SF 2063

as introduced - 87th Legislature (2011 - 2012) Posted on 02/24/2012 09:31am

A bill for an act
relating to limited liability companies; providing for the creation and operation
of low-profit limited liability companies; amending Minnesota Statutes 2010,
sections 322B.03, by adding a subdivision; 322B.115, subdivision 1; 322B.12,
subdivision 1; 322B.833, subdivision 1; 322B.843, subdivision 1; proposing
coding for new law in Minnesota Statutes, chapter 322B.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

Minnesota Statutes 2010, section 322B.03, is amended by adding a
subdivision to read:

new text begin Subd. 28a. new text end

new text begin Low-profit limited liability company; L3C. new text end

new text begin "Low-profit limited
liability company" or "L3C" means a limited liability company organized under section
322B.976.
new text end

Sec. 2.

Minnesota Statutes 2010, section 322B.115, subdivision 1, is amended to read:

Subdivision 1.

Required provisions.

The articles of organization must contain:

(1) the name of the limited liability company;

(2) the address of the registered office of the limited liability company and the name
of its registered agent, if any, at that address;

(3) the name and address of each organizer; deleted text begin and
deleted text end

(4) a statement of the period of existence for the limited liability company if different
from the period set forth in section 322B.20, subdivision 2 new text begin ; and
new text end

new text begin (5) in the case of a low-profit limited liability company, a statement that it is formed
for both a business and charitable purpose that requires its operation as a low-profit limited
liability company in accordance with section 322B.976 new text end .

Sec. 3.

Minnesota Statutes 2010, section 322B.12, subdivision 1, is amended to read:

Subdivision 1.

Requirements and prohibitions.

The limited liability company
name must:

(1) be in the English language or in any other language expressed in English letters
or characters;

(2) contain the words "limited liability company," or deleted text begin must contain deleted text end the abbreviation
"LLC" or deleted text begin , deleted text end new text begin :
new text end

new text begin (i) new text end in the case of an organization formed pursuant to chapter 319B, must meet the
requirements of section 319B.05 applicable to a limited liability company new text begin ; or
new text end

new text begin (ii) if organized as a low-profit limited liability company, contain the words
"low-profit limited liability company" or "L3C" new text end ;

(3) not contain the word corporation or incorporated and must not contain the
abbreviation of either or both of these words;

(4) not contain a word or phrase that indicates or implies that it is organized for a
purpose other than a legal business purpose; and

(5) be distinguishable upon the records in the Office of the Secretary of State
from the name of each domestic limited liability company, limited liability partnership,
corporation, and limited partnership, whether profit or nonprofit, and each foreign limited
liability company, limited liability partnership, corporation, and limited partnership on
file, authorized or registered to do business in this state at the time of filing, whether profit
or nonprofit, and each name the right to which is, at the time of organization, reserved as
provided for in sections 5.35, 302A.117, 317A.117, 321.0109, 322B.125, or 333.001 to
333.54, unless there is filed with the articles of organization one of the following:

(i) the written consent of the domestic limited liability company, limited liability
partnership, corporation, or limited partnership or the foreign limited liability company,
limited liability partnership, corporation, or limited partnership authorized or registered to
do business in this state or the holder of a reserved name or a name filed by or registered
with the secretary of state under sections 333.001 to 333.54 having a name that is not
distinguishable;

(ii) a certified copy of a final decree of a court in this state establishing the prior right
of the applicant to the use of the name in this state; or

(iii) the applicant's affidavit that the domestic or foreign limited liability company,
domestic or foreign corporation, or domestic or foreign limited partnership with the
name that is not distinguishable has been organized, incorporated, or on file in this
state for at least three years prior to the affidavit, if it is a domestic limited liability
company, corporation, or limited partnership, or has been authorized or registered to
do business in this state for at least three years prior to the affidavit, if it is a foreign
limited liability company, corporation, or limited partnership, or that the holder of a name
filed or registered with the secretary of state under sections 333.001 to 333.54 filed
or registered that name at least three years prior to the affidavit, that the domestic or
foreign limited liability company, domestic or foreign corporation, or domestic or foreign
limited partnership or holder has not during the three-year period before the affidavit filed
any document with the secretary of state; that the applicant has mailed written notice
to the domestic or foreign limited liability company, domestic or foreign corporation,
or domestic or foreign limited partnership or the holder of a name filed or registered
with the secretary of state under sections 333.001 to 333.54 by certified mail, return
receipt requested, properly addressed to the registered office of the domestic or foreign
limited liability company or domestic or foreign corporation or in care of the agent of the
domestic or foreign limited partnership, or the address of the holder of a name filed or
registered with the secretary of state under sections 333.001 to 333.54, shown in the
records of the secretary of state, stating that the applicant intends to use a name that is
not distinguishable and the notice has been returned to the applicant as undeliverable to
the addressee of the domestic or foreign limited liability company, domestic or foreign
corporation, or domestic or foreign limited partnership or holder of a name filed or
registered with the secretary of state under sections 333.001 to 333.54; that the applicant,
after diligent inquiry, has been unable to find any telephone listing for the domestic or
foreign limited liability company, domestic or foreign corporation, or domestic or foreign
limited partnership with the name that is not distinguishable in the county in which is
located the registered office of the domestic or foreign limited liability company, domestic
or foreign corporation, or domestic or foreign limited partnership shown in the records of
the secretary of state or has been unable to find any telephone listing for the holder of a
name filed or registered with the secretary of state under sections 333.001 to 333.54
in the county in which is located the address of the holder shown in the records of the
secretary of state; and that the applicant has no knowledge that the domestic or foreign
limited liability company, domestic or foreign corporation, or domestic or foreign limited
partnership or holder of a name filed or registered with the secretary of state under sections
333.001 to 333.54 is currently engaged in business in this state.

Sec. 4.

Minnesota Statutes 2010, section 322B.833, subdivision 1, is amended to read:

Subdivision 1.

When permitted.

A court may grant any equitable relief it considers
just and reasonable in the circumstances or may dissolve, wind up, and terminate a limited
liability company:

(1) in a supervised winding up and termination pursuant to section 322B.83;

(2) in an action by a member when it is established that:

(i) the governors or the persons having the authority otherwise vested in the board
of governors are deadlocked in the management of the affairs of the limited liability
company and the members are unable to break the deadlock;

(ii) the governors or those in control of the limited liability company have acted
fraudulently, illegally, or in a manner unfairly prejudicial toward one or more members in
their capacities as members or governors of any limited liability company, or as managers
or employees of a closely held limited liability company;

(iii) the members of the limited liability company are so divided in voting power
that, for a period that includes the time when two consecutive regular meetings were held,
they have failed to elect successors to governors whose terms have expired or would have
expired upon the election and qualification of their successors;

(iv) the limited liability company assets are being misapplied or wasted; deleted text begin or
deleted text end

(v) an event of dissolution has occurred under section 322B.80, subdivision 1, clause
(1), (4) or (5) but the limited liability company is not acting to wind up its affairs new text begin ; or
new text end

new text begin (vi) if the limited liability company is a low-profit limited liability company, it
ceases to meet any of the requirements of section 322B.976, subdivision 1 or 2, and for
60 or more days after it ceased to meet those requirements, failed to comply with section
322B.976, subdivision 3 new text end ;

(3) in an action by a creditor when:

(i) the claim of the creditor has been reduced to judgment and an execution on the
judgment has been returned unsatisfied; or

(ii) the limited liability company has admitted in writing that the claim of the creditor
is due and owing and it is established that the limited liability company is unable to pay its
debts in the ordinary course of business; or

(4) in an action by the attorney general to dissolve the limited liability company in
accordance with section 322B.843 when it is established that a decree of termination
is appropriate.

Sec. 5.

Minnesota Statutes 2010, section 322B.843, subdivision 1, is amended to read:

Subdivision 1.

When permitted.

A limited liability company may be involuntarily
dissolved, wound up and terminated by a decree of a court in this state in an action filed by
the attorney general when it is established that:

(1) the articles of organization were procured through fraud;

(2) the limited liability company was organized for a purpose not permitted by
section 322B.10;

(3) the limited liability company failed to comply with the requirements of sections
322B.10 to 322B.18 essential to organization under this chapter;

(4) the limited liability company has flagrantly violated a provision of this chapter,
or has violated a provision of this chapter more than once, or has violated more than
one provision of this chapter; deleted text begin or
deleted text end

(5) the limited liability company has acted, or failed to act, in a manner that
constitutes surrender or abandonment of the limited liability company privileges or
enterprise new text begin ; or
new text end

new text begin (6) if the limited liability company is a low-profit limited liability company, it ceases
to meet any of the requirements of section 322B.976, subdivision 1 or 2, and for 60 or
more days after it ceased to meet those requirements, failed to comply with section
322B.976, subdivision 3 new text end .

Sec. 6.

new text begin [322B.976] LOW-PROFIT LIMITED LIABILITY COMPANIES.
new text end

new text begin Subdivision 1. new text end

new text begin Required purposes. new text end

new text begin A low-profit limited liability company must
significantly further the accomplishment of one or more charitable or educational purposes
within the meaning of section 170(c)(2)(B) of the Internal Revenue Code of 1986, United
States Code, title 26, section 170(c)(2)(B), as amended.
new text end

new text begin Subd. 2. new text end

new text begin Limitations on purposes. new text end

new text begin (a) A significant purpose of a low-profit limited
liability company must not include the production of income or the appreciation of
property. The fact that a company produces significant income or capital appreciation is
not, in the absence of other factors, conclusive evidence of a significant purpose involving
the production of income or the appreciation of property.
new text end

new text begin (b) A purpose of a low-profit limited liability company must not include the
accomplishment of one or more political or legislative purposes within the meaning of
section 170(c)(2)(D) of the Internal Revenue Code of 1986, United States Code, title 26,
section 170(c)(2)(D), as amended.
new text end

new text begin Subd. 3. new text end

new text begin Change of status. new text end

new text begin A low-profit limited liability company that no longer
satisfies the requirements of this section continues to exist as a limited liability company
provided that it:
new text end

new text begin (1) promptly amends its articles of organization and name so that it is no longer
identified as a low-profit limited liability company; and
new text end

new text begin (2) continues to meet all other requirements of this chapter applicable to a limited
liability company.
new text end

new text begin Subd. 4. new text end

new text begin No limitation on other limited liability companies. new text end

new text begin This section does not
prevent a limited liability company that is not governed by this section from electing a
charitable or educational purpose in whole or in part for doing business under this chapter.
new text end