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78 Cards in this Set
- Front
- Back
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Partnerships - Elements
1 |
→ each partner must consent to p’ship & make an econ contribution (either efforts or resources)
• Each partner owes p’ship what he has agreed to contribute (oral/written) (Cs can sue to enforce) |
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Partnerships - Reqs if Written & Filed
2 |
(must be filed if P’ship owns IMM or is a PIC)→ P’ship name & address, each partner’s name & address (including CPs), & and each CP’s contribution
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Name of P’ship
3 |
→ can adopt a name or include some but not all partners’ names; adopting no name means the biz must be conducted in name of all of the partners
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Sharing-
4 |
P’s share equally in profits, losses, ditrib of assets. Contrib of capital is restored in pro rata
• Sating that a partner gets other than = portion in a category results in same being applied to all categories unless stated otherwise |
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Decisions
5 |
→ each partner gets 1 vote, unless o/w agreed
• Unanimity Required→ amend P’ship agreement/admit new partners/terminate P’ship, unless o/w agreed • Majority Required→ management decisions not in derogation of P’ship agreement, unless o/w agreed ➢ Immov- to be valid acquisition P’ship must be in writing when imov acquired. No writing = joint ownership • FX to 3P’s occur if the P’ship agreement is filed w/ Sec of State- if not 3P acts like P’s own as individuals. Retroactive ownership- P’ship creation can relate back to date imov is acquired but No FX on 3Ps rts |
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Fiduciary Duty to P’ship and Partners
6 |
→ can’t appropriate any P’ship asset (including prospective business opportunity) for own personal benefit OR act in manner contrary to best interest of P’ship
• If violates→ P’ship may recover damages and any profit received |
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Sharing w/ others-
7 |
P can share his interest w/ 3P but is liable for damages 3P causes. 3P isn’t member
➢ Partner as Creditor- a partner can be a creditor of the P’ship for sums disbursed etc. |
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Partner as Mandatary
8 |
→ 4 all matters in ordin course of biz except alienation/lease/encumbrance of IMMs
• Limitation of authority isn’t effective a/g 3dPs transacting bus w/P’ship in GF (w/o knowledge or notice) • If partner transacts business w/3dP in excess of authority, P’ship may recover damages from him • Partner doesn’t get reimbursement for expenses if he acts w/o authority • Agreement stating that a partner doesn’t share in loses is not binding on 3P’s |
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Inspect Books
9 |
→ any partner, whether involved in management or not, may inspect books w/o preconditions
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Liability
10 |
→ P’ship is primarily liable for its debts & partners are secondarily liable for virile share of P’ship but may plead discussion if sued individually (require C to seize P’ship’s assets b/4 his)
• If partner’s sued in capacity as partner, he doesn’t get indemnification/reimbursement even if wins • However, may be entitled to such under mandate law if suffered loss w/o his own fault • CC is unclear if new P is liable for debts incurred b4 joining P’ship. In other 49 he’s not |
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Partner Ceases to be Member Upon
11 |
→ death, interdiction, bankruptcy, seizure of his interest, expulsion, w/drawal, or in accordance w/P’ship agreement
• P’ship doesn’t end unless only 1 partner remains, in which case it becomes a sole proprietorship • Seizure of Partner’s P’ship Interest by C→ causes cessation of membership IF effected under a writ of execution AND it’s not released w/in 30days. Cessation is Retro to date of seizure • Expulsion of Partner→ only for just cause (not 4 mere neg). Need majority vote, unless o/w agreed • Withdrawal→ If P’ship is 4 Term: may w/draw w/o partner’s consent IF another partner fails to perform mat’l obl (doesn’t include mere neg) • If not 4 term→ may w/draw at any time if gives GF notice at time not unfavorable 2 P’ship ➢ FX of Cessation- P is to be pd the value of his interest in the P’ship. If no contrary argmnt- must be in $ • Value can be determ. by many methods- looking @ FMV, etc.- if they didn’t agree ct will decide amnt ➢ Termination- P’shp terms thru unanimous consent, judgment of term, bankruptcy, redux to 1 person, term, attaining obj of P’ship (or impossibility of doing so), or thru P’ship provisions • Can be expressly or tacitly continued after the term expires, object attained etc. ➢ FX of Term- P’s cease to be mandates except for acts of liquidation. If P doesn’t know of term he can still bind the P’ship. Also term can’t effect 3P transax w/ the P’ship if they’re in GF. |
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Dissolution/Liquidation
12 |
- C’s order of pmt- secured C’s (p’s and non-p’s); unsecured C’s (non-p’s);unsecured C’s (p’s); capital contributions; divide surplus
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P’ship In Commendam
13 |
→ P’ship w/ 1+ commendam P’s w/ lmtd rts/liability AND 1+ gen P’s
• Form: file written PIC agreement w/ Sec of State (must clearly indicate that it’s a PIC) • PIC’s Name→ must include its status as a PIC & can’t use PC’s name unless it’s also the name of a GP • GPs→ subject to general rules of liability • CPs→ must contribute either cash/prop/performance of non-managerial services • Not personally liable. Only liable up to extent of contribution, even if not actually rendered • PIC agreement must describe contributions & its value or how it’s to be valued • Don’t have authority as GP’s do to bind the P’ship to obs w/ 3P’s • Even if intend to be CP, still liable as GP IF: • PIC agreement fails to describe contribution • PIC name doesn’t clearly reflect it’s a PIC or suggests that CP is a GP • CP permits his name to be used in business dealings of PIC • CP participates in management/administration or conducts business w/3dP on behalf of PIC • BUT, only liable to 3dPs who reasonably believe PC has authority to bind PIC • PIC can serve as officer/director of corp GP w/o becoming liable as a GP |
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RLLP
14 |
→ a previously existing ordinary/commendam P’ship that has, w/in the prior yr, filed an application to become an RLLP [name of p’ship; address of principal offc; number of P’s; stmnt of biz P’ship is engaged in] w/Sec of State and paid $100 fee to Sec of State
• Name must include ‘registered limtd liability p’ship’ OR L.L.P • Insulates partners from personal liability for tortuous acts of other partners or representatives of P’ship • No protection 4- virile share of other P’ship debts; Pship debts from P’s actions including neg • At end of yr, must file renewal application & pay $100 or it reverts to former P’ship status • Look to date of occurrence if a K or tort occurs when P’ship is in LLP and later lapses or vice versa |
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Corps - Formation
15 |
→ file articles of incorp and initial report w/Sec of State (& mort records, but still valid if don’t)
• Name held for 60 days w/ 2 30 day ext. Name must include word ‘compnany’,‘corporation’, ‘limited’ ‘incorporated’ or an abbreviation of the words. BUT ‘CO’ can’t be preceded by ‘and’ or ‘&’ name must be distinguishable. FX of bad name= Sec. State can refuse to accept Arts injunction from ct |
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Corps - Articles
16 |
→ corp’s name, purpose (not 2 make $), # of shares corp can issue & value of each (or state no value) if 1 class. More than 1 class= # of shares, par/no par stock, preference/rts of ea class; name of ea.inc
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Amend Articles
17 |
→ must be proposed by Bd/SH(s) holding at least 20% of stock/president by calling a special SH meeting w/proper notice. Need approval of 2/3 of SH voting power present at meeting
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Initial Report
18 |
→ state name, location, & address of the corporation, its agents, & each initial director
• Existence- begins when cert or inc is issued by Sec of State but has retro FX to date arts were filed |
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Annual report
19 |
: signed by ofc or 2 directors, stating p.o. and munic address of: registered ofc; agents, directors/ofc; state # of issued shares of ea class of stock; taxpayer ID of corp. Failure to File= 1st demand +15 days= $50/day penalty; if not filed for 3 straight yrs Sec State can revoke arts of corp and it ceases to exist
• Bylaws are NOT necessary |
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Issuing Shares
20 |
- all shares must be authorized in Arts. Permitted consideration=cash, cert cks, all property, services rendered to corp. Pre-inc services/unexecuted promise to perform aren’t allowed but sidestep thru payment @ time thru fee for services and then $ is returned for stock
• Amnt of Consid- par value stock (PVS) can’t be sold for less than PV. No par is sold @ any price if sold for prop then bds determin of prop value is ok if in GF, selling @ different prices= dilution= liability to SH w/ diluted stock unless done w/ valid reason. Treas stock- stock repurchased by bd=sold for any amnt • Stock Certificates- shares must be rep’d by certs unless corp is participant in Direct Reg System or Dep Trust & Clearing System. Certs must state on face: name of issuing corp &its organized in LA, name of person to whom its issued, #/class/series; rts/prefs/limitations of class/series. If no certs all this info should be provided in writing |
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Promoters
21 |
- must act as fiduciaries. Breach corp can rescind K or damages. C’s may sue promo in place of corp that is insolvent. Innocent SH can bring derivative suit but damages go to corp not SH.
• Liability- for K’s entered into b4 corp exists unless ratified by corp after coming into existence. Promo not liable if in GF and 1) de facto corp doctrine- he made a GF effort to inc. and used corp authority or 2) Corp estoppel doctrine- other party relied on corps name/assets and not the promos. |
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Piercing the Corp Veil
22 |
- SH are only liable for debts of corp to limit of their investment. This ‘veil’ can be pierced if not doing so will cause injustice/fraud. Reasons: biz not conducted in proper corp form; asets of corp are treated as the SH own or comingled; corp is undercapitalized; corp is thinly capitalized
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Deep Rock
23 |
- SH state vast majority of assets as debt (80%) when Corp is insolvent then SH claim = higher status to creditors and get pd 1st of assets. Finding this = SH getting pd after C’s.
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Capital Stock Structure -Stated Capital
24 |
= at least the aggregate par value of all outstanding shares (whether authorized or issued)
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Capital Surplus
25 |
= the received for the initial sale of all shares that exceeds the par value; if not par value, the amount received minus what the Board designates as stated capital
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Earned Surplus
26 |
= all corporate assets minus liabilities, stated capital, and stated surplus (i.e. total accumulated profits)
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Preferred Stock Preferences (not tested lately)
27 |
• Dividend Guarantees – Generally, preferred stock holders are paid a fixed amount of dividends each year but if not paid in one year->if cumulative → the unpaid amount is carried over and is added to the guarantee for next year if noncumulative → the mount is lost if the articles are silent = noncumulative
• Dividend and Liquidation Participation Rights – when dividends are declared or there is a dissolution, preferred stock receive a guaranteed amt per share, but sometimes there is some left over … how is the left over divided? if preferred shares are participating → preferred stock share in the residual nonparticipating → preferred stock gets only the guaranteed amt if the articles are silent = nonparticipating |
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Filling Board Vacancies
28 |
• A Board vacancy can be filled for the remainder of that term by: (either/or – whichever acts first) (1) maj vote of the remaining directors (even if not a quorum)(2) maj vote of the SH at a special meeting
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Board Action – Meetings and Quorums
29 |
• The Board can ONLY act at a regular meeting or a special meeting with adequate notice (reasonable time)
• The chairman of the Board presides over mtg . To vote, the members must be present at the meeting and MAY NOT vote by proxy (unless articles provide, in which case the proxy would be held by another director or shareholder) EXCEPTION … Board can act through unanimous written consent Board may meet by conference telephone call • The Articles/By-Laws may delegate authority to a Committee made up of 1 ore more Directors committees have the same mtg requirements • Quorum Requirement: a majority of the Board (including vacant seats) must be present at the beginning of the mtg in order to take action. If some leave after the mtg starts, (i.e. less than quorum present), action may still be taken but only if the number voting for the action is a majority of the quorum • Voting Requirement: in order for the Board to act, there must be a majority vote of those directors present (i.e. not voting is the same as a no vote) if a Board mtg is improper b/c lack of adequate notice, any action is voidable |
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Power to Make Changes:
30 |
Directors have NO power to (1) amend articles (2) dissolve corporation (3) sell all/substantially all corporations assets (ie. liquidate) OR (4) merge w/ another entity (unless other entity is >90% owned by first corporation. These changes can ONLY be decided by SH.
• For each of above 4, the action must first be proposed and submitted to SH before they can approve it. |
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Only Board Can Proposex
31 |
• Only Board Can Propose—mergers and liquidations Note: SH remedy is to remove director who refuses to propose a desired action and replace w/ new director Board OR SH (holding at least 20% stock) OR President can Propose—amending articles, dissolving corporation Must call a special mtg w/ proper notice. Proposal Requirements: For article amendments, liquidations or mergers, the proposed action MUST be approved by 2/3 of SH voting power present at SH mtg. OR some other % specified in articles, NOT less than majority of voting power present.
• officer has power and authority in managing the corp as prescribed in articles, by-laws, or by the BOD (in that order).BUT—Pres has inherent authority to act for corp in legal proceedings in a variety of specified ways unless specifically denied by articles, by-laws, or BOD. |
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Liability:
32 |
Corp. liability of the officers depends on Agency Principles (see above).
• Officer’s action binds the corp if she acted w/ actual OR apparent authority, or if corp subsequently ratified. Corp may recover from officer any liability it incurs or damages it suffers from officer action that exceeded her authority. Note: Case law—ofc who borrows $ on note solely in his personal capacity, w/out assertion of corporate authority, does NOT obligate the corp on the loan, even if $ used for corporate benefit. |
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Indemnification and Protection of Officers and Directors
33 |
• Articles may have provisions limiting/eliminating a director/officer’s personal liability to the corp/SH for $ damages for breach of fiduciary duty of care he has to the corp. The provisions may NOT limit liability for: Breach of duty of loyalty; Intentional misconduct; wrongful payment of assets for dividends or stock repurchases. Any action which officer/director received improper personal benefit.
• LA grants broad authority to corps to indemnify/insure directors/officers/corp agents from liability for acts done in GF on behalf of corp. • Director/SH is will NOT be liable for any unlawful acts if she was absent from the mtg at which such act was authorized, or if she was present but clearly recorded a dissent to the action in the mtg minutes or in a writing filed promptly thereafter w/ the corporation agent. Asked July 04, 05 • Director/officer/employee/agent of corp will be reimbursed expenses if sued by reason of their office in the corp and they are successful. |
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Bd of Directors
34 |
→ all corp powers shall be vested in & business affairs managed by the Bd
• Size→ Must have at least 1 person. • Chosen→ initially named in initial/supplemental report. Thereafter, they’re elected by SHs either by: • Straight Voting→ each seat is separately voted on & candidate w/majority vote wins OR • Cumulative Voting→ all seats up for election are elected simultaneously w/all candidates running for all seats. Each share gets as many votes as # of seats up for election, & votes may be cast for 1 candidate or distributed among 2+ candidates • Term→ Elected for 1yr, unless articles/by-laws extend term up to max of 5yrs • Meetings→ Bd may act at regular/special meetings called w/adequate notice to each director • To vote, must be present at meeting. No voting by proxy unless proxy is held by another director/SH & the articles provide for proxy voting. • Bd may take action by unanimous written consent of all directors or committee members • A majority of Bd (quorum) must be present at meeting for action to take place at meeting. If after meeting starts, directors leave so that less than a quorum is present, action may still be taken, but only if # of directors voting for action is majority of quorum. |
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Bd of Directors - Adopt By-Laws; Issuance of Shares,
35 |
→ regulate mundane internal affairs & are easier to amend (not required)
• Bd may amend/repeal w/o SH approval, unless articles provide o/w • Issuance of Shares→ May issue all shares authorized by articles • Only way for SH to take Bd’s authority to issue un-issued shares would be to amend articles to reduce # of authorized shares to the amount already issued • Permitted Consideration→ cash, property, or services already rendered • Promises to perform future services or transfer property aren’t valid consideration • C may assert claim a/g directors who consented to or voted in favor of the issuance of shares & accepting of payment therefore prop/services that are grossly overvalued |
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Bd of Directors - Liability
26 |
→ Owe fiduciary duties of care & loyalty
• Not personally liable UNLESS breach fiduciary duty • Loyalty→ if director has conflict of interest in K, it’s presumed to be tainted & voidable UNLESS: • Fully disclosed to Bd b/4 voting & vote of interested director didn’t count toward passage of K • Fully disclosed to SHs who approved or subsequently ratified the K OR • Transaction was fair to corp as of the time it was authorized/approved/ratified • Care→ can’t engage in grossly negligent acts. Articles can eliminate liability for breach of duty of care • But can’t eliminate for breach of duty of loyalty. Negligence may be ok, but betrayal is not • Bd can indemnify/insure director/officer/agent involved in criminal/civil/admin/investigative proceeding for his conduct engaged in on behalf of corp in GF. • But, if liable to corp in SH derivative suit, indemnification may only cover expenses (atty fees) • If director/officer/agent (not SH) is sued for acts on behalf of corp & successfully defends on the merits, all litigation expenses (including atty fees) WILL BE PAID by corp |
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Bd of Directors - Pay Dividends, Dismissal
27 |
→ May pay dividends out of surplus/profits, but only if corp’s solvent & payment won’t render insolvent. If vote in favor of unlawful dividend→ liable to corp & Cs (SH also liable for amount received). If found liable may bring action a/g SH w/in 2yrs to recover proportionate amount SH received
• Dismissal→ SHs can dismiss director w/or w/o cause at a special meeting called for that purpose • Must have maj vote of all outstanding shares regardless of whether they’re represented at meeting • If elected by cumulative voting cant be removed if votes cast a/g removal would be enough to elect |
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Officers
28 |
→ have agency authority to act for corp in accordance w/their authority
• Elected→ by Bd’s majority vote (president, secretary, & treasurer, but 2 of 3 can be combined in 1 person) • Power→ Have such power & authority as is defined in the articles/by-laws/Bd (in that order of priority) • Also have the inherent authority of their position • Removal→ Bd can remove an officer at any time, w/or w/o cause by majority vote at meeting |
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Redemption
39 |
→ when corp exercises unilateral right stated in stock cert to buy back shares from SH
• SH can’t refuse if proper value is offered |
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Ultra Vires Doctrine
40 |
→ if corp exceeds powers stated in articles, ultra vires may be raised in suit by/a/g corp for damages a/g offending directors or officers
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Preferred SHs
41 |
→ If have different classes of stock, preferred SHs have preferred stock
• If dividends paid or corp dissolves, preferred SHs receive a guaranteed amount per share • If preferred shares are “nonparticipating,” they don’t participate in the residual distribution • If “participating,” they do participate (“participating” must be expressly stated for in articles) |
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Right to Inspect Books/Records/Accounts
42 |
→ must give 5days written demand & hold at least 5% of outstanding shares for 6mths & not be a business competitor (if competitor, must own 25%)
• 2+ SHs can aggregate their shares to reach the required % |
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Dissenter’s Rights
43 |
→ gives SH right to demand corp purchase stock at FMV, but only arises if:
• Corp has approved lease/sale/exchange of all assets by < 80% of its authorized voting shares or become a party to a merger/consolidation AND • SH voted a/g such approval and filed an objection to it prior to or at the meeting |
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Preemptive Rights
44 |
→ gives SH right to purchase same % of newly issued stock as SH currently holds of total outstanding voting shares (prevents power from being diluted). Must be provided 4 in articles & parameters &/or limitations may be established. If articles only state SH has it, SH has no right w/respect to issuance of shares which are issued as comp under employment K w/officer/agent, non-$ pmts etc.
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Meetings
45 |
→ written notice of meeting & specific matters to be voted on must be given 10-60days b/4
• Annual Meetings→ directors are elected and other business is conducted. Any single SH can call a regular meeting at corp’s registered office if corp doesn’t hold a regular annual meeting for 18mths • Special Meetings→ may be called by Bd, president, or SHs holding at least 1/5 of voting shares • Telecom meetings are presumed to be illegal • May take action w/o meeting by unanimous written consent of all SHs. Less than unan if arts provide • All SHs of record on specific date are entitled to vote & may vote by proxy, which is doc in which SH transfers power to vote his stock at meeting to someone else. Must be in writing & filed w/corp sec • Unless articles state o/w, 1 share gets 1 vote. Treas shares, unissued shares, shares owned by a subsid aren’t allowed to vote. Need majority vote of votes actually cast at meeting to act, EXCEPT need 2/3 vote to: (1) amend articles (2) authorize a merger w/another corp that is < 90% owned by the corp or (3) authorize liquidation (sale of all or substantially all of corp’s assets) |
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Electing directors
46 |
- Straight voting (default)- Ea seat is sep voted on and candidate for ea seat getting plurality wins. Cumulative- all seats up for election are elected simultaneously w/ all running for all seats. Ea share gets votes = # seats up for election and votes can be distrib between many or 1 candidat
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SH Agreement-
47 |
• Voting Trusts: 1+ SH can create a trust into which all shares donated by them transf to a TEE who votes the shares and distributes the dividends per trut docs. Unless otherwise stated- TEE holds all rts pertaining to shares. VT is valid for no more than 15 yrs. Agmnt may provide for an extension of the trust (w/ maj agrmnt) for up to 10 yrs under same terms etc. VT is pub doc and must be filed w/ corp
• Vote Pooling Agmnt- Written agmnt b/twn SH’s where they agree to cast all of their votes together as a block determined by agmnt. Can be compelled by: SH voting on matters needing SH approval; directors voting on mgt matters |
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Stock Transfer Restrictions
48 |
→ stock is always transferable unless something expressly limits it
• Restrictions don’t affect shares issued b/4 restriction was adopted unless SH voted in favor of it or was a party to private SH agreement. Restriction must be expressly noted on front/back of stock cert or it’s not enforceable a/g acquirer (e.g.→ buy & sell clause upon death/w/drawal of SH, 1st right of refusal clause, etc)Restrictions must be reasonable or won’t be enforced by ct. |
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SH Derivative Action
49 |
→ suit brought by SH on behalf of corp a/g liable party. Corp is a nominal Defendant and an indispensible party. Recovery goes to the corp bank acct.
• Proper P: a SH in corp or have a beneficial interest in shares when suit filed; own shares or hold int thru the litigation; owned shares @ time of alleged wrong unless wrong is a continuing one or P acquired shares thru testacy/intestacy etc and did not participate in wrong or ratify it |
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SH Expulsion
50 |
→ Can’t “expel” SH. But, a “freeze-out” merger w/shell corporation created by other SHs accomplishes basically same thing, & requires approval of Bd & 2/3 of shares present at valid SH meeting
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Majority & Minority SHs
51 |
→ maj-SHs have fiduciary duty to treat min-SHs fairly
• Can’t “freeze” them out by I’ally using procedural devices technically allowed but serve no legit corp purpose & render min-SH’s equity interest far less valuable. If does so, min-SH has cause of action a/g maj-SH (not corp) to recover diminished value & force him to buy remaining shares at FMV • Maj-SH can’t use “insider knowledge” (gained b/c insider position in corp) to profit personally while w/holding info from min-SHs who made decisions based on false assumptions a/b value of stock |
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Dissolution
52 |
→ assets are liquidated, liabilities are paid off, & any remaining $/assets is distributed to SHs then must notify Sec of state and Corp ceases to exist
• Vol Dissolution must be proposed initially at SH meeting by Bd or anyone else authorized to call one • SHs must vote & a majority of SH voting power must be present, unless o/w required. • Can be proposed by Board or anyone authorized to call a special meeting • Invol Dissolution may be judicially granted if (1) corps insolvent (2) Bd’s deadlocked & SH can’t break it (3)gross/ persistent ultra vires acts (4) failure/abandonment of object of corp (5) failure to do business for 1yr (6) its in SH best interest (7)SH deadlocked in voting pwr and for 2 annual meetings haven’t elected a director • Proper Parties- SH w/ 20% of voting shares; maj of bd; frustrated C of Corp; Corp receiver aptd by ct to take Corps Prop |
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Grounds 4 appointment of a receiver to take charge of corp’s prop→
53 |
(1) insolvency (2) Bd’s deadlocked & SHs are unable to break it (3) ultra vires acts (4) directors are jeopardizing the rts of SH- persistent UV acts (5) corps prop has been abandoned (6) coprs property seized thru judicial process, fraud/collusion (7) maj SH are violating the rts/interests of minority SH’s (8) SH d-locked for 2 yrs and not elected directors
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Mergers Consolidations Takeovers-
54 |
Role of Acquiring/New Corp: Acquire all rts, privileges and franchises owned by previous corp; take/own all prop and assets of any kind owned by predecessor; be responsible for all liabilities and obs of any predecessor corps.
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LLC -
55 |
Limited Liability – neither owners nor managers are liable for any of its debts.
➢ Characteristics: LLC is a legal entity; can be NPO; needs no capital/surplus accts; no operational formalities ➢ Formation→ can only be formed by 1+ persons w/ capacity to K. Formed when articles of organization & initial report are filed w/SoS who issues a cert of org • Name- can’t be misleading must be disting from all other corps, must contain “L.L.C” or written out • Purpose- can be for any lawful purpose except underwriting insur. Has same pwrs as a Corp or P’ship |
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LLC - Tax benefits
56 |
- income is not subject to federal or LA taxes at the entity level
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LLC - Articles
57 |
→ Mandatory:(1) written in English (2) signed by at least 1 person who may or may not be a m/m (3) state name of LLC & (4) state purpose for which formed
Permissive: any limits on authority of members to bind the LLC; extent that LLC is managed by managers and their restrictions; latest date of dissolution (if set); any other provision not inconsistent w/ law • Articles and initial report must be filed w/ Sec of State • Sec of state can reject if not in proper form but if does accept then no FX. • Existence begins @ 1)issuance of cert of organiz by Sec but is retro to date of filing 2) notarization if w/in 5 days of filing 3) Retro to date ownership of immov prop is acquired if prior to filing |
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Annual Report
58 |
- must be filed every yr (from date of formation) w/ Sec of State. Must 1) s/ by manager 2) state muni address of: registered office; reg agents; managers. Failure to file for 3yrs = revocation of arts must give 30 days notice and opportunity to cure
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Amending Arts of Organ
59 |
- to amend file ‘Arts of Amendment’ if inaccurate/deficient file cert of Correction
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Initial Report
60 |
→ must be signed by each person/agent who signs articles & must state the name, location, & address of LLC, its agents, and persons vested w/management power
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Operating Agreement
71 |
- Agmt written/oral by members to the affairs of LLC and conduct of biz (like bylaws); can be multiple op agmt if not inconsistent. If inconsistent most recent prevails.
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Members
72 |
- anyone can be a member of LLC, can have multiple classes also. Members who aren’t managers do not have agency authority or duties of care/loyalty. Only is an equity owner w/ no fiduc duties/authority
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Contribution
73 |
→ a promise to contribute isn’t enforceable unless it’s made in writing & signed by promising member, also not enforceable if unable to perform due to death, disability or other reason unless arts state o/wise. If in writing, it’s enforceable by LLC and also Cs unable to satisfy debt directly from LLC
• Contrib doesn’t have to be public record, so can be confidential. See below for compromise of contrib. |
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Distribution
74 |
- no distrib allowed if after distrib: LLC cant pay debts; LLC’s assets are less than liabilities; distrib would violate arts or written op agmnt. LLC can rely on financial stmnts or reasonable accounting methods to decide to pay. Distrib should be made equally to all mems unless written agmnt states o/wise
• Wrongful distrib= jnt/sev liab for mems/mngrs knowingly or w/o reasonable care vote for wrongful exercise; liability is to LLC. RX is 2yrs. |
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Mem-Managed classification
75 |
→ managed directly by all members, unless articles/ written operating agreement provides otherwise.
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Manager- Managed
76 |
- designated by members to manage LLC- need not be member. LLC’s don’t have to have mngrs.
➢ Man-Managed→ managed by a Bd of mngrs consisting of 1+ persons elected by members who may be, but need not be, members. Arts must specify LLC is man-managed (o/w it’s mem-managed) and that mngr can be non-members. Arts must also specify how many mngrs there will be. • Selection- ea position is filled by plurality vote of mems (straight voting). Removed w/o cause by maj vote • All mandatary authority & voting power is held by managers, & each manager gets 1 vote • Except members get to vote 4 following issues → (1) admit new members (need unanimity), (2) compromise a member’s contribution (unanimity), (3) dissolution & winding up (maj), (4) disposal/encumbrance of all or substantially all of LLC’s assets (maj), (5) merger/consolidation (maj), (6) incurrence of debt other than in ordinary course (maj), (7) alienation/lease/encumb of IMM (maj), & (8) amend the articles (maj) • Arts/written agmnt can abrogate need for majority vote or 1 vote per member |
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Conflict of Interest-
77 |
mems/mngrs voting on issue which they have fin conflict doesn’t void transax if: mem/mngr disclosed interest and disinterested maj approved the transax Or transax was in LLC’s best interest when it was approved.
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Duties & Liabilities
78 |
→ m/m owe duty of care & loyalty & aren’t personally liable for LLC debts unless breaches this duty or the veil is pierced (undercapitalization or commingling). Mem/Mngr- monetary liability for breach of care/loyalty can actually be lmtd
• If m/m’s sued in capacity as m/m, he doesn’t get indemnification/reimbursement even if wins • However, may be entitled to such under mandate law if suffered loss w/o his own fault |
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Authority
79 |
→ mem or mngr is fiduciary/mandate for all matters in ordinary course of business except alienation lease/encumbrance of IMM. Mandate authority can be removed by: 1) Arts 2) Op agmnt 3) maj vote of mems/mngrs but 3Ps must know of loss of auth to be effected.
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Piercing Veil
80 |
- veil wont be pierced b/c of lack of formalities BUT will be for fraud comingling under-cap etc.
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Financial Structure
81 |
- profits/losses shared equally unless arts/written op agmnt state otherwise
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Assignment of Mem Interest-
82 |
interest is incorporeal movable. Is assignable in whole or pt unless Arts/op agmnt state o/wise. Assignment entitles assignee to receive distributions but not to exercise rts/pwrs of mem unless unanimously approved by mems (unless arts etc state lesser vote is acceptable) Asignee becoming mem assumes all rts/obs except those liabilities unknown to hime when he became mem
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Death/Incapc-
83 |
if mem dies becomes incompetent- mem ceases and executor etc is treated like and assignee if dead mems heir is not admitted by LLC the LLC must buy out the interest w/in reasonable time
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W/Drawl-
84 |
LLC for term→ may not w/draw w/o consent unless just cause b/c other mem failed to perform material ob. No term, member may w/draw for any reason if gives LLC & members 30days written notice or immediately on occurrence of event spec’d in written op agmnt. W/drawing member continues to get share of profits until LLC pays FMV of interest as of w/drawal. Wrongful w/drawl is not effective
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Expulsion of a Member→
85 |
there’s no procedure for this, but could accomplish this by freeze-out merger
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Dissolution→
86 |
occurs w/: event spec’d in arts or an op agmnt; consent of a maj of mem; judicial decree of dissolution on application of a mem when its not practical to carry on biz. Pay Cs, then members owed distributions, then return capital contributions, distribute rest
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Conversion- (conversion of a biz form to another)
87 |
any La biz can convert by submitting conv application w/ an initial report per type of biz it wishes to convert to Sec of State. Equity owners of entity must approve the conversion according to law and docs governing the entity (2/3 quorum). Equity interest may NOT convert if Eq owner of entity becomes personally liable for any liability or obs.
• Application Reqs- state: name of both the converting and the converted enity; stmnt of type of entity being converted too along w/ a stmnt that entity is continuing existence in new entity; way the equity interest in converting entity is being translated; fact that conversion is being done per statute; list info req’d in governing doc of whatever type of entity that’s being converted into (arts of organiz etc) and initial report; S/ by one person vested w/ agency/mandate authority of entity |
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Conversion -
88 |
Filing: may be delivered to Sec of State 1st provided filing occurs w/in 30 days; if all in order conversion occurs @ date of recordation unless it was filed w/in 5 days of being signed then its date of /s.
➢ Fx of conv: conversion doesn’t= dissolution of old entity and no wind up req’d. Prop rts will be held by new entity but cert of conv must be filed for recording in convey records in parishes where imov’s are located. Tax liability is calculated @ date of conv. C’s rts are not affected. Ongoing Judic procedings need no substitution. Equity owners will not become liable due to conversion. |
