Office of the Revisor of Statutes
Minnesota Session Laws - 1996, Regular Session
Key: (1) language to be deleted (2) new language
KEY: stricken = old language to be removed
underscored = new language to be added
CHAPTER 361-H.F.No. 1704
An act relating to commerce; making various technical
and conforming changes related to limited liability
companies; regulating investment securities; amending
Minnesota Statutes 1994, sections 322B.105; 322B.115,
subdivisions 2, 3, and 4; 322B.125, subdivision 1;
322B.135, subdivision 3; 322B.145; 322B.15,
subdivisions 1, 3, and 4; 322B.155; 322B.175; 322B.20,
subdivision 2; 322B.30, subdivision 3; 322B.313,
subdivision 2; 322B.33, subdivisions 4 and 9; 322B.34,
subdivisions 1 and 3; 322B.346, subdivision 2;
322B.36, subdivisions 2 and 3; 322B.363, subdivision
1; 322B.373, subdivision 2; 322B.376; 322B.383,
subdivision 1; 322B.386, subdivisions 4 and 7;
322B.40, subdivision 6; 322B.42, subdivisions 2 and 4;
322B.54, subdivision 1; 322B.56, subdivision 1;
322B.60, subdivision 2; 322B.643, subdivision 3;
322B.646; 322B.653; 322B.666, subdivision 2; 322B.693,
subdivision 1; 322B.699, subdivision 6; 322B.72,
subdivisions 2 and 3; 322B.75, subdivision 1; 322B.77,
subdivision 1; 322B.803, subdivisions 1 and 2;
322B.813, subdivision 5; 322B.833, subdivisions 1, 2,
and 4; 323.14, subdivision 4; Minnesota Statutes 1995
Supplement, sections 322B.12, subdivision 1;
336.8-103; and 336.8-603.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
Section 1. Minnesota Statutes 1994, section 322B.105, is
amended to read:
322B.105 [ORGANIZERS.]
One or more natural persons of full at least 18 years of
age may act as organizers of a limited liability company by
filing with the secretary of state articles of organization for
the limited liability company.
Sec. 2. Minnesota Statutes 1994, section 322B.115,
subdivision 2, is amended to read:
Subd. 2. [STATUTORY PROVISIONS THAT MAY BE MODIFIED ONLY
IN ARTICLES OF ORGANIZATION.] The following provisions govern a
limited liability company unless modified in the articles of
organization or a member control agreement under section 322B.37:
(1) a limited liability company has general business
purposes (section 322B.10);
(2) a limited liability company has certain powers (section
322B.20);
(3) the power to adopt, amend, or repeal the operating
agreement is vested in the board of governors (section
322B.603);
(4) a limited liability company must allow cumulative
voting for governors (section 322B.63);
(5) the affirmative vote of a majority of governors present
is required for an action of the board of governors (section
322B.653);
(6) a written action by the board of governors taken
without a meeting must be signed by all governors (section
322B.656);
(7) the board may accept contributions, make contribution
agreements, and make contribution allowance agreements (sections
322B.40, subdivision 1; 322B.42; and 322B.43);
(8) all membership interests are ordinary membership
interests entitled to vote and are of one class with no series
(section 322B.40, subdivision 5, clauses (1) and (2));
(9) all membership interests have equal rights and
preferences in all matters not otherwise provided for by the
board of governors (section 322B.40, subdivision 5, clause (2));
(10) the restatement of value of previous contributions is
to be determined according to a specified process (section
322B.41, subdivisions 3 and 4);
(11) a member has certain preemptive rights, unless
otherwise provided by the board of governors (section 322B.33);
(12) the affirmative vote of the owners of a majority of
the voting power of the membership interests present and
entitled to vote at a duly held meeting is required for an
action of the members, except where this chapter requires the
affirmative vote of a majority of the voting power of all
membership interests entitled to vote (section 322B.35,
subdivision 1);
(13) the voting power of each membership interest is in
proportion to the value reflected in the required records of the
contributions of the members (section 322B.356);
(14) members share in distributions in proportion to the
value reflected in the required records of the contributions of
members (section 322B.50);
(15) members share profits and losses in proportion to the
value reflected in the required records of the contributions of
members (section 322B.326);
(16) a written action by the members taken without a
meeting must be signed by all members (section 322B.35);
(17) members have no right to receive distributions in kind
and the limited liability company has only limited rights to
make distributions in kind (section 322B.52);
(18) a member is not subject to expulsion (section
322B.306, subdivision 2);
(19) unanimous consent is required for the transfer of
governance rights to a person not already a member (section
322B.313, subdivision 2); and
(20) unanimous consent is required to avoid dissolution
(section 322B.80, subdivision 1, clause (5)(B)).
Sec. 3. Minnesota Statutes 1994, section 322B.115,
subdivision 3, is amended to read:
Subd. 3. [STATUTORY PROVISIONS THAT MAY BE MODIFIED EITHER
IN ARTICLES OF ORGANIZATION OR IN THE OPERATING AGREEMENT.] The
following provisions govern a limited liability company unless
modified either in the articles of organization, a member
control agreement under section 322B.37 or in the operating
agreement:
(1) governors serve for an indefinite term that expires at
the next regular meeting of members (section 322B.616);
(2) the compensation of governors is fixed by the board of
governors (section 322B.623);
(3) a certain method must be used for removal of governors
(section 322B.636);
(4) a certain method must be used for filling board of
governor vacancies (section 322B.64);
(5) if the board of governors fails to select a place for a
board meeting, it must be held at the principal executive office
(section 322B.643, subdivision 1);
(6) a governor may call a board of governors meeting, and
the notice of the a board of governors meeting need not state
the purpose of the meeting (section 322B.643, subdivision 3);
(7) a majority of the board of governors is a quorum for a
board meeting (section 322B.65);
(8) a committee consists of one or more persons, who need
not be governors, appointed by affirmative vote of a majority of
the governors present (section 322B.66, subdivision 2);
(9) the board may establish a special litigation committee
(section 322B.66);
(10) the chief manager and treasurer have specified duties,
until the board of governors determines otherwise (section
322B.673);
(11) managers may delegate some or all of their duties and
powers, if not prohibited by the board of governors from doing
so (section 322B.689);
(12) regular meetings of members need not be held, unless
demanded by a member under certain conditions (section
322B.333);
(13) in all instances where a specific minimum notice
period has not otherwise been fixed by law, not less than ten
days' notice is required for a meeting of members (section
322B.34, subdivision 2);
(14) for a quorum at a members' meeting there is required a
majority of the voting power of the membership interests
entitled to vote at the meeting (section 322B.353);
(15) the board of governors may fix a date up to 60 days
before the date of a members' meeting as the date for the
determination of the members entitled to notice of and entitled
to vote at the meeting (section 322B.356, subdivision 1);
(16) indemnification of certain persons is required
(section 322B.699);
(17) the board of governors may authorize, and the limited
liability company may make, distributions not prohibited,
limited, or restricted by an agreement (section 322B.54,
subdivision 1); and
(18) members have no right to interim distributions except
as provided through the operating agreement or an act of the
board of governors (section 322B.51).
Sec. 4. Minnesota Statutes 1994, section 322B.115,
subdivision 4, is amended to read:
Subd. 4. [OPTIONAL PROVISIONS AND SPECIFIC SUBJECTS.] The
following provisions relating to the management of the business
or the regulation of the affairs of a limited liability company
may be included either in the articles of organization, a member
control agreement under section 322B.37 or, except for naming
persons to serve as the first board of governors, fixing a
greater than majority governor or member vote, establishing the
rights and priorities for distributions and the rights to share
in profits and losses, or giving or prescribing the manner of
giving voting rights to persons other than members otherwise
than pursuant to the articles of organization, or eliminating or
limiting a governor's personal liability, in the operating
agreement:
(1) the persons to serve as the first board of governors
may be named in the articles of organization (section 322B.606,
subdivision 1);
(2) a manner for increasing or decreasing the number of
governors may be provided (section 322B.61);
(3) additional qualifications for governors may be imposed
(section 322B.613);
(4) governors may be classified (section 322B.626);
(5) the day or date, time, and place of board of governors
meetings may be fixed (section 322B.643, subdivision 1);
(6) absent governors may be permitted to give written
consent or opposition to a proposal (section 322B.646);
(7) a larger than majority vote may be required for board
of governor action (section 322B.653);
(8) authority to sign and deliver certain documents may be
delegated to a manager or agent of the limited liability company
other than the chief manager (section 322B.673, subdivision 2);
(9) additional managers may be designated (section
322B.676);
(10) additional powers, rights, duties, and
responsibilities may be given to managers (section 322B.679
322B.676);
(11) a method for filling vacant offices may be specified
(section 322B.686, subdivision 3);
(12) the day or date, time, and place of regular member
meetings may be fixed (section 322B.333, subdivision 3);
(13) certain persons may be authorized to call special
meetings of members (section 322B.336, subdivision 1);
(14) notices of member meetings may be required to contain
certain information (section 322B.34, subdivision 3);
(15) a larger than majority vote may be required for member
action (section 322B.346);
(16) voting rights may be granted in or pursuant to the
articles of organization to persons who are not members (section
322B.356, subdivision 3);
(17) limited liability company actions giving rise to
dissenter rights may be designated (section 322B.386,
subdivision 1, paragraph (e)); and
(18) a governor's personal liability to the limited
liability company or its members for monetary damages for breach
of fiduciary duty as a governor may be eliminated or limited in
the articles (section 322B.663, subdivision 4).
Sec. 5. Minnesota Statutes 1995 Supplement, 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 must
contain the abbreviation "LLC" or, in the case of an
organization formed pursuant to section 319A.03, must meet the
requirements of section 319A.07 applicable to a limited
liability company;
(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 a each domestic limited
liability company, limited liability partnership, corporation,
or and limited partnership, whether profit or nonprofit, or a
and each foreign limited liability company, limited liability
partnership, corporation, or and limited partnership authorized
or registered to do business in this state, whether profit or
nonprofit, or a and each name the right to which is, at the time
of organization, reserved or as provided for in sections
302A.117, 317A.117, 322A.03, 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 limited liability
company, corporation, or 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, and that the limited
liability company, corporation, or limited partnership or holder
has not during the three-year period filed any document with the
secretary of state; that the applicant has mailed written notice
to the limited liability company, corporation, or 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 limited liability company or
corporation or in care of the agent of the 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 limited liability company, corporation, or
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 limited liability company,
corporation, or limited partnership with the name that is not
distinguishable in the county in which is located the registered
office of the limited liability company or, corporation, or
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 limited liability company, corporation, or 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. 6. Minnesota Statutes 1994, section 322B.125,
subdivision 1, is amended to read:
Subdivision 1. [WHO MAY RESERVE.] The exclusive right to
the use of a limited liability company name otherwise permitted
by section 322B.12 may be reserved by:
(1) a person doing business in this state under that name;
(2) a person intending to organize under this chapter;
(3) a domestic limited liability company intending to
change its name;
(4) a foreign limited liability company intending to make
application for a certificate of authority to transact business
in this state;
(5) a foreign limited liability company authorized to
transact business in this state and intending to change its
name;
(6) a person intending to organize a foreign limited
liability company and intending to have the foreign limited
liability company make application for a certificate of
authority to transact business in this state; or
(7) a foreign limited liability company doing business
under that name or a name deceptively similar to not
distinguishable from that name in one or more states other than
this state and not described in clause (4), (5), or (6).
Sec. 7. Minnesota Statutes 1994, section 322B.135,
subdivision 3, is amended to read:
Subd. 3. [CHANGE OF BUSINESS ADDRESS OR NAME OF AGENT.] If
the business address or name of a registered agent changes, the
agent shall change the address of the registered office or the
name of the registered agent, as the case may be, of each
limited liability company represented by that agent by filing
with the secretary of state a statement as required in
subdivision 1, except that it need be signed only by the
registered agent, need not be responsive to clause (3) or (6),
and must state that a copy of the statement has been mailed to
each of those limited liability companies or to the legal
representative of each of those limited liability companies.
Sec. 8. Minnesota Statutes 1994, section 322B.145, is
amended to read:
322B.145 [PROCEDURE FOR AMENDMENT BEFORE CONTRIBUTION.]
Before any contribution is reflected in the required
records of a limited liability company, the articles of
organization may be amended pursuant to section 322B.60 by the
organizers or by the board of governors. The articles of
organization may also be amended by the board of governors to
change or cancel a statement pursuant to section 322B.40,
subdivision 6, establishing or fixing the rights and preferences
of a class or series of membership interests before any
contribution pertaining to that class or series is reflected in
the required records of the limited liability company by filing
articles of amendment or a statement of cancellation, as
appropriate, with the secretary of state.
Sec. 9. Minnesota Statutes 1994, section 322B.15,
subdivision 1, is amended to read:
Subdivision 1. [MANNER OF AMENDMENT.] Except as otherwise
set forth in section 322B.145, after any contribution has been
reflected in the required records of a limited liability
company, the articles of organization may be amended in the
manner set forth in this section.
Sec. 10. Minnesota Statutes 1994, section 322B.15,
subdivision 3, is amended to read:
Subd. 3. [NOTICE.] Written notice of the members' meeting
setting forth the substance of the proposed amendment must be
given to each member entitled to vote in the manner provided in
section 322B.34 for the giving of notice of meetings of members.
Sec. 11. Minnesota Statutes 1994, section 322B.15,
subdivision 4, is amended to read:
Subd. 4. [APPROVAL BY MEMBERS.] (a) The proposed amendment
is adopted when approved by the affirmative vote of the owners
of a majority of the voting power of the members present and
entitled to vote members required by section 322B.346, except as
provided in paragraphs (b) and (c), and subdivision 5.
(b) For a closely held limited liability company, if the
articles of organization provide for a specified proportion
equal to or larger than the majority necessary to transact a
specified type of business at a meeting, or if it is proposed to
amend the articles to provide for a specified proportion equal
to or larger than the majority necessary to transact a specified
type of business at a meeting, the affirmative vote necessary to
add the provision to, or to amend an existing provision in, the
articles of organization is the larger of:
(1) the specified proportion or, in the absence of a
specific provision, the affirmative vote necessary to transact
the type of business described in the proposed amendment at a
meeting immediately before the effectiveness of the proposed
amendment; or
(2) the specified proportion that would, upon effectiveness
of the proposed amendment, be necessary to transact the
specified type of business at a meeting.
(c) For limited liability companies other than closely held
limited liability companies, if the articles provide for a
larger proportion to transact a specified type of business at a
meeting, the affirmative vote of that larger proportion is
necessary to amend the articles to decrease the proportion
necessary to transact the business.
Sec. 12. Minnesota Statutes 1994, section 322B.155, is
amended to read:
322B.155 [CLASS OR SERIES VOTING ON AMENDMENTS.]
The owners of the outstanding membership interests of a
class or series are entitled to vote as a class or series upon a
proposed amendment, whether or not entitled to vote on the
amendment by the provisions of the articles of organization, if
the amendment would:
(1) effect an exchange, reclassification, or cancellation
of all or part of the membership interests of the class or
series;
(2) effect an exchange, or create a right of exchange, of
all or any part of the membership interests of another class or
series for the membership interests of the class or series;
(3) change the rights or preferences of the membership
interests of the class or series;
(4) change the membership interests of the class or series
into the same or a different number of membership interests of
the same or another class or series;
(5) create a new class or series of membership interests
having rights and preferences prior and superior to the
membership interests of that class or series, or increase the
rights and preferences or the number of membership interests, of
a class or series having rights and preferences prior or
superior to the membership interests of that class or series;
(6) divide the membership interests of the class into
series and determine the designation of each series and the
variations in the relative rights and preferences between the
membership interests of each series or authorize the board of
governors to do so;
(7) limit or deny any existing preemptive rights of the
membership interests of the class or series; or
(8) cancel or otherwise affect distributions on the
membership interests of the class or series.
Sec. 13. Minnesota Statutes 1994, section 322B.175, is
amended to read:
322B.175 [EFFECTIVE DATE OF ARTICLES OF ORGANIZATION.]
Articles of organization are effective and limited
liability company existence begins when the articles of
organization are filed with the secretary of state accompanied
by a payment of $135, which includes a $100 organization fee in
addition to the $35 filing fee required by section 322B.03,
subdivision 18. Articles of amendment and articles of merger
are effective when filed with the secretary of state or at
another time within 30 days after filing if the articles of
amendment so provide. Articles of merger must be accompanied by
a fee of $60, which includes a $25 merger fee in addition to the
$35 filing fee required by section 322B.03, subdivision 18.
Sec. 14. Minnesota Statutes 1994, section 322B.20,
subdivision 2, is amended to read:
Subd. 2. [DURATION.] A limited liability company has a
limited duration of 30 years from the date the articles of
organization are filed with the secretary of state, unless the
articles of organization state a shorter or longer period of
duration.
Sec. 15. Minnesota Statutes 1994, section 322B.30,
subdivision 3, is amended to read:
Subd. 3. [GRANT OF A SECURITY INTEREST.] Notwithstanding
any law to the contrary, For the purpose of any law relating to
security interests, a membership interest, governance rights,
and financial rights are each a general intangible, as defined
in section 336.9-106, and not a certificated security as defined
in section 336.8-102(1)(a) and not an uncertificated security as
defined in section 336.8-102(1)(b) and not chattel paper as
defined in section 336.9-105(1)(b) and not an instrument as
defined in section 336.9-105(1)(i) and not an account as defined
in section 336.9-106 to be characterized as provided in section
336.8-103, paragraph (c).
Sec. 16. Minnesota Statutes 1994, section 322B.313,
subdivision 2, is amended to read:
Subd. 2. [WHEN UNANIMOUS CONSENT REQUIRED.] Subject to
subdivision 6, a member may, without the consent of any other
member, assign governance rights, in whole or in part, to
another person already a member at the time of the
assignment. Except as otherwise set forth in the articles of
organization, any other assignment of any governance rights is
effective only if all the members, other than the member seeking
to make the assignment, approve the assignment by unanimous
written consent, unless the articles of organization provide for
written consent by fewer than all members. Subject to
subdivision 6, a member may grant a security interest in a
complete membership interest or governance rights without
obtaining the consent required by this subdivision. However, a
secured party may not take or assign ownership of governance
rights without first obtaining the consent required by this
subdivision. If a secured party has a security interest in both
a member's financial rights and governance rights, including a
security interest in a complete membership interest, this
subdivision's requirement that the secured party obtain consent
applies only to taking or assigning ownership of the governance
rights and does not apply to taking or assigning ownership of
the financial rights.
Sec. 17. Minnesota Statutes 1994, section 322B.33,
subdivision 4, is amended to read:
Subd. 4. [EXEMPTIONS.] Unless otherwise provided in the
articles of organization, no preemptive rights according to this
section arise as to contributions to be accepted from others or
as to contribution allowance agreements to be made with others
when the contribution is:
(1) to be made in a form other than money;
(2) to be made or reflected pursuant to a plan of merger or
exchange;
(3) to be made or reflected pursuant to an employee or
incentive benefit plan approved at a meeting by the affirmative
vote of the owners of a majority of the voting power of all
membership interests entitled to vote;
(4) to be made pursuant to a previously made contribution
allowance agreement; or
(5) to be made or reflected pursuant to a plan of
reorganization approved by a court of competent jurisdiction
pursuant to a statute of this state or of the United States.
Sec. 18. Minnesota Statutes 1994, section 322B.33,
subdivision 9, is amended to read:
Subd. 9. [MODIFICATION.] If the members of a limited
liability company are entitled to cumulative voting in the
election of governors, no amendment to the articles of
organization that has the effect of denying, limiting, or
modifying the preemptive rights provided in this section shall
be adopted if the votes of a proportion of the voting power
sufficient to elect a governor at an election of the entire
board of governors under cumulative voting are cast against the
amendment.
Sec. 19. Minnesota Statutes 1994, section 322B.34,
subdivision 1, is amended to read:
Subdivision 1. [TO WHOM GIVEN.] Except as otherwise
provided in this chapter, notice of all meetings of members must
be given to every owner of membership interests entitled to
vote, unless:
(1) the meeting is an adjourned meeting to be held not more
than 120 days after the date fixed for the original meeting and
the date, time, and place of the meeting were announced at the
time of the original meeting or any adjournment of the original
meeting; or
(2) the following have been mailed by first class mail to a
member at the address in the limited liability company records
and returned undeliverable:
(i) two consecutive annual meeting notices and notice of
any special meetings held during the period between the two
annual meetings; and
(ii) all payment of distributions sent during a 12-month
period, provided there are at least two sent during a the
12-month period.
If notice of an adjourned meeting is required under clause
(1), then the date for determination of members entitled to
notice of, and entitled to vote at, the adjourned meeting must
comply with section 322B.356, subdivision 1, except that if the
date of the meeting is set by court order, the court may provide
that the original date of determination will continue in effect
or may fix a new date.
An action or meeting that is taken or held without notice
under clause (2) has the same force and effect as if notice was
given. If the member delivers a written notice of the member's
current address to the limited liability company, the notice
requirement is reinstated.
Sec. 20. Minnesota Statutes 1994, section 322B.34,
subdivision 3, is amended to read:
Subd. 3. [CONTENTS.] The notice must contain the date,
time, and place of the meeting, the information with respect to
dissenters' rights required by section 322B.386, subdivision 2,
if applicable, and any other information required by this
chapter. In the case of a special meeting, the notice must
contain a statement of the purposes of the meeting. The notice
may also contain any other information required by the articles
of organization or operating agreement or considered necessary
or desirable by the board of governors or by any other person or
persons calling the meeting.
Sec. 21. Minnesota Statutes 1994, section 322B.346,
subdivision 2, is amended to read:
Subd. 2. [VOTING BY CLASS OR SERIES.] In any case where a
class or series of membership interests is entitled by this
chapter, the articles of organization, the operating agreement,
or the terms of the membership interests to vote as a class or
series, the matter being voted upon must also receive the
affirmative vote of the owners of the same proportion of the
membership interests present of that class or series, or of the
total outstanding membership interests of that class or series,
as the proportion required pursuant to subdivision 1, unless the
articles require a larger proportion. Unless otherwise stated
in the articles or operating agreement in the case of voting as
a class or series, the minimum percentage of the total voting
power of membership interests of the class or series that must
be present is equal to the minimum percentage of all membership
interests entitled to vote required to be present under section
322B.353.
Sec. 22. Minnesota Statutes 1994, section 322B.36,
subdivision 2, is amended to read:
Subd. 2. [MEMBERSHIP INTERESTS HELD BY SUBSIDIARY.] Except
as provided in subdivision 3, membership interests of a limited
liability company reflected in the required records as being
owned by a subsidiary are not entitled to vote be voted on any
matter.
Sec. 23. Minnesota Statutes 1994, section 322B.36,
subdivision 3, is amended to read:
Subd. 3. [MEMBERSHIP INTERESTS CONTROLLED IN A FIDUCIARY
CAPACITY.] Membership interests of a limited liability company
in the name of, or under the control of, the limited liability
company or a subsidiary in a fiduciary capacity are not entitled
to vote be voted on any matter, except to the extent that the
settlor or beneficiary possesses and exercises a right to vote
or gives the limited liability company or, with respect to
membership interests in the name of or under control of a
subsidiary, the subsidiary, binding instructions on how to vote
the membership interests.
Sec. 24. Minnesota Statutes 1994, section 322B.363,
subdivision 1, is amended to read:
Subdivision 1. [AUTHORIZATION.] A member may cast or
authorize the casting of a vote by filing a written appointment
of a proxy with a manager of the limited liability company at or
before the meeting at which the appointment is to be effective.
A written appointment of a proxy may be signed by the member or
authorized by the member by transmission of a telegram,
cablegram, or other means of electronic transmission. The
telegram, cablegram, or other means of electronic transmission
must set forth or be submitted with information from which it
can be determined, provided that the limited liability company
has no reason to believe that the telegram, cablegram, or other
electronic transmission was not authorized by the member. Any
reproduction of the writing or transmission may be substituted
or used in lieu of the original writing or transmission for any
purpose for which the original transmission could be used, if
the copy, facsimile telecommunication, or other reproduction is
a complete and legible reproduction of the entire original
writing or transmission. An appointment of a proxy for
membership interests owned jointly by two or more members is
valid if signed or otherwise authorized by any one of them,
unless the limited liability company receives from any one of
those members written notice either denying the authority of
that person to appoint a proxy or appointing a different proxy.
Sec. 25. Minnesota Statutes 1994, section 322B.373,
subdivision 2, is amended to read:
Subd. 2. [RIGHT TO INSPECT.] (a) A member of a limited
liability company has an absolute right, upon written demand, to
examine and copy, in person or by a legal representative, at any
reasonable time, and the limited liability company shall make
available within ten days after receipt by a manager of the
limited liability company of the written demand, all documents
referred to in subdivision 1.
(b) A member of a limited liability company has a right,
upon written demand, to examine and copy, in person or by a
legal representative, other limited liability company records at
any reasonable time only if the member demonstrates a proper
purpose for the examination.
(c) For purposes of this section, a "proper purpose" is one
reasonably related to the person's interest as a member of the
limited liability company.
Sec. 26. Minnesota Statutes 1994, section 322B.376, is
amended to read:
322B.376 [FINANCIAL STATEMENTS.]
(a) A limited liability company shall, upon written request
by a member, furnish annual financial statements,
including prepare annual financial statements within 180 days
after the close of the limited liability company's fiscal year.
The financial statements must include at least a balance sheet
as of the end of each fiscal year and a statement of income for
the fiscal year, prepared on the basis of accounting methods
reasonable in the circumstances. The financial statements may
be consolidated statements of the limited liability company and
one or more of its subsidiaries. In the case of statements
audited by a public accountant, each copy must be accompanied by
a report setting forth the opinion of the accountant on the
statements; in other cases, each copy must be accompanied by a
statement of the treasurer or other person in charge of the
limited liability company's financial records stating the
reasonable belief of the person that the financial statements
were prepared in accordance with accounting methods reasonable
in the circumstances, describing the basis of presentation, and
describing any respects in which the financial statements were
not prepared on a basis consistent with those prepared for the
previous year.
(b) Upon written request by a member, a limited liability
company shall furnish its most recent annual financial
statements as required under paragraph (a) no later than ten
business days after receipt of a member's written request.
"Furnish" for purposes of this paragraph means that the limited
liability company shall deliver or mail, postage prepaid, the
financial statements to the address specified by the requesting
member.
Sec. 27. Minnesota Statutes 1994, section 322B.383,
subdivision 1, is amended to read:
Subdivision 1. [ACTIONS CREATING DISSENTERS' RIGHTS.]
Subject to a member control agreement under section 322B.37, a
member of a limited liability company may dissent from, and
obtain payment for the fair value of the member's membership
interests in the event of, any of the following limited
liability company actions:
(1) an amendment of the articles of organization that
materially and adversely affects the rights or preferences of
the membership interests of the dissenting member in that it:
(i) alters or abolishes a preferential right of the
membership interests;
(ii) creates, alters, or abolishes a right in respect of
the redemption of the membership interests, including a
provision respecting a sinking fund for the redemption or
repurchase of the membership interests;
(iii) alters or abolishes a preemptive right of the owner
of the membership interests to make a contribution;
(iv) excludes or limits the right of a member to vote on a
matter, or to cumulate votes, except as the right may be
excluded or limited through the acceptance of contributions or
the making of contribution agreements pertaining to membership
interests with similar or different voting rights;
(v) changes a member's right to resign or retire;
(vi) establishes or changes the conditions for or
consequences of expulsion;
(vii) changes the statement required under section
322B.115, subdivision 1, clause (5);
(viii) changes the statement required under section
322B.115, subdivision 1, clause (6); or
(2) a sale, lease, transfer, or other disposition of all or
substantially all of the property and assets of the limited
liability company not made in the usual or regular course of its
business, but not including a transaction permitted without
member approval in section 322B.77, subdivision 1, or a
disposition in dissolution described in section 322B.813,
subdivision 4, or a disposition pursuant to an order of a court,
or a disposition for cash on terms requiring that all or
substantially all of the net proceeds of disposition be
distributed to the members in accordance with their respective
membership interests within one year after the date of
disposition;
(3) a plan of merger to which the limited liability company
is a party, except as provided in section 322B.873, subdivision
2, clause (1)(i) and subject to section 322B.873, subdivision 3;
(4) a plan of exchange to which the limited liability
company is a party as the organization whose ownership interests
will be acquired by the acquiring organization, if the
membership interests being acquired are entitled to be voted on
the plan;
(5) any other limited liability company action taken
pursuant to a member vote with respect to which the articles of
organization, the operating agreement, or a resolution approved
by the board of governors directs that dissenting members may
obtain payment for their membership interests; or
(6) a resolution of the board of governors under section
322B.873, subdivision 2, to implement a business continuation
agreement.
Sec. 28. Minnesota Statutes 1994, section 322B.386,
subdivision 4, is amended to read:
Subd. 4. [NOTICE OF PROCEDURE.] (a) After the proposed
action has been approved by the board of governors and, if
necessary, the members, the limited liability company shall send
to all members who have complied with subdivision 3 and to all
members entitled to dissent if no member vote was required, a
notice that contains:
(1) the address to which a demand for payment must be sent
in order to obtain payment and the date by which the demand must
be received;
(2) a form to be used to certify the date on which the
member acquired the membership interests and to demand payment;
and
(3) a copy of section 322B.383, this section and, if
applicable, section 322B.873, subdivisions 2 and 3, and a brief
description of the procedures to be followed under these
sections.
(b) In order to receive the fair value of the membership
interests, a dissenting member must demand payment within 30
days after the notice required by paragraph (a) was given, but
the dissenter retains all other rights of a member until the
proposed action takes effect.
Sec. 29. Minnesota Statutes 1994, section 322B.386,
subdivision 7, is amended to read:
Subd. 7. [PETITION AND DETERMINATION.] If the limited
liability company receives a demand under subdivision 6, it
shall, within 60 days after receiving the demand, either pay to
the dissenter the amount demanded or agreed to by the dissenter
after discussion with the limited liability company or file in
court a petition requesting that the court determine the fair
value of the membership interests, plus interest. The petition
must be filed in the county in which the registered office of
the limited liability company is located, except that a
surviving foreign corporation that receives a demand relating to
the membership interests of a constituent limited liability
company shall file the petition in the county in this state in
which the last registered office of the constituent limited
liability company was located. The petition must name as
parties all dissenters who have demanded payment under
subdivision 6 and who have not reached agreement with the
limited liability company. The limited liability company shall,
after filing the petition, serve all parties with a summons and
copy of the petition under the rules of civil procedure.
Nonresidents of this state may be served by registered or
certified mail or by publication as provided by law. Except as
otherwise provided, the rules of civil procedure apply to this
proceeding. The jurisdiction of the court is plenary and
exclusive. The court may appoint appraisers, with powers and
authorities the court considers proper, to receive evidence on
and recommend the amount of the fair value of the membership
interests. The court shall determine whether the member or
members in question have fully complied with the requirements of
this section, and shall determine the fair value of the
membership interests, taking into account any and all factors
the court finds relevant, computed by any method or combination
of methods that the court, in its discretion, sees fit to use,
whether or not used by the limited liability company or by a
dissenter. The fair value of the membership interests as
determined by the court is binding on all members, wherever
located. A dissenter is entitled to judgment in cash for the
amount by which the fair value of the membership interests as
determined by the court, plus interest, exceeds the amount, if
any, remitted under subdivision 5, but is not liable to the
limited liability company for the amount, if any, by which the
amount, if any, remitted to the dissenter under subdivision 5
exceeds the fair value of the membership interests as determined
by the court, plus interest.
Sec. 30. Minnesota Statutes 1994, section 322B.40,
subdivision 6, is amended to read:
Subd. 6. [PROCEDURE FOR FIXING TERMS.] (a) Subject to any
restrictions in the articles of organization, the power granted
in subdivision 5 may be exercised by a resolution or resolutions
establishing a class or series, setting forth the designation of
the class or series, and fixing the relative rights and
preferences of the class or series. Any of the rights and
preferences of a class or series established in the articles of
organization or by resolution of the board of governors:
(1) may be made dependent upon facts ascertainable outside
the articles of organization, or outside the resolution or
resolutions establishing the class or series, if the manner in
which the facts operate upon the rights and preferences of the
class or series is clearly and expressly set forth in the
articles of organization or in the resolution or resolutions
establishing the class or series; and
(2) may incorporate by reference some or all of the terms
of any agreements, contracts, or other arrangements entered into
by the limited liability company in connection with the
establishment of the class or series if the limited liability
company retains at its principal executive office a copy of the
agreements, contracts, or other arrangements or the portions
incorporated by reference.
(b) A statement setting forth the name of the limited
liability company and the text of the resolution and certifying
the adoption of the resolution and the date of adoption must be
filed with the secretary of state before the acceptance of any
contributions for which the resolution creates rights or
preferences not set forth in the articles of organization.
However, where the members have received notice of the creation
of membership interests with rights or preferences not set forth
in the articles of organization before the acceptance of the
contributions with respect to the membership interests, the
statement may be filed any time within one year after the
acceptance of contributions. The resolution is effective when
the statement has been filed with the secretary of state; or, if
it is not required to be filed with the secretary of state
before the acceptance of contributions, on the date of its
adoption by the governors.
(c) A statement filed with the secretary of state in
accordance with paragraph (b) is not considered an amendment of
the articles of organization for purposes of sections 322B.155
and 322B.383.
Sec. 31. Minnesota Statutes 1994, section 322B.42,
subdivision 2, is amended to read:
Subd. 2. [IRREVOCABLE PERIOD.] Unless otherwise provided
in the contribution agreement, or unless all of the would-be
contributors and, if in existence, the limited liability
company, consent to a shorter or longer period, a contribution
agreement is irrevocable for a period of six months, unless the
contribution agreement provides for, or unless all other
would-be contributors who are a party to a contribution consent
to, an earlier revocation.
Sec. 32. Minnesota Statutes 1994, section 322B.42,
subdivision 4, is amended to read:
Subd. 4. [FAILURE TO PAY REMEDIES.] (a) Unless otherwise
provided in the contribution agreement, in the event of default
in the payment or performance of an installment or call when
due, the limited liability company may proceed to collect the
amount due in the same manner as a debt due the limited
liability company, or, if the amount due remains unpaid for a
period of 20 days after written notice of demand for payment has
been given to the delinquent would-be contributor, the board of
governors may declare a forfeiture of the contribution agreement
or cancel it in accordance with this subdivision. If a would-be
contributor does not make a required contribution of property or
services, the limited liability company shall require the
would-be contributor to contribute cash equal to that portion of
the value, as stated in the limited liability company required
records, of the contribution that has not been made.
(b) Upon forfeiture of a contribution agreement, If the
amount due under a contribution agreement remains unpaid for a
period of 20 days after written notice of demand for payment has
been given to the delinquent would-be contributor, the
membership interests that were subject to the contribution
agreement may be offered for sale by the limited liability
company for a price in money equaling or exceeding the sum of
the full balance owed by the delinquent would-be contributor
plus the expenses incidental to the sale. Any excess of net
proceeds realized by the limited liability company over the sum
of the amount owed by the delinquent would-be contributor plus
the expenses incidental to the sale must be paid to the
delinquent would-be contributor or to a legal representative.
The payment must not exceed the amount of contribution actually
made by the delinquent would-be contributor.
If the membership interests that were subject to the
contribution agreement are sold according to this paragraph, the
limited liability company shall pay to the delinquent would-be
contributor or to the delinquent would-be contributor's legal
representative the lesser of (i) the excess of net proceeds
realized by the limited liability company over the sum of the
amount owed by the delinquent would-be contributor plus the
expenses incidental to the sale, and (ii) the amount actually
paid by the delinquent would-be contributor. If the membership
interests that were subject to the contribution agreement are
not sold according to this paragraph, the limited liability
company may collect the amount due in the same manner as a debt
due the limited liability company or cancel the contribution
agreement according to paragraph (c).
(c) If, within 20 days after the limited liability company
offers to sell If the amount due under a contribution agreement
remains unpaid for a period of 20 days after written notice of
demand for payment has been given to the delinquent would-be
contributor and the membership interests that were subject to
the defaulted contribution agreement, no prospective purchaser
offers to purchase the membership interests for a money price
sufficient to pay the sum of the full balance owed by the
delinquent would-be contributor plus the expenses incidental to
the sale, or if the limited liability company has refunded to
the would-be contributor or a legal representative a have not
been sold according to paragraph (b), the limited liability
company may cancel the contribution agreement, the limited
liability company may retain the portion of the contribution
agreement price actually paid, the contribution agreement may be
canceled that does not exceed ten percent of the contribution
agreement, and the limited liability company may retain
the shall refund to the delinquent would-be contributor or the
delinquent would-be contributor's legal representatives that
portion of the contribution agreement price actually paid
that does not exceed exceeds ten percent of the contribution
agreement price.
Sec. 33. Minnesota Statutes 1994, section 322B.54,
subdivision 1, is amended to read:
Subdivision 1. [WHEN DISTRIBUTIONS ARE PERMITTED.] (a) The
board of governors may authorize and cause the limited liability
company to make a distribution only if the board of governors
determines, in accordance with subdivision 2, that the limited
liability company will be able to pay its debts in the ordinary
course of business after making the distribution and the board
of governors does not know before the distribution is made that
the determination was or has become erroneous, and.
(b) The limited liability company may make the distribution
if it is able to pay its debts in the ordinary course of
business after making the distribution.
(c) The effect of a distribution on the ability of the
limited liability company to pay its debts in the ordinary
course of business after making the distribution must be
measured in accordance with subdivision 3.
(d) The right of the board of governors to authorize, and
the limited liability company to make, distributions may be
prohibited, limited, or restricted by the articles of
organization or operating agreement or an agreement.
Sec. 34. Minnesota Statutes 1994, section 322B.56,
subdivision 1, is amended to read:
Subdivision 1. [LIABILITY.] In addition to any other
liabilities, a governor who is present at a meeting and fails to
vote against, or who consents in writing to, a distribution made
in violation of section 322B.54, subdivision 1 or 4, or a
restriction contained in the articles of organization or
operating agreement or an agreement, and who fails to comply
with the standard of conduct provided in section 322B.663, is
liable to the limited liability company, its receiver or any
other person winding up its affairs jointly and severally with
all other governors so liable and to other governors under
subdivision 3, but only to the extent that the distribution
exceeded the amount that properly could have been paid under
section 322B.54.
Sec. 35. Minnesota Statutes 1994, section 322B.60,
subdivision 2, is amended to read:
Subd. 2. [MEETING.] After the issuance of the
certificate filing of articles of organization, the organizers
or the governors named in the articles of organization shall
either hold an organizational meeting at the call of a majority
of the organizers or of the governors named in the articles, or
take written action, for the purposes of transacting business
and taking actions necessary or appropriate to complete the
organization of the limited liability company, including,
without limitation, amending the articles, electing governors,
adopting an operating agreement, electing managers, adopting
banking resolutions, authorizing or ratifying the purchase,
lease, or other acquisition of suitable space, furniture,
furnishings, supplies, and materials, approving a limited
liability company seal, adopting a fiscal year for the limited
liability company, contracting to receive and accept
contributions, and making any appropriate tax elections. If a
meeting is held, the person or persons calling the meeting shall
give at least three days notice of the meeting to each organizer
or governor named, stating the date, time, and place of the
meeting. Organizers and governors may waive notice of an
organizational meeting in the same manner that a governor may
waive notice of meetings of the board under section 322B.643,
subdivision 5.
Sec. 36. Minnesota Statutes 1994, section 322B.643,
subdivision 3, is amended to read:
Subd. 3. [CALLING MEETINGS AND NOTICE.] Unless the
articles of organization or operating agreement provide for a
different time period, a governor may call a board meeting by
giving at least ten days notice or, in the case of
organizational meetings under section 322B.60, subdivision 2, at
least three days notice to all governors of the date, time, and
place of the meeting. The notice need not state the purpose of
the meeting unless the articles or operating agreement require
it.
Sec. 37. Minnesota Statutes 1994, section 322B.646, is
amended to read:
322B.646 [ABSENT GOVERNORS.]
If the articles of organization or operating agreement so
provide, a governor may give advance written consent or
opposition to a proposal to be acted on at a board of governors
meeting. If the governor is not present at the meeting, consent
or opposition to a proposal does not constitute presence for
purposes of determining the existence of a quorum, but consent
or opposition must be counted as a the vote of a governor
present at the meeting in favor of or against the proposal and
must be entered in the minutes or other record of action at the
meeting, if the proposal acted on at the meeting is
substantially the same or has substantially the same effect as
the proposal to which the governor has consented or objected.
Sec. 38. Minnesota Statutes 1994, section 322B.653, is
amended to read:
322B.653 [ACT OF THE BOARD OF GOVERNORS.]
The board of governors shall take action by the affirmative
vote of the greater of (1) a majority of governors present at a
duly held meeting at the time the action is taken, or (2) a
majority of the minimum proportion of number of governors that
would constitute a quorum for the transaction of business at the
meeting, except where this chapter or the articles require the
affirmative vote of a larger proportion or number. If the
articles require a larger proportion or number than is required
by this chapter for a particular action, the articles control.
Sec. 39. Minnesota Statutes 1994, section 322B.666,
subdivision 2, is amended to read:
Subd. 2. [MATERIAL FINANCIAL INTEREST.] For purposes of
this section:
(1) a governor does not have a material financial interest
in a resolution fixing the compensation of the a governor or
fixing the compensation of another governor as a governor,
manager, employee, or agent of the limited liability company,
even though the first governor is also receiving compensation
from the limited liability company is not void or voidable or
considered to be a contract or other transaction between a
limited liability company and one or more of its governors for
purposes of this section even though the governor receiving the
compensation fixed by the resolution is present and voting at
the meeting of the board or a committee at which the resolution
is authorized, approved, or ratified or even though other
governors voting upon the resolution are also receiving
compensation from the limited liability company; and
(2) a governor has a material financial interest in each
organization in which the governor, or the spouse, parents,
children and spouses of children, brothers and sisters and
spouses of brothers and sisters, and the brothers and sisters of
the spouse of the governor, or any combination of them have a
material financial interest. For purposes of this section, a
contract or other transaction between a limited liability
company and the spouse, parents, children and spouses of
children, brothers and sisters, spouses of brothers and sisters,
and the brothers and sisters of the spouse of a governor, or any
combination of them, is considered to be a transaction between
the limited liability company and the governor.
Sec. 40. Minnesota Statutes 1994, section 322B.693,
subdivision 1, is amended to read:
Subdivision 1. [PREREQUISITES.] A limited liability
company may lend money to, guarantee an obligation of, become a
surety for, or otherwise financially assist a person, if the
transaction, or a class of transactions to which the transaction
belongs, is approved by the affirmative vote of a majority of
the governors present and:
(1) is in the usual and regular course of business of the
limited liability company;
(2) is with, or for the benefit of, a related organization,
an organization in which the limited liability company has a
financial interest, an organization with which the limited
liability company has a business relationship, or an
organization to which the limited liability company has the
power to make donations, any of which relationships constitute
consideration sufficient to make the loan, guarantee,
suretyship, or other financial assistance so approved
enforceable against the limited liability company;
(3) is with, or for the benefit of, a member who provides
services to the limited liability company, or a manager or other
employee of the limited liability company or a subsidiary,
including a member, manager, or employee who is a governor of
the limited liability company or a subsidiary, and may
reasonably be expected, in the judgment of the board of
governors, to benefit the limited liability company; or
(4) whether or not any separate consideration has been or
promised to the limited liability company, has been approved by
the owners of two-thirds of the voting power of persons other
than the interested person or persons, or the unanimous
affirmative vote of all members, whether or not ordinarily
entitled to vote.
Sec. 41. Minnesota Statutes 1994, section 322B.699,
subdivision 6, is amended to read:
Subd. 6. [DETERMINATION OF ELIGIBILITY.] (a) All
determinations whether indemnification of a person is required
because the criteria set forth in subdivision 2 have been
satisfied and whether a person is entitled to payment or
reimbursement of expenses in advance of the final disposition of
a proceeding as provided in subdivision 3 must be made:
(1) by the board of governors by a majority of a quorum.
If the governors who are, at the time, parties to the proceeding
are not counted for determining either a majority or the
presence of a quorum;
(2) if a quorum under clause (1) cannot be obtained, by a
majority of a committee of the board of governors, consisting
solely of two or more governors not at the time parties to the
proceeding, duly designated to act in the matter by a majority
of the full board of governors including governors who are
parties;
(3) if a determination is not made under clause (1) or (2),
by special legal counsel, selected either by a majority of the
board of governors or a committee by vote pursuant to clause (1)
or (2) or, if the requisite quorum of the full board of
governors cannot be obtained and the committee cannot be
established, by a majority of the full board of governors
including governors who are parties;
(4) if a determination is not made under clauses (1) to
(3), by the members, excluding the votes of but the membership
interests held by parties to the proceeding must not be counted
in determining the presence of a quorum and are not considered
to be present and entitled to vote on the determination; or
(5) if an adverse determination is made under clauses (1)
to (4) or under paragraph (b), or if no determination is made
under clauses (1) to (4) or under paragraph (b) within 60 days
after (i) the later to occur of the termination of a proceeding
or a written request for indemnification to the limited
liability company or after a (ii) a written request for an
advance of expenses, as the case may be, by a court in this
state, which may be the same court in which the proceeding
involving the person's liability took place, upon application of
the person and any notice the court requires. The person
seeking indemnification or payment or reimbursement of expenses
pursuant to this clause has the burden of establishing that the
person is entitled to indemnification or payment or
reimbursement or expenses.
(b) With respect to a person who is not, and was not at the
time of the acts or omissions complained of in the proceedings,
a governor, manager, or person possessing, directly or
indirectly, the power to direct or cause the direction of the
management or policies of the limited liability company, the
determination whether indemnification of this person is required
because the criteria set forth in subdivision 2 have been
satisfied and whether this person is entitled to payment or
reimbursement of expenses in advance of the final disposition of
a proceeding as provided in subdivision 3 may be made by an
annually appointed committee of the board of governors, having
at least one member who is a governor. The committee shall
report at least annually to the board of governors concerning
its actions.
Sec. 42. Minnesota Statutes 1994, section 322B.72,
subdivision 2, is amended to read:
Subd. 2. [APPROVAL BY OWNERS.] (a) At the meeting a vote
of the owners must be taken on the proposed plan. The plan of
merger or exchange is adopted when approved by the affirmative
vote of the owners of a majority of the voting power of all
ownership interests entitled to vote. Except as provided in
paragraph (b), a class or series of ownership interests of the
organization is entitled to vote as a class or series if any
provision of the plan would, if contained in a proposed
amendment to the articles of organization or articles of
incorporation, as the case may be, entitle the class or series
of ownership interests to vote as a class or series and, in the
case of an exchange, if the class or series is included in the
exchange.
(b) A class or series of ownership interests of the
organization is not entitled to vote as a class or series solely
because the plan of merger or exchange effects a cancellation of
the ownership interests of the class or series if the plan of
merger or exchange effects a cancellation of all ownership
interests of the organization of all classes and series that are
existing immediately before the merger or exchange and owners of
ownership interests of that class or series are entitled to
obtain payment for the fair value of their shares under section
322B.383 or 302A.471, as the case may be, in the event of the
merger or exchange.
Sec. 43. Minnesota Statutes 1994, section 322B.72,
subdivision 3, is amended to read:
Subd. 3. [WHEN APPROVAL BY SHAREHOLDERS OF A SURVIVING
CORPORATION IS NOT REQUIRED.] Notwithstanding subdivisions 1 and
2, submission of a plan of merger to a vote at a meeting of
shareholders of a surviving corporation is not required if:
(1) the articles of the corporation will not be amended in
the transaction;
(2) each holder of shares of the corporation that were
outstanding immediately before the effective date time of the
transaction will hold the same number of shares with identical
rights immediately after that date;
(3) the number of voting power of the outstanding shares of
the corporation entitled to vote immediately after the merger,
plus the number of voting power of the shares of the corporation
entitled to vote issuable on conversion of securities other than
shares or on the exercise of rights to purchase, securities
issued by virtue of the terms of in the transaction, will not
exceed by more than 20 percent, the number of voting power of
the outstanding shares of the corporation entitled to vote
immediately before the transaction; and
(4) the number of participating shares of the corporation
immediately after the merger, plus the number of participating
shares of the corporation issuable on conversion, or on the
exercise of rights to purchase, securities issued in the
transaction, will not exceed by more than 20 percent, the number
of participating shares of the corporation immediately before
the transaction. "Participating shares" are outstanding shares
of the corporation that entitle their holders to participate
without limitation in distributions by the corporation.
Sec. 44. Minnesota Statutes 1994, section 322B.75,
subdivision 1, is amended to read:
Subdivision 1. [EFFECTIVE DATE OR TIME.] A merger or
exchange is effective when the articles of merger or exchange
are filed with the secretary of state or on a later date or at a
later time specified in the articles of merger or exchange.
Sec. 45. Minnesota Statutes 1994, section 322B.77,
subdivision 1, is amended to read:
Subdivision 1. [MEMBER APPROVAL AND WHEN NOT REQUIRED.] A
limited liability company may, by affirmative vote of a majority
of the governors present, may sell, lease, transfer, or
otherwise dispose of all or substantially all of its property
and assets in the usual and regular course of its business and
grant a mortgage of or security interest in and otherwise
encumber and assign for purposes of security all or
substantially all of its property and assets whether or not in
the usual and regular course of its business, upon those terms
and conditions and for those considerations, which may be money,
securities, or other instruments for the payment of money or
other property, as the board of governors considers expedient,
in which case no and without member approval is required:
(1) sell, lease, transfer, or otherwise dispose of all or
substantially all of its property and assets in the usual and
regular course of its business;
(2) grant a security interest in all or substantially all
of its property and assets whether or not in the usual and
regular course of its business; or
(3) transfer any or all of its property to a corporation
all the shares of which are owned by the limited liability
company.
Sec. 46. Minnesota Statutes 1994, section 322B.803,
subdivision 1, is amended to read:
Subdivision 1. [MANNER.] A limited liability company that
has not accepted contributions may be dissolved and terminated
by the organizers or governors in the manner set forth in this
section.
Sec. 47. Minnesota Statutes 1994, section 322B.803,
subdivision 2, is amended to read:
Subd. 2. [ARTICLES OF DISSOLUTION AND TERMINATION.] (a) A
majority of the organizers or governors shall sign articles of
dissolution and termination containing:
(1) the name of the limited liability company;
(2) the date of organization;
(3) a statement that contributions have not been accepted;
(4) a statement that no debts remain unpaid.
(b) The articles of dissolution and termination shall be
filed with the secretary of state.
Sec. 48. Minnesota Statutes 1994, section 322B.813,
subdivision 5, is amended to read:
Subd. 5. [DISTRIBUTION TO MEMBERS.] All tangible or
intangible property, including money, remaining after the
discharge of, or after making adequate provision for the
discharge of, the debts, obligations, and liabilities of the
limited liability company must be distributed to the members in
accordance with sections 322B.52 and 322B.873.
Sec. 49. Minnesota Statutes 1994, 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 as 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; or
(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;
(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. 50. Minnesota Statutes 1994, section 322B.833,
subdivision 2, is amended to read:
Subd. 2. [BUY-OUT ON MOTION.] In an action under
subdivision 1, clause (2), involving a closely held limited
liability company at the time the action is commenced and in
which one or more of the circumstances described in that clause
is established, the court may, upon motion of a limited
liability company or a member, order the sale by a plaintiff or
a defendant of all membership interests of the limited liability
company held by the plaintiff or defendant to either the limited
liability company or the moving members, whichever is specified
in the motion, if the court determines in its discretion that an
order would be fair and equitable to all parties under all of
the circumstances of the case.
The purchase price of any membership interest so sold must
be the fair value of the membership interest as of the date of
the commencement of the action or as of another date found
equitable by the court. If the articles of organization, a
member control agreement or business continuation agreement
states a price for the redemption or buy-out of membership
interests, the court shall order the sale for the price and on
the terms set forth in them, unless the court determines that
the price or terms are unreasonable under all the circumstances
of the case.
Within five days after the entry of the order, the limited
liability company shall provide each selling member with the
information it is required to provide under section 322B.386,
subdivision 5, paragraph (a).
If the parties are unable to agree on fair value within 40
days of entry of the order, the court shall determine the fair
value of the membership interests under the provisions of
section 322B.386, subdivision 7, may allow interest or costs as
provided in section 322B.386, subdivisions 1 and 8, and may
allocate payment among the member whose membership interest is
being sold and any assignees of the financial rights of that
member.
The purchase price must be paid in one or more installments
as agreed on by the parties, or, if no agreement can be reached
within 40 days of entry of the order, as ordered by the court.
Upon entry of an order for the sale of a membership interest
under this subdivision and provided that the limited liability
company or the moving members post a bond in adequate amount
with sufficient sureties or otherwise satisfy the court that any
full purchase price of the membership interest, plus the
additional costs, expenses, and fees awarded by the court, will
be paid when due and payable, the selling member shall no longer
have any rights or status as a member, manager, or governor,
except the right to receive the fair value of the membership
interest plus other amounts as might be awarded.
Sec. 51. Minnesota Statutes 1994, section 322B.833,
subdivision 4, is amended to read:
Subd. 4. [CONSIDERATIONS IN GRANTING RELIEF INVOLVING
CLOSELY HELD LIMITED LIABILITY COMPANIES.] In determining
whether to order relief under this section and in determining
what particular relief to order, the court shall take into
consideration the duty that all members in a closely held
limited liability company owe one another to act in an honest,
fair, and reasonable manner in the operation of the limited
liability company and the reasonable expectations of the all
members as they exist at the inception and develop during the
course of the members' relationship with the limited liability
company and with each other. For purposes of this section, any
written agreements, including employment agreements and buy-sell
agreements, between or among members or between or among one or
more members and the limited liability company are presumed to
reflect the parties' reasonable expectations concerning matters
dealt with in the agreements.
Sec. 52. Minnesota Statutes 1994, section 323.14,
subdivision 4, is amended to read:
Subd. 4. [LIMITED LIABILITY AFTER DISSOLUTION.] (a)
Subject to section 323.44, subdivision 7, the limited liability
described in subdivisions 2 and 3 continues in full force for
the dissolved partnership regardless of any dissolution, winding
up, and termination of a limited liability partnership.
(b) If a limited liability partnership dissolves and its
business is continued by a successor general partnership under
section 323.37, then the limited liability described in
subdivisions 2 and 3 and 4 also applies to that successor
partnership until the expiration of the registration that the
dissolved partnership had in effect under section 323.44 at the
moment of dissolution. The successor general partnership may at
any time file its own registration under section 323.44.
Sec. 53. Minnesota Statutes 1995 Supplement, section
336.8-103, is amended to read:
336.8-103 [RULES FOR DETERMINING WHETHER CERTAIN
OBLIGATIONS AND INTERESTS ARE SECURITIES OR FINANCIAL ASSETS.]
(a) A share or similar equity interest issued by a
corporation, business trust, joint stock company, or similar
entity is a security.
(b) An "investment company security" is a security.
"Investment company security" means a share or similar equity
interest issued by an entity that is registered as an investment
company under the federal investment company laws, an interest
in a unit investment trust that is so registered, or a
face-amount certificate issued by a face-amount certificate
company that is so registered. Investment company security does
not include an insurance policy or endowment policy or annuity
contract issued by an insurance company.
(c) An interest in a partnership or limited liability
company is a general intangible and is not a security or a
financial asset, except as follows:
(1) An interest in a partnership or limited liability
company is not a security unless and is not a general intangible
if it is dealt in or traded on a securities exchanges exchange
or in a securities markets market, its terms expressly provide
that it is a security governed by this article, or it is an
investment company security. However,
(2) An interest in a partnership or limited liability
company is a financial asset and is not a general intangible if
it is held in a securities account.
(d) A writing that is a security certificate is governed by
this article and not by article 3, even though it also meets the
requirements of that article. However, a negotiable instrument
governed by article 3 is a financial asset if it is held in a
securities account.
(e) An option or similar obligation issued by a clearing
corporation to its participants is not a security, but is a
financial asset.
(f) A commodity contract, as defined in section 336.9-115,
is not a security or a financial asset.
Sec. 54. Minnesota Statutes 1995 Supplement, section
336.8-603, is amended to read:
336.8-603 [SAVINGS CLAUSE.]
(a) Laws 1995, chapter 194, does not affect an action or
proceeding commenced before January 1, 1996.
(b) If a security interest in a security is perfected on
January 1, 1996 December 31, 1995, and the action by which the
security interest was perfected would suffice to perfect a
security interest under Laws 1995, chapter 194 this act, no
further action is required to continue perfection. If a
security interest in a security is perfected at January 1, 1996
on December 31, 1995, but the action by which the security
interest was perfected would not suffice to perfect a security
interest under Laws 1995, chapter 194 in the same property under
this act, the security interest remains perfected for a period
of four months after January 1, 1996 during the period through
December 31, 1996, so long as the security interest could have
remained perfected under the law in effect on December 31, 1995,
if that law continued in effect after December 31, 1995, and
continues perfected thereafter if appropriate action to perfect
under Laws 1995, chapter 194, this act is taken within that
period during the one-year period from January 1, 1996 to
December 31, 1996. If a security interest is perfected at
January 1, 1996 on December 31, 1995, and the security interest
can be perfected by filing under Laws 1995, chapter 194 this
act, a financing statement signed by the secured party instead
of the debtor may be filed within that period to continue
perfection or thereafter to perfect.
Sec. 55. [EFFECTIVE DATE.]
Sections 15, 53, and 54 are effective retroactive to
January 1, 1996.
Presented to the governor March 19, 1996
Signed by the governor March 21, 1996, 2:15 p.m.
Official Publication of the State of Minnesota
Revisor of Statutes