Does New Jersey’s New LLC Law Impact Your Business?
April 7, 2014
New Jersey’s Revised Uniform Limited Liability Company Act (the “Revised Act”) became effective on March 1, 2014.
The Revised Act was effective as of March 18, 2013 for newly formed LLCs and now applies to all New Jersey LLCs regardless of when formed. The changes in the law are significant enough to warrant managers and members conducting a thorough review of their Operating Agreement. A few changes by the new law include:
The Revised Act eliminates the default rule that unless otherwise set forth in the LLC’s Certificate of Formation, the LLC had a limited existence. LLCs have perpetual duration under the Revised Act.
The Revised Act provides that a LLC’s Operating Agreement can be in writing, oral or even implied. An Operating Agreement can alter or eliminate certain fiduciary duties. Indemnification is mandatory for members, managers, employees and agents under certain circumstances. The Operating Agreement can eliminate or alter the indemnification provisions.
Minority Shareholder Oppression
The Revised Act applies the minority oppression laws to an LLC. Minority members of an LLC may now seek dissolution of the LLC if the managers or the controlling members have acted in a manner that is oppressive. Minority members are also permitted to seek the appointment of a custodian or provisional manager or require the LLC or other members to purchase the equity interest of an oppressed member.
Dissociation of a Member
Under the Revised Act, a resigning member or withdrawing shareholder is no longer entitled to receive the fair market value of his/her ownership interest in the LLC. The resigning member relinquishes voting rights and retains only an economic interest.
There are numerous other changes by the Revised Act that may impact your LLC. If you have any questions about this new law or would like to discuss how it affects your limited liability company, please contact me, or the Scarinci Hollenbeck attorney with whom you work.