a meeting by the affirmative 14.27 vote of the owners of a majority of the voting power of all 14.28 membership interests entitled to vote; 14.29 (4) to be made pursuant to a previously made contribution 14.30 allowance agreement; or 14.31 (5) to be made or reflected pursuant to a plan of 14.32 reorganization approved by a court of competent jurisdiction 14.33 pursuant to a statute of this state or of the United States. 14.34 Sec. 18. Minnesota Statutes 1994, section 322B.33, 14.35 subdivision 9, is amended to read: 14.36 Subd. 9. [MODIFICATION.] If the members of a limited 15.1 liability company are entitled to cumulative voting in the 15.2 election of governors, no amendment to the articles of 15.3 organization that has the effect of denying, limiting, or 15.4 modifying the preemptive rights provided in this section shall 15.5 be adopted if the votes of a proportion of the voting power 15.6 sufficient to elect a governor at an election of the entire 15.7 board of governors under cumulative voting are cast against the 15.8 amendment. 15.9 Sec. 19. Minnesota Statutes 1994, section 322B.34, 15.10 subdivision 1, is amended to read: 15.11 Subdivision 1. [TO WHOM GIVEN.] Except as otherwise 15.12 provided in this chapter, notice of all meetings of members must 15.13 be given to every owner of membership interests entitled to 15.14 vote, unless: 15.15 (1) the meeting is an adjourned meeting to be held not more 15.16 than 120 days after the date fixed for the original meeting and 15.17 the date, time, and place of the meeting were announced at the 15.18 time of the original meeting or any adjournment of the original 15.19 meeting; or 15.20 (2) the following have been mailed by first class mail to a 15.21 member at the address in the limited liability company records 15.22 and returned undeliverable: 15.23 (i) two consecutive annual meeting notices and notice of 15.24 any special meetings held during the period between the two 15.25 annual meetings; and 15.26 (ii) all payment of distributions sent during a 12-month 15.27 period, provided there are at least two sent during athe 15.28 12-month period. 15.29 If notice of an adjourned meeting is required under clause 15.30 (1), then the date for determination of members entitled to 15.31 notice of, and entitled to vote at, the adjourned meeting must 15.32 comply with section 322B.356, subdivision 1, except that if the 15.33 date of the meeting is set by court order, the court may provide 15.34 that the original date of determination will continue in effect 15.35 or may fix a new date. 15.36 An action or meeting that is taken or held without notice 16.1 under clause (2) has the same force and effect as if notice was 16.2 given. If the member delivers a written notice of the member's 16.3 current address to the limited liability company, the notice 16.4 requirement is reinstated. 16.5 Sec. 20. Minnesota Statutes 1994, section 322B.34, 16.6 subdivision 3, is amended to read: 16.7 Subd. 3. [CONTENTS.] The notice must contain the date, 16.8 time, and place of the meeting, the information with respect to 16.9 dissenters' rights required by section 322B.386, subdivision 2, 16.10 if applicable, and any other information required by this 16.11 chapter. In the case of a special meeting, the notice must 16.12 contain a statement of the purposes of the meeting. The notice 16.13 may also contain any other information required by the articles 16.14 of organization or operating agreement or considered necessary 16.15 or desirable by the board of governors or by any other person or 16.16 persons calling the meeting. 16.17 Sec. 21. Minnesota Statutes 1994, section 322B.346, 16.18 subdivision 2, is amended to read: 16.19 Subd. 2. [VOTING BY CLASS OR SERIES.] In any case where a 16.20 class or series of membership interests is entitled by this 16.21 chapter, the articles of organization, the operating agreement, 16.22 or the terms of the membership interests to vote as a class or 16.23 series, the matter being voted upon must also receive the 16.24 affirmative vote of the owners of the same proportion of the 16.25 membership interests present of that class or series, or of the 16.26 total outstanding membership interests of that class or series, 16.27 as the proportion required pursuant to subdivision 1, unless the 16.28 articles require a larger proportion. Unless otherwise stated 16.29 in the articles or operating agreement in the case of voting as 16.30 a class or series, the minimum percentage of the total voting 16.31 power of membership interests of the class or series that must 16.32 be present is equal to the minimum percentage of all membership 16.33 interests entitled to vote required to be present under section 16.34 322B.353. 16.35 Sec. 22. Minnesota Statutes 1994, section 322B.36, 16.36 subdivision 2, is amended to read: 17.1 Subd. 2. [MEMBERSHIP INTERESTS HELD BY SUBSIDIARY.] Except 17.2 as provided in subdivision 3, membership interests of a limited 17.3 liability company reflected in the required records as being 17.4 owned by a subsidiary are not entitled to votebe voted on any 17.5 matter. 17.6 Sec. 23. Minnesota Statutes 1994, section 322B.36, 17.7 subdivision 3, is amended to read: 17.8 Subd. 3. [MEMBERSHIP INTERESTS CONTROLLED IN A FIDUCIARY 17.9 CAPACITY.] Membership interests of a limited liability company 17.10 in the name of, or under the control of, the limited liability 17.11 company or a subsidiary in a fiduciary capacity are not entitled 17.12 to votebe voted on any matter, except to the extent that the 17.13 settlor or beneficiary possesses and exercises a right to vote 17.14 or gives the limited liability company or, with respect to 17.15 membership interests in the name of or under control of a 17.16 subsidiary, the subsidiary, binding instructions on how to vote 17.17 the membership interests. 17.18 Sec. 24. Minnesota Statutes 1994, section 322B.363, 17.19 subdivision 1, is amended to read: 17.20 Subdivision 1. [AUTHORIZATION.] A member may cast or 17.21 authorize the casting of a vote by filing a written appointment 17.22 of a proxy with a manager of the limited liability company at or 17.23 before the meeting at which the appointment is to be effective. 17.24 A written appointment of a proxy may be signed by the member or 17.25 authorized by the member by transmission of a telegram, 17.26 cablegram, or other means of electronic transmission . The17.27 telegram, cablegram, or other means of electronic transmission17.28 must set forth or be submitted with information from which it17.29 can be determined, provided that the limited liability company 17.30 has no reason to believe that the telegram, cablegram, or other 17.31 electronic transmission was not authorized by the member. Any 17.32 reproduction of the writing or transmission may be substituted 17.33 or used in lieu of the original writing or transmission for any 17.34 purpose for which the original transmission could be used, if 17.35 the copy, facsimile telecommunication, or other reproduction is 17.36 a complete and legible reproduction of the entire original 18.1 writing or transmission. An appointment of a proxy for 18.2 membership interests owned jointly by two or more members is 18.3 valid if signed or otherwise authorized by any one of them, 18.4 unless the limited liability company receives from any one of 18.5 those members written notice either denying the authority of 18.6 that person to appoint a proxy or appointing a different proxy. 18.7 Sec. 25. Minnesota Statutes 1994, section 322B.373, 18.8 subdivision 2, is amended to read: 18.9 Subd. 2. [RIGHT TO INSPECT.] (a) A member of a limited 18.10 liability company has an absolute right, upon written demand, to 18.11 examine and copy, in person or by a legal representative, at any 18.12 reasonable time, and the limited liability company shall make 18.13 available within ten days after receipt by a manager of the 18.14 limited liability company of the written demand, all documents 18.15 referred to in subdivision 1. 18.16 (b) A member of a limited liability company has a right, 18.17 upon written demand, to examine and copy, in person or by a 18.18 legal representative, other limited liability company records at 18.19 any reasonable time only if the member demonstrates a proper 18.20 purpose for the examination. 18.21 (c) For purposes of this section, a "proper purpose" is one 18.22 reasonably related to the person's interest as a member of the 18.23 limited liability company. 18.24 Sec. 26. Minnesota Statutes 1994, section 322B.376, is 18.25 amended to read: 18.26 322B.376 [FINANCIAL STATEMENTS.] 18.27 (a) A limited liability company shall , upon written request18.28 by a member, furnish annual financial statements,18.29 includingprepare annual financial statements within 180 days 18.30 after the close of the limited liability company's fiscal year. 18.31 The financial statements must include at least a balance sheet 18.32 as of the end of each fiscal year and a statement of income for 18.33 the fiscal year, prepared on the basis of accounting methods 18.34 reasonable in the circumstances. The financial statements may 18.35 be consolidated statements of the limited liability company and 18.36 one or more of its subsidiaries. In the case of statements 19.1 audited by a public accountant, each copy must be accompanied by 19.2 a report setting forth the opinion of the accountant on the 19.3 statements; in other cases, each copy must be accompanied by a 19.4 statement of the treasurer or other person in charge of the 19.5 limited liability company's financial records stating the 19.6 reasonable belief of the person that the financial statements 19.7 were prepared in accordance with accounting methods reasonable 19.8 in the circumstances, describing the basis of presentation, and 19.9 describing any respects in which the financial statements were 19.10 not prepared on a basis consistent with those prepared for the 19.11 previous year. 19.12 (b) Upon written request by a member, a limited liability 19.13 company shall furnish its most recent annual financial 19.14 statements as required under paragraph (a) no later than ten 19.15 business days after receipt of a member's written request. 19.16 "Furnish" for purposes of this paragraph means that the limited 19.17 liability company shall deliver or mail, postage prepaid, the 19.18 financial statements to the address specified by the requesting 19.19 member. 19.20 Sec. 27. Minnesota Statutes 1994, section 322B.383, 19.21 subdivision 1, is amended to read: 19.22 Subdivision 1. [ACTIONS CREATING DISSENTERS' RIGHTS.] 19.23 Subject to a member control agreement under section 322B.37, a 19.24 member of a limited liability company may dissent from, and 19.25 obtain payment for the fair value of the member's membership 19.26 interests in the event of, any of the following limited 19.27 liability company actions: 19.28 (1) an amendment of the articles of organization that 19.29 materially and adversely affects the rights or preferences of 19.30 the membership interests of the dissenting member in that it: 19.31 (i) alters or abolishes a preferential right of the 19.32 membership interests; 19.33 (ii) creates, alters, or abolishes a right in respect of 19.34 the redemption of the membership interests, including a 19.35 provision respecting a sinking fund for the redemption or 19.36 repurchase of the membership interests; 20.1 (iii) alters or abolishes a preemptive right of the owner 20.2 of the membership interests to make a contribution; 20.3 (iv) excludes or limits the right of a member to vote on a 20.4 matter, or to cumulate votes, except as the right may be 20.5 excluded or limited through the acceptance of contributions or 20.6 the making of contribution agreements pertaining to membership 20.7 interests with similar or different voting rights; 20.8 (v) changes a member's right to resign or retire; 20.9 (vi) establishes or changes the conditions for or 20.10 consequences of expulsion; 20.11 (vii) changes the statement required under section 20.12 322B.115, subdivision 1, clause (5); 20.13 (viii) changes the statement required under section 20.14 322B.115, subdivision 1, clause (6); or 20.15 (2) a sale, lease, transfer, or other disposition of all or 20.16 substantially all of the property and assets of the limited 20.17 liability company not made in the usual or regular course of its20.18 business, but not including a transaction permitted without 20.19 member approval in section 322B.77, subdivision 1, or a 20.20 disposition in dissolution described in section 322B.813, 20.21 subdivision 4, or a disposition pursuant to an order of a court, 20.22 or a disposition for cash on terms requiring that all or 20.23 substantially all of the net proceeds of disposition be 20.24 distributed to the members in accordance with their respective 20.25 membership interests within one year after the date of 20.26 disposition; 20.27 (3) a plan of merger to which the limited liability company 20.28 is a party, except as provided in section 322B.873, subdivision 20.29 2, clause (1)(i) and subject to section 322B.873, subdivision 3; 20.30 (4) a plan of exchange to which the limited liability 20.31 company is a party as the organization whose ownership interests 20.32 will be acquired by the acquiring organization, if the 20.33 membership interests being acquired are entitled to be voted on 20.34 the plan; 20.35 (5) any other limited liability company action taken 20.36 pursuant to a member vote with respect to which the articles of 21.1 organization, the operating agreement, or a resolution approved 21.2 by the board of governors directs that dissenting members may 21.3 obtain payment for their membership interests; or 21.4 (6) a resolution of the board of governors under section 21.5 322B.873, subdivision 2, to implement a business continuation 21.6 agreement. 21.7 Sec. 28. Minnesota Statutes 1994, section 322B.386, 21.8 subdivision 4, is amended to read: 21.9 Subd. 4. [NOTICE OF PROCEDURE.] (a) After the proposed 21.10 action has been approved by the board of governors and, if 21.11 necessary, the members, the limited liability company shall send 21.12 to all members who have complied with subdivision 3 and to all 21.13 members entitled to dissent if no member vote was required, a 21.14 notice that contains: 21.15 (1) the address to which a demand for payment must be sent 21.16 in order to obtain payment and the date by which the demand must 21.17 be received; 21.18 (2) a form to be used to certify the date on which the 21.19 member acquired the membership interests and to demand payment; 21.20 and 21.21 (3) a copy of section 322B.383, this section and, if 21.22 applicable, section 322B.873, subdivisions 2 and 3, and a brief 21.23 description of the procedures to be followed under these 21.24 sections. 21.25 (b) In order to receive the fair value of the membership 21.26 interests, a dissenting member must demand payment within 30 21.27 days after the notice required by paragraph (a) was given, but 21.28 the dissenter retains all other rights of a member until the 21.29 proposed action takes effect. 21.30 Sec. 29. Minnesota Statutes 1994, section 322B.386, 21.31 subdivision 7, is amended to read: 21.32 Subd. 7. [PETITION AND DETERMINATION.] If the limited 21.33 liability company receives a demand under subdivision 6, it 21.34 shall, within 60 days after receiving the demand, either pay to 21.35 the dissenter the amount demanded or agreed to by the dissenter 21.36 after discussion with the limited liability company or file in 22.1 court a petition requesting that the court determine the fair 22.2 value of the membership interests, plus interest. The petition 22.3 must be filed in the county in which the registered office of 22.4 the limited liability company is located, except that a 22.5 surviving foreign corporation that receives a demand relating to 22.6 the membership interests of a constituent limited liability 22.7 company shall file the petition in the county in this state in 22.8 which the last registered office of the constituent limited 22.9 liability company was located. The petition must name as 22.10 parties all dissenters who have demanded payment under 22.11 subdivision 6 and who have not reached agreement with the 22.12 limited liability company. The limited liability company shall, 22.13 after filing the petition, serve all parties with a summons and 22.14 copy of the petition under the rules of civil procedure. 22.15 Nonresidents of this state may be served by registered or 22.16 certified mail or by publication as provided by law. Except as 22.17 otherwise provided, the rules of civil procedure apply to this 22.18 proceeding. The jurisdiction of the court is plenary and 22.19 exclusive. The court may appoint appraisers, with powers and 22.20 authorities the court considers proper, to receive evidence on 22.21 and recommend the amount of the fair value of the membership 22.22 interests. The court shall determine whether the member or 22.23 members in question have fully complied with the requirements of 22.24 this section, and shall determine the fair value of the 22.25 membership interests, taking into account any and all factors 22.26 the court finds relevant, computed by any method or combination 22.27 of methods that the court, in its discretion, sees fit to use, 22.28 whether or not used by the limited liability company or by a 22.29 dissenter. The fair value of the membership interests as 22.30 determined by the court is binding on all members, wherever 22.31 located. A dissenter is entitled to judgment in cash for the 22.32 amount by which the fair value of the membership interests as 22.33 determined by the court, plus interest, exceeds the amount, if 22.34 any, remitted under subdivision 5, but is not liable to the 22.35 limited liability company for the amount, if any, by which the 22.36 amount, if any, remitted to the dissenter under subdivision 5 23.1 exceeds the fair value of the membership interests as determined 23.2 by the court, plus interest. 23.3 Sec. 30. Minnesota Statutes 1994, section 322B.40, 23.4 subdivision 6, is amended to read: 23.5 Subd. 6. [PROCEDURE FOR FIXING TERMS.] (a) Subject to any 23.6 restrictions in the articles of organization, the power granted 23.7 in subdivision 5 may be exercised by a resolution or resolutions 23.8 establishing a class or series, setting forth the designation of 23.9 the class or series, and fixing the relative rights and 23.10 preferences of the class or series. Any of the rights and 23.11 preferences of a class or series established in the articles of 23.12 organization or by resolution of the board of governors: 23.13 (1) may be made dependent upon facts ascertainable outside 23.14 the articles of organization, or outside the resolution or 23.15 resolutions establishing the class or series, if the manner in 23.16 which the facts operate upon the rights and preferences of the 23.17 class or series is clearly and expressly set forth in the 23.18 articles of organization or in the resolution or resolutions 23.19 establishing the class or series; and 23.20 (2) may incorporate by reference some or all of the terms 23.21 of any agreements, contracts, or other arrangements entered into 23.22 by the limited liability company in connection with the 23.23 establishment of the class or series if the limited liability 23.24 company retains at its principal executive office a copy of the 23.25 agreements, contracts, or other arrangements or the portions 23.26 incorporated by reference. 23.27 (b) A statement setting forth the name of the limited 23.28 liability company and the text of the resolution and certifying 23.29 the adoption of the resolution and the date of adoption must be 23.30 filed with the secretary of state before the acceptance of any 23.31 contributions for which the resolution creates rights or 23.32 preferences not set forth in the articles of organization. 23.33 However, where the members have received notice of the creation 23.34 of membership interests with rights or preferences not set forth 23.35 in the articles of organization before the acceptance of the 23.36 contributions with respect to the membership interests, the 24.1 statement may be filed any time within one year after the 24.2 acceptance of contributions. The resolution is effective when 24.3 the statement has been filed with the secretary of state; or, if 24.4 it is not required to be filed with the secretary of state 24.5 before the acceptance of contributions, on the date of its 24.6 adoption by the governors. 24.7 (c) A statement filed with the secretary of state in 24.8 accordance with paragraph (b) is not considered an amendment of 24.9 the articles of organization for purposes of sections 322B.155 24.10 and 322B.383. 24.11 Sec. 31. Minnesota Statutes 1994, section 322B.42, 24.12 subdivision 2, is amended to read: 24.13 Subd. 2. [IRREVOCABLE PERIOD.] Unless otherwise provided 24.14 in the contribution agreement, or unless all of the would-be 24.15 contributors and, if in existence, the limited liability 24.16 company, consent to a shorter or longer period, a contribution 24.17 agreement is irrevocable for a period of six months , unless the24.18 contribution agreement provides for, or unless all other24.19 would-be contributors who are a party to a contribution consent24.20 to, an earlier revocation. 24.21 Sec. 32. Minnesota Statutes 1994, section 322B.42, 24.22 subdivision 4, is amended to read: 24.23 Subd. 4. [FAILURE TO PAY REMEDIES.] (a) Unless otherwise 24.24 provided in the contribution agreement, in the event of default 24.25 in the payment or performance of an installment or call when 24.26 due, the limited liability company may proceed to collect the 24.27 amount due in the same manner as a debt due the limited 24.28 liability company , or, if the amount due remains unpaid for a24.29 period of 20 days after written notice of demand for payment has24.30 been given to the delinquent would-be contributor, the board of24.31 governors may declare a forfeiture of the contribution agreement24.32 or cancel it in accordance with this subdivision. If a would-be 24.33 contributor does not make a required contribution of property or 24.34 services, the limited liability company shall require the 24.35 would-be contributor to contribute cash equal to that portion of 24.36 the value, as stated in the limited liability company required 25.1 records, of the contribution that has not been made. 25.2 (b) Upon forfeiture of a contribution agreement,If the 25.3 amount due under a contribution agreement remains unpaid for a 25.4 period of 20 days after written notice of demand for payment has 25.5 been given to the delinquent would-be contributor, the 25.6 membership interests that were subject to the contribution 25.7 agreement may be offered for sale by the limited liability 25.8 company for a price in money equaling or exceeding the sum of 25.9 the full balance owed by the delinquent would-be contributor 25.10 plus the expenses incidental to the sale. Any excess of net25.11 proceeds realized by the limited liability company over the sum25.12 of the amount owed by the delinquent would-be contributor plus25.13 the expenses incidental to the sale must be paid to the25.14 delinquent would-be contributor or to a legal representative.25.15 The payment must not exceed the amount of contribution actually25.16 made by the delinquent would-be contributor.25.17 If the membership interests that were subject to the 25.18 contribution agreement are sold according to this paragraph, the 25.19 limited liability company shall pay to the delinquent would-be 25.20 contributor or to the delinquent would-be contributor's legal 25.21 representative the lesser of (i) the excess of net proceeds 25.22 realized by the limited liability company over the sum of the 25.23 amount owed by the delinquent would-be contributor plus the 25.24 expenses incidental to the sale, and (ii) the amount actually 25.25 paid by the delinquent would-be contributor. If the membership 25.26 interests that were subject to the contribution agreement are 25.27 not sold according to this paragraph, the limited liability 25.28 company may collect the amount due in the same manner as a debt 25.29 due the limited liability company or cancel the contribution 25.30 agreement according to paragraph (c). 25.31 (c) If, within 20 days after the limited liability company25.32 offers to sellIf the amount due under a contribution agreement 25.33 remains unpaid for a period of 20 days after written notice of 25.34 demand for payment has been given to the delinquent would-be 25.35 contributor and the membership interests that were subject to 25.36 the defaulted contribution agreement , no prospective purchaser26.1 offers to purchase the membership interests for a money price26.2 sufficient to pay the sum of the full balance owed by the26.3 delinquent would-be contributor plus the expenses incidental to26.4 the sale, or if the limited liability company has refunded to26.5 the would-be contributor or a legal representative ahave not 26.6 been sold according to paragraph (b), the limited liability 26.7 company may cancel the contribution agreement, the limited 26.8 liability company may retain the portion of the contribution 26.9 agreement price actually paid , the contribution agreement may be26.10 canceledthat does not exceed ten percent of the contribution 26.11 agreement, and the limited liability company may retain26.12 theshall refund to the delinquent would-be contributor or the 26.13 delinquent would-be contributor's legal representatives that 26.14 portion of the contribution agreement price actually paid 26.15 that does not exceedexceeds ten percent of the contribution 26.16 agreement price. 26.17 Sec. 33. Minnesota Statutes 1994, section 322B.54, 26.18 subdivision 1, is amended to read: 26.19 Subdivision 1. [WHEN DISTRIBUTIONS ARE PERMITTED.] (a) The 26.20 board of governors may authorize and cause the limited liability 26.21 company to make a distribution only if the board of governors 26.22 determines, in accordance with subdivision 2, that the limited 26.23 liability company will be able to pay its debts in the ordinary 26.24 course of business after making the distribution and the board 26.25 of governors does not know before the distribution is made that 26.26 the determination was or has become erroneous , and. 26.27 (b) The limited liability company may make the distribution 26.28 if it is able to pay its debts in the ordinary course of 26.29 business after making the distribution. 26.30 (c) The effect of a distribution on the ability of the 26.31 limited liability company to pay its debts in the ordinary 26.32 course of business after making the distribution must be 26.33 measured in accordance with subdivision 3. 26.34 (d) The right of the board of governors to authorize, and 26.35 the limited liability company to make, distributions may be 26.36 prohibited, limited, or restricted by the articles of 27.1 organization or operating agreement or an agreement. 27.2 Sec. 34. Minnesota Statutes 1994, section 322B.56, 27.3 subdivision 1, is amended to read: 27.4 Subdivision 1. [LIABILITY.] In addition to any other 27.5 liabilities, a governor who is present at a meeting and fails to 27.6 vote against, or who consents in writing to, a distribution made 27.7 in violation of section 322B.54, subdivision 1 or 4, or a 27.8 restriction contained in the articles of organization or 27.9 operating agreement or an agreement, and who fails to comply 27.10 with the standard of conduct provided in section 322B.663, is 27.11 liable to the limited liability company, its receiver or any 27.12 other person winding up its affairs jointly and severally with 27.13 all other governors so liable and to other governors under 27.14 subdivision 3, but only to the extent that the distribution 27.15 exceeded the amount that properly could have been paid under 27.16 section 322B.54. 27.17 Sec. 35. Minnesota Statutes 1994, section 322B.60, 27.18 subdivision 2, is amended to read: 27.19 Subd. 2. [MEETING.] After the issuance of the27.20 certificatefiling of articles of organization, the organizers 27.21 or the governors named in the articles of organization shall 27.22 either hold an organizational meeting at the call of a majority 27.23 of the organizers or of the governors named in the articles, or 27.24 take written action, for the purposes of transacting business 27.25 and taking actions necessary or appropriate to complete the 27.26 organization of the limited liability company, including, 27.27 without limitation, amending the articles, electing governors, 27.28 adopting an operating agreement, electing managers, adopting 27.29 banking resolutions, authorizing or ratifying the purchase, 27.30 lease, or other acquisition of suitable space, furniture, 27.31 furnishings, supplies, and materials, approving a limited 27.32 liability company seal, adopting a fiscal year for the limited 27.33 liability company, contracting to receive and accept 27.34 contributions, and making any appropriate tax elections. If a 27.35 meeting is held, the person or persons calling the meeting shall 27.36 give at least three days notice of the meeting to each organizer 28.1 or governor named, stating the date, time, and place of the 28.2 meeting. Organizers and governors may waive notice of an 28.3 organizational meeting in the same manner that a governor may 28.4 waive notice of meetings of the board under section 322B.643, 28.5 subdivision 5. 28.6 Sec. 36. Minnesota Statutes 1994, section 322B.643, 28.7 subdivision 3, is amended to read: 28.8 Subd. 3. [CALLING MEETINGS AND NOTICE.] Unless the 28.9 articles of organization or operating agreement provide for a 28.10 different time period, a governor may call a board meeting by 28.11 giving at least ten days notice or, in the case of 28.12 organizational meetings under section 322B.60, subdivision 2, at 28.13 least three days notice to all governors of the date, time, and 28.14 place of the meeting. The notice need not state the purpose of 28.15 the meeting unless the articles or operating agreement require 28.16 it. 28.17 Sec. 37. Minnesota Statutes 1994, section 322B.646, is 28.18 amended to read: 28.19 322B.646 [ABSENT GOVERNORS.] 28.20 If the articles of organization or operating agreement so 28.21 provide, a governor may give advance written consent or 28.22 opposition to a proposal to be acted on at a board of governors 28.23 meeting. If the governor is not present at the meeting, consent 28.24 or opposition to a proposal does not constitute presence for 28.25 purposes of determining the existence of a quorum, but consent 28.26 or opposition must be counted as athe vote of a governor 28.27 present at the meeting in favor of or against the proposal and 28.28 must be entered in the minutes or other record of action at the 28.29 meeting, if the proposal acted on at the meeting is 28.30 substantially the same or has substantially the same effect as 28.31 the proposal to which the governor has consented or objected. 28.32 Sec. 38. Minnesota Statutes 1994, section 322B.653, is 28.33 amended to read: 28.34 322B.653 [ACT OF THE BOARD OF GOVERNORS.] 28.35 The board of governors shall take action by the affirmative 28.36 vote of the greater of (1) a majority of governors present at a 29.1 duly held meeting at the time the action is taken, or (2) a 29.2 majority of the minimum proportion of number of governors that 29.3 would constitute a quorum for the transaction of business at the 29.4 meeting, except where this chapter or the articles require the 29.5 affirmative vote of a larger proportion or number. If the 29.6 articles require a larger proportion or number than is required 29.7 by this chapter for a particular action, the articles control. 29.8 Sec. 39. Minnesota Statutes 1994, section 322B.666, 29.9 subdivision 2, is amended to read: 29.10 Subd. 2. [MATERIAL FINANCIAL INTEREST.] For purposes of 29.11 this section: 29.12 (1) a governor does not have a material financial interest29.13 ina resolution fixing the compensation of thea governor or 29.14 fixing the compensation of another governor as a governor, 29.15 manager, employee, or agent of the limited liability company, 29.16 even though the first governor is also receiving compensation29.17 from the limited liability companyis not void or voidable or 29.18 considered to be a contract or other transaction between a 29.19 limited liability company and one or more of its governors for 29.20 purposes of this section even though the governor receiving the 29.21 compensation fixed by the resolution is present and voting at 29.22 the meeting of the board or a committee at which the resolution 29.23 is authorized, approved, or ratified or even though other 29.24 governors voting upon the resolution are also receiving 29.25 compensation from the limited liability company; and 29.26 (2) a governor has a material financial interest in each 29.27 organization in which the governor, or the spouse, parents, 29.28 children and spouses of children, brothers and sisters and 29.29 spouses of brothers and sisters, and the brothers and sisters of 29.30 the spouse of the governor, or any combination of them have a 29.31 material financial interest. For purposes of this section, a 29.32 contract or other transaction between a limited liability 29.33 company and the spouse, parents, children and spouses of 29.34 children, brothers and sisters, spouses of brothers and sisters, 29.35 and the brothers and sisters of the spouse of a governor, or any 29.36 combination of them, is considered to be a transaction between 30.1 the limited liability company and the governor. 30.2 Sec. 40. Minnesota Statutes 1994, section 322B.693, 30.3 subdivision 1, is amended to read: 30.4 Subdivision 1. [PREREQUISITES.] A limited liability 30.5 company may lend money to, guarantee an obligation of, become a 30.6 surety for, or otherwise financially assist a person, if the 30.7 transaction, or a class of transactions to which the transaction 30.8 belongs, is approved by the affirmative vote of a majority of 30.9 the governors present and: 30.10 (1) is in the usual and regular course of business of the 30.11 limited liability company; 30.12 (2) is with, or for the benefit of, a related organization, 30.13 an organization in which the limited liability company has a 30.14 financial interest, an organization with which the limited 30.15 liability company has a business relationship, or an 30.16 organization to which the limited liability company has the 30.17 power to make donations, any of which relationships constitute 30.18 consideration sufficient to make the loan, guarantee, 30.19 suretyship, or other financial assistance so approved 30.20 enforceable against the limited liability company; 30.21 (3) is with, or for the benefit of, a member who provides 30.22 services to the limited liability company, or a manager or other 30.23 employee of the limited liability company or a subsidiary, 30.24 including a member, manager, or employee who is a governor of 30.25 the limited liability company or a subsidiary, and may 30.26 reasonably be expected, in the judgment of the board of 30.27 governors, to benefit the limited liability company; or 30.28 (4) whether or not any separate consideration has been or 30.29 promised to the limited liability company, has been approved by 30.30 the owners of two-thirds of the voting power of persons other 30.31 than the interested person or persons, or the unanimous 30.32 affirmative vote of all members, whether or not ordinarily 30.33 entitled to vote. 30.34 Sec. 41. Minnesota Statutes 1994, section 322B.699, 30.35 subdivision 6, is amended to read: 30.36 Subd. 6. [DETERMINATION OF ELIGIBILITY.] (a) All 31.1 determinations whether indemnification of a person is required 31.2 because the criteria set forth in subdivision 2 have been 31.3 satisfied and whether a person is entitled to payment or 31.4 reimbursement of expenses in advance of the final disposition of 31.5 a proceeding as provided in subdivision 3 must be made: 31.6 (1) by the board of governors by a majority of a quorum. 31.7 If the governors who are, at the time, parties to the proceeding 31.8 are not counted for determining either a majority or the 31.9 presence of a quorum; 31.10 (2) if a quorum under clause (1) cannot be obtained, by a 31.11 majority of a committee of the board of governors, consisting 31.12 solely of two or more governors not at the time parties to the 31.13 proceeding, duly designated to act in the matter by a majority 31.14 of the full board of governors including governors who are 31.15 parties; 31.16 (3) if a determination is not made under clause (1) or (2), 31.17 by special legal counsel, selected either by a majority of the 31.18 board of governors or a committee by vote pursuant to clause (1) 31.19 or (2) or, if the requisite quorum of the full board of 31.20 governors cannot be obtained and the committee cannot be 31.21 established, by a majority of the full board of governors 31.22 including governors who are parties; 31.23 (4) if a determination is not made under clauses (1) to 31.24 (3), by the members, excluding the votes ofbut the membership 31.25 interests held by parties to the proceeding must not be counted 31.26 in determining the presence of a quorum and are not considered 31.27 to be present and entitled to vote on the determination; or 31.28 (5) if an adverse determination is made under clauses (1) 31.29 to (4) or under paragraph (b), or if no determination is made 31.30 under clauses (1) to (4) or under paragraph (b) within 60 days 31.31 after (i) the later to occur of the termination of a proceeding 31.32 or a written request for indemnification to the limited 31.33 liability company or after a(ii) a written request for an 31.34 advance of expenses, as the case may be, by a court in this 31.35 state, which may be the same court in which the proceeding 31.36 involving the person's liability took place, upon application of 32.1 the person and any notice the court requires. The person 32.2 seeking indemnification or payment or reimbursement of expenses 32.3 pursuant to this clause has the burden of establishing that the 32.4 person is entitled to indemnification or payment or 32.5 reimbursement or expenses. 32.6 (b) With respect to a person who is not, and was not at the 32.7 time of the acts or omissions complained of in the proceedings, 32.8 a governor, manager, or person possessing, directly or 32.9 indirectly, the power to direct or cause the direction of the 32.10 management or policies of the limited liability company, the 32.11 determination whether indemnification of this person is required 32.12 because the criteria set forth in subdivision 2 have been 32.13 satisfied and whether this person is entitled to payment or 32.14 reimbursement of expenses in advance of the final disposition of 32.15 a proceeding as provided in subdivision 3 may be made by an 32.16 annually appointed committee of the board of governors, having 32.17 at least one member who is a governor. The committee shall 32.18 report at least annually to the board of governors concerning 32.19 its actions. 32.20 Sec. 42. Minnesota Statutes 1994, section 322B.72, 32.21 subdivision 2, is amended to read: 32.22 Subd. 2. [APPROVAL BY OWNERS.] (a) At the meeting a vote 32.23 of the owners must be taken on the proposed plan. The plan of 32.24 merger or exchange is adopted when approved by the affirmative 32.25 vote of the owners of a majority of the voting power of all 32.26 ownership interests entitled to vote. Except as provided in 32.27 paragraph (b), a class or series of ownership interests of the 32.28 organization is entitled to vote as a class or series if any 32.29 provision of the plan would, if contained in a proposed 32.30 amendment to the articles of organization or articles of 32.31 incorporation, as the case may be, entitle the class or series 32.32 of ownership interests to vote as a class or series and, in the 32.33 case of an exchange, if the class or series is included in the 32.34 exchange. 32.35 (b) A class or series of ownership interests of the 32.36 organization is not entitled to vote as a class or series solely 33.1 because the plan of merger or exchangeeffects a cancellation of 33.2 the ownership interests of the class or series if the plan of 33.3 merger or exchangeeffects a cancellation of all ownership 33.4 interests of the organization of all classes and series that are 33.5 existing immediately before the merger or exchangeand owners of 33.6 ownership interests of that class or series are entitled to 33.7 obtain payment for the fair value of their shares under section 33.8 322B.383 or 302A.471, as the case may be, in the event of the 33.9 merger or exchange. 33.10 Sec. 43. Minnesota Statutes 1994, section 322B.72, 33.11 subdivision 3, is amended to read: 33.12 Subd. 3. [WHEN APPROVAL BY SHAREHOLDERS OF A SURVIVING 33.13 CORPORATION IS NOT REQUIRED.] Notwithstanding subdivisions 1 and 33.14 2, submission of a plan of merger to a vote at a meeting of 33.15 shareholders of a surviving corporation is not required if: 33.16 (1) the articles of the corporation will not be amended in 33.17 the transaction; 33.18 (2) each holder of shares of the corporation that were 33.19 outstanding immediately before the effective datetime of the 33.20 transaction will hold the same number of shares with identical 33.21 rights immediately after that date; 33.22 (3) the number ofvoting power of the outstanding shares of 33.23 the corporation entitled to vote immediately after the merger, 33.24 plus the number ofvoting power of the shares of the corporation 33.25 entitled to vote issuable on conversion of securities other than33.26 sharesor on the exercise of rights to purchase, securities 33.27 issued by virtue of the terms ofin the transaction, will not 33.28 exceed by more than 20 percent, the number ofvoting power of 33.29 the outstanding shares of the corporation entitled to vote 33.30 immediately before the transaction; and 33.31 (4) the number of participating shares of the corporation 33.32 immediately after the merger, plus the number of participating 33.33 shares of the corporation issuable on conversion, or on the 33.34 exercise of rights to purchase, securities issued in the 33.35 transaction, will not exceed by more than 20 percent, the number 33.36 of participating shares of the corporation immediately before 34.1 the transaction. "Participating shares" are outstanding shares 34.2 of the corporation that entitle their holders to participate 34.3 without limitation in distributions by the corporation. 34.4 Sec. 44. Minnesota Statutes 1994, section 322B.75, 34.5 subdivision 1, is amended to read: 34.6 Subdivision 1. [EFFECTIVE DATE OR TIME.] A merger or 34.7 exchange is effective when the articles of merger or exchange 34.8 are filed with the secretary of state or on a later date or at a 34.9 later time specified in the articles of merger or exchange. 34.10 Sec. 45. Minnesota Statutes 1994, section 322B.77, 34.11 subdivision 1, is amended to read: 34.12 Subdivision 1. [MEMBER APPROVAL AND WHEN NOT REQUIRED.] A 34.13 limited liability company may, by affirmative vote of a majority 34.14 of the governors present, may sell, lease, transfer, or34.15 otherwise dispose of all or substantially all of its property34.16 and assets in the usual and regular course of its business and34.17 grant a mortgage of or security interest in and otherwise34.18 encumber and assign for purposes of security all or34.19 substantially all of its property and assets whether or not in34.20 the usual and regular course of its business,upon those terms 34.21 and conditions and for those considerations, which may be money, 34.22 securities, or other instruments for the payment of money or 34.23 other property, as the board of governors considers expedient, 34.24 in which case noand without member approval is required: 34.25 (1) sell, lease, transfer, or otherwise dispose of all or 34.26 substantially all of its property and assets in the usual and 34.27 regular course of its business; 34.28 (2) grant a security interest in all or substantially all 34.29 of its property and assets whether or not in the usual and 34.30 regular course of its business; or 34.31 (3) transfer any or all of its property to a corporation 34.32 all the shares of which are owned by the limited liability 34.33 company. 34.34 Sec. 46. Minnesota Statutes 1994, section 322B.803, 34.35 subdivision 1, is amended to read: 34.36 Subdivision 1. [MANNER.] A limited liability company that 35.1 has not accepted contributions may be dissolved and terminated 35.2 by the organizers or governors in the manner set forth in this 35.3 section. 35.4 Sec. 47. Minnesota Statutes 1994, section 322B.803, 35.5 subdivision 2, is amended to read: 35.6 Subd. 2. [ARTICLES OF DISSOLUTION AND TERMINATION.] (a) A 35.7 majority of the organizers or governors shall sign articles of 35.8 dissolution and termination containing: 35.9 (1) the name of the limited liability company; 35.10 (2) the date of organization; 35.11 (3) a statement that contributions have not been accepted; 35.12 (4) a statement that no debts remain unpaid. 35.13 (b) The articles of dissolution and termination shall be 35.14 filed with the secretary of state. 35.15 Sec. 48. Minnesota Statutes 1994, section 322B.813, 35.16 subdivision 5, is amended to read: 35.17 Subd. 5. [DISTRIBUTION TO MEMBERS.] All tangible or 35.18 intangible property, including money, remaining after the 35.19 discharge of, or after making adequate provision for the 35.20 discharge of, the debts, obligations, and liabilities of the 35.21 limited liability company must be distributed to the members in 35.22 accordance with sections 322B.52 and 322B.873. 35.23 Sec. 49. Minnesota Statutes 1994, section 322B.833, 35.24 subdivision 1, is amended to read: 35.25 Subdivision 1. [WHEN PERMITTED.] A court may grant any 35.26 equitable relief it considers just and reasonable in the 35.27 circumstances or may dissolve, wind up, and terminate a limited 35.28 liability company: 35.29 (1) in a supervised winding up and termination pursuant to 35.30 section 322B.83; 35.31 (2) in an action by a member when it is established that: 35.32 (i) the governors or the persons having the authority 35.33 otherwise vested in the board of governors are deadlocked in the 35.34 management of the affairs of the limited liability company and 35.35 the members are unable to break the deadlock; 35.36 (ii) the governors or those in control of the limited 36.1 liability company have acted fraudulently, illegally, or in a 36.2 manner unfairly prejudicial toward one or more members in their 36.3 capacities as members ,or governors of any limited liability 36.4 company, or as managers ,or asemployees of a closely held 36.5 limited liability company; 36.6 (iii) the members of the limited liability company are so 36.7 divided in voting power that, for a period that includes the 36.8 time when two consecutive regular meetings were held, they have 36.9 failed to elect successors to governors whose terms have expired 36.10 or would have expired upon the election and qualification of 36.11 their successors; 36.12 (iv) the limited liability company assets are being 36.13 misapplied or wasted; or 36.14 (v) an event of dissolution has occurred under section 36.15 322B.80, subdivision 1, clause (1), (4) or (5) but the limited 36.16 liability company is not acting to wind up its affairs; 36.17 (3) in an action by a creditor when: 36.18 (i) the claim of the creditor has been reduced to judgment 36.19 and an execution on the judgment has been returned unsatisfied; 36.20 or 36.21 (ii) the limited liability company has admitted in writing 36.22 that the claim of the creditor is due and owing and it is 36.23 established that the limited liability company is unable to pay 36.24 its debts in the ordinary course of business; or 36.25 (4) in an action by the attorney general to dissolve the 36.26 limited liability company in accordance with section 322B.843 36.27 when it is established that a decree of termination is 36.28 appropriate. 36.29 Sec. 50. Minnesota Statutes 1994, section 322B.833, 36.30 subdivision 2, is amended to read: 36.31 Subd. 2. [BUY-OUT ON MOTION.] In an action under 36.32 subdivision 1, clause (2), involving a closely held limited36.33 liability company at the time the action is commenced andin 36.34 which one or more of the circumstances described in that clause 36.35 is established, the court may, upon motion of a limited 36.36 liability company or a member, order the sale by a plaintiff or 37.1 a defendant of all membership interests of the limited liability 37.2 company held by the plaintiff or defendant to either the limited 37.3 liability company or the moving members, whichever is specified 37.4 in the motion, if the court determines in its discretion that an 37.5 order would be fair and equitable to all parties under all of 37.6 the circumstances of the case. 37.7 The purchase price of any membership interest so sold must 37.8 be the fair value of the membership interest as of the date of 37.9 the commencement of the action or as of another date found 37.10 equitable by the court. If the articles of organization, a 37.11 member control agreement or business continuation agreement 37.12 states a price for the redemption or buy-out of membership 37.13 interests, the court shall order the sale for the price and on 37.14 the terms set forth in them, unless the court determines that 37.15 the price or terms are unreasonable under all the circumstances 37.16 of the case. 37.17 Within five days after the entry of the order, the limited 37.18 liability company shall provide each selling member with the 37.19 information it is required to provide under section 322B.386, 37.20 subdivision 5, paragraph (a). 37.21 If the parties are unable to agree on fair value within 40 37.22 days of entry of the order, the court shall determine the fair 37.23 value of the membership interests under the provisions of 37.24 section 322B.386, subdivision 7, may allow interest or costs as 37.25 provided in section 322B.386, subdivisions 1 and 8, and may 37.26 allocate payment among the member whose membership interest is 37.27 being sold and any assignees of the financial rights of that 37.28 member. 37.29 The purchase price must be paid in one or more installments 37.30 as agreed on by the parties, or, if no agreement can be reached 37.31 within 40 days of entry of the order, as ordered by the court. 37.32 Upon entry of an order for the sale of a membership interest 37.33 under this subdivision and provided that the limited liability 37.34 company or the moving members post a bond in adequate amount 37.35 with sufficient sureties or otherwise satisfy the court that any 37.36 full purchase price of the membership interest, plus the 38.1 additional costs, expenses, and fees awarded by the court, will 38.2 be paid when due and payable, the selling member shall no longer 38.3 have any rights or status as a member, manager, or governor, 38.4 except the right to receive the fair value of the membership 38.5 interest plus other amounts as might be awarded. 38.6 Sec. 51. Minnesota Statutes 1994, section 322B.833, 38.7 subdivision 4, is amended to read: 38.8 Subd. 4. [CONSIDERATIONS IN GRANTING RELIEF INVOLVING 38.9 CLOSELY HELD LIMITED LIABILITY COMPANIES.] In determining 38.10 whether to order relief under this section and in determining 38.11 what particular relief to order, the court shall take into 38.12 consideration the duty that all members in a closely held 38.13 limited liability company owe one another to act in an honest, 38.14 fair, and reasonable manner in the operation of the limited 38.15 liability company and the reasonable expectations of theall 38.16 members as they exist at the inception and develop during the 38.17 course of the members' relationship with the limited liability 38.18 company and with each other. For purposes of this section, any 38.19 written agreements, including employment agreements and buy-sell 38.20 agreements, between or among members or between or among one or 38.21 more members and the limited liability company are presumed to 38.22 reflect the parties' reasonable expectations concerning matters 38.23 dealt with in the agreements. 38.24 Sec. 52. Minnesota Statutes 1994, section 323.14, 38.25 subdivision 4, is amended to read: 38.26 Subd. 4. [LIMITED LIABILITY AFTER DISSOLUTION.] (a) 38.27 Subject to section 323.44, subdivision 7, the limited liability 38.28 described in subdivisions 2 and 3 continues in full force for 38.29 the dissolved partnership regardless of any dissolution, winding 38.30 up, and termination of a limited liability partnership. 38.31 (b) If a limited liability partnership dissolves and its 38.32 business is continued by a successor general partnership under 38.33 section 323.37, then the limited liability described in 38.34 subdivisions 2 and 3 and 4also applies to that successor 38.35 partnership until the expiration of the registration that the 38.36 dissolved partnership had in effect under section 323.44 at the 39.1 moment of dissolution. The successor general partnership may at 39.2 any time file its own registration under section 323.44. 39.3 Sec. 53. Minnesota Statutes 1995 Supplement, section 39.4 336.8-103, is amended to read: 39.5 336.8-103 [RULES FOR DETERMINING WHETHER CERTAIN 39.6 OBLIGATIONS AND INTERESTS ARE SECURITIES OR FINANCIAL ASSETS.] 39.7 (a) A share or similar equity interest issued by a 39.8 corporation, business trust, joint stock company, or similar 39.9 entity is a security. 39.10 (b) An "investment company security" is a security. 39.11 "Investment company security" means a share or similar equity 39.12 interest issued by an entity that is registered as an investment 39.13 company under the federal investment company laws, an interest 39.14 in a unit investment trust that is so registered, or a 39.15 face-amount certificate issued by a face-amount certificate 39.16 company that is so registered. Investment company security does 39.17 not include an insurance policy or endowment policy or annuity 39.18 contract issued by an insurance company. 39.19 (c) An interest in a partnership or limited liability 39.20 company is a general intangible and is not a security or a 39.21 financial asset, except as follows: 39.22 (1) An interest in a partnership or limited liability 39.23 company is nota security unlessand is not a general intangible 39.24 if it is dealt in or traded on a securities exchangesexchange 39.25 or in a securities marketsmarket, its terms expressly provide 39.26 that it is a security governed by this article, or it is an 39.27 investment company security. However,39.28 (2) An interest in a partnership or limited liability 39.29 company is a financial asset and is not a general intangible if 39.30 it is held in a securities account. 39.31 (d) A writing that is a security certificate is governed by 39.32 this article and not by article 3, even though it also meets the 39.33 requirements of that article. However, a negotiable instrument 39.34 governed by article 3 is a financial asset if it is held in a 39.35 securities account. 39.36 (e) An option or similar obligation issued by a clearing 40.1 corporation to its participants is not a security, but is a 40.2 financial asset. 40.3 (f) A commodity contract, as defined in section 336.9-115, 40.4 is not a security or a financial asset. 40.5 Sec. 54. Minnesota Statutes 1995 Supplement, section 40.6 336.8-603, is amended to read: 40.7 336.8-603 [SAVINGS CLAUSE.] 40.8 (a) Laws 1995, chapter 194, does not affect an action or 40.9 proceeding commenced before January 1, 1996. 40.10 (b) If a security interest in a security is perfected on 40.11 January 1, 1996December 31, 1995, and the action by which the 40.12 security interest was perfected would suffice to perfect a 40.13 security interest under Laws 1995, chapter 194this act, no 40.14 further action is required to continue perfection. If a 40.15 security interest in a security is perfected at January 1, 199640.16 on December 31, 1995, but the action by which the security 40.17 interest was perfected would not suffice to perfect a security 40.18 interest under Laws 1995, chapter 194in the same property under 40.19 this act, the security interest remains perfected for a period40.20 of four months after January 1, 1996during the period through 40.21 December 31, 1996, so long as the security interest could have 40.22 remained perfected under the law in effect on December 31, 1995, 40.23 if that law continued in effect after December 31, 1995, and 40.24 continues perfected thereafter if appropriate action to perfect 40.25 under Laws 1995, chapter 194,this act is taken within that40.26 periodduring the one-year period from January 1, 1996 to 40.27 December 31, 1996. If a security interest is perfected at40.28 January 1, 1996on December 31, 1995, and the security interest 40.29 can be perfected by filing under Laws 1995, chapter 194this 40.30 act, a financing statement signed by the secured party instead 40.31 of the debtor may be filed within that period to continue 40.32 perfection or thereafter to perfect. 40.33 Sec. 55. [EFFECTIVE DATE.] 40.34 Sections 15, 53, and 54 are effective retroactive to 40.35 January 1, 1996.