Certain Alabama Limited Liability Company Operating Agreements Must Be Amended Under the 2014 LLC Law

ALABAMA LIMITED LIABILITY COMPANY LAW OF 2014

In 2014 Alabama adopted a new Limited Liability Company Act (“LLC Act”), which was effective January 1, 2015.  The 2014 Act provided that the statutory provisions of the previous LLC Act were effective until January 1, 2017, when they were repealed.

This means that your current Operating Agreements are not in compliance with either the previous LLC Act or the current LLC Act. The Operating Agreements must be amended and restated to comply with the current LLC Act.

Under the LLC Act, the agreement is no longer referred to as the “Operating Agreement” but is now called the “Limited Liability Company Agreement.” The following are some of the changes in the LLC Act:

(a)   The LLC Act no longer refers to the filing of Articles of Organization but to a Certificate of Formation. Ala. Code Section 10A-5A-3.02 provides that no person has the power to bind the LLC unless the person is authorized to act as an agent of the LLC pursuant to the LLC Agreement or if the person is authorized to act as an agent of the LLC due to his position as a designated managing member.

(b)  Ala. Code Section 10A-5A-4.07 modifies the direction of oversight of the LLC. The LLC Act provides that the LLC is subject to the direction of oversight (as opposed to management) by its (i) members; (ii) one or more managers; or (iii) such other governance structure provided in the LLC Agreement. If the LLC Agreement is silent as to the management, Ala. Code Section 10A-5A-4.07 provides default provisions relating to management of the LLC.

(c)  The LLC Act, unlike the previous LLC Act, specifies the property an LLC holds. The previous LLC Act contained provisions relating to the fact that property was required, held and conveyed in the name of the LLC, and any real property acquired by the LLC vested in the LLC itself rather than the members. Under the LLC Act, the legislature determined that it is well-established that the LLC is an entity separate from its members; therefore, the LLC Act states: “A member has no interest in any specific property of a limited liability company or series thereof.” This enhances the asset protection of an Alabama LLC for its members, especially in enhancing the strength of the charging order.

 (d)  Article 11 of the LLC Act provides for the LLC to create a series of one or more LLCs. A series of LLCs is like creating subsidiary LLCs but no actual filing of an LLC certificate is made because it is treated as a separate LLC without such filings.

Please advise if you want Duke Law Firm, P.C., to amend and restate the previous Operating Agreements for your Alabama limited liability company or companies. If so, we shall prepare a Legal Services Agreement or letter agreement with respect to completing the work for you.

 

 

 

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s