August 17, 2010, Introduced by Senator HUNTER and referred to the Committee on Commerce and Tourism.
A bill to amend 1993 PA 23, entitled
"Michigan limited liability company act,"
by amending sections 102, 103, 206, 211, 302, 304, 308, 401, 403,
404, 406, 501, 502, 503, 505, 506, 507, 510, 514, 515, 604, 702,
801, 804, and 805 (MCL 450.4102, 450.4103, 450.4206, 450.4211,
450.4302, 450.4304, 450.4308, 450.4401, 450.4403, 450.4404,
450.4406, 450.4501, 450.4502, 450.4503, 450.4505, 450.4506,
450.4507, 450.4510, 450.4514, 450.4515, 450.4604, 450.4702,
450.4801, 450.4804, and 450.4805), section 102 as amended by 2008
PA 566, sections 103, 304, 403, 406, 501, 502, 503, 506, 515, 801,
and 804 as amended by 2002 PA 686, section 206 as amended by 2008
PA 567, and sections 302, 308, 401, 404, and 702 as amended by 1997
PA 52, and by adding sections 216, 409, 708, and 709; and to repeal
acts and parts of acts.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 102. (1) Unless the context requires otherwise, the
definitions in this section control the interpretation of this act.
(2) As used in this act:
(a) "Administrator" means the director of the department or
his or her designated representative.
(b) "Articles of organization" means the original documents
filed to organize a limited liability company, as amended or
restated by certificates of correction, amendment, or merger, by
restated articles, or by other instruments filed or issued under
any statute.
(c) "Constituent" means a party to a plan of merger, including
the survivor.
(d) "Contribution" means anything of value that a person
contributes to the limited liability company as a prerequisite for,
or in connection with, membership, including cash, property,
services performed, or a promissory note or other binding
obligation to contribute cash or property, or to perform services.
(e) "Corporation" or "domestic corporation" means any of the
following:
(i) A corporation formed under the business corporation act,
1972 PA 284, MCL 450.1101 to 450.2098.
(ii) A corporation existing on January 1, 1973 and formed under
another statute of this state for a purpose for which a corporation
may be formed under the business corporation act, 1972 PA 284, MCL
450.1101 to 450.2098.
(iii) A corporation formed under the professional service
corporation act, 1962 PA 192, MCL 450.221 to 450.235.
(f) "Department" means the department of energy, labor, and
economic growth.
(g) "Distribution" means a direct or indirect transfer of
money or other property or the incurrence of indebtedness by a
limited liability company to or for the benefit of its members or
assignees of its members in respect of the members' membership
interests.
(h) "Electronic transmission" or "electronically transmitted"
means any form of communication that meets all of the following:
(i) It does not directly involve the physical transmission of
paper.
(ii) It creates a record that may be retained and retrieved by
the recipient.
(iii) It may be directly reproduced in paper form by the
recipient through an automated process.
(i) "Foreign limited liability company" means a limited
liability company formed under laws other than the laws of this
state.
(j) "Foreign limited partnership" means a limited partnership
formed under laws other than the laws of this state.
(k) "Limited liability company" or "domestic limited liability
company" means an entity that is an unincorporated membership
organization formed under this act.
(l) "Limited partnership" or "domestic limited partnership"
means a limited partnership formed under the Michigan revised
uniform limited partnership act, 1982 PA 213, MCL 449.1101 to
449.2108.
(m) "Low-profit limited liability company" means a limited
liability company that has included in its articles of organization
a purpose that meets, and that at all times conducts its activities
to meet, all of the following requirements:
(i) The limited liability company significantly furthers the
accomplishment of 1 or more charitable or educational purposes
described in section 170(c)(2)(B) of the internal revenue code, 26
USC 170, and would not have been formed except to accomplish those
charitable or educational purposes.
(ii) The production of income or appreciation of property is
not a significant purpose of the limited liability company.
However, in the absence of other factors, the fact that a limited
liability company produces significant income or capital
appreciation is not conclusive evidence of a significant purpose
involving the production of income or the appreciation of property.
(iii) The purposes of the limited liability company do not
include accomplishing 1 or more political or legislative purposes
described in section 170(c)(2)(D) of the internal revenue code, 26
USC 170.
(n) "Majority in interest" means a majority of votes as
allocated by an operating agreement, or by the statute in the
absence of an allocation by operating agreement, and held by
members entitled to vote on a matter submitted for a vote by
members.
(o) "Manager" or "managers" means a person or persons
designated to manage the limited liability company pursuant to a
provision in the articles of organization stating that the business
is to be managed by or under the authority of managers.
(p) "Member" means a person who has been admitted to a limited
liability company as provided in section 501, or, in the case of a
foreign limited liability company, a person that is a member of the
foreign limited liability company in accordance with the laws under
which the foreign limited liability company is organized.
(q) "Membership interest" or "interest" means a member's
rights in the limited liability company, including, but not limited
to, any right to receive distributions of the limited liability
company's assets and any right to vote or participate in
management.
(r) "Operating agreement" means a written agreement by the
member of a limited liability company that has 1 member, or between
all of the members of a limited liability company that has more
than 1 member, pertaining to the affairs of the limited liability
company and the conduct of its business. The term includes any
provision in the articles of organization pertaining to the affairs
of the limited liability company and the conduct of its business.
(s) "Person" means an individual, partnership, limited
liability company, trust, custodian, estate, association,
corporation, governmental entity, or any other legal entity.
(t) "Services in a learned profession" means services rendered
by a dentist, an osteopathic physician, a physician, a surgeon, a
doctor of divinity or other clergy, or an attorney-at-law.
(u) "Surviving company", "surviving entity", or "survivor"
means the constituent that survives a merger, as identified in the
certificate of merger.
(v) "Vote" means an affirmative vote, approval, or consent.
Sec. 103. (1) One or more persons organizing a limited
liability company shall sign the original articles of organization
as organizers. The articles shall state the names of the organizers
beneath or opposite their signatures.
(2) Any document other than original articles of organization
required or permitted to be filed under this act that this act
requires be executed on behalf of the domestic limited liability
company shall be signed by a manager of the company if management
is vested in 1 or more managers, by at least 1 member if management
remains
in the members, or by an any
authorized agent of the
company. A document required to be executed on behalf of a foreign
limited liability company shall be signed by a person with
authority to do so under the laws of the jurisdiction of its
organization. The document shall state the name of the person
signing the document and the capacity in which he or she signs
beneath or opposite his or her signature.
(3)
A person executing may sign a
document under this section
may
sign the document by an attorney in fact. Powers as an
authorized agent of a limited liability company. If the
authorization is pursuant to a power of attorney, the power of
attorney
relating to authorizing the signing of a the document
by
an
attorney in fact the person need not be sworn to, verified,
acknowledged, or filed with the administrator. A document signed by
a
person by an attorney in fact under
this subsection as an
authorized agent of a limited liability company shall state the
capacity
of the person signing the document. by the attorney in
fact.
Sec. 206. (1) A domestic or foreign limited liability company
may transact business under an assumed name or names other than its
name as set forth in its articles of organization or certificate of
authority, if not precluded from use of the assumed name or names
under section 204(3), by filing a certificate stating the true name
of the company and the assumed name or names under which business
is to be transacted.
(2) A certificate of assumed name is effective, unless
terminated by filing a certificate of termination or by the
dissolution or withdrawal of the company, for a period expiring on
December 31 of the fifth full calendar year following the year in
which the certificate of assumed name was filed. The certificate of
assumed name may be extended for additional consecutive periods of
5 full calendar years each by filing a similar certificate of
assumed name not earlier than 90 days before the expiration of the
initial or any subsequent 5-year period.
(3) The administrator shall notify a domestic or foreign
limited liability company of the impending expiration of a
certificate of assumed name not later than 90 days before the
expiration of the initial or any subsequent 5-year period described
in subsection (2).
(4) Filing a certificate of assumed name under this section
does not create substantive rights to the use of a particular
assumed name.
(5) The same name may be assumed by 2 or more limited
liability companies or by 1 or more limited liability companies and
1 or more corporations, limited partnerships, or other enterprises
participating together in a partnership or joint venture. Each
participating limited liability company shall file a certificate of
assumed name under this section.
(6) A limited liability company participating in a merger, or
any other entity participating in a merger under section 705a, may
transfer to the survivor the use of an assumed name for which a
certificate of assumed name is on file with the administrator
before the merger, if the transfer of the assumed name is noted in
the certificate of merger as provided in section 703(1)(c),
705a(7)(c), or other applicable statute. The use of an assumed name
transferred under this subsection may continue for the remaining
effective period of the certificate of assumed name on file before
the merger and the survivor may terminate or extend the certificate
in accordance with subsection (2).
(7) A limited liability company surviving a merger may use as
an assumed name the name of a merging limited liability company, or
the name of any other entity participating in the merger under
section 705a, by filing a certificate of assumed name under
subsection (1) or by providing for the use of the assumed name in
the certificate of merger. The surviving limited liability company
may also file a certificate of assumed name under subsection (1) or
provide in the certificate of merger for the use of an assumed name
of a merging entity not transferred pursuant to subsection (6). A
provision in the certificate of merger pursuant to this subsection
is treated as a new certificate of assumed name.
(8) A business organization into which a domestic limited
liability company has converted under section 708 may use an
assumed name of the converting company, if the company has a
certificate of assumed name for that assumed name on file with the
administrator before the conversion, by providing for the use of
the name as an assumed name in the certificate of conversion. The
use of an assumed name under this subsection may continue for the
remaining effective period of the certificate of assumed name on
file before the conversion, and the surviving business organization
may terminate or extend the certificate of assumed name in the
manner described in subsection (2).
(9) A domestic limited liability company into which a business
organization has converted under section 709 may use as an assumed
name the name of the business organization converting into that
company, or use as an assumed name an assumed name of that business
organization, by filing a certificate of assumed name under
subsection (2) or by providing for the use of that name or assumed
name as an assumed name of the company in the certificate of
conversion. A provision in the certificate of conversion under this
subsection shall be treated as a new certificate of assumed name.
Sec. 211. An act of a limited liability company and a transfer
of real or personal property to or by a limited liability company,
otherwise lawful, is not invalid because the company was without
capacity or power to do the act or make or receive the transfer,
except that the lack of capacity or power may be asserted in any of
the following:
(a) In an action by a member against the company to enjoin the
doing of an act or the transfer of real or personal property by or
to the company.
(b) In an action by or in the right of the company to procure
a judgment in its favor against an incumbent or former member or
manager
of the company for loss or damage due to his or her an
unauthorized act of that member or manager.
(c) In an action or special proceeding by the attorney general
to dissolve the company or to enjoin it from the transaction of
unauthorized business.
Sec. 216. Except as otherwise provided in an operating
agreement, a limited liability company may do any of the following:
(a) Indemnify, hold harmless, and defend a member, manager, or
other person from and against any and all losses, expenses, claims,
and demands sustained by that person, except that the company may
not indemnify a person for conduct described in section 407(a),
(b), or (c).
(b) Purchase and maintain insurance on behalf of a member,
manager, or other person against any liability or expense asserted
against or incurred by that person, whether or not the company may
indemnify that person under subdivision (a).
Sec. 302. (1) A promise by a member to contribute to the
limited liability company is not enforceable unless the promise is
in writing and signed by the member.
(2) Unless otherwise provided in an operating agreement, a
member is obligated to the limited liability company to perform any
enforceable promise to contribute cash or property or to perform
services,
even if he or she the
member is unable to perform because
of death, disability, or other reason. If a member does not make
the
required contribution of property or services, he or she the
member is obligated, at the option of the limited liability
company, to contribute cash equal to that portion of value of the
stated contribution that is not made.
(3) The rights of the limited liability company under
subsection (2) are in addition to any other rights that the limited
liability company may have under an operating agreement or
applicable law.
(4) Unless otherwise provided in an operating agreement, a
member's obligation to make a contribution or to return money or
other property paid or distributed in violation of this act may be
compromised only upon the unanimous vote of the members of the
limited liability company entitled to vote. Notwithstanding a
compromise of a member's obligation, a creditor of a limited
liability company who extends credit or otherwise acts in reliance
on the member's obligation after the member signs a writing that
reflects the obligation and before the amendment of the writing to
reflect the compromise may enforce the member's original
obligation.
Sec. 304. (1) Except as otherwise provided in this act and
subject to subsection (2), a member is entitled to receive
distributions
a distribution from a limited liability company
before the withdrawal of the member from the limited liability
company
and or before the dissolution and winding up of the limited
liability company to the extent and at the times or upon the
happening of the events specified in an operating agreement.
(2) If an operating agreement does not address a member's
right to receive a distribution before the withdrawal of the member
from the limited liability company or before the dissolution and
winding up of the limited liability company, the unanimous approval
of the members is required for any distribution to that member.
Sec.
308. (1) A member or manager who that votes for or
assents to a distribution in violation of an operating agreement or
section 307 is personally liable, jointly and severally, to the
limited liability company for the amount of the distribution that
exceeds what could have been distributed without violating the
operating agreement or section 307 if it is established that the
member or manager did not comply with section 404.
(2) For purposes of liability under subsection (1), a member
or manager entitled to participate in a decision to make a
distribution is presumed to have assented to a distribution unless
he
or she files the member or
manager does 1 of the following:
(a) Votes against the distribution.
(b) Files a written dissent with the limited liability company
either
at the meeting at which the distribution decision is made if
it
is made at a meeting and he or she is present or within a
reasonable
time after he or she the
member or manager has knowledge
of the decision.
(3)
A member who that accepts or receives a distribution with
knowledge of facts indicating it is in violation of an operating
agreement or section 307 is liable to the limited liability company
for the amount the member accepts or receives that exceeds the
member's share of the amount that could have been distributed
without violating section 307 or the operating agreement.
(4) Each member or manager held liable under subsection (1)
for an unlawful distribution is entitled to contribution from each
other member or manager who could be held liable under subsection
(1) or (3). The contribution of a person held liable under both
subsections
(1) and (3) shall not exceed his or her the person's
liability under either subsection (1) or (3), whichever is greater.
(5) A proceeding under this section is barred unless it is
commenced within 2 years after the date on which the effect of the
distribution is measured under section 307.
Sec. 401. Unless the articles of organization state that the
business of the limited liability company is to be managed by 1 or
more managers, the business of the limited liability company shall
be managed by the members, subject to any provision in an operating
agreement restricting or enlarging the management rights and duties
of any member or group of members. If management is vested in the
members, both of the following apply:
(a) The members are considered managers for purposes of
applying this act, including section 406 regarding the agency
authority of managers, unless the context clearly requires
otherwise.
(b) The members have, and are subject to, all duties and
liabilities of managers and to all limitations on liability and
indemnification rights of managers.
Sec. 403. (1) A vote of a majority in interest of the members
entitled to vote in accordance with section 502(1) is required to
select 1 or more managers to fill initial positions or vacancies.
(2) The members may remove 1 or more managers with or without
cause unless an operating agreement provides that managers may be
removed only for cause.
(3) The members may remove a manager for cause only at a
meeting
called expressly for that purpose, and that the manager
shall
have reasonable advance notice of the allegations against him
or
her that manager and an opportunity to be heard at the meeting.
Sec.
404. (1) A manager shall discharge his or her the duties
as
a of manager in good faith, with the care an ordinarily
prudent
person in a like position would exercise under similar
circumstances,
and in a manner he or she the
manager reasonably
believes to be in the best interests of the limited liability
company.
(2)
In discharging his or her the
manager's duties, a manager
may rely on information, opinions, reports, or statements,
including, but not limited to, financial statements or other
financial data, if prepared or presented by any of the following:
(a) One or more other managers or members or employees of the
limited liability company whom the manager reasonably believes to
be reliable and competent in the matter presented.
(b) Legal counsel, public accountants, engineers, or other
persons as to matters the manager reasonably believes are within
the person's professional or expert competence.
(c)
A committee of managers of which he or she the manager is
not a member if the manager reasonably believes the committee
merits confidence.
(3) A manager is not entitled to rely on the information,
opinions,
reports, or statements described in subsection (2) if he
or
she the manager has knowledge concerning the matter in question
that makes reliance otherwise permitted by subsection (2)
unwarranted.
(4) A manager is not liable for an action taken as a manager
or
the failure to take an action if he or she the manager performs
the
duties of his or her the
manager's office in compliance with
this section.
(5) Except as otherwise provided in an operating agreement or
by vote of the members pursuant to section 502(4) and (7), a
manager shall account to the limited liability company and hold as
trustee for it any profit or benefit derived by the manager from
any transaction connected with the conduct or winding up of the
limited liability company or from any personal use by the manager
of its property.
(6) An action against a manager for failure to perform the
duties imposed by this act shall be commenced within 3 years after
the cause of action has accrued or within 2 years after the cause
of action is discovered or should reasonably have been discovered
by the complainant, whichever occurs first.
Sec. 406. A manager is an agent of the limited liability
company for the purpose of its business, and the act of a manager,
including the execution in the limited liability company name of
any instrument, that apparently carries on in the usual way the
business
of the limited liability company of which he or she the
manager is a manager binds the limited liability company, unless
both of the following apply:
(a) The manager does not have the authority to act for the
limited liability company in that particular matter.
(b) The person with whom the manager is dealing has actual
knowledge that the manager lacks authority to act or the articles
of organization or this act establishes that the manager lacks
authority to act.
Sec. 409. (1) Except as otherwise provided in an operating
agreement, a transaction in which a manager or agent of a limited
liability company is determined to have an interest shall not,
because of the interest, be enjoined, be set aside, or give rise to
an award of damages or other sanctions, in a proceeding by a member
or by or in the right of the company, if the manager or agent
interested in the transaction establishes any of the following:
(a) The transaction was fair to the company at the time
entered into.
(b) The material facts of the transaction and the manager's or
agent's interest were disclosed or known to the managers and the
managers authorized, approved, or ratified the transaction.
(c) The material facts of the transaction and the manager's or
agent's interest were disclosed or known to the members entitled to
vote and they authorized, approved, or ratified the transaction.
(2) Except as otherwise provided in the articles of
organization or an operating agreement, a transaction is
authorized, approved, or ratified for purposes of subsection (1)(b)
if it receives the affirmative vote of a majority of the managers
that have no interest in the transaction. The presence of, or a
vote cast by, a manager with an interest in the transaction does
not affect the validity of an action taken under subsection (1)(b).
(3) Except as otherwise provided in the articles of
organization or an operating agreement, a transaction is
authorized, approved, or ratified for purposes of subsection (1)(c)
if it receives a majority of votes cast by the members entitled to
vote that do not have an interest in the transaction.
(4) Satisfying the requirements of subsection (1) does not
preclude other claims relating to a transaction in which a manager
or agent is determined to have an interest. Those claims shall be
evaluated under principles of law applicable to a transaction in
which a similarly situated person does not have an interest.
Sec. 501. (1) A person may be admitted as a member of a
limited
liability company in 1 or more connection
with the
formation of the limited liability company in any of the following
ways:
(a)
In connection with the formation of the limited liability
company,
by signing the initial operating agreement.
(a) If an operating agreement includes requirements for
admission, by complying with those requirements.
(b) If an operating agreement does not include requirements
for admission, if either of the following are met:
(i) The person signs the initial operating agreement.
(ii) The person's status as a member is reflected in the
records, tax filings, or other written statements of the limited
liability company.
(c) In any manner established in a written agreement of the
members.
(2)
(b) After A person may be admitted as a
member of a
limited liability company after the formation of the limited
liability
company , in 1
or more any of the following ways:
(a) (i) In If
the case of a person is
acquiring a membership
interest directly from the limited liability company, by complying
with the provisions of an operating agreement prescribing the
requirements for admission or, in the absence of provisions
prescribing the requirements for admission in an operating
agreement, upon the unanimous vote of the members entitled to vote.
(b) (ii) In If
the case of person is an assignee of a
membership interest, as provided in section 506.
(c) If the person is becoming a member of a surviving limited
liability company as the result of a merger or conversion approved
under this act, as provided in the plan of merger or plan of
conversion.
(3) (2)
A limited liability company may
admit a person as a
member
who that does not make a contribution or incur an obligation
to make a contribution to the limited liability company.
(4) (3)
Unless otherwise provided by law or
in an operating
agreement,
a person who that is a member or manager, or both, of a
limited liability company is not liable for the acts, debts, or
obligations of the limited liability company.
Sec. 502. (1) An operating agreement may establish and
allocate the voting rights of members and may provide that certain
members or groups of members have only limited or no voting rights.
If an operating agreement does not address voting rights, votes are
allocated as follows:
(a)
Prior to Before July 1, 1997, the
members of a limited
liability company shall vote in proportion to their shares of
distributions
of the company, as determined in accordance with
under section 303.
(b) On and after July 1, 1997, except as otherwise provided in
subsection (2), each member of a limited liability company has 1
vote. For purposes of this subdivision, a membership interest held
by 2 or more persons, whether as fiduciaries, members of a
partnership, tenants in common, joint tenants, tenants by the
entirety,
or otherwise, is treated as considered
held by 1 member.
(2) If a limited liability company in existence before July 1,
1997 allocated votes on the basis of subsection (1)(a), the company
shall continue to allocate votes pursuant to subsection (1)(a)
until the allocation is changed by an operating agreement.
(3) If a membership interest that has voting rights is held by
2 or more persons, whether as fiduciaries, members of a
partnership, tenants in common, joint tenants, tenants by the
entirety, or otherwise, the voting of the interest shall be in
accordance with the instrument or order appointing them or creating
the relationship if a copy of that instrument or order is furnished
to the limited liability company. If an instrument or order is not
furnished to the limited liability company, 1 of the following
applies to the voting of that membership interest:
(a) If an operating agreement applies to the voting of the
membership interest, the vote shall be in accordance with that
operating agreement.
(b) If an operating agreement does not apply to the voting of
the
membership interest and only 1 of the persons who that hold
the
membership interest votes, that person's vote determines the voting
of the membership interest.
(c) If an operating agreement does not apply to the voting of
the
membership interest and 2 or more of the persons who that hold
the membership interest vote, the vote of a majority determines the
voting of the membership interest, and if there is no majority, the
voting of the membership interest is divided among those voting.
(4) Only members of a limited liability company, and not its
managers, may authorize the following actions:
(a)
The dissolution of the limited liability company pursuant
to
under section 801(c).
(b)
Merger of the limited liability company pursuant to under
sections 701 through 706.
(c) An amendment to the articles of organization.
(d) Conversion of the limited liability company under section
708.
(5)
Unless authorized in advance by an operating agreement, a
transaction
with the limited liability company or a transaction
connected
with the conduct or winding up of the limited liability
company
in which a manager of the limited liability company has a
direct
or indirect interest or a manager's personal use of property
of
the limited liability company may be authorized or ratified only
by
a vote of the disinterested members entitled to vote. The
manager
shall disclose all material facts regarding the transaction
and
the manager's interest in the transaction or all material facts
about
the manager's personal use of the limited liability company's
property
before the members vote on that transaction or use. Except
as otherwise provided in the articles of organization or an
operating agreement, members have the voting rights provided in
section 409 regarding transactions in which a manager or agent has
an interest.
(6) Unless otherwise provided in an operating agreement, the
sale, exchange, lease, or other transfer of all or substantially
all of the assets of a limited liability company, other than in the
ordinary course of business, may be authorized only by a vote of
the members entitled to vote.
(7) The articles of organization or an operating agreement may
provide for additional voting rights of members of the limited
liability company.
(8) Unless the vote of a greater percentage of the voting
interest of members is required by this act, the articles of
organization, or an operating agreement, a vote of a majority in
interest of the members entitled to vote is required to approve any
matter
submitted for a vote by of
the members.
Sec. 503. (1) Upon written request of a member, a limited
liability company shall send a copy of its most recent annual
financial statement and its most recent federal, state, and local
income
tax returns, and reports any other returns or filings the
limited liability company has submitted or is required to submit to
any federal, state, local, or other governmental taxing authority,
to the member by mail or electronic transmission.
(2) Upon reasonable request, a member may obtain true and full
information
regarding the current state of the a limited liability
company's financial condition.
(3) (2)
Upon reasonable written request and
during ordinary
business
hours, a member or his or her the
member's designated
representative may inspect and copy, at the member's expense, any
of
the records required to be maintained a limited liability
company is required to maintain under section 213, at the location
where the records are kept.
(4) (3)
Upon reasonable written request, a
member may obtain
other
information regarding the a
limited liability company's
affairs or may inspect, personally or through a representative and
during ordinary business hours, other books and records of the
limited liability company, as is just and reasonable.
(5) (4)
A member may have a formal
accounting of the a limited
liability company's affairs, as provided in an operating agreement
or whenever circumstances render it just and reasonable.
Sec. 505. (1) Except as provided in an operating agreement, a
membership interest is assignable in whole or in part.
(2) An assignment of a membership interest does not of itself
entitle the assignee to participate in the management and affairs
of
the a limited liability company or to become or exercise any
rights of a member. An assignment entitles the assignee to receive,
to the extent assigned, only the distributions to which the
assignor would be entitled.
(3) Unless otherwise provided in an operating agreement and
except to the extent assumed by agreement, an assignee has no
liability as a member solely as a result of the assignment.
(4) Except as provided in an operating agreement, a member
ceases
to be a member upon assignment of all of his or her
membership
interest when the member's
entire membership interest is
assigned. The assignor is not released from his or her any
liability
to the company under sections 302 and 308 , even if the
assignee becomes a member.
Sec. 506. (1) Unless otherwise provided in an operating
agreement, an assignee of a membership interest in a limited
liability
company having that has
more than 1 member may become a
member only upon a unanimous vote of the members entitled to vote.
An assignee of a membership interest in a limited liability company
having
that has
1 member may become a member in
accordance with the
terms of the agreement between the member and the assignee.
(2)
An assignee who that becomes a member of a limited
liability company has, to the extent assigned, the rights and
powers, and is subject to the restrictions and liabilities, of a
member under the articles of organization, an operating agreement,
and
this act. An assignee who that
becomes a member also is liable
for
any obligations of his or her the
assignor has to make
contributions and to return distributions under sections 302 and
308(3). An assignee is not obligated for liabilities unknown to the
assignee
when he or she at the time
the assignee became a member
unless the liabilities are shown on the financial records of the
limited liability company.
Sec.
507. (1) On application to If
a court of competent
jurisdiction
by receives an application
from any judgment creditor
of a member of a limited liability company, the court may charge
the membership interest of the member with payment of the
unsatisfied
amount of judgment with interest. To the extent the
membership
interest is so charged, the judgment creditor has only
the
rights of an assignee of the membership interest.
(2) If a limited liability company is served with a charging
order and notified of the terms of that order, then to the extent
described in the order, the member's judgment creditor described in
the order is entitled to receive only any distribution or
distributions to which the judgment creditor is entitled with
respect to the member's membership interest.
(3) This act does not deprive any member of the benefit of any
exemption
laws applicable to his or her the
member's membership
interest.
(4) (2)
Unless otherwise provided in an
operating agreement ,
the
member remains a member or
admitted as a member under section
501, a judgment creditor of a member that obtains a charging order
does not become a member of the limited liability company, and the
member that is the subject of the charging order remains a member
of the limited liability company and retains all rights and powers
of membership except the right to receive distributions to the
extent charged.
(5) A charging order is a lien on the membership interest of
the member that is the subject of the charging order. However, a
person may not foreclose on that lien or on the membership interest
under this act or any other law, and the charging order is not an
assignment of the member's membership interest for purposes of
section 505(4).
(6) This section provides the exclusive remedy by which a
judgment creditor of a member may satisfy a judgment out of the
member's membership interest in a limited liability company. A
court order to which a member may have been entitled that requires
a limited liability company to take an action, provide an
accounting, or answer an inquiry is not available to a judgment
creditor of that member attempting to satisfy a judgment out of the
member's membership interest, and a court may not issue an order to
a judgment creditor.
Sec. 510. A member may commence and maintain a civil suit in
the right of a limited liability company if all of the following
conditions are met:
(a) Either management of the limited liability company is
vested
in a manager or managers who that
have the sole authority to
cause the limited liability company to sue in its own right or
management of the limited liability company is reserved to the
members but the plaintiff does not have the authority to cause the
limited liability company to sue in its own right under the
provisions of an operating agreement.
(b) The plaintiff has made written demand on the managers or
the members with the authority requesting that the managers or
members cause the limited liability company to take suitable
action.
(c) Ninety days have expired from the date the demand was made
unless the member has earlier been notified that the demand has
been rejected or unless irreparable injury to the limited liability
company would result by waiting for the expiration of the 90-day
period.
(d) The plaintiff was a member of the limited liability
company
at the time of the act or omission of which he or she the
member
complains, or his or her the member's status as a member
devolved
upon him or her the member
by operation of law or pursuant
to this act or the terms of an operating agreement from a person
who
that was a member at that time.
(e) The plaintiff fairly and adequately represents the
interests of the limited liability company in enforcing the right
of the limited liability company.
(f) The plaintiff continues to be a member until the time of
judgment, unless the failure to continue to be a member is the
result of action by the limited liability company in which the
former
member did not acquiesce and the derivative proceeding
demand
was commenced prior to made before the termination of the
former member's status as a member.
Sec.
514. Upon termination of the If
a derivative proceeding
is terminated, the court may order 1 of the following:
(a) The plaintiff to pay any of the defendants' reasonable
expenses, including reasonable attorney fees, incurred in defending
the proceeding if it finds that the proceeding was commenced or
maintained in bad faith or without reasonable cause.
(b) The limited liability company to pay the plaintiff's
reasonable expenses, including reasonable attorney fees, incurred
in the proceeding if it finds that the proceeding has resulted in a
substantial benefit to the company. The court shall direct the
plaintiff to account to the company for any proceeds received by
the plaintiff in excess of expenses awarded by the court, except
that this provision does not apply to a judgment rendered for the
benefit of an injured member only and limited to a recovery of the
loss
or damage sustained by him or her that member.
Sec. 515. (1) A member of a limited liability company may
bring an action in the circuit court of the county in which the
limited liability company's principal place of business or
registered office is located to establish that acts of the managers
or members in control of the limited liability company are illegal
or fraudulent or constitute willfully unfair and oppressive conduct
toward the limited liability company or the member. If the member
establishes grounds for relief, the circuit court may issue an
order or grant relief as it considers appropriate, including, but
not limited to, an order providing for any of the following:
(a) The dissolution and liquidation of the assets and business
of the limited liability company.
(b) The cancellation or alteration of a provision in the
articles of organization or in an operating agreement.
(c) The direction, alteration, or prohibition of an act of the
limited
liability company , or of
members, managers, or other
persons
party to the action its
members or managers.
(d) The purchase at fair value of the member's interest in the
limited
liability company, either by the company or by the managers
or
other any members responsible for the wrongful acts.
(e) An award of damages to the limited liability company or to
the member. An action seeking an award of damages must be commenced
within 3 years after the cause of action under this section has
accrued or within 2 years after the member discovers or reasonably
should have discovered the cause of action under this section,
whichever occurs first.
(2) As used in this section, "willfully unfair and oppressive
conduct" means a continuing course of conduct or a significant
action or series of actions that substantially interferes with the
interests of the member as a member. Willfully unfair and
oppressive conduct may include the termination of employment or
limitations on employment benefits to the extent that the actions
interfere with distributions or other member interests
disproportionately as to the affected member. The term does not
include conduct or actions that are permitted by the articles of
organization, an operating agreement, another agreement to which
the member is a party, or a consistently applied written company
policy or procedure.
Sec. 604. (1) A limited liability company may integrate into a
single instrument the provisions of its articles of organization
that are then in effect and operative by filing restated articles
of organization executed as provided in section 103.
(2)
A limited liability company may at the same time amend
include
amendments to its articles of
organization and include the
amendment
in the restated articles of organization filed under
subsection
(1). An amendment effected to the articles of
organization of a limited liability company in connection with the
integration and restatement of the articles under this section is
subject to any other provision of this act that would apply if a
certificate
of amendment were to be filed to effect the amendment,
including the requirement of member approval.
(3)
Restated A limited
liability company shall specifically
designate
restated articles of organization shall
be specifically
designated
filed under this section as such in the heading and
shall state, either in the heading or in an introductory paragraph,
the
present name of the limited liability company, and, all
of the
former names of the limited liability company if the name has
changed,
all of its former names, and the date of filing of its
original articles of organization. If the restated articles include
a
further amendment pursuant to under
subsection (2), the articles
shall
state that the amendment was approved by the members. 1 of
the following:
(a) If an operating agreement establishes a vote requirement
for amending the articles of organization, by the vote required
under the operating agreement.
(b) If subdivision (a) does not apply, by a unanimous vote of
all of the members entitled to vote on the amendment.
(4)
When the its restated articles of organization become
effective
in accordance with under section 104, the limited
liability company's original articles of organization are
superseded and the restated articles are the articles of
organization of the company.
Sec. 702. (1) A plan of merger shall be submitted to the
members
of each constituent company for approval. , and approval
shall
be by A unanimous vote of the members entitled to vote in
each constituent company is required to approve a merger, unless an
operating agreement of a constituent company provides otherwise.
(2) If an operating agreement of a constituent company
provides for approval of a merger by less than unanimous vote of
members
entitled to vote and the merger is approved, a member who
voted
against that did not vote in
favor of the merger may withdraw
from the limited liability company and receive, within a reasonable
time, the fair value of the member's interest in the limited
liability company, based upon the member's share of distributions
as determined under section 303.
Sec. 708. (1) A domestic limited liability company may convert
into a business organization if all of the following requirements
are satisfied:
(a) The conversion is permitted by the law that will govern
the internal affairs of the business organization after conversion
and the surviving business organization complies with that law in
converting.
(b) Unless subdivision (d) applies, the domestic limited
liability company proposing to convert adopts a plan of conversion
that includes all of the following:
(i) The name of the domestic limited liability company, the
name of the business organization into which the domestic limited
liability company is converting, the type of business organization
into which the domestic limited liability company is converting,
identification of the statute that will govern the internal affairs
of the surviving business organization, the street address of the
surviving business organization, the street address of the domestic
limited liability company if different from the street address of
the surviving business organization, and the principal place of
business of the surviving business organization.
(ii) The terms and conditions of the proposed conversion,
including the manner and basis of converting the membership
interests of the domestic limited liability company into ownership
interests or obligations of the surviving business organization,
into cash, into other consideration that may include ownership
interests or obligations of an entity that is not a party to the
conversion, or into a combination of cash and other consideration.
(iii) The terms and conditions of the organizational documents
that are to govern the surviving business organization.
(iv) Any other provisions with respect to the proposed
conversion that the domestic limited liability company considers
necessary or desirable.
(c) A vote of the members of a domestic limited liability
company is required to adopt a plan of conversion under subdivision
(b). A unanimous vote of the members entitled to vote is required
to approve a plan of conversion unless the articles of organization
or an operating agreement provide otherwise. If the articles of
organization or an operating agreement of the domestic limited
liability company provide for approval by less than a unanimous
vote of members entitled to vote and the conversion is approved, a
member that did not vote in favor of the conversion may withdraw
from the domestic limited liability company before the conversion
and receive, within a reasonable time, the fair value of the
member's interest in the domestic limited liability company.
(d) If the domestic limited liability company has not
commenced business; has not issued any membership interests; has no
debts or other liabilities; and has not received any payments, or
has returned any payments it has received after deducting any
amount disbursed for payment of expenses, for subscriptions for its
membership interests, subdivisions (b) and (c) do not apply and the
organizers of the domestic limited liability company may approve of
the conversion of the domestic limited liability company into a
business organization by unanimous consent. To effect the
conversion, a majority of the organizers must execute and file a
certificate of conversion under subdivision (e).
(e) If the plan of conversion is approved under subdivision
(c) or the conversion is approved under subdivision (d), the
domestic limited liability company files any formation documents
required to be filed under the laws governing the internal affairs
of the surviving business organization, in the manner prescribed by
those laws, and files a certificate of conversion with the
administrator. The certificate of conversion shall include all of
the following:
(i) Unless subdivision (d) applies, all of the information
described in subdivision (b)(i).
(ii) A statement that the members of the domestic limited
liability company have adopted the plan of conversion under
subdivision (c), or that the organizers of the domestic limited
liability company have approved of the conversion under subdivision
(d), as applicable.
(iii) A statement that the surviving business organization will
furnish a copy of the plan of conversion, on request and without
cost, to any member of the domestic limited liability company.
(iv) A statement specifying each assumed name of the domestic
limited liability company that the surviving business organization
is authorized to continue to use under section 206(8).
(2) Section 104 applies in determining when a certificate of
conversion under this section becomes effective.
(3) When a conversion under this section takes effect, all of
the following apply:
(a) The domestic limited liability company converts into the
surviving business organization, and the articles of organization
of the domestic limited liability company are canceled. Except as
otherwise provided in this section, the surviving business
organization is organized under and subject to the organizational
laws of the jurisdiction of the surviving business organization as
stated in the certificate of conversion.
(b) The surviving business organization has all of the
liabilities of the domestic limited liability company. The
conversion of the domestic limited liability company into a
business organization under this section shall not be considered to
affect any obligations or liabilities of the domestic limited
liability company incurred before the conversion or the personal
liability of any person incurred before the conversion, and the
conversion shall not be considered to affect the choice of law
applicable to the domestic limited liability company with respect
to matters arising before the conversion.
(c) The title to all real estate and other property and rights
owned by the domestic limited liability company remain vested in
the surviving business organization without reversion or
impairment. The rights, privileges, powers, and interests in
property of the domestic limited liability company, as well as the
debts, liabilities, and duties of the domestic limited liability
company, shall not be considered, as a consequence of the
conversion, to have been transferred to the surviving business
organization to which the domestic limited liability company has
converted for any purpose of the laws of this state.
(d) The surviving business organization may use the name and
the assumed names of the domestic limited liability company if the
filings required under section 206(8) or any other applicable
statute are made and the laws regarding use and form of names are
followed.
(e) A proceeding pending against the domestic limited
liability company may be continued as if the conversion had not
occurred, or the surviving business organization may be substituted
in the proceeding for the domestic limited liability company.
(f) The surviving business organization is considered to be
the same entity that existed before the conversion and is
considered to be organized on the date that the domestic limited
liability company was originally organized.
(g) The membership interests of the domestic limited liability
company that were to be converted into ownership interests or
obligations of the surviving business organization or into cash or
other property are converted.
(h) Unless otherwise provided in a plan of conversion adopted
in accordance with this section, the domestic limited liability
company is not required to wind up its affairs or pay its
liabilities and distribute its assets on account of the conversion,
and the conversion does not constitute a dissolution of the
domestic limited liability company.
(4) If the surviving business organization of a conversion
under this section is a foreign business organization, it is
subject to the laws of this state pertaining to the transaction of
business in this state if it transacts business in this state. The
surviving business organization is liable for, and is subject to
service of process in a proceeding in this state for the
enforcement of, an obligation of the domestic limited liability
company, and in a proceeding for the enforcement of a right of a
member of the domestic limited liability company that has withdrawn
under subsection (1)(c).
(5) As used in this section and section 709, "business
organization" and "entity" mean those terms as defined in section
705a.
Sec. 709. (1) A business organization may convert into a
domestic limited liability company if all of the following
requirements are satisfied:
(a) The conversion is permitted by the law that governs the
internal affairs of the business organization, and the business
organization complies with that law in converting.
(b) The business organization proposing to convert into a
domestic limited liability company adopts a plan of conversion that
includes all of the following:
(i) The name of the business organization, the type of business
organization that is converting, identification of the statute that
governs the internal affairs of the business organization, the name
of the surviving domestic limited liability company into which the
business organization is converting, the street address of the
surviving domestic limited liability company, the street address of
the business organization if different from the street address of
the surviving domestic limited liability company, and the principal
place of business of the surviving domestic limited liability
company.
(ii) The terms and conditions of the proposed conversion,
including the manner and basis of converting the ownership
interests of the business organization into membership interests of
the surviving domestic limited liability company, into cash, into
other consideration that may include ownership interests or
obligations of an entity that is not a party to the conversion, or
into a combination of cash and other consideration.
(iii) The terms and conditions of the articles of organization
that are to govern the surviving domestic limited liability
company.
(iv) Any other provisions with respect to the proposed
conversion that the business organization considers necessary or
desirable.
(c) If a plan of conversion is adopted by the business
organization under subdivision (b), the plan of conversion is
submitted for approval in the manner required by the law governing
the internal affairs of that business organization.
(d) If the plan of conversion is approved under subdivisions
(b) and (c), the business organization executes as provided in
section 103 and files a certificate of conversion with the
administrator. The certificate of conversion shall include all of
the following:
(i) All of the information described in subdivision (b)(i) and
(ii).
(ii) A statement that the business organization has obtained
approval of the plan of conversion under subdivision (c).
(iii) A statement that the surviving domestic limited liability
company will furnish a copy of the plan of conversion, on request
and without cost, to any owner of the business organization.
(iv) A statement specifying each assumed name of the business
organization that the surviving domestic limited liability company
is authorized to continue to use under section 206(9).
(v) Articles of organization for the surviving domestic
limited liability company that meet all of the requirements of this
act applicable to articles of organization.
(2) Section 104 applies in determining when a certificate of
conversion under this section becomes effective.
(3) When a conversion under this section takes effect, all of
the following apply:
(a) The business organization converts into the surviving
domestic limited liability company. Except as otherwise provided in
this section, the surviving domestic limited liability company is
organized under and subject to this act.
(b) The surviving domestic limited liability company has all
of the liabilities of the business organization. The conversion of
the business organization into a domestic limited liability company
under this section shall not be considered to affect any
obligations or liabilities of the business organization incurred
before the conversion or the personal liability of any person
incurred before the conversion, and the conversion shall not be
considered to affect the choice of law applicable to the business
organization with respect to matters arising before the conversion.
(c) The title to all real estate and other property and rights
owned by the business organization remains vested in the surviving
domestic limited liability company without reversion or impairment.
The rights, privileges, powers, and interests in property of the
business organization, as well as the debts, liabilities, and
duties of the business organization, shall not be considered, as a
consequence of the conversion, to have been transferred to the
surviving domestic limited liability company to which the business
organization has converted for any purpose of the laws of this
state.
(d) The surviving domestic limited liability company may use
the name and the assumed names of the business organization if the
filings required under section 206(9) or any other applicable
statute are made and the laws regarding use and form of names are
followed.
(e) A proceeding pending against the business organization may
be continued as if the conversion had not occurred, or the
surviving domestic limited liability company may be substituted in
the proceeding for the business organization.
(f) The surviving domestic limited liability company is
considered to be the same entity that existed before the conversion
and is considered to be organized on the date that the business
organization was originally organized.
(g) The ownership interests of the business organization that
were to be converted into membership interests or obligations of
the surviving domestic limited liability company or into cash or
other property are converted.
(h) Unless otherwise provided in a plan of conversion adopted
in accordance with this section, the business organization is not
required to wind up its affairs or pay its liabilities and
distribute its assets on account of the conversion, and the
conversion does not constitute a dissolution of the business
organization.
Sec. 801. A limited liability company is dissolved and its
affairs shall be wound up when the first of the following occurs:
(a)
Automatically, at the if a time specified in the
articles
of organization is reached.
(b)
Upon the happening of an If
a vote of the members or other
event specified in the articles of organization or in an operating
agreement ,
including a vote of members takes
place.
(c)
Upon the unanimous vote of all The
members entitled to
vote unanimously vote for dissolution.
(d)
Automatically, upon the entry of if a
decree of judicial
dissolution is entered.
(e) A majority of the organizers of the limited liability
company vote for dissolution, if the limited liability company has
not commenced business; has not issued any membership interests;
has no debts or other liabilities; and has not received any
payments, or has returned any payments it has received after
deducting any amount disbursed for payment of expenses, for
subscriptions for its membership interests.
Sec.
804. (1) Upon the dissolution and commencement of winding
up
of the limited liability company When
it begins winding up its
affairs, a limited liability company that dissolves under section
801(b)
or (c) , shall
execute a certificate of dissolution shall
be
signed
as provided in section 103 and filed
file the certificate
with
the administrator. The certificate of
dissolution shall set
forth
contain all of the following:
(a) The name of the limited liability company.
(b) The reason for the dissolution.
(c) The effective date of the dissolution if later than the
date of filing of the certificate of dissolution.
(2) When it begins winding up its affairs, a limited liability
company that dissolves under section 801(e) shall execute a
certificate of dissolution as provided in section 103 and file the
certificate with the administrator. The certificate of dissolution
shall contain all of the following:
(a) The name of the limited liability company.
(b) A statement that includes all of the following:
(i) That the limited liability company has not commenced
business, has not issued any membership interests, and has no debts
or other liabilities.
(ii) That the limited liability company has not received any
payments, or has returned any payments it has received after
deducting any amount disbursed for payment of expenses, for
subscriptions for its membership interests.
(iii) That a majority of the organizers of the limited liability
company have approved the dissolution.
Sec. 805. (1) Except as otherwise provided in the articles of
organization, an operating agreement, or this section, the members
or
managers who that have not wrongfully dissolved a limited
liability company may wind up the company's affairs, but the
circuit court for the county in which the registered office is
located may wind up the limited liability company's affairs on
application
of, and for good cause shown by, any member , his or
her
or legal representative , or assignee
of a member.
(2)
The members or managers who that
are winding up the a
limited liability company's affairs shall continue to function, for
the purpose of winding up, in accordance with the procedures
established by this act, the articles of organization, and
operating
agreements, shall not be held to no a greater standard of
conduct
than that described by in section 404, and shall be are
not
subject
to no any greater liabilities than would apply in the
absence of dissolution.
(3)
The A dissolved limited liability company may sue and be
sued in its name and process may issue by and against the company
in the same manner as if dissolution had not occurred. An action
brought
by or against the a
limited liability company before its
dissolution does not abate because of the dissolution.
Enacting section 1. Section 408 of the Michigan limited
liability company act, 1993 PA 23, MCL 450.4408, is repealed.