Office of the Revisor of Statutes
Minnesota Session Laws - 1999, Regular Session
Key: (1) language to be deleted (2) new language
CHAPTER 85-H.F.No. 836
An act relating to business organizations; regulating
business corporations; defining terms; modifying the
authority to grant restricted stock; regulating
take-over offers; providing for name changes in
certain circumstances; regulating mergers and
exchanges; making clarifying and technical changes;
removing ambiguities; regulating limited liability
companies; eliminating unnecessary provisions;
correcting terminology; regulating member control
agreements and dissolutions; providing for the
duration of certain companies; making conforming
changes required by the enactment of the revised
Uniform Partnership Act; amending Minnesota Statutes
1998, sections 302A.011, subdivisions 7 and 56;
302A.111, subdivision 5; 302A.181, subdivision 1;
302A.223, subdivision 3; 302A.402, subdivision 3;
302A.405, subdivision 1; 302A.417, subdivision 7;
302A.457, subdivisions 1 and 2; 302A.471, subdivision
1; 302A.613, subdivision 1; 302A.621, subdivisions 1
and 6; 302A.671, subdivision 1; 302A.675, subdivision
2; 319B.02, subdivisions 10, 12, 21, and 22; 319B.04,
subdivisions 2 and 3; 319B.08, subdivision 1; 319B.10,
subdivision 2; 319B.11, subdivisions 3, 4, and 8;
322A.02; 322A.87; 322A.88; 322B.03, subdivisions 12,
30, 44, and 45; 322B.115, subdivisions 1, 2, and 3;
322B.155; 322B.20, subdivisions 1 and 2; 322B.30,
subdivision 2; 322B.306; 322B.31, subdivision 3;
322B.313, subdivisions 2, 3, and 7; 322B.323,
subdivision 2; 322B.326; 322B.33, subdivisions 1 and
4; 322B.333, subdivisions 1 and 3; 322B.336,
subdivisions 1 and 3; 322B.34, subdivisions 2 and 3;
322B.343, subdivisions 1 and 2; 322B.346; 322B.35,
subdivision 1; 322B.353; 322B.356, subdivisions 1, 2,
and 3; 322B.363, subdivisions 2 and 3; 322B.366,
subdivision 1; 322B.37; 322B.383, subdivision 1;
322B.386, subdivisions 1, 2, 4, and 5; 322B.40,
subdivisions 1, 5, and 6; 322B.41, subdivisions 3 and
4; 322B.42, subdivision 5; 322B.43, subdivisions 1 and
3; 322B.50; 322B.51; 322B.52; 322B.54, subdivision 1;
322B.56, subdivision 1; 322B.603; 322B.606,
subdivision 1; 322B.61; 322B.613; 322B.616; 322B.623;
322B.626; 322B.63, subdivision 1; 322B.636,
subdivisions 1 and 3; 322B.64; 322B.643, subdivisions
1, 3, and 4; 322B.646; 322B.65; 322B.653; 322B.656,
subdivision 1; 322B.66, subdivision 2; 322B.663,
subdivision 4; 322B.666, subdivision 1; 322B.673,
subdivisions 1 and 2; 322B.676; 322B.686, subdivision
3; 322B.689; 322B.699, subdivision 4; 322B.72,
subdivisions 1 and 2; 322B.80, subdivision 1;
322B.813, subdivision 3; 322B.816, subdivision 4;
322B.833, subdivisions 2, 5, and 6; 322B.843,
subdivision 2; 322B.873, subdivisions 1 and 4;
323A.10-01; and 323A.11-02; repealing Minnesota
Statutes 1998, sections 322B.03, subdivisions 4, 5, 9,
and 16; 322B.363, subdivision 8; 322B.366, subdivision
2; 322B.816, subdivision 3; and 322B.873, subdivisions
2 and 3.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
ARTICLE 1
BUSINESS CORPORATIONS
Section 1. Minnesota Statutes 1998, section 302A.011,
subdivision 7, is amended to read:
Subd. 7. [CONSTITUENT CORPORATION.] "Constituent
corporation" means a domestic or corporation or a foreign
corporation that is a party to a merger or exchange:
(1) in a merger is either the surviving corporation or a
corporation that is merged into the surviving organization; or
(2) in an exchange is either the acquiring corporation or a
corporation whose shares are acquired by the acquiring
organization.
Sec. 2. Minnesota Statutes 1998, section 302A.011,
subdivision 56, is amended to read:
Subd. 56. [CONSTITUENT ORGANIZATION.] "Constituent
organization" means a corporation, foreign corporation, or a
domestic limited liability company or foreign limited liability
company that is a party to a merger or an exchange:
(1) in a merger is either the surviving organization or an
organization that is merged into the surviving organization; or
(2) in an exchange is either the acquiring organization or
an organization whose securities are acquired by the acquiring
organization.
Sec. 3. Minnesota Statutes 1998, section 302A.111,
subdivision 5, is amended to read:
Subd. 5. [OPTIONAL PROVISIONS: GENERALLY.] The articles
may contain other provisions not inconsistent with section
302A.201 or any other provision of law relating to the
management of the business or the regulation of the affairs of
the corporation.
Sec. 4. Minnesota Statutes 1998, section 302A.181,
subdivision 1, is amended to read:
Subdivision 1. [GENERALLY.] A corporation may, but need
not, have bylaws. Bylaws may contain any provision relating to
the management of the business or the regulation of the affairs
of the corporation not inconsistent with section 302A.201 or any
other provision of law or the articles.
Sec. 5. Minnesota Statutes 1998, section 302A.223,
subdivision 3, is amended to read:
Subd. 3. [REMOVAL BY SHAREHOLDERS.] Except as provided in
subdivision 4, any one or all of the directors may be removed at
any time, with or without cause, by the affirmative vote of the
holders of the proportion or number a majority of the voting
power of the all shares of the classes or series the director
represents sufficient to elect them, except as provided in
subdivision 4 entitled to vote at an election of directors;
provided that, if a director has been elected solely by the
holders of a class or series of shares, as stated in the
articles or bylaws, then that director may be removed only by
the affirmative vote of the holders of a majority of the voting
power of all shares of that class or series entitled to vote at
an election of that director.
Sec. 6. Minnesota Statutes 1998, section 302A.402,
subdivision 3, is amended to read:
Subd. 3. [BY ACTION OF BOARD ALONE; FILING OF ARTICLES OF
AMENDMENT.] (a) Subject to the restrictions provided in
subdivision 2 or any restrictions provision in the articles that
states that section 302A.402, subdivision 3, does not apply, a
share dividend, division, or combination may be effected by
action of the board alone, without the approval of shareholders
under sections 302A.135 and 302A.137. In effecting a division
or combination under this subdivision, the board may amend the
articles to increase or decrease the par value of shares,
increase or decrease the number of authorized shares, and make
any other change necessary or appropriate to assure that the
rights or preferences of the holders of outstanding shares of
any class or series will not be adversely affected by the
division or combination.
(b) If a division or combination that includes an amendment
of the articles is effected under this subdivision, then
articles of amendment must be prepared that contain the
information required by section 302A.139 and a statement that
the amendment will not adversely affect the rights or
preferences of the holders of outstanding shares of any class or
series and will not result in the percentage of authorized
shares of any class or series that remains unissued after the
division or combination exceeding the percentage of authorized
shares of that class or series that were unissued before the
division or combination.
Sec. 7. Minnesota Statutes 1998, section 302A.405,
subdivision 1, is amended to read:
Subdivision 1. [CONSIDERATION; PROCEDURE.] Subject to any
restrictions in the articles:
(a) Shares may be issued for any consideration, including,
without limitation, money or other tangible or intangible
property received by the corporation or to be received by the
corporation under a written agreement, or services rendered to
the corporation or to be rendered to the corporation under a
written agreement, as authorized by resolution approved by the
affirmative vote of the directors required by section 302A.237,
or, if provided for in the articles, approved by the affirmative
vote of the shareholders required by section 302A.437,
establishing a price in money or other consideration, or a
minimum price, or a general formula or method by which the price
will be determined; and
(b) A corporation may, without any new or additional
consideration, issue its own shares in exchange for or in
conversion of its outstanding shares, or, subject to
authorization of share dividends, divisions, and combinations
according to section 302A.402, issue its own shares pro rata to
its shareholders or the shareholders of one or more classes or
series, to effectuate share dividends, divisions, or
combinations. No shares of a class or series, shares of which
are then outstanding, shall be issued to the holders of shares
of another class or series (except in exchange for or in
conversion of outstanding shares of the other class or series),
unless the issuance either is expressly provided for in the
articles or is approved at a meeting by the affirmative vote of
the holders of a majority of the voting power of all shares of
the same class or series as the shares to be issued.
Sec. 8. Minnesota Statutes 1998, section 302A.417,
subdivision 7, is amended to read:
Subd. 7. [UNCERTIFICATED SHARES.] Unless uncertificated
shares are prohibited by the articles or bylaws, a resolution
approved by the affirmative vote of a majority of the directors
present may provide that some or all of any or all classes and
series of its shares will be uncertificated shares. The
resolution does not apply to shares represented by a certificate
until the certificate is surrendered to the corporation. Within
a reasonable time after the issuance or transfer of
uncertificated shares, the corporation shall send to the new
shareholder the information required by this section to be
stated on certificates. This information is not required to be
sent to the new shareholder by a publicly held corporation that
has adopted a system of issuance, recordation, and transfer of
its shares by electronic or other means not involving an
issuance of certificates if the system complies with section 174
17A of the Securities Exchange Act of 1934. Except as otherwise
expressly provided by statute, the rights and obligations of the
holders of certificated and uncertificated shares of the same
class and series are identical.
Sec. 9. Minnesota Statutes 1998, section 302A.457,
subdivision 1, is amended to read:
Subdivision 1. [AUTHORIZED.] A written agreement among the
shareholders of a corporation and the subscribers for shares to
be issued, relating to the control of any phase of the business
and affairs of the corporation, its liquidation and dissolution,
or the relations among shareholders of or subscribers to shares
of the corporation is valid and specifically enforceable as
provided in subdivision 2. The agreement may also include as
parties persons who are neither shareholders nor subscribers.
Sec. 10. Minnesota Statutes 1998, section 302A.457,
subdivision 2, is amended to read:
Subd. 2. [METHOD OF APPROVAL; ENFORCEABILITY; COPIES.] (a)
A written agreement among persons as described in subdivision 1
that relates to the control of or the liquidation and
dissolution of the corporation, the relations among them the
shareholders and subscribers, or any phase of the business and
affairs of the corporation, including, without limitation, the
management of its business, the declaration and payment of
distributions, the election of directors or officers, the
employment of shareholders and others by the corporation, or the
arbitration of disputes, is valid and specifically enforceable,
if the agreement is signed by all persons who, on the date the
agreement first becomes effective, are then the shareholders of
the corporation, whether or not the shareholders all have voting
shares, and the subscribers for shares, whether or not voting
shares, to be issued. A written agreement as described in
subdivision 1 may provide for its amendment through nonunanimous
means.
(b) The agreement is enforceable by the persons described
in subdivision 1 who are parties to it and is binding upon and
enforceable against only those persons and other persons having
knowledge of the existence of the agreement. A copy of the
agreement shall be filed with the corporation. The existence
and location of a copy of the agreement shall be noted
conspicuously on the face or back of each certificate for shares
issued by the corporation and included in information sent to
the holders of uncertificated shares according to section
302A.417, subdivision 7.
(c) A shareholder, a beneficial owner of shares, or another
person having a security interest in shares has the right upon
written demand to obtain a copy of the agreement from the
corporation at the expense of the corporation.
Sec. 11. Minnesota Statutes 1998, section 302A.471,
subdivision 1, is amended to read:
Subdivision 1. [ACTIONS CREATING RIGHTS.] A shareholder of
a corporation may dissent from, and obtain payment for the fair
value of the shareholder's shares in the event of, any of the
following corporate actions:
(a) An amendment of the articles that materially and
adversely affects the rights or preferences of the shares of the
dissenting shareholder in that it:
(1) alters or abolishes a preferential right of the shares;
(2) creates, alters, or abolishes a right in respect of the
redemption of the shares, including a provision respecting a
sinking fund for the redemption or repurchase of the shares;
(3) alters or abolishes a preemptive right of the holder of
the shares to acquire shares, securities other than shares, or
rights to purchase shares or securities other than shares;
(4) excludes or limits the right of a shareholder to vote
on a matter, or to cumulate votes, except as the right may be
excluded or limited through the authorization or issuance of
securities of an existing or new class or series with similar or
different voting rights; except that an amendment to the
articles of an issuing public corporation that provides that
section 302A.671 does not apply to a control share acquisition
does not give rise to the right to obtain payment under this
section;
(b) A sale, lease, transfer, or other disposition of all or
substantially all of the property and assets of the corporation,
but not including a transaction permitted without shareholder
approval in section 302A.661, subdivision 1, or a disposition in
dissolution described in section 302A.725, subdivision 2, 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 shareholders
in accordance with their respective interests within one year
after the date of disposition;
(c) A plan of merger, whether under this chapter or under
chapter 322B, to which the corporation is a party constituent
organization, except as provided in subdivision 3;
(d) A plan of exchange, whether under this chapter or under
chapter 322B, to which the corporation is a party as the
corporation whose shares will be acquired by the acquiring
corporation, if the shares of the shareholder are entitled to be
voted on the plan; or
(e) Any other corporate action taken pursuant to a
shareholder vote with respect to which the articles, the bylaws,
or a resolution approved by the board directs that dissenting
shareholders may obtain payment for their shares.
Sec. 12. Minnesota Statutes 1998, section 302A.613,
subdivision 1, is amended to read:
Subdivision 1. [BOARD APPROVAL; NOTICE TO SHAREHOLDERS.] A
resolution containing the plan of merger or exchange shall be
approved by the affirmative vote of a majority of the directors
present at a meeting of the board of each constituent
corporation and shall then be submitted at a regular or a
special meeting to the shareholders of (i) each constituent
corporation, in the case of a plan of merger, and (ii) the
corporation whose shares will be acquired by the acquiring
organization in the exchange, in the case of a plan of
exchange. The plan of merger or exchange may require that it be
submitted to the shareholders whether or not the board of
directors determines at any time after the board of directors'
initial approval of the plan that the plan is no longer
advisable and recommends that the shareholders reject it. If
shareholders holding any class or series of stock of the
corporation are entitled to vote on the plan of merger or
exchange pursuant to this section, written notice shall be given
to every shareholder of a corporation, whether or not entitled
to vote at the meeting, not less than 14 days nor more than 60
days before the meeting, in the manner provided in section
302A.435 for notice of meetings of shareholders. The written
notice shall state that a purpose of the meeting is to consider
the proposed plan of merger or exchange. A copy or short
description of the plan of merger or exchange shall be included
in or enclosed with the notice. If the merger or exchange is
with a domestic or foreign limited liability company, the plan
of merger or exchange must also be approved in the manner
required by the laws of the state under which the limited
liability company is organized.
Sec. 13. Minnesota Statutes 1998, section 302A.621,
subdivision 1, is amended to read:
Subdivision 1. [WHEN AUTHORIZED; CONTENTS OF PLAN.] A
parent owning at least 90 percent of the outstanding shares of
each class and series of a subsidiary directly, or indirectly
through related corporations, may merge the subsidiary into
itself or into any other subsidiary at least 90 percent of the
outstanding shares of each class and series of which is owned by
the parent directly, or indirectly through related corporations,
without a vote of the shareholders of itself or any subsidiary
or may merge itself, or itself and one or more of the
subsidiaries, into one of the subsidiaries under this section.
A resolution approved by the affirmative vote of a majority of
the directors of the parent present shall set forth a plan of
merger that contains:
(a) The name of the subsidiary or subsidiaries, the name of
the parent and the name of the surviving corporation;
(b) The manner and basis of converting the shares of the
subsidiary or subsidiaries or parent into securities of the
parent, subsidiary, or of another corporation or, in whole or in
part, into money or other property;
(c) If the parent is a constituent corporation but is not
the surviving corporation in the merger, a provision for the pro
rata issuance of shares of the surviving corporation to the
holders of shares of the parent on surrender of any certificates
for shares of the parent; and
(d) If the surviving corporation is a subsidiary, a
statement of any amendments to the articles of the surviving
corporation that will be part of the merger.
If the parent is a constituent corporation and the
surviving corporation in the merger, it may change its corporate
name, without a vote of its shareholders, by the inclusion of a
provision to that effect in the resolution of merger setting
forth the plan of merger that is approved by the affirmative
vote of a majority of the directors of the parent present. Upon
the effective date of the merger, the name of the parent shall
be changed.
If the parent is a constituent corporation but is not the
surviving corporation in the merger, the resolution is not
effective unless it is also approved by the affirmative vote of
the holders of a majority of the voting power of all shares of
the parent entitled to vote at a regular or special meeting held
in accordance with section 302A.613 if the parent is a domestic
corporation or in accordance with the laws under which it is
incorporated if the parent is a foreign corporation.
Sec. 14. Minnesota Statutes 1998, section 302A.621,
subdivision 6, is amended to read:
Subd. 6. [RIGHTS OF DISSENTING SHAREHOLDERS.] In the event
all of the stock of one or more domestic subsidiaries that is a
constituent party to a merger under this section is not owned by
the parent directly, or indirectly through related corporations,
immediately prior to the merger, the shareholders of each
domestic subsidiary have dissenters' rights under
section sections 302A.471, (without regard to section 302A.471,
subdivision 3) and 302A.473. If the parent is a constituent
corporation but is not the surviving corporation in the merger,
and the articles of incorporation of the surviving corporation
immediately after the merger differ from the articles of
incorporation of the parent immediately prior to the merger in a
manner that would entitle a shareholder of the parent to
dissenters' rights under section 302A.471, subdivision 1,
paragraph (a), if the articles of incorporation of the surviving
corporation constituted an amendment to the articles of
incorporation of the parent, that shareholder of the parent has
dissenters' rights as provided under sections 302A.471 and
302A.473. Except as provided in this subdivision, sections
302A.471 and 302A.473 do not apply to any merger effected under
this section.
Sec. 15. Minnesota Statutes 1998, section 302A.671,
subdivision 1, is amended to read:
Subdivision 1. [APPLICATION.] (a) Unless otherwise
expressly provided in the articles or in bylaws approved by the
shareholders of an issuing public corporation, this section
applies to a control share acquisition. A shareholder's
proposal to amend the corporation's articles or bylaws to cause
this section to be inapplicable to the corporation requires the
vote set forth in subdivision 4a, paragraph (b), in order for it
to be effective, unless it is approved by a committee of the
board comprised solely of directors who:
(1) are neither officers nor employees of, nor were during
the five years preceding the formation of the committee officers
or employees of, the corporation or a related organization;
(2) are neither acquiring persons nor affiliates or
associates of an acquiring person;
(3) were not nominated for election as directors by an
acquiring person or an affiliate or associate of an acquiring
person; and
(4) were directors at the time an acquiring person became
an acquiring person or were nominated, elected, or recommended
for election as directors by a majority of those directors.
(b) The shares of an issuing public corporation acquired by
an acquiring person in a control share acquisition that exceed
the threshold of voting power of any of the ranges specified in
subdivision 2, paragraph (d), shall have only the voting rights
as shall be accorded to them pursuant to subdivision 4a.
Sec. 16. Minnesota Statutes 1998, section 302A.675,
subdivision 2, is amended to read:
Subd. 2. [EXCEPTION.] Subdivision 1 does not apply if the
proposed acquisition of shares is approved, before the purchase
of any shares by the offeror pursuant to the earlier takeover
offer, by a committee of the board's disinterested directors
before the purchase of any shares by the offeror pursuant to the
earlier takeover offer. The provisions of section 302A.673,
subdivision 1, paragraph (d), relating to a committee of
disinterested directors, apply to this section board, comprised
solely of directors who:
(1) neither are officers or employees of, nor were during
the five years preceding the formation of the committee officers
or employees of, the corporation or a related organization;
(2) are neither the offerors nor affiliates or associates
of the offeror;
(3) were not nominated for election as directors by the
offeror or an affiliate or associate of the offeror; and
(4) were directors at the time of the first public
announcement of the takeover offer or were nominated, elected,
or recommended for election as directors by a majority of the
directors.
Sec. 17. [EFFECTIVE DATE.]
Sections 1 to 16 are effective the day following final
enactment.
ARTICLE 2
LIMITED LIABILITY COMPANIES
Section 1. Minnesota Statutes 1998, section 322B.03,
subdivision 12, is amended to read:
Subd. 12. [CONSTITUENT ORGANIZATION.] "Constituent
organization" means a limited liability company or a domestic or
corporation or a foreign corporation that is a party to a merger
or an exchange.:
(1) in a merger is either the surviving organization or an
organization that is merged into the surviving organization; or
(2) in an exchange is either the acquiring organization or
an organization whose securities are acquired by the acquiring
organization.
Sec. 2. Minnesota Statutes 1998, section 322B.03,
subdivision 30, is amended to read:
Subd. 30. [MEMBER.] "Member" means a person reflected in
the required records of a limited liability company as the owner
of some governance rights of a membership interest of the
limited liability company. A person may be a member without
having voting rights.
Sec. 3. Minnesota Statutes 1998, section 322B.03,
subdivision 44, is amended to read:
Subd. 44. [SERIES.] "Series" means a category of
membership interests, within a class of membership interests,
that have some of the same rights and preferences as other
membership interests within the same class, but that differ in
or one or more rights and preferences from another category of
membership interests within that class.
Sec. 4. Minnesota Statutes 1998, section 322B.03,
subdivision 45, is amended to read:
Subd. 45. [SIGNED.] (a) "Signed" means that the signature
of a person has been written on a document, as provided in
section 645.44, subdivision 14, and, with respect to a document
required by this chapter to be filed with the secretary of
state, means that the document has been signed by a person
authorized to do so by this chapter, the articles of
organization, a member control agreement, or operating agreement
or a resolution approved by the governors as required by section
322B.653 or the members as required by section 322B.346.
(b) A signature on a document may be a facsimile affixed,
engraved, printed, placed, stamped with indelible ink,
transmitted by facsimile or electronically, or in any other
manner reproduced on the document.
Sec. 5. Minnesota Statutes 1998, 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; and
(4) a statement of the period of existence for the limited
liability company if different from the 30-year period set forth
in section 322B.20, subdivision 2.
Sec. 6. Minnesota Statutes 1998, section 322B.115,
subdivision 2, is amended to read:
Subd. 2. [STATUTORY PROVISIONS THAT MAY BE MODIFIED ONLY
IN ARTICLES OF ORGANIZATION OR A MEMBER CONTROL AGREEMENT.] 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 restated when
a new contribution is accepted (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) for limited liability companies whose existence begins
before August 1, 1999, unanimous consent is required to avoid
dissolution (section 322B.80, subdivision 1, clause (5)(B)(i));
(21) the termination of a person's membership interest has
specified consequences (section 322B.306); and
(22) restrictions apply to the assignment of governance
rights (section 322B.313).
Sec. 7. Minnesota Statutes 1998, section 322B.115,
subdivision 3, is amended to read:
Subd. 3. [STATUTORY PROVISIONS THAT MAY BE MODIFIED EITHER
IN ARTICLES OF ORGANIZATION, A MEMBER CONTROL AGREEMENT, OR IN
THE OPERATING AGREEMENT.] The following provisions govern a
limited liability company unless modified 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) the notice of 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. 8. Minnesota Statutes 1998, 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 to the articles of organization, 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
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. 9. Minnesota Statutes 1998, section 322B.20,
subdivision 1, is amended to read:
Subdivision 1. [GENERALLY AND LIMITATIONS.] A limited
liability company has the powers set forth in this section,
subject to any limitations provided in any other statute of this
state or in its articles of organization. The articles may not
limit the powers stated in subdivision 3. A member control
agreement may limit the powers stated in subdivisions 4 to 24.
Sec. 10. Minnesota Statutes 1998, section 322B.20,
subdivision 2, is amended to read:
Subd. 2. [DURATION.] (a) A limited liability company whose
existence begins before August 1, 1999, 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, which may be
perpetual.
(b) A limited liability company whose existence begins on
or after August 1, 1999, has perpetual duration.
Sec. 11. Minnesota Statutes 1998, section 322B.30,
subdivision 2, is amended to read:
Subd. 2. [STATEMENT OF MEMBERSHIP INTEREST.] At the
request of any member, the limited liability company shall state
in writing the particular membership interest owned by that
member as of the moment the limited liability company makes the
statement. The statement must describe the member's rights to
vote, if any, to share in profits and losses, and to share in
distributions, restrictions on assignments of financial rights
under section 322B.31, subdivision 3, or governance rights under
section 322B.313, subdivision 6, then in effect, as well as any
assignment of the member's rights then in effect other than a
security interest. The statement is not a certificated security
as defined in section 336.8-102(1)(a), is not a negotiable
instrument, and may not serve as a vehicle by which a transfer
of any membership interest may be effected.
Sec. 12. Minnesota Statutes 1998, section 322B.306, is
amended to read:
322B.306 [TERMINATION OF A MEMBERSHIP INTEREST.]
Subdivision 1. [TERMINATION DEFINED; MEMBER'S POWER TO
TERMINATE MEMBERSHIP.] The continued membership of a member in a
limited liability company is terminated by:
(i) the member's death;
(ii) the member's retirement;
(iii) the member's resignation;
(iv) redemption of the member's complete membership
interest;
(v) an assignment of the member's governance rights under
section 322B.313 which leaves the assignor with no governance
rights;
(vi) a buyout of a member's membership interest under
section 322B.833 that leaves that member with no governance
rights;
(vii) the member's expulsion;
(viii) the member's bankruptcy;
(ix) the dissolution of a member that is an organization;
(x) a merger in which the limited liability company is not
the surviving organization; or
(xi) the occurrence of any other event that terminates the
continued membership of a member in the limited liability
company.
A member always has the power, though not necessarily the
right, to terminate its membership by resigning or retiring at
any time. A member's resignation or retirement, whether
rightful or wrongful, causes dissolution under section 322B.80,
subdivision 1, clause (5), unless dissolution is avoided under
that clause. A member has no power to transfer all or part of
the member's membership interest, except as provided in sections
322B.31 and 322B.313.
Subd. 2. [WHEN EXPULSION PERMITTED.] Unless otherwise
provided in the articles of organization or a member control
agreement, a member may not be expelled.
Subd. 3. [EFFECT OF TERMINATION OF MEMBERSHIP ON THE
GOVERNANCE RIGHTS OF THE TERMINATED MEMBER.] If for any reason
the continued membership of a member is terminated, then subject
to the articles of organization and any member control agreement:
(1) if dissolution under section 322B.80, subdivision 1,
clause (5), is avoided under that clause, then the termination
does not result in the dissolution of the limited liability
company, the member whose membership has terminated loses all
governance rights and will be considered merely an assignee of
the financial rights owned before the termination of membership;
and
(2) if dissolution under section 322B.80, subdivision 1,
clause (5), is not avoided under that clause the termination
results in the dissolution of the limited liability company, the
member whose continued membership has terminated retains all
governance rights and financial rights owned before the
termination of the membership and may exercise those rights
through the winding up and termination of the limited liability
company.
Subd. 4. [ADDITIONAL EFFECTS IF TERMINATION OF MEMBERSHIP
IS WRONGFUL.] If a member resigns or retires in contravention of
the articles of organization or a member control agreement then:
(1) if dissolution avoidance consent is obtained, the
member who has wrongfully resigned or retired is liable to the
limited liability company to the extent damaged by the wrongful
resignation or retirement; and
(2) if dissolution avoidance consent is not obtained,
section 322B.873 applies.
Sec. 13. Minnesota Statutes 1998, section 322B.31,
subdivision 3, is amended to read:
Subd. 3. [RESTRICTIONS OF ASSIGNMENT OF FINANCIAL RIGHTS.]
(a) A restriction on the assignment of financial rights may be
imposed in the articles, in a member control agreement, in the
operating agreement, by a resolution adopted by the members, or
by an agreement among or other written action by members or
among them and the limited liability company. A restriction is
not binding with respect to financial rights reflected in the
required records before the adoption of the restriction, unless
the owners of those financial rights are parties to the
agreement or voted in favor of the restriction.
(b) Subject to paragraph (c), a written restriction on the
assignment of financial rights that is not manifestly
unreasonable under the circumstances and is noted conspicuously
in the required records may be enforced against the owner of the
restricted financial rights or a successor or transferee of the
owner, including a pledgee or a legal representative. Unless
noted conspicuously in the required records, a restriction, even
though permitted by this section, is ineffective against a
person without knowledge of the restriction.
(c) With regard to restrictions on the assignment of
financial rights, a would-be assignee of financial rights is
entitled to rely on a statement of membership interest issued by
the limited liability company under section 322B.30. A
restriction on the assignment of financial rights, which is
otherwise valid and in effect at the time of the issuance of a
statement of membership interest but which is not reflected in
that statement, is ineffective against an assignee who takes an
assignment in reliance on the statement.
(d) Notwithstanding any provision of law, articles of
organization, member control agreement, operating agreement,
other agreement, resolution, or action to the contrary, a
security interest in a member's financial rights may be
foreclosed and otherwise enforced, and a secured party may
assign a member's financial rights in accordance with chapter
336, without the consent or approval of the member whose
financial rights are subject to the security interest.
Sec. 14. Minnesota Statutes 1998, 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 or
a member control agreement, 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. 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. 15. Minnesota Statutes 1998, section 322B.313,
subdivision 3, is amended to read:
Subd. 3. [EFFECT ON MEMBERSHIP.] When an assignment of
governance rights is effective under subdivision 2:
(1) if the assignment is not a security interest, the
assignee becomes a member, if not already a member; and
(2) if the assignor does not retain any governance rights,
the assignor ceases to be a member and the written consent
required under subdivision 2 also constitutes the dissolution
avoidance consent necessary to avoid dissolution that would
otherwise ensue under section 322B.80, subdivision 1, clause
(5), on account of the assignor ceasing to be a member if the
consent required to avoid dissolution is not greater than the
consent required under subdivision 2.
Sec. 16. Minnesota Statutes 1998, section 322B.313,
subdivision 7, is amended to read:
Subd. 7. [FORECLOSURE OF SECURITY INTEREST.] 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 subdivision 2. However, a
secured party may not take or assign ownership of governance
rights without first obtaining the consent required by
subdivision 2. If a secured party has a security interest in
both 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 the
consents required by subdivision 2 applies only to taking or
assigning ownership of the governance rights and does not apply
to taking or assigning ownership of the financial rights.
Notwithstanding any provision of law, articles of organization,
member control agreement, operating agreement, other agreement,
resolution, or action to the contrary, a security interest in a
member's full membership interest or governance rights may be
foreclosed and otherwise enforced, and a secured party may
assign a member's complete membership interest or governance
rights in accordance with chapter 336, all without the consent
or approval of the member whose full membership interest or
governance rights are the subject of the security interest.
Sec. 17. Minnesota Statutes 1998, section 322B.323,
subdivision 2, is amended to read:
Subd. 2. [WHEN MEMBERSHIP IS TERMINATED.] If an event
referred to in subdivision 1 causes the termination of a
member's membership interest and the termination does not result
in dissolution is avoided under section 322B.80, subdivision 1,
clause (5), then subject to the articles of organization and any
member control agreement:
(1) as provided in section 322B.306, subdivision 3, the
terminated member's interest will be considered to be merely
that of an assignee of the financial rights owned before the
termination of membership; and
(2) the rights to be exercised by the legal representative
of the terminated member will be limited accordingly.
Sec. 18. Minnesota Statutes 1998, section 322B.326, is
amended to read:
322B.326 [SHARING OF PROFITS AND LOSSES.]
Unless otherwise provided in the articles of organization,
a member control agreement, or by the board of governors under
section 322B.40, subdivisions 5 and 6, the profits and losses of
a limited liability company are to be allocated among the
members, and among classes and series of members, in proportion
to the value of the contributions of the members reflected in
the required records.
Sec. 19. Minnesota Statutes 1998, section 322B.33,
subdivision 1, is amended to read:
Subdivision 1. [PRESUMPTION AND MODIFICATION.] Unless
denied or limited in the articles of organization, a member
control agreement, or by the board of governors pursuant to
section 322B.40, subdivision 5, clause (2), a member of a
limited liability company has the preemptive rights provided in
this section.
Sec. 20. Minnesota Statutes 1998, section 322B.33,
subdivision 4, is amended to read:
Subd. 4. [EXEMPTIONS.] Unless otherwise provided in the
articles of organization or a member control agreement, 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. 21. Minnesota Statutes 1998, section 322B.333,
subdivision 1, is amended to read:
Subdivision 1. [FREQUENCY.] Regular meetings of members
may be held on an annual or other less frequent periodic basis,
but need not be held unless required by the articles of
organization, a member control agreement, or operating agreement
or by subdivision 2.
Sec. 22. Minnesota Statutes 1998, section 322B.333,
subdivision 3, is amended to read:
Subd. 3. [TIME AND PLACE.] A regular meeting, if any, must
be held on the day or date and at the time and place fixed by,
or in a manner authorized by, the articles, a member control
agreement, or operating agreement, except that a meeting called
by or at the demand of a member pursuant to subdivision 2 must
be held in the county where the principal executive office of
the limited liability company is located.
Sec. 23. Minnesota Statutes 1998, section 322B.336,
subdivision 1, is amended to read:
Subdivision 1. [WHO MAY CALL.] Special meetings of the
members may be called for any purpose or purposes at any time,
by:
(1) the chief manager;
(2) the treasurer;
(3) two or more governors;
(4) a person authorized in the articles, a member control
agreement, or operating agreement to call special meetings; or
(5) a member or members owning ten percent or more of the
voting power of all membership interests entitled to vote.
Sec. 24. Minnesota Statutes 1998, section 322B.336,
subdivision 3, is amended to read:
Subd. 3. [TIME AND PLACE.] Special meetings must be held
on the date and at the time and place fixed by the chief
manager, the treasurer, the board of governors, or a person
authorized by the articles, a member control agreement, or
operating agreement to call a meeting, except that a special
meeting called by or at the demand of a member or members
pursuant to subdivision 2 must be held in the county where the
principal executive office is located.
Sec. 25. Minnesota Statutes 1998, section 322B.34,
subdivision 2, is amended to read:
Subd. 2. [WHEN GIVEN.] In all instances where a specific
minimum notice period has not otherwise been fixed by law, the
notice must be given at least ten days before the date of the
meeting, or a shorter time provided in the articles of
organization, a member control agreement, or operating
agreement, and not more than 60 days before the date of the
meeting.
Sec. 26. Minnesota Statutes 1998, 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, a member control agreement, or operating
agreement or considered necessary or desirable by the board of
governors or by any other person or persons calling the meeting.
Sec. 27. Minnesota Statutes 1998, section 322B.343,
subdivision 1, is amended to read:
Subdivision 1. [ELECTRONIC CONFERENCES.] If and to the
extent authorized in a member control agreement, the operating
agreement, or by the board of governors of a closely held
limited liability company, a conference among members by any
means of communication through which the members may
simultaneously hear each other during the conference constitutes
a regular or special meeting of members, if the same notice is
given of the conference to every owner of membership interests
entitled to vote as would be required by this chapter for a
meeting, and if the membership interests held by the members
participating in the conference would be sufficient to
constitute a quorum at a meeting. Participation in a conference
by that means constitutes presence at the meeting in person or
by proxy if all the other requirements of section 322B.363 are
met.
Sec. 28. Minnesota Statutes 1998, section 322B.343,
subdivision 2, is amended to read:
Subd. 2. [PARTICIPATION BY ELECTRONIC MEANS.] If and to
the extent authorized in a member control agreement, the
operating agreement, or by the board of governors of a closely
held limited liability company, a member may participate in a
regular or special meeting of members not described in
subdivision 1 by any means of communication through which the
member, other members so participating, and all members
physically present at the meeting may simultaneously hear each
other during the meeting. Participation in a meeting by that
means constitutes presence at the meeting in person or by proxy
if all the other requirements of section 322B.363 are met.
Sec. 29. Minnesota Statutes 1998, section 322B.346, is
amended to read:
322B.346 [ACT OF MEMBERS.]
Subdivision 1. [MAJORITY REQUIRED.] The members shall take
action by the affirmative vote of the owners of the greater of:
(1) a majority of the voting power of the membership interests
present and entitled to vote on that item of business; or (2) a
majority of the voting power that would constitute a quorum for
the transaction of business at the meeting, except where this
chapter or, the articles of organization, or a member control
agreement, require a larger proportion. If the articles or a
member control agreement require a larger proportion than is
required by this chapter for a particular action, the
articles or the member control agreement control.
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, a member control
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 or the member control agreement require a larger
proportion. Unless otherwise stated in the articles, a member
control agreement, 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. 30. Minnesota Statutes 1998, section 322B.35,
subdivision 1, is amended to read:
Subdivision 1. [METHOD.] An action required or permitted
to be taken at a meeting of the members may be taken by written
action signed by all of the members. If the articles or a
member control agreement so provide, any action may be taken by
written action signed by the members who own voting power equal
to the voting power that would be required to take the same
action at a meeting of the members at which all members were
present.
Sec. 31. Minnesota Statutes 1998, section 322B.353, is
amended to read:
322B.353 [QUORUM.]
The owners of a majority of the voting power of the
membership interests entitled to vote at a meeting are a quorum
for the transaction of business, unless a larger or smaller
proportion is provided in the articles, a member control
agreement, or operating agreement. If a quorum is present when
a duly called or held meeting is convened, the members present
may continue to transact business until adjournment, even though
the withdrawal of members originally present leaves less than
the proportion otherwise required for a quorum.
Sec. 32. Minnesota Statutes 1998, section 322B.356,
subdivision 1, is amended to read:
Subdivision 1. [DETERMINATION.] The board of governors may
fix, or authorize a manager to fix, a date not more than 60
days, or a shorter time period provided in the articles of
organization, a member control agreement, or operating
agreement, before the date of a meeting of members as the date
for the determination of the owners of membership interests
entitled to notice of and entitled to vote at the meeting. When
a date is so fixed, only members on that date are entitled to
notice of and permitted to vote at that meeting of members.
Sec. 33. Minnesota Statutes 1998, section 322B.356,
subdivision 2, is amended to read:
Subd. 2. [VOTING POWER.] Unless otherwise provided in the
articles, a member control agreement, or by the board of
governors under section 322B.40, subdivisions 5 and 6, members
have voting power in proportion to the value of the
contributions of the members as reflected in the required
records.
Sec. 34. Minnesota Statutes 1998, section 322B.356,
subdivision 3, is amended to read:
Subd. 3. [NONMEMBERS.] The articles of organization or a
member control agreement may give or prescribe the manner of
giving a creditor, security holder, or other person a right to
vote under this section, but no prescription under this
subdivision may have the effect of transferring from an assignor
of financial rights to the assignee the assignor's voting rights.
Sec. 35. Minnesota Statutes 1998, section 322B.363,
subdivision 2, is amended to read:
Subd. 2. [DURATION.] The appointment of a proxy is valid
for 11 months, unless a longer period is expressly provided in
the appointment. No appointment is irrevocable and any
agreement purporting to grant an irrevocable proxy is void. A
member who revokes a proxy is not liable in any way for damages,
restitution, or other claim unless the appointment is coupled
with an interest in the membership interests or the limited
liability company.
Sec. 36. Minnesota Statutes 1998, section 322B.363,
subdivision 3, is amended to read:
Subd. 3. [TERMINATION.] An appointment may be terminated
at will, unless the appointment is coupled with an interest, in
which case it shall not be terminated except in accordance with
the terms of an agreement, if any, between the parties to the
appointment. Termination may be made by filing written notice
of the termination of the appointment with a manager of the
limited liability company, or by filing a new written
appointment of a proxy with a manager of the limited liability
company. Termination in either manner revokes all prior proxy
appointments and is effective when filed with a manager of the
limited liability company.
Sec. 37. Minnesota Statutes 1998, section 322B.366,
subdivision 1, is amended to read:
Subdivision 1. [GENERAL RULE.] Except as provided in
subdivision 2, A written agreement among persons who are then
members or who have signed contribution agreements, relating to
the voting of their membership interests, is valid and
specifically enforceable by and against the parties to the
agreement. The agreement may override the provisions of section
322B.363, subdivisions 1 to 7, regarding proxies.
Sec. 38. Minnesota Statutes 1998, section 322B.37, is
amended to read:
322B.37 [MEMBER CONTROL AGREEMENTS.]
Subdivision 1. [AUTHORIZATION AND SCOPE.] A written
agreement among persons who are then members, including a sole
member, or who have signed contribution agreements, relating to
the control of any phase of the business and affairs of the
limited liability company, its liquidation, dissolution and
termination, or the relations among members or persons who have
signed contribution agreements is valid as provided in
subdivision 2. Wherever this chapter provides that a particular
result may or must be obtained through a provision in the
articles of organization (other than a provision required by
section 322B.115, subdivision 1, to be contained in the
articles) or in the operating agreement, the same result can be
accomplished through a member control agreement valid under this
section or through a procedure established by a member control
agreement valid under this section. A member control agreement
may waive, in whole or in part, a member's dissenting rights
under sections 322B.383 and 322B.386, but may not waive
dissenters' rights under section 322B.873, subdivision 2, clause
(1). A member control agreement relating to any phase or aspect
of the business and affairs of a limited liability company is
valid as provided in subdivision 2 and enforceable as provided
in subdivision 3. A member control agreement valid under
subdivision 2 may relate to, without limitation, the management
of the limited liability company's business, the declaration and
payment of distributions, the sharing of profits and losses, the
election of governors or managers, the employment of members and
others by the limited liability company, the relations among
members and persons who have signed contribution agreements
(including the termination of continued membership), the
dissolution, termination, and liquidation of the limited
liability company (including the continuation of the limited
liability company's business through a successor organization or
individual), and the arbitration of disputes. Wherever this
chapter provides that a particular result may or must be
obtained through a provision in the articles of organization
(other than a provision required by section 322B.115,
subdivision 1, to be contained in the articles), in the bylaws,
or by an act of the board, the same result can be accomplished
through a member control agreement valid under this section or
through a procedure established by a member control agreement
valid under this section. A member control agreement may
allocate to the members authority ordinarily exercised by the
board of governors, allocate to the board of governors authority
ordinarily exercised by the members, or structure the governance
of the limited liability company in any agreed fashion and may
waive, in whole or in part, a member's dissenting rights under
sections 322B.383 and 322B.386.
Subd. 2. [METHOD OF APPROVAL.] A written agreement among
persons described in subdivision 1 that relates to the control
of or the liquidation, dissolution and termination of the
limited liability company, the relations among them, or any
phase of the business and affairs of the limited liability
company, including, without limitation, the management of its
business, the declaration and payment of distributions, the
sharing of profits and losses, the election of governors or
managers, the employment of members by the limited liability
company, or the arbitration of disputes, is valid, if the
agreement is signed by all persons who are then the members of
the limited liability company, whether or not the members all
have voting power, and all those who have signed contribution
agreements, regardless of whether those signatories will, when
members, have voting power. An agreement authorized under this
section may allocate to the members authority ordinarily
exercised by the board of governors, allocate to the board of
governors authority ordinarily exercised by the members, or
structure the governance of the limited liability company in any
agreed fashion. A member control agreement as described in
subdivision 1 is valid if the agreement is in writing and is
signed by the persons who, on the date the agreement first
becomes effective, comprise all the members of the limited
liability company (regardless of voting power), and all persons
who are party to contribution agreements that on that date have
not yet been fully performed (regardless of whether those
parties will, when members, have voting power). A member
control agreement may also include as parties persons who are
neither members nor parties to a contribution agreement. A
member control agreement may provide for its amendment through
nonunanimous means.
Subd. 3. [ENFORCEABILITY AND COPIES.] (a) An A member
control agreement valid under subdivisions 1 and 2 is
enforceable by persons who are parties to it and is binding upon
and enforceable against only those persons and other persons
having knowledge of the existence of the member control
agreement. A copy of the member control agreement must be filed
with the limited liability company. The limited liability
company shall note in its required records that the members'
interests are governed by a member control agreement entered
into under this section.
(b) A member control agreement valid under subdivisions 1
and 2 is specifically enforceable.
(c) A member control agreement may waive dissenters'
rights, subject to section 322B.873, subdivision 3.
(d) A member or any assignee of financial rights has the
right upon written demand to obtain a copy of any member control
agreement from the limited liability company at the company's
expense.
Subd. 4. [LIABILITY.] If an a member control agreement
authorized under this section takes away from any person any of
the authority and responsibility which that person would
otherwise possess under this chapter, the effect of the member
control agreement is also to relieve that person of liability
imposed by law for acts and omissions in the possession or
exercise of that authority and responsibility and to impose that
liability on the person or persons possessing the authority and
responsibility under the agreement.
Subd. 5. [OTHER AGREEMENTS.] This section does not apply
to, limit, or restrict agreements otherwise valid, nor is the
procedure set forth in this section the exclusive method of
agreement among members or between the members and the limited
liability company with respect to any of the matters described.
Sec. 39. Minnesota Statutes 1998, 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, but
not an amendment to a member control agreement, which 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 a statement that was required under section
322B.115, subdivision 1, regarding the power of remaining
members to avoid dissolution by giving dissolution avoidance
consent, if the statement was required under the law when the
articles of organization were executed;
(viii) changes a statement that was required under section
322B.115, subdivision 1, regarding the power of members to enter
into a business continuation agreement, if the statement was
required under the law when the articles of organization were
executed; or
(2) a sale, lease, transfer, or other disposition of all or
substantially all of the property and assets of the limited
liability company, 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 constituent organization;
(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; or
(5) any other limited liability company action taken
pursuant to a member vote with respect to which the articles of
organization, a member control agreement, 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. 40. Minnesota Statutes 1998, section 322B.386,
subdivision 1, is amended to read:
Subdivision 1. [DEFINITIONS.] (a) For purposes of this
section, the terms defined in this subdivision have the meanings
given them.
(b) "Limited liability company" means a limited liability
company whose members have obtained rights to dissent under
section 322B.383, subdivision 1, and includes any successor by
merger.
(c) "Fair value of the membership interests" means the
value of the membership interests of a limited liability company
immediately before the effective date of the limited liability
company action referred to in section 322B.383, subdivision 1.
(d) "Interest" means interest beginning five days after the
effective date of the limited liability company action referred
to in section 322B.383, subdivision 1, up to and including the
date of payment, calculated at the rate provided in section
549.09 for interest on verdicts and judgments.
(e) "Member" includes a former member when dissenters'
rights exist because:
(1) the membership of that former member has terminated
causing dissolution; and
(2) the dissolved limited liability company has then either
entered into a winding up merger under section 322B.81,
subdivision 3, or has disposed of its assets pursuant to a
business continuation agreement under section 322B.873,
subdivision 2.
Sec. 41. Minnesota Statutes 1998, section 322B.386,
subdivision 2, is amended to read:
Subd. 2. [NOTICE OF ACTION.] If a limited liability
company calls a member meeting at which any action described in
section 322B.383, subdivision 1, is to be voted upon, the notice
of the meeting must inform each member of the right to dissent
and must include a copy of section 322B.383 and this section,
and if applicable, sections 322B.873, subdivisions 2 and 3, and
a brief description of the procedure to be followed under these
sections. For members who have assigned some or all of their
financial rights, the description must also include the
procedures under subdivision 9.
Sec. 42. Minnesota Statutes 1998, 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, and 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. 43. Minnesota Statutes 1998, section 322B.386,
subdivision 5, is amended to read:
Subd. 5. [PAYMENT.] (a) After the limited liability
company action takes effect, or after the limited liability
company receives a valid demand for payment, whichever is later,
the limited liability company shall remit to each dissenting
member who has complied with subdivisions 3 and 4 the amount the
limited liability company estimates to be the fair value of the
membership interests, plus interest, accompanied by:
(1) the limited liability company's closing balance sheet
and statement of income for a fiscal year ending not more than
16 months before the effective date of the limited liability
company action, together with the latest available interim
financial statements;
(2) an estimate by the limited liability company of the
fair value of the membership interests and a brief description
of the method used to reach the estimate; and
(3) a copy of section 322B.383, and this section, and, if
applicable, section 322B.873, subdivisions 2 and 3, and a brief
description of the procedure to be followed in demanding
supplemental payment.
(b) The limited liability company may withhold the
remittance described in paragraph (a) from a person who was not
a member on the date the action dissented from was first
announced to the public. If the dissenter has complied with
subdivisions 3 and 4, the limited liability company shall
forward to the dissenter the materials described in paragraph
(a), a statement of the reason for withholding the remittance,
and an offer to pay to the dissenter the amount listed in the
materials if the dissenter agrees to accept that amount in full
satisfaction. The dissenter may decline the offer and demand
payment under subdivision 6. Failure to do so entitles the
dissenter only to the amount offered. If the dissenter makes
demand, subdivisions 7 and 8 apply.
Sec. 44. Minnesota Statutes 1998, section 322B.40,
subdivision 1, is amended to read:
Subdivision 1. [BOARD OF GOVERNORS MAY AUTHORIZE.] Subject
to any restrictions in the articles of organization or a member
control agreement and only when authorized by the board of
governors or pursuant to a member control agreement, a limited
liability company may accept contributions under subdivisions 2
and 3, make contribution agreements under section 322B.42, and
make contribution allowance agreements under section 322B.43.
Sec. 45. Minnesota Statutes 1998, section 322B.40,
subdivision 5, is amended to read:
Subd. 5. [TERMS OF MEMBERSHIP INTERESTS.] All the
membership interests of a limited liability company must:
(1) be of one class, without series, unless the articles of
organization or a member control agreement establish, or
authorize the board of governors to establish, more than one
class or series within classes;
(2) be ordinary membership interests entitled to vote as
provided in section 322B.356, and have equal rights and
preferences in all matters not otherwise provided for by the
board of governors unless and to the extent that the articles of
organization or a member control agreement have fixed the
relative rights and preferences of different classes and series;
and
(3) share profits and losses as provided in section
322B.326, and be entitled to distributions as provided in
sections 322B.50, 322B.51, and 322B.873, subdivision 1, clause
(3).
Sec. 46. Minnesota Statutes 1998, 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 or a member control
agreement, 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, in a member control agreement,
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 or a
member control agreement. 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 or a member control agreement 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. 47. Minnesota Statutes 1998, section 322B.41,
subdivision 3, is amended to read:
Subd. 3. [RESTATEMENT AS TO THE PARTICULAR SERIES OR CLASS
TO WHICH THE NEW CONTRIBUTION PERTAINS.] Unless otherwise
provided in the articles of organization or a member control
agreement, this subdivision states the method of restating the
value of old contributions that pertain to the same series or
class to which the new contribution pertains:
(1) state the value the limited liability company has
accorded to the new contribution under section 322B.40,
subdivision 3, clause (1);
(2) determine what percentage the value stated under clause
(1) will constitute, after the restatement required by this
subdivision, of the total value of all contributions that
pertain to the particular series or class to which the new
contribution pertains;
(3) divide the value stated under clause (1) by the
percentage determined under clause (2), yielding the total
value, after the restatement required by this subdivision, of
all contributions pertaining to the particular series or class;
(4) subtract the value stated under clause (1) from the
value determined under clause (3), yielding the total value,
after the restatement required by this subdivision, of all the
old contributions pertaining to the particular series or class;
(5) subtract the value, as reflected in the required
records before the restatement required by this subdivision, of
the old contributions from the value determined under clause
(4), yielding the value to be allocated among and added to the
old contributions pertaining to the particular series or class;
and
(6) allocate the value determined under clause (5)
proportionally among the old contributions pertaining to the
particular series or class, add the allocated values to those
old contributions, and change the required records accordingly.
The values determined under clause (5) and allocated and
added under clause (6) may be positive, negative, or zero.
Sec. 48. Minnesota Statutes 1998, section 322B.41,
subdivision 4, is amended to read:
Subd. 4. [RESTATEMENT METHOD FOR OTHER SERIES OR CLASSES.]
Unless otherwise provided in the articles of organization or a
member control agreement, this subdivision states the method of
restating the value of old contributions that do not pertain to
the same series or class to which the new contribution pertains;
(1) determine the percentage by which the restatement under
subdivision 3 has changed the total contribution value reflected
in the required records for the series or class to which the new
contribution pertains; and
(2) as to each old contribution that does not pertain to
the same series or class to which the new contribution pertains,
change the value reflected in the required records by the
percentage determined under clause (1). The percentage
determined under clause (1) may be positive, negative, or zero.
Sec. 49. Minnesota Statutes 1998, section 322B.42,
subdivision 5, is amended to read:
Subd. 5. [RESTRICTIONS ON ASSIGNMENT.] Unless otherwise
provided in the articles of organization or a member control
agreement, a would-be contributor's rights under a contribution
agreement may not be assigned, in whole or in part, to a person
who was not a member at the time of the assignment, unless all
the members approve the assignment by unanimous written consent.
Sec. 50. Minnesota Statutes 1998, section 322B.43,
subdivision 1, is amended to read:
Subdivision 1. [AGREEMENTS PERMITTED.] Subject to any
restrictions in the articles of organization or a member control
agreement, a limited liability company may enter into
contribution allowance agreements under the terms, provisions,
and conditions fixed by the board of governors.
Sec. 51. Minnesota Statutes 1998, section 322B.43,
subdivision 3, is amended to read:
Subd. 3. [RESTRICTIONS ON ASSIGNMENT.] Unless otherwise
provided in the articles of organization or a member control
agreement, a would-be contributor's rights under a contribution
allowance agreement may not be assigned in whole or in part to a
person who was not a member at the time of the assignment,
unless all the members approve the assignment by unanimous
written consent.
Sec. 52. Minnesota Statutes 1998, section 322B.50, is
amended to read:
322B.50 [SHARING OF DISTRIBUTIONS.]
Unless otherwise provided in the articles of organization,
or a member control agreement, or by the board of governors
under section 322B.40, subdivisions 5 and 6, distributions of
cash or other assets of a limited liability company, including
distributions on termination of the limited liability company,
must be allocated in proportion to the value of the
contributions of the members reflected in the required records.
Sec. 53. Minnesota Statutes 1998, section 322B.51, is
amended to read:
322B.51 [INTERIM DISTRIBUTIONS.]
Except as provided in the articles of organization or a
member control agreement, a member is entitled to receive
distributions before the limited liability company's termination
only as specified in the operating agreement or by the act of
the board of governors.
Sec. 54. Minnesota Statutes 1998, section 322B.52, is
amended to read:
322B.52 [DISTRIBUTION IN KIND.]
Except as provided in the articles of organization or a
member control agreement, a member, regardless of the nature of
the member's contribution, has no right to demand and receive
any distribution from a limited liability company in any form
other than cash. Except as provided in the articles of
organization or a member control agreement, a member may not be
compelled to accept a distribution of any asset in kind from a
limited liability company to the extent that the percentage of
the asset distributed to the member exceeds a percentage of that
asset that is equal to the percentage in which the member shares
in distributions from the limited liability company.
Sec. 55. Minnesota Statutes 1998, 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.
(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, a member control agreement, or operating agreement
or an agreement.
Sec. 56. Minnesota Statutes 1998, 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, a member
control agreement, 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. 57. Minnesota Statutes 1998, section 322B.603, is
amended to read:
322B.603 [OPERATING AGREEMENT BYLAWS.]
Subdivision 1. [GENERALLY.] A limited liability company
may, but need not, have bylaws, which may, but need not, be
known as an operating agreement. The operating agreement may
contain any provision relating to the management of the business
or the regulation of the affairs of the limited liability
company not inconsistent with law or the articles of
organization. An act of the board under subdivision 2 and of
the members under subdivision 3 will be considered part of the
operating agreement only if the act expressly states that it is
intended to constitute or revise the operating agreement.
Subd. 2. [POWER OF BOARD OF GOVERNORS.] An initial
operating agreement may be adopted pursuant to section 322B.60
by the organizers or by the first board of governors. Unless
reserved by the articles of organization or a member control
agreement to the members, the power to adopt, amend, or repeal
the operating agreement is vested in the board of governors.
The power of the board of governors is subject to the power of
the members, exercisable in the manner provided in subdivision
3, to adopt, amend, or repeal the operating agreement adopted,
amended, or repealed by the board of governors. After the
adoption of the initial operating agreement, the board of
governors shall not adopt, amend, or repeal an operating
agreement provision fixing a quorum for meetings of members,
prescribing procedures for removing governors or filling
vacancies in the board of governors, or fixing the number of
governors or their classifications, qualifications, or terms of
office, but may adopt or amend an operating agreement provision
to increase the number of governors.
Subd. 3. [POWER OF MEMBERS AND PROCEDURE.] If a member or
members owning three percent or more of the voting power of the
members entitled to vote propose a resolution for action by the
members to adopt, amend, or repeal operating agreement
provisions adopted, amended, or repealed by the board of
governors and the resolution sets forth the provision or
provisions proposed for adoption, amendment, or repeal, the
limitations and procedures for submitting, considering, and
adopting the resolution are the same as provided in section
322B.15, subdivisions 2 to 4, for amendment of the articles of
organization.
Sec. 58. Minnesota Statutes 1998, section 322B.606,
subdivision 1, is amended to read:
Subdivision 1. [BOARD OF GOVERNORS TO MANAGE.] The
business and affairs of a limited liability company is to be
managed by or under the direction of a board of governors,
subject to the provisions of subdivision 2 and section 322B.37.
The first board of governors may be named in the articles of
organization or a member control agreement or elected by the
organizers pursuant to section 322B.60 or by the members.
Sec. 59. Minnesota Statutes 1998, section 322B.61, is
amended to read:
322B.61 [NUMBER.]
The board of governors consists of one or more governors.
The number of governors must be fixed by or in the manner
provided in the articles of organization, a member control
agreement, or the operating agreement. The number of governors
may be increased or, subject to section 322B.636, decreased at
any time by amendment to or in the manner provided in the
articles, a member control agreement, or operating agreement.
Sec. 60. Minnesota Statutes 1998, section 322B.613, is
amended to read:
322B.613 [QUALIFICATIONS AND ELECTION.]
Governors must be natural persons. The method of election
and any additional qualifications for governors may be imposed
by or in the manner provided in the articles, a member control
agreement, or operating agreement.
Sec. 61. Minnesota Statutes 1998, section 322B.616, is
amended to read:
322B.616 [TERMS.]
Unless fixed terms are provided for in the articles, a
member control agreement, or operating agreement, a governor
serves for an indefinite term that expires at the next regular
meeting of the members. A fixed term of a governor must not
exceed five years. A governor holds office for the term for
which the governor was elected and until a successor is elected
and has qualified, or until the earlier death, resignation,
removal, or disqualification of the governor.
Sec. 62. Minnesota Statutes 1998, section 322B.623, is
amended to read:
322B.623 [COMPENSATION.]
Subject to any limitations in the articles, a member
control agreement, or operating agreement, the board of
governors may fix the compensation of governors.
Sec. 63. Minnesota Statutes 1998, section 322B.626, is
amended to read:
322B.626 [CLASSIFICATION OF GOVERNORS.]
Governors may be divided into classes as provided in the
articles, a member control agreement, or operating agreement.
Sec. 64. Minnesota Statutes 1998, section 322B.63,
subdivision 1, is amended to read:
Subdivision 1. [VOTING RIGHTS.] Unless the articles of
organization or a member control agreement provide that there is
no cumulative voting, and except as provided in section
322B.636, subdivision 5, each member entitled to vote for
governors has the right to cumulate voting power in the election
of governors by giving written notice of intent to cumulate
voting power to any manager of the limited liability company
before the meeting, or to the presiding manager at the meeting
at which the election is to occur at any time before the
election of governors at the meeting, in which case:
(1) the presiding manager at the meeting shall announce,
before the election of governors, that members shall cumulate
their voting power; and
(2) each member shall cumulate that voting power either by
casting for one candidate the amount of voting power equal to
the number of governors to be elected multiplied by the voting
power represented by the membership interests owned by that
member, or by distributing all of that voting power on the same
principle among any number of candidates.
Sec. 65. Minnesota Statutes 1998, section 322B.636,
subdivision 1, is amended to read:
Subdivision 1. [MODIFICATION.] The provisions of this
section apply unless modified by the articles of organization, a
member control agreement, or the operating agreement.
Sec. 66. Minnesota Statutes 1998, section 322B.636,
subdivision 3, is amended to read:
Subd. 3. [REMOVAL BY MEMBERS.] Except as provided in
subdivision 4, any one or all of the governors may be removed at
any time, with or without cause, by the affirmative vote of the
owners of the proportion a majority of the voting power of the
all membership interests of the classes or series the governor
represents sufficient to elect them, except as provided in
subdivision 4 entitled to vote at an election of governors;
provided that if a governor has been elected solely by the
holders of a class or series of membership interests, as stated
in the articles, any member control agreement, or bylaws, then
that governor may be removed only by the affirmative vote of the
holders of a majority of the voting power of all membership
interests of that class or series entitled to vote at an
election of that governor.
Sec. 67. Minnesota Statutes 1998, section 322B.64, is
amended to read:
322B.64 [VACANCIES.]
Unless different rules for filling vacancies are provided
for in the articles, a member control agreement, or operating
agreement:
(1)(i) vacancies on the board of governors resulting from
the death, resignation, removal, or disqualification of a
governor may be filled by the affirmative vote of a majority of
the remaining governors, even though less than a quorum; and
(ii) vacancies on the board of governors resulting from
newly created governorships may be filled by the affirmative
vote of a majority of the governors serving at the time of the
increase; and
(2) each governor elected under this section to fill a
vacancy holds office until a qualified successor is elected by
the members at the next regular or special meeting of the
members.
Sec. 68. Minnesota Statutes 1998, section 322B.643,
subdivision 1, is amended to read:
Subdivision 1. [TIME AND PLACE.] Meetings of the board of
governors may be held from time to time as provided in the
articles of organization, a member control agreement, or
operating agreement at any place within or without the state
that the board of governors may select or by any means described
in subdivision 2. If the board of governors fails to select a
place for a meeting, the meeting must be held at the principal
executive office, unless the articles, a member control
agreement, or operating agreement provide otherwise.
Sec. 69. Minnesota Statutes 1998, section 322B.643,
subdivision 3, is amended to read:
Subd. 3. [CALLING MEETINGS AND NOTICE.] Unless the
articles of organization, a member control agreement, 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, a member control agreement, or operating agreement
require it.
Sec. 70. Minnesota Statutes 1998, section 322B.643,
subdivision 4, is amended to read:
Subd. 4. [PREVIOUSLY SCHEDULED MEETINGS.] If the day or
date, time, and place of a board of governors meeting have been
provided in the articles, a member control agreement, or
operating agreement, or announced at a previous meeting of the
board of governors, no notice is required. Notice of an
adjourned meeting need not be given other than by announcement
at the meeting at which adjournment is taken.
Sec. 71. Minnesota Statutes 1998, section 322B.646, is
amended to read:
322B.646 [ABSENT GOVERNORS.]
If the articles of organization, a member control
agreement, 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 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. 72. Minnesota Statutes 1998, section 322B.65, is
amended to read:
322B.65 [QUORUM.]
A majority, or a larger or smaller proportion or number
provided in the articles of organization, a member control
agreement, or operating agreement, of the governors currently
holding office is a quorum for the transaction of business. In
the absence of a quorum, a majority of the governors present may
adjourn a meeting from time to time until a quorum is present.
If a quorum is present when a duly called or held meeting is
convened, the governors present may continue to transact
business until adjournment, even though the withdrawal of a
number of governors originally present leaves less than the
proportion or number otherwise required for a quorum.
Sec. 73. Minnesota Statutes 1998, 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 or number of governors
that would constitute a quorum for the transaction of business
at the meeting, except where this chapter or, the articles, or a
member control agreement require the affirmative vote of a
larger proportion or number. If the articles or a member
control agreement require a larger proportion or number than is
required by this chapter for a particular action, the
articles or member control agreement control.
Sec. 74. Minnesota Statutes 1998, section 322B.656,
subdivision 1, is amended to read:
Subdivision 1. [METHOD.] An action required or permitted
to be taken at a board of governors meeting may be taken by
written action signed by all of the governors. If the
articles or a member control agreement so provide, any action,
other than an action requiring member approval, may be taken by
written action signed by the number of governors that would be
required to take the same action at a meeting of the board of
governors at which all governors were present.
Sec. 75. Minnesota Statutes 1998, section 322B.66,
subdivision 2, is amended to read:
Subd. 2. [MEMBERSHIP.] Committee members must be natural
persons. Unless the articles, or a member control agreement, or
operating agreement provide for a different membership or manner
of appointment, a committee consists of one or more persons, who
need not be governors, appointed by affirmative vote of a
majority of the governors present.
Sec. 76. Minnesota Statutes 1998, section 322B.663,
subdivision 4, is amended to read:
Subd. 4. [ELIMINATION OR LIMITATION OF LIABILITY.] 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 of
organization or a member control agreement. Neither the
articles nor a member control agreement may not eliminate or
limit the liability of a governor:
(1) for any breach of the governor's duty of loyalty to the
limited liability company or its members;
(2) for acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law;
(3) under section 80A.23 or 322B.56;
(4) for any transaction from which the governor derived an
improper personal benefit; or
(5) for any act or omission occurring before the date when
the provision in the articles of organization or a member
control agreement eliminating or limiting liability becomes
effective.
Sec. 77. Minnesota Statutes 1998, section 322B.666,
subdivision 1, is amended to read:
Subdivision 1. [CONFLICT AND PROCEDURE WHEN CONFLICT
ARISES.] A contract or other transaction between a limited
liability company and one or more of its governors, or between a
limited liability company and an organization in or of which one
or more of its governors are governors, directors, managers,
officers, or legal representatives or have a material financial
interest, is not void or voidable because the governor or
governors or the other organizations are parties or because the
governor or governors are present at the meeting of the members
or the board of governors or a committee at which the contract
or transaction is authorized, approved, or ratified, if:
(1) the contract or transaction was, and the person
asserting the validity of the contract or transaction sustains
the burden of establishing that the contract or transaction was,
fair and reasonable as to the limited liability company at the
time it was authorized, approved, or ratified;
(2) the material facts as to the contract or transaction
and as to the manager's governor's or managers' governors'
interest are fully disclosed or known to the members and the
contract or transaction is approved in good faith by (i) the
owners of two-thirds of the voting power of the membership
interests entitled to vote that are owned by persons other than
the interested governor or governors, or (ii) the unanimous
affirmative vote of all members, whether or not entitled to
vote;
(3) the material facts as to the contract or transaction
and as to the governor's or governors' interest are fully
disclosed or known to the board of governors or a committee, and
the board of governors or committee authorizes, approves, or
ratifies the contract or transaction in good faith by a majority
of the board of governors or committee, but the interested
governor or governors are not counted in determining the
presence of a quorum and must not vote; or
(4) the contract or transaction is a distribution described
in section 322B.54, subdivision 1, or a merger or exchange
described in section 322B.70, subdivision 1 or 2.
Sec. 78. Minnesota Statutes 1998, section 322B.673,
subdivision 1, is amended to read:
Subdivision 1. [PRESUMPTION AND MODIFICATION.] Unless the
articles of organization, a member control agreement, or the
operating agreement provide otherwise, the chief manager and
treasurer have the duties specified in this section.
Sec. 79. Minnesota Statutes 1998, section 322B.673,
subdivision 2, is amended to read:
Subd. 2. [CHIEF MANAGER.] The chief manager shall:
(1) have general active management of the business of the
limited liability company;
(2) when present, preside at all meetings of the board of
governors and of the members;
(3) see that all orders and resolutions of the board of
governors are carried into effect;
(4) sign and deliver in the name of the limited liability
company any deeds, mortgages, bonds, contracts or other
instruments pertaining to the business of the limited liability
company, except in cases in which the authority to sign and
deliver is required by law to be exercised by another person or
is expressly delegated by the articles, a member control
agreement, or operating agreement or the board of governors to
some other manager or agent of the limited liability company;
(5) maintain records of and, whenever necessary, certify
all proceedings of the board of governors and the members; and
(6) perform other duties prescribed by the board of
governors.
Sec. 80. Minnesota Statutes 1998, section 322B.676, is
amended to read:
322B.676 [OTHER MANAGERS.]
The board of governors may elect or appoint, in a manner
set forth in the articles of organization, a member control
agreement, or operating agreement or in a resolution approved by
the affirmative vote of a majority of the governors present, any
other managers or agents the board of governors considers
necessary for the operation and management of the limited
liability company. Each of these managers and agents has the
powers, rights, duties, responsibilities, and terms in office
provided for in the articles, a member control agreement, or
operating agreement or determined by the board of governors.
Sec. 81. Minnesota Statutes 1998, section 322B.686,
subdivision 3, is amended to read:
Subd. 3. [VACANCY.] A vacancy in an office because of
death, resignation, removal, disqualification, or other cause
may, or in the case of a vacancy in the office of chief manager
or treasurer must, be filled for the unexpired portion of the
term in the manner provided in the articles, a member control
agreement, or operating agreement, or determined by the board of
governors, or pursuant to section 322B.68.
Sec. 82. Minnesota Statutes 1998, section 322B.689, is
amended to read:
322B.689 [DELEGATION.]
Unless prohibited by the articles, a member control
agreement, or operating agreement or by a resolution approved by
the affirmative vote of a majority of the governors present, a
manager elected or appointed by the board of governors may,
without the approval of the board, delegate some or all of the
duties and powers of an office to other persons. A manager who
delegates the duties or powers of an office remains subject to
the standard of conduct for a manager with respect to the
discharge of all duties and powers so delegated.
Sec. 83. Minnesota Statutes 1998, section 322B.699,
subdivision 4, is amended to read:
Subd. 4. [PROHIBITION OR LIMIT ON INDEMNIFICATION OR
ADVANCES.] The articles of organization, a member control
agreement, or operating agreement either may prohibit
indemnification or advances of expenses otherwise required by
this section or may impose conditions on indemnification or
advances of expenses in addition to the conditions contained in
subdivisions 2 and 3 including, without limitation, monetary
limits on indemnification or advances of expenses, if the
conditions apply equally to all persons or to all persons within
a given class. A prohibition or limit on indemnification or
advances may not apply to or affect the right of a person to
indemnification or advances of expenses with respect to any acts
or omissions of the person occurring before the effective date
of a provision in the articles of organization, a member control
agreement, or the date of adoption of a provision in the
operating agreement establishing the prohibition or limit on
indemnification or advances.
Sec. 84. Minnesota Statutes 1998, section 322B.72,
subdivision 1, is amended to read:
Subdivision 1. [GOVERNING BOARD APPROVAL AND NOTICE TO
OWNERS.] A resolution containing the plan of merger or exchange
must be approved by the affirmative vote of a majority of the
board members present at a meeting of the governing board of
each constituent organization and must then be submitted at a
regular or a special meeting to the owners of:
(1) each constituent organization, in the case of a plan of
merger; and
(2) the organization whose ownership interests will be
acquired by the acquiring organization in the exchange, in the
case of a plan of exchange.
The plan of merger or exchange may require that it be submitted
to the owners whether or not the governing board determines at
any time after the governing board's initial approval of the
plan that the plan is no longer advisable and recommends that
the owners reject it. If owners owning any class or series
of stock ownership interest of an organization are entitled to
vote on the plan of merger or exchange pursuant to this section,
written notice must be given to every owner of that
organization, whether or not entitled to vote at the meeting,
not less than 14 days nor more than 60 days before the meeting,
in the manner provided in section 302A.435 for notice of
meetings of shareholders in the case of a domestic corporation
and in the manner provided in section 322B.34 for notice of
meetings of members in the case of a limited liability company.
The written notice must state that a purpose of the meeting is
to consider the proposed plan of merger or exchange. A copy or
short description of the plan of merger or exchange must be
included in or enclosed with the notice.
Sec. 85. Minnesota Statutes 1998, 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) or a member control agreement, 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 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 effects a cancellation of the
ownership interests of the class or series if the plan of merger
effects a cancellation of all ownership interests of the
organization of all classes and series that are existing
immediately before the merger 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 in the event
of the merger.
Sec. 86. Minnesota Statutes 1998, section 322B.80,
subdivision 1, is amended to read:
Subdivision 1. [DISSOLUTION EVENTS.] A limited liability
company dissolves upon the occurrence of any of the following
events:
(1) when the period, if any, fixed in the articles of
organization for the duration of the limited liability company
expires, or if the limited liability company's term expires
pursuant to section 322B.20, subdivision 2, paragraph (a);
(2) by order of a court pursuant to sections 322B.833 and
322B.843;
(3) by action of the organizers pursuant to section
322B.803;
(4) by action of the members pursuant to section 322B.806;
(5)(i) for limited liability companies whose existence
begins before the effective date of this act, except as
otherwise provided in the articles of organization or a member
control agreement, upon the occurrence of an event that
terminates the continued membership of a member in the limited
liability company, including:
(i) death of any member;
(ii) retirement of any member;
(iii) resignation of any member;
(iv) redemption of a member's complete membership interest;
(v) assignment of a member's governance rights under
section 322B.313 which leaves the assignor with no governance
rights;
(vi) a buy-out of a member's membership interest under
section 322B.833 that leaves that member with no governance
rights;
(vii) expulsion of any member;
(viii) bankruptcy of any member;
(ix) dissolution of any member;
(x) a merger in which the limited liability company is not
the surviving organization;
(xi) an exchange in which the limited liability company is
not the acquiring organization; or
(xii) the occurrence of any other event that terminates the
continued membership of a member in the limited liability
company,
but the limited liability company is not dissolved and is not
required to be wound up by reason of any event that terminates
the continued membership of a member if (A) there is at least
one remaining member and the existence and business of the
limited liability company is continued by the consent of all the
remaining members obtained no later than 90 days after the
termination of the continued membership, or (B) if the
membership of the last or sole member terminates and the legal
representative of that last or sole member causes the limited
liability company to admit at least one member; or
(ii) for limited liability companies whose existence begins
on or after the effective date of this act, upon the occurrence
of an event that terminates the continued membership of a member
in the limited liability company, but only if: (A) the articles
of organization or a member control agreement specifically
provide that the termination causes dissolution and in that
event only as provided in the articles or member control
agreement; or (B) if the membership of the last or sole member
terminates and the legal representative of that last or sole
member does not cause the limited liability company to admit at
least one member within 180 days after the termination;
(6) a merger in which the limited liability company is not
the surviving organization; or
(7) when terminated by the secretary of state according to
section 322B.960.
Sec. 87. Minnesota Statutes 1998, section 322B.813,
subdivision 3, is amended to read:
Subd. 3. [COLLECTION AND PAYMENT.] When a notice of
dissolution has been filed with the secretary of state, the
board of governors, or the managers acting under the direction
of the board of governors, shall proceed as soon as possible:
(1) to give notice to creditors and claimants under section
322B.816 or to proceed under section 322B.82;
(2) subject to any business continuation agreement, to
collect or make provision for the collection of all known debts
due or owing to the limited liability company, including
unperformed contribution agreements; and
(3) except as provided in sections 322B.816, 322B.82, and
322B.863, to pay or make provision for the payment of all known
debts, obligations, and liabilities of the limited liability
company according to their priorities under section 322B.873.
Sec. 88. Minnesota Statutes 1998, section 322B.816,
subdivision 4, is amended to read:
Subd. 4. [CLAIMS AGAINST LIMITED LIABILITY COMPANIES THAT
GIVE NOTICE.] (a) A limited liability company that gives notice
to creditors and claimants has 30 days from the receipt of each
claim filed according to the procedures set forth by the limited
liability company on or before the date set forth in the notice
to accept or reject the claim by giving written notice to the
person submitting it. A claim not expressly rejected in this
manner is considered accepted.
(b) A creditor or claimant to whom notice is given and
whose claim is rejected by the limited liability company has 60
days from the date of rejection, 180 days from the date the
limited liability company filed with the secretary of state the
notice of dissolution, or 90 days after the date on which notice
was given to the creditor or claimant, whichever is longer, to
pursue any other remedies with respect to the claim.
(c) A creditor or claimant to whom notice is given who
fails to file a claim according to the procedures set forth by
the limited liability company on or before the date set forth in
the notice is barred from suing the dissolved limited liability
company on that claim or otherwise realizing upon or enforcing
it against the dissolved limited liability company, except as
provided in section 322B.863. If the dissolved limited
liability company gave the additional information referred to in
subdivision 3, nothing in this section bars the creditor or
claimant from seeking to enforce its rights against the
successor organization.
(d) A creditor or claimant whose claim is rejected by the
limited liability company under paragraph (b) is barred from
suing on that claim or otherwise realizing upon or enforcing it
whether against the dissolved limited liability company or any
successor organization, if the creditor or claimant does not
initiate legal, administrative, or arbitration proceedings with
respect to the claim within the time provided in paragraph (b).
Sec. 89. Minnesota Statutes 1998, section 322B.833,
subdivision 2, is amended to read:
Subd. 2. [BUY-OUT ON MOTION.] In an action under
subdivision 1, clause (2), 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, or 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. 90. Minnesota Statutes 1998, section 322B.833,
subdivision 5, is amended to read:
Subd. 5. [CONSIDERATIONS AS TO DISSOLUTION.] In
determining what relief to order, the court shall take into
account that any relief that results in the termination of a
member's membership interest will may cause dissolution of the
limited liability company. If the court orders relief that
results in dissolution of the limited liability company, the
court shall make appropriate orders providing for the winding up
and termination of the dissolved limited liability company.
Sec. 91. Minnesota Statutes 1998, section 322B.833,
subdivision 6, is amended to read:
Subd. 6. [LIQUIDATION REMEDY.] In deciding whether to
order winding up through liquidation, the court shall consider
whether lesser relief suggested by one or more parties, or
provided in a business continuation member control agreement,
such as any form of equitable relief, or a buy-out or partial
liquidation coupled with the continuation of the business of the
dissolved limited liability company through a successor
organization, would be adequate to permanently relieve the
circumstances established under subdivision 1, clause (2) or
(3). Lesser relief may be ordered in any case where it would be
appropriate under all the facts and circumstances of the case.
Sec. 92. Minnesota Statutes 1998, section 322B.843,
subdivision 2, is amended to read:
Subd. 2. [NOTICE TO LIMITED LIABILITY COMPANY AND
CORRECTION.] An action must not be commenced under this section
until 30 days after notice to the limited liability company by
the attorney general of the reason for the filing of the
action. If the reason for filing the action is an act that the
limited liability company has done, or omitted to do, and the
act or omission may be corrected by an amendment of the articles
of organization, a member control agreement, or the operating
agreement or by performance of or abstention from the act, the
attorney general shall give the limited liability company 30
additional days in which to effect the correction before filing
the action.
Sec. 93. Minnesota Statutes 1998, section 322B.873,
subdivision 1, is amended to read:
Subdivision 1. [DISPOSITION UPON LIQUIDATION.] Subject to
subdivision 4, except when the business of a dissolved limited
liability company is being continued under subdivision 2 or when
the dissolved limited liability company is being wound up and
terminated under section 322B.81, subdivision 3, the assets of
the dissolved limited liability company must be disposed of to
satisfying liabilities according to the following priorities:
(1) to creditors, including members who are creditors, to
the extent otherwise permitted by law, in satisfaction of
liabilities of the limited liability company other than
liabilities for interim distributions to members under section
322B.51 or termination distributions under section 322B.50;
(2) unless otherwise provided in the articles of
organization or a member control agreement, to members and
former members of the limited liability company in satisfaction
of liabilities for distributions under section 322B.50 or
322B.51; and
(3) unless otherwise provided in the articles of
organization or a member control agreement, to members first for
a return of their contributions, as restated from time to time
under section 322B.41, and secondly respecting their membership
interests in the proportions in which the members share in
distributions.
Sec. 94. Minnesota Statutes 1998, section 322B.873,
subdivision 4, is amended to read:
Subd. 4. [DAMAGES AND OFFSETS FOR WRONGFUL DISSOCIATION
AND BREACH OF A MEMBER CONTROL AGREEMENT.] A member who
wrongfully resigns or retires is liable to the limited liability
company for any damages caused by the member's wrongful
resignation or retirement. Any member who breaches a member
control agreement is liable to the limited liability company for
any damages caused by the breach. Any payment due a member
under this section, including payments, if any, to dissenters
due to winding up merger under section 322B.81, subdivision 3,
is subject to offset these damages.
Sec. 95. [REPEALER.]
Minnesota Statutes 1998, sections 322B.03, subdivisions 4,
5, 9, and 16; 322B.363, subdivision 8; 322B.366, subdivision 2;
322B.816, subdivision 3; and 322B.873, subdivisions 2 and 3, are
repealed.
Sec. 96. [REVISOR INSTRUCTION.]
The revisor of statutes shall change the term "operating
agreement" or similar term to "bylaws" or similar term wherever
it appears in Minnesota Statutes, chapter 322B, except in the
first sentence of section 322B.603, subdivision 1.
Sec. 97. [EFFECTIVE DATE; APPLICATION.]
Sections 1 to 96 are effective August 1, 1999, and unless
otherwise specified apply to all limited liability companies in
existence on or after that date.
ARTICLE 3
RUPA CONFORMING CHANGES
Section 1. Minnesota Statutes 1998, section 319B.02,
subdivision 10, is amended to read:
Subd. 10. [MINNESOTA FIRM.] "Minnesota firm" includes a
corporation organized under chapter 302A or 317A, limited
liability company organized under chapter 322B, and limited
liability partnership registered under section 323.44, and
limited liability partnership that has an effective statement of
qualification under section 323A.10-01.
Sec. 2. Minnesota Statutes 1998, section 319B.02,
subdivision 12, is amended to read:
Subd. 12. [ORGANIZATIONAL DOCUMENT.] "Organizational
document" means:
(1) with respect to a corporation organized under chapter
302A or 317A, that corporation's articles of incorporation;
(2) with respect to a limited liability company organized
under chapter 322B, that limited liability company's articles of
organization; and
(3) with respect to a limited liability partnership
registered under section 323.44, that limited liability
partnership's registration and any notice filed under section
323.44, subdivision 9, in connection with that registration; and
(4) with respect to a limited liability partnership that
has an effective statement of qualification under section
323A.10-01, that statement of qualification.
Sec. 3. Minnesota Statutes 1998, section 319B.02,
subdivision 21, is amended to read:
Subd. 21. [STATEMENT OF FOREIGN QUALIFICATION.] "Statement
of foreign qualification" means,:
(1) with respect to a foreign firm that is a limited
liability partnership, the and has filed a statement of
qualification required under section 323.49, that statement of
qualification and any notice filed under section 323.49,
subdivision 9, in connection with that registration.; and
(2) with respect to a limited liability partnership that
has an effective statement of foreign qualification under
section 323A.11-02, that statement of foreign qualification.
Sec. 4. Minnesota Statutes 1998, section 319B.02,
subdivision 22, is amended to read:
Subd. 22. [UPDATE.] "Update" means:
(1) with respect to a Minnesota professional firm that is
either a Minnesota corporation or a Minnesota limited liability
company, amend the organizational document;
(2) with respect to a Minnesota professional firm that is a
Minnesota limited liability partnership registered under section
323.44, file a notice under section 323.44, subdivision 9, in
connection with the Minnesota limited liability partnership's
registration;
(3) with respect to a foreign professional firm that is a
foreign corporation, file a notice under section 303.115 in
connection with the foreign corporation's certificate of
authority;
(4) with respect to a foreign firm that is a limited
liability company, file a notice under section 322B.92, clause
(3), in connection with the foreign limited liability company's
certificate of authority; and
(5) with respect to a foreign professional firm that is a
foreign limited liability partnership and has filed a statement
of qualification under section 323.49, file a notice under
section 323.49, subdivision 9, in connection with the foreign
limited liability partnership's that statement of qualification
.;
(6) with respect to a Minnesota professional firm that is a
limited liability partnership and has an effective statement of
qualification under section 323A.10-01, amend that statement of
qualification; and
(7) with respect to a foreign professional firm that is a
limited liability partnership and has an effective statement of
foreign qualification under section 323A.11-02, amend that
statement of foreign qualification.
Sec. 5. Minnesota Statutes 1998, section 319B.04,
subdivision 2, is amended to read:
Subd. 2. [ELECTION TO INVOKE AUTHORITY UNDER THIS ACT.] To
elect to become a foreign professional firm and be authorized to
furnish professional services according to sections 319B.01 to
319B.12, a foreign firm must in its certificate of authority or
statement of foreign qualification:
(1) state that the firm elects to operate under sections
319B.01 to 319B.12;
(2) acknowledge that the firm is subject to those sections;
(3) state that, to the extent its generally applicable
governing law conflicts or differs with those sections, the
foreign firm has made the necessary changes to the agreements
and other documents controlling its structure, governance,
operations, and internal affairs so as to comply with those
sections; and
(4) specify from the list stated in section 319B.02,
subdivision 19, the category or categories of professional
services the foreign firm is authorized to provide within
Minnesota.
The statements, acknowledgment, and specification may be
made when the foreign firm initially files for a certificate of
authority or statement of foreign qualification or may be added
at a later time by updating that document.
Sec. 6. Minnesota Statutes 1998, section 319B.04,
subdivision 3, is amended to read:
Subd. 3. [RESCISSION AND AMENDMENT OF ELECTION.] (a) A
foreign firm may rescind its election by updating its
certificate of authority or statement of foreign qualification
to delete the statements, acknowledgment, and specification
required by subdivision 2.
(b) A foreign firm may update its certificate of authority
or statement of foreign qualification to change the
specification required by subdivision 2, clause (4).
Sec. 7. Minnesota Statutes 1998, section 319B.08,
subdivision 1, is amended to read:
Subdivision 1. [ACQUISITION OF INTERESTS OR AUTOMATIC LOSS
OF PROFESSIONAL FIRM STATUS.] (a) If an owner dies or becomes
disqualified to practice all the pertinent professional
services, then either:
(1) within 90 days after the death or the beginning of the
disqualification, all of that owner's ownership interest must be
acquired by the professional firm, by persons permitted by
section 319B.07 to own the ownership interest, or by some
combination; or
(2) at the end of the 90-day period, the firm's election
under section 319B.03, subdivision 2, or 319B.04, subdivision 2,
is automatically rescinded, the firm loses its status as a
professional firm, and the authority created by that election
and status terminates.
An acquisition satisfies clause (1) if all right and title
to the deceased or disqualified owner's interest are acquired
before the end of the 90-day period, even if some or all of the
consideration is paid after the end of the 90-day period.
However, payment cannot be secured in any way that violates
sections 319B.01 to 319B.12.
(b) If automatic rescission does occur under paragraph (a),
the firm must immediately and accordingly update its
organizational document, certificate of authority, or statement
of foreign qualification. Even without that updating, however,
the rescission, loss of status, and termination of authority
provided by paragraph (a) occur automatically at the end of the
90-day period.
Sec. 8. Minnesota Statutes 1998, section 319B.10,
subdivision 2, is amended to read:
Subd. 2. [EFFECT ON PARTICIPATING PROFESSIONAL FIRM.] (a)
If a professional firm participates in and survives a
reorganization but the reorganization causes the surviving firm
to be out of compliance with section 319B.07 or 319B.09, or both:
(1) the surviving firm's election under section 319B.03,
subdivision 2, or 319B.04, subdivision 2, is automatically
rescinded;
(2) the surviving firm immediately loses its status as a
professional firm and the authority created by that election and
status terminates; and
(3) the surviving firm must immediately and accordingly
update its organizational document, certificate of authority, or
statement of foreign qualification. Even without that
amendment, however, the rescission, loss of status, and
termination of authority occur automatically when the
reorganization takes effect.
(b) If, before a reorganization takes effect, the 90-day
deadline established in section 319B.07, subdivision 1, has been
triggered but has not yet elapsed with regard to an ownership
interest in a professional firm participating in the
reorganization, the surviving firm is not out of compliance with
sections 319B.07 and 319B.09 merely because the reorganization
accords a comparable ownership interest in the surviving firm to
the disqualified owner or the representative of the deceased
owner's estate. The original 90-day deadline applies to the
comparable ownership interest and the surviving firm.
Sec. 9. Minnesota Statutes 1998, section 319B.11,
subdivision 3, is amended to read:
Subd. 3. [FILING OF ORGANIZATIONAL DOCUMENT AND REPORT
INFORMATION.] (a) No professional firm may furnish professional
services within Minnesota until the firm files with each board
having jurisdiction over the pertinent professional services:
(1) a copy of the firm's organizational document,
certificate of authority, or statement of foreign qualification;
(2) a report containing the same information as required by
subdivision 4; and
(3) except as stated in paragraph (b), a fee of $100.
(b) If a firm has previously been organized under sections
319A.01 to 319A.22, that firm is not required to pay the filing
fee under paragraph (a).
Sec. 10. Minnesota Statutes 1998, section 319B.11,
subdivision 4, is amended to read:
Subd. 4. [ANNUAL REPORT.] (a) Every professional firm must
file annually on or before January 1 with the board or boards
having jurisdiction over the pertinent professional services a
report containing the following:
(1) the name and address of the professional firm;
(2) the contents of any amendment made to the firm's
organizational document, certificate of authority, or statement
of foreign qualification since the filing of the most recent
report under subdivision 3 or this subdivision;
(3) a designation of the position or positions within the
firm that have governance authority;
(4) the name and address of each owner of an ownership
interest and each person occupying a position with governance
authority;
(5) a statement as to whether all employees, agents, and
independent contractors furnishing professional services within
Minnesota on behalf of the professional firm are professionals
authorized to furnish at least one category of the pertinent
professional services;
(6) except in the case of a professional firm that is
organized under chapter 317A or the nonprofit corporation
statute of another state, a statement as to whether all owners
and persons occupying a position with governance authority are
professionals authorized to furnish at least one category of the
pertinent professional services;
(7) in the case of a professional firm that is organized
under chapter 317A or the nonprofit corporation statute of
another state, a statement as to whether at least one person
occupying a position with governance authority is a professional
authorized to furnish at least one category of the pertinent
professional services; and
(8) any additional information as the board may by rule
prescribe as appropriate to assist in determining whether a
professional firm is complying with sections 319B.01 to 319B.12.
The statement required by clauses (5), (6), and (7) must be
made and signed under oath by a professional who is an owner or
employee of the professional firm, licensed in at least one
category of the pertinent professional services and duly
authorized to make the statement on behalf of the professional
firm.
(b) For filing each annual report under paragraph (a), each
firm must pay a fee of $25 to each board with which the report
is filed.
Sec. 11. Minnesota Statutes 1998, section 319B.11,
subdivision 8, is amended to read:
Subd. 8. [INVOLUNTARY DISSOLUTION AND RESCISSION OF
PROFESSIONAL FIRM STATUS.] A board, through the attorney
general, may institute proceedings in a district court of this
state or a contested case proceeding under chapter 14 to
involuntarily rescind a professional firm's election under
section 319B.03, subdivision 2, or 319B.04, subdivision 2, to
impose restrictions or conditions on that election or to
reprimand the professional firm due to a violation of sections
319B.01 to 319B.12, the relevant licensing statute as listed in
section 319B.02, subdivision 19, or the rules of the board. A
board, through the attorney general, may institute proceedings
in a district court of this state to have a Minnesota
professional firm involuntarily dissolved, or a foreign
professional firm's certificate of authority or statement of
foreign qualification revoked on those grounds, as well as on
any other grounds provided by Minnesota law. A board may seek
reprimands, restrictions, conditions, involuntary rescission,
and, as appropriate, dissolution or revocation within a single
proceeding in a district court of this state. After a court
enters a decree imposing rescission, dissolution, or revocation
upon a professional firm, a board shall cause a certified copy
of the decree to be filed with the secretary of state. The
secretary of state shall not charge a fee for filing the
decree. A board's claim against a professional firm for
involuntary dissolution or revocation does not abate simply
because the professional firm has rescinded its election under
section 319B.03, subdivision 2, or 319B.04, subdivision 2. A
voluntary rescission does abate a board's claim to obtain
reprimands, restrictions, conditions, or involuntary rescission.
Sec. 12. Minnesota Statutes 1998, section 322A.02, is
amended to read:
322A.02 [NAME.]
(a) The name of each limited partnership as set forth in
its certificate of limited partnership:
(1) shall contain the words "limited partnership" or the
abbreviation "LP" or "L.P." or in the case of a limited
liability limited partnership shall contain:
(i) the words "limited liability limited partnership" or
the abbreviation "LLLP" or "L.L.L.P."; or
(ii) the words "limited partnership" or the abbreviation
"LP" or "L.P." plus the words "Registered Limited Liability
Partnership" or "Limited Liability Partnership" or the
abbreviation "R.L.L.P.," "L.L.P.," "RLLP," or "LLP";
(2) may not contain the name of a limited partner unless
(i) it is also the name of a general partner or the corporate
name of a corporate general partner, or (ii) the business of the
limited partnership had been carried on under that name before
the admission of that limited partner;
(3) must be distinguishable from the name of a domestic
corporation or limited partnership, whether profit or nonprofit,
or a foreign corporation or limited partnership authorized or
registered to do business in this state, whether profit or
nonprofit, a limited liability company, whether domestic or
foreign, a limited liability partnership, whether domestic or
foreign, or a name the right to which is reserved or provided
for in the manner provided for in sections 302A.117, 322A.03,
322B.125, or 333.001 to 333.54, unless there is filed with the
certificate a written consent, court decree of prior right, or
affidavit of nonuse, of the kind required by section 302A.115,
subdivision 1, paragraph (d); and
(4) may not contain the following words: corporation,
incorporated.
The secretary of state shall determine whether a name is
"distinguishable" from another name for purposes of this section
and section 322A.03. This section does not abrogate or limit
the law of unfair competition or unfair practices, nor sections
333.001 to 333.54, nor the laws of the United States with
respect to the right to acquire and protect copyrights,
trademarks, service names, service marks, or any other rights to
the exclusive use of names or symbols, nor derogate the common
law or principles of equity.
(b) A person doing business in this state may contest the
subsequent registration of a name with the office of the
secretary of state as provided in section 5.22.
Sec. 13. Minnesota Statutes 1998, section 322A.87, is
amended to read:
322A.87 [RULES FOR CASES NOT PROVIDED FOR IN SECTIONS
322A.01 TO 322A.87.]
In any case not provided for in sections 322A.01 to 322A.87
the provisions of chapter 323, the Uniform Partnership Act
govern. (a) Before January 1, 2002, for any case not provided
for in sections 322A.01 to 322A.87 the governing law is as
follows:
(1) for limited partnerships formed after December 31,
1998, chapter 323A governs;
(2) for limited partnerships formed before January 1, 1999;
(i) if the limited partnership has filed a statement of
qualification under section 322A.88 or has amended its
certificate of limited partnership to state that the limited
partnership is subject to chapter 323A, chapter 323A governs;
(ii) if subparagraph (i) does not apply, chapter 323
governs.
(b) Beginning January 1, 2002, for any case not provided
for in sections 322A.01 to 322A.87, chapter 323A governs.
Sec. 14. Minnesota Statutes 1998, section 322A.88, is
amended to read:
322A.88 [LIMITED LIABILITY LIMITED PARTNERSHIP.]
(a) A limited partnership may become a limited liability
limited partnership by:
(1) obtaining approval of the terms and conditions under
which the limited partnership elects limited liability limited
partnership status by the vote necessary to amend the limited
partnership agreement except, in the case of a limited
partnership agreement that expressly considers contribution
obligations, the vote necessary to amend those provisions;
(2) filing a statement of qualification under section
323A.10-01(c) of the Uniform Partnership Act (1994); and
(3) complying with the name requirements of section
323A.10-02 of the Uniform Partnership Act (1994) 322A.02,
paragraph (a), clause (1), as those requirements pertain to a
limited liability limited partnership.
(b) A limited liability limited partnership continues to be
the same entity that existed before the filing of a statement of
qualification under section 323A.10-01(c) of the Uniform
Partnership Act (1994).
(c) Sections 323A.3-06(c) and 323A.3-07(d) of the Uniform
Partnership Act (1994) apply to both general and limited
partners of a limited liability limited partnership.
Sec. 15. Minnesota Statutes 1998, section 323A.10-01, is
amended to read:
323A.10-01 [STATEMENT OF QUALIFICATION.]
(a) A partnership may become a limited liability
partnership pursuant to this section.
(b) The terms and conditions on which a partnership becomes
a limited liability partnership must be approved by the vote
necessary to amend the partnership agreement except, in the case
of a partnership agreement that expressly considers obligations
to contribute to the partnership, the vote necessary to amend
those provisions.
(c) After the approval required by subsection (b), a
partnership may become a limited liability partnership by filing
a statement of qualification. The statement must contain:
(1) the name of the partnership;
(2) the street address, including the zip code, of the
partnership's chief executive office and, if different, the
street address, including the zip code, of an office in this
state, if any;
(3) if the partnership does not have an office in this
state, the name and street address, including the zip code, of
the partnership's agent for service of process;
(4) a statement that the partnership elects to be a limited
liability partnership; and
(5) a deferred effective date, if any.
(d) The agent of a limited liability partnership for
service of process must be an individual who is a resident of
this state or other person authorized to do business in this
state.
(e) The status of a partnership as a limited liability
partnership is effective on the later of the filing of the
statement or a date specified in the statement. The status
remains effective, regardless of changes in the partnership,
until it is canceled pursuant to section 323A.1-05(d) or revoked
pursuant to section 323A.10-03.
(f) The status of a partnership as a limited liability
partnership and the liability of its partners is not affected by
errors or later changes in the information required to be
contained in the statement of qualification under subsection (c).
(g) The filing of a statement of qualification establishes
that a partnership has satisfied all conditions precedent to the
qualification of the partnership as a limited liability
partnership.
(h) An amendment or cancellation of a statement of
qualification is effective when it is filed or on a deferred
effective date specified in the amendment or cancellation.
(i) A statement of qualification may include the
information necessary to make an election under section 319B.03,
subdivision 2, and to update that information as provided in
section 319B.03, subdivision 3.
Sec. 16. Minnesota Statutes 1998, section 323A.11-02, is
amended to read:
323A.11-02 [STATEMENT OF FOREIGN QUALIFICATION.]
(a) Before transacting business in this state, a foreign
limited liability partnership must file a statement of foreign
qualification. The statement must contain:
(1) the name of the foreign limited liability partnership
which satisfies the requirements of the state or other
jurisdiction under whose law it is formed and ends with
"Registered Limited Liability Partnership," "Limited Liability
Partnership," "R.L.L.P.," "L.L.P.," "RLLP," or "LLP;"
(2) the street address, including the zip code, of the
partnership's chief executive office and, if different, the
street address, including the zip code, of an office of the
partnership in this state, if any;
(3) if there is no office of the partnership in this state,
the name and street address, including the zip code, of the
partnership's agent for service of process; and
(4) a deferred effective date, if any.
(b) The agent of a foreign limited liability company for
service of process must be an individual who is a resident of
this state or other person authorized to do business in this
state.
(c) The status of a partnership as a foreign limited
liability partnership is effective on the later of the filing of
the statement of foreign qualification or a date specified in
the statement. The status remains effective, regardless of
changes in the partnership, until it is canceled pursuant to
section 323A.1-05(d) or revoked pursuant to section 323A.10-03.
(d) An amendment or cancellation of a statement of foreign
qualification is effective when it is filed or on a deferred
effective date specified in the amendment or cancellation.
(e) A statement of foreign qualification may include the
information necessary to make an election under section 319B.04,
subdivision 2, and to update that information as provided in
section 319B.04, subdivision 3.
Sec. 17. [REVISOR INSTRUCTION.]
Effective January 1, 2002, the revisor of statutes shall
remove from Minnesota Statutes, chapter 319B, all references to
Minnesota Statutes, chapter 323.
Sec. 18. [EFFECTIVE DATE.]
Sections 1 to 16 are effective retroactive to January 1,
1999.
Presented to the governor April 19, 1999
Signed by the governor April 22, 1999, 9:30 a.m.
Official Publication of the State of Minnesota
Revisor of Statutes