Minnesota Revised Uniform Limited Liability Company Act
Nearly 200,000 LLCs formed in Minnesota since 1993 will be affected by the new Minnesota Revised Uniform Limited Liability Company Act, which became law in 2014. On April 8th, 2014, Minnesota Governor Mark Dayton signed into law the Minnesota Revised Uniform Limited Liability Company Act.
This law impacts all LLCs in Minnesota. This is the most significant change affecting Minnesota LLC law since LLCs were first permitted in Minnesota.
Key Dates for the New LLC Act
Here are the dates important to LLC owners:
August 1, 2015:
LLCs formed on August 1, 2015, or later are subject to the new LLC Act. LLCs formed prior to August 1, 2015, are subject to the old LLC Act.
August 1, 2015 to January 1, 2018 (Conversion Period)
Owners of an LLC formed before August 1, 2015 can convert their company to be governed by the new LLC Act between August 1, 2015, and January 1, 2018.
January 1, 2018
All LLCs that have not converted to the new LLC Act will be automatically converted on January 1, 2018.
The fact that LLC documents were written under the old LLC Act, but will be governed by the new LLC Act, may create complex problems for these LLCs. In short, LLC owners will likely find their LLC articles, bylaws, operating agreement, and member control agreement do not accomplish what the owners intended. LLC owners should update their legal documents prior to January 1, 2018 to avoid unintended consequences impacting their legal and financial rights.
Why Was Minnesota’s LLC Act Changed?
Minnesota’s LLC law was very different from all other states, which added unnecessary complexity.
Minnesota enacted this new LLC law to implement best practices in LLC law and establish an LLC approach that operates better with other states.
What are Major Changes for Minnesota LLC Owners?
Major changes include
- shifting from a corporation-based model to the partnership-based model used by all other states and
- adopting best practices recommended by business law experts.
One of its drafters, Professor Daniel Kleinberger, noted the Revised Uniform LLC Act has significant changes concerning
- the operating agreement
- the “un-cabining” of fiduciary duty
- the obligation of good faith and fair dealing
- an owner’s legitimate self-interest
- a reformation of the duty of care
- the “shelf LLC” issue
- the question of “statutory apparent authority”
- statements of authority by position
- default rules on management structure
- charging orders
- a remedy for oppressive conduct
- derivative claims and special litigation committees
- organic transactions — mergers, conversions, and domestications
The legislation has a grandfather clause allowing existing LLCs to continue under some of the old provisions.
How Does Our New LLC Act Compare to Other States?
Minnesota’s new LLC Act is modeled after the Revised Uniform Limited Liability Company Act (also known as the Revised Uniform LLC Act or Re-ULLCA). Other states that have already enacted most of the Revised Uniform LLC Act include California, District of Columbia, Florida, Idaho, Iowa, Nebraska, New Jersey, Utah, and Wyoming.
Most of the remaining states have older LLC laws based on Re-ULLCA’s predecessor, the Uniform Limited Liability Company Act (also known as the Uniform LLC Act or ULLCA).
Who Wrote Our LLC Laws?
Both the Uniform LLC Act, drafted in 1996, and Revised Uniform LLC Act, drafted in 2006, were written by the Uniform Law Commission, a nonprofit organization established in 1892. The Uniform Law Commission provides states with non-partisan, well-conceived and well-drafted legislation that brings clarity and stability to critical areas of state statutory law.
Minnesota’s original LLC laws are found in Minnesota Statutes chapter 322B. This chapter is partially based on the Uniform LLC Act. However, the Minnesota Legislature substantially deviated from the partnership-based approach of the Uniform LLC Act by enacting a unique corporation-based approach. The new LLC Act is available in Minnesota Statutes chapter 322C.
Minnesota’s 2014 legislation, the Minnesota Revised Uniform Limited Liability Company Act, generally implemented the Revised Uniform LLC Act drafted by the Uniform Law Commission in 2006.
Who Supported Enacting the Revised Uniform LLC Act?
There was no significant opposition to the Uniform LLC Act and Revised Uniform LLC Act in general, but legal experts have a variety of opinions on specific provisions.
Virtually all states model their LLC laws on the Uniform LLC Act. California, District of Columbia, Florida, Idaho, Iowa, Nebraska, New Jersey, Utah, Wyoming, and Minnesota have updated their LLC laws to include the 2006 version, the Revised Uniform LLC Act.
The Revised Uniform LLC Act was endorsed by the Minnesota State Bar Association and American Bar Association.
Where Can I Learn More about the Revised Uniform LLC Act?
The Uniform Law Commission provides a number of resources on the Revised Uniform LLC Act:
- Legislative Fact Sheet
- Act Summary
- Complete RULLCA Legislative Information Kit
- Why States Should Adopt
- University of Arkansas Law Review (pdf)
- The Business Lawyer- The Next Generation (pdf)
Professor Daniel Kleinberger and his written works are credited for much of the information here. Professor Kleinberger is one of the nation’s leading experts on LLC law. He serves on the Uniform Law Commission, is a professor at William Mitchell College of Law, and oversaw attorney Aaron Hall’s legal research and writing on closely held businesses for the William Mitchell Law Review.