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H.B. 275

             1     

BUSINESS ENTITY AMENDMENTS

             2     
2005 GENERAL SESSION

             3     
STATE OF UTAH

             4     
Sponsor: Ross I. Romero

             5     
             6      LONG TITLE
             7      General Description:
             8          This bill modifies provisions addressing business entities under the Utah Revised
             9      Business Corporation Act, Utah Revised Uniform Limited Partnership Act, and Utah
             10      Revised Limited Liability Company Act.
             11      Highlighted Provisions:
             12          This bill:
             13          .    clarifies definitions in the Utah Revised Business Corporation Act;
             14          .    clarifies notice requirements in the Utah Revised Business Corporation Act;
             15          .    addresses who may be a registered agent under the Utah Revised Uniform Limited
             16      Partnership Act;
             17          .    addresses the duration of a limited partnership under the Utah Revised Uniform
             18      Limited Partnership Act;
             19          .    modifies provisions of the Utah Revised Limited Liability Company Act, including
             20      provisions:
             21              .    defining terms;
             22              .    addressing limitations on a company's articles of organization and operating
             23      agreement;
             24              .    addressing the effect of certain filings as to third persons, members, and
             25      managers;
             26              .    addressing powers of a company;
             27              .    related to annual reports;



             28              .    related to organization of a company under the act;
             29              .    related to the duration of a company;
             30              .    related to amending articles of organization;
             31              .    related to an initial operating agreement of a company;
             32              .    related to membership of a company;
             33              .    related to management by members of a company;
             34              .    related to the calculation of a member's profits interest;
             35              .    related to management by managers;
             36              .    related to duties of managers and members;
             37              .    related to capital accounts;
             38              .    related to the rights of a creditor or a member;
             39              .    related to dissolution of a company; and
             40              .    related to company conversion; and
             41          .    makes technical changes.
             42      Monies Appropriated in this Bill:
             43          None
             44      Other Special Clauses:
             45          None
             46      Utah Code Sections Affected:
             47      AMENDS:
             48          16-10a-102, as last amended by Chapter 218, Laws of Utah 2001
             49          16-10a-103, as enacted by Chapter 277, Laws of Utah 1992
             50          48-2a-104, as last amended by Chapter 193, Laws of Utah 2002
             51          48-2a-201, as last amended by Chapter 189, Laws of Utah 1991
             52          48-2c-102, as enacted by Chapter 260, Laws of Utah 2001
             53          48-2c-110, as last amended by Chapter 193, Laws of Utah 2002
             54          48-2c-120, as enacted by Chapter 260, Laws of Utah 2001
             55          48-2c-121, as enacted by Chapter 260, Laws of Utah 2001
             56          48-2c-203, as enacted by Chapter 260, Laws of Utah 2001
             57          48-2c-401, as last amended by Chapter 193, Laws of Utah 2002
             58          48-2c-403, as enacted by Chapter 260, Laws of Utah 2001



             59          48-2c-408, as last amended by Chapter 193, Laws of Utah 2002
             60          48-2c-501, as enacted by Chapter 260, Laws of Utah 2001
             61          48-2c-702, as enacted by Chapter 260, Laws of Utah 2001
             62          48-2c-803, as enacted by Chapter 260, Laws of Utah 2001
             63          48-2c-804, as last amended by Chapter 193, Laws of Utah 2002
             64          48-2c-807, as enacted by Chapter 260, Laws of Utah 2001
             65          48-2c-903, as enacted by Chapter 260, Laws of Utah 2001
             66          48-2c-1103, as last amended by Chapter 193, Laws of Utah 2002
             67          48-2c-1201, as enacted by Chapter 260, Laws of Utah 2001
             68          48-2c-1204, as enacted by Chapter 260, Laws of Utah 2001
             69          48-2c-1207, as last amended by Chapter 193, Laws of Utah 2002
             70          48-2c-1211, as enacted by Chapter 260, Laws of Utah 2001
             71          48-2c-1404, as enacted by Chapter 260, Laws of Utah 2001
             72          48-2c-1406, as enacted by Chapter 260, Laws of Utah 2001
             73      ENACTS:
             74          48-2c-803.1, Utah Code Annotated 1953
             75     
             76      Be it enacted by the Legislature of the state of Utah:
             77          Section 1. Section 16-10a-102 is amended to read:
             78           16-10a-102. Definitions.
             79          As used in this chapter:
             80          (1) (a) "Address" means a location where mail can be delivered by the United States
             81      Postal Service.
             82          (b) "Address" includes:
             83          (i) a post office box [numbers,] number;
             84          (ii) a rural free delivery route [numbers,] number; and
             85          (iii) a street [names and numbers] name and number.
             86          (2) "Affiliate" means a person that directly or indirectly through one or more
             87      intermediaries controls, or is controlled by, or is under common control with, the person
             88      specified.
             89          (3) "Assumed corporate name" means the name assumed for use in this state by a


             90      foreign corporation pursuant to Section 16-10a-1506 because its corporate name is not
             91      available for use in this state.
             92          (4) "Articles of incorporation" include:
             93          (a) amended and restated articles of incorporation[,];
             94          (b) articles of merger[,]; and
             95          (c) documents of a similar import to those described in Subsections (4)(a) and (b).
             96          (5) "Authorized shares" means the shares of all classes a domestic or foreign
             97      corporation is authorized to issue.
             98          (6) "Bylaws" includes amended bylaws and restated bylaws.
             99          (7) "Cash" and "money" are used interchangeably in this chapter and mean legal tender
             100      and negotiable instruments and other cash equivalents readily convertible into legal tender.
             101          (8) "Conspicuous" means so written that a reasonable person against whom the writing
             102      is to operate should have noticed it[. For example], including:
             103          (a) printing or typing in italics[,];
             104          (b) boldface[,];
             105          (c) contrasting color[,];
             106          (d) capitals[,]; or
             107          (e) underlining [is conspicuous].
             108          (9) "Control" or a "controlling interest" means the direct or indirect possession of the
             109      power to direct or cause the direction of the management and policies of an entity, whether
             110      through the ownership of voting shares, by contract, or otherwise.
             111          (10) "Corporate name" means:
             112          (a) the name of a domestic corporation or a domestic nonprofit corporation as stated in
             113      its articles of incorporation; or
             114          (b) the name of a foreign corporation or a foreign nonprofit corporation as stated in its
             115      articles of incorporation or document of similar import.
             116          (11) "Corporation" or "domestic corporation" means a corporation for profit, which is
             117      not a foreign corporation, incorporated under or subject to the provisions of this chapter.
             118          (12) "Deliver" includes delivery by mail and any other means of transmission
             119      authorized by Section 16-10a-103 , except that delivery to the division means actual receipt by
             120      the division.


             121          (13) (a) "Distribution" means a direct or indirect transfer of money or other property,
             122      except:
             123          (i) a corporation's own shares[,]; or
             124          (ii) incurrence of indebtedness by a corporation to or for the benefit of its shareholders
             125      in respect of any of [its] the corporation's shares.
             126          (b) A distribution may be in the form of:
             127          (i) a declaration or payment of a dividend[,];
             128          (ii) a purchase, redemption, or other acquisition of shares[,];
             129          (iii) distribution of indebtedness[,]; or [otherwise]
             130          (iv) other form.
             131          (14) "Division" means the Division of Corporations and Commercial Code.
             132          (15) "Effective date," when referring to a document filed by the division, means the
             133      time and date determined in accordance with Section 16-10a-123 .
             134          (16) "Effective date of notice" means the date notice is effective as provided in Section
             135      16-10a-103 .
             136          (17) "Electronic transmission" or "electronically transmitted" means any process of
             137      communication not directly involving the physical transfer of paper that is suitable for the
             138      receipt, retention, retrieval, and reproduction of information by the recipient, whether by
             139      e-mail, facsimile, or otherwise.
             140          (18) "Employee" includes an officer but not a director[. A], unless the director [may
             141      accept] accepts duties that make that director also an employee.
             142          (19) "Entity" includes:
             143          (a) a domestic and foreign corporation[,];
             144          (b) a nonprofit corporation[,];
             145          (c) a limited liability company[,];
             146          (d) a profit or nonprofit unincorporated association[,];
             147          (e) a business trust[,];
             148          (f) an estate[,];
             149          (g) a partnership[,];
             150          (h) a trust[,];
             151          (i) two or more persons having a joint or common economic interest[,];


             152          (j) a state[,];
             153          (k) the United States[,]; and
             154          (l) a foreign government.
             155          (20) "Foreign corporation" means a corporation for profit incorporated under a law
             156      other than the law of this state.
             157          (21) "Governmental subdivision" means:
             158          (a) county[,];
             159          (b) municipality[, and]; or
             160          (c) any other [types] type of governmental subdivision authorized by the laws of this
             161      state.
             162          (22) "Individual" means:
             163          (a) a natural person[,];
             164          (b) the estate of an incompetent individual[,]; or
             165          (c) the estate of a deceased individual.
             166          (23) "Mail," "mailed," or "mailing" means deposit, deposited, or depositing in the
             167      United States mail, properly addressed, first class postage prepaid, and includes registered or
             168      certified mail for which the proper fee has been paid.
             169          (24) "Notice" is as provided in Section 16-10a-103 .
             170          (25) "Principal office" means the office, in or out of this state, designated by a
             171      domestic or foreign corporation as its principal office in the most recent document on file with
             172      the division providing the information, including:
             173          (a) an annual report[,];
             174          (b) an application for a certificate of authority[,]; or
             175          (c) a notice of change of principal office.
             176          (26) "Proceeding" includes:
             177          (a) a civil suit[,];
             178          (b) arbitration or mediation[,]; and
             179          (c) a criminal, administrative, or investigatory action.
             180          (27) "Qualified shares" means, with respect to a director's conflicting interest
             181      transaction pursuant to Section 16-10a-853 , any shares entitled to vote on the transaction,
             182      except shares:


             183          (a) that, to the knowledge, before the vote, of the secretary, other officer, or agent of
             184      the corporation authorized to tabulate votes, are beneficially owned[,]; or
             185          (b) the voting of which is controlled, by:
             186          (i) a director who has a conflicting interest respecting the transaction[, or by];
             187          (ii) a related person of that director[,]; or [both]
             188          (iii) persons referred to in Subsections (27)(b)(i) and (ii).
             189          (28) "Receive," when used in reference to receipt of a writing or other document by a
             190      domestic or foreign corporation, means the writing or other document is actually received:
             191          (a) by the corporation at its registered office in this state or at its principal office;
             192          (b) by the secretary of the corporation, wherever the secretary is found; or
             193          (c) by any other person authorized by the bylaws or the board of directors to receive the
             194      writing or other document, wherever that person is found.
             195          (29) "Record date" means the date established under Part 6, Shares and Distributions,
             196      or 7 [of this chapter], Shareholders, on which a corporation determines the identity of its
             197      shareholders. The determination shall be made as of the close of business on the record date
             198      unless another time for doing so is specified when the record date is fixed.
             199          (30) "Registered office" means the office within this state designated by a domestic or
             200      foreign corporation as its registered office in the most recent document on file with the division
             201      providing that information, including:
             202          (a) articles of incorporation[,];
             203          (b) an application for a certificate of authority[,]; or
             204          (c) a notice of change of registered office.
             205          (31) "Related person" of a director means:
             206          (a) the spouse of the director, or a child, grandchild, sibling, or parent of the director;
             207          (b) the spouse of a child, grandchild, sibling, or parent of the director;
             208          (c) an individual having the same home as the director;
             209          (d) a trust or estate of which the director or any other individual specified in this
             210      Subsection (31) is a substantial beneficiary; or
             211          (e) a trust, estate, incompetent, conservatee, or minor of which the director is a
             212      fiduciary.
             213          (32) "Secretary" means the corporate officer to whom the bylaws or the board of


             214      directors has delegated responsibility under Subsection 16-10a-830 (3) for:
             215          (a) the preparation and maintenance of:
             216          (i) minutes of the meetings of the board of directors and of the shareholders; and [of]
             217          (ii) the other records and information required to be kept by the corporation by Section
             218      16-10a-830 [,]; and
             219          (b) for authenticating records of the corporation.
             220          (33) "Shares" means the units into which the proprietary interests in a corporation are
             221      divided.
             222          (34) "Shareholder" means the person in whose name shares are registered in the
             223      records of a corporation or the beneficial owner of shares to the extent recognized pursuant to
             224      Section 16-10a-723 . For purposes of this chapter:
             225          (a) the following, [which are] identified as a shareholder in a corporation's current
             226      record of shareholders, constitute one shareholder:
             227          (i) (A) three or fewer coowners; or
             228          (B) in the case of more than three coowners each coowner in excess of the first three
             229      will be counted as a separate shareholder;
             230          (ii) a corporation, limited liability company, partnership, trust, estate, or other entity;
             231      and
             232          (iii) the trustees, guardians, custodians, or other fiduciaries of a single trust, estate, or
             233      account;
             234          (b) shareholdings registered in substantially similar names constitute one shareholder if
             235      it is reasonable to believe that the names represent the same person; and
             236          (c) in any case where the record of shareholders has not been maintained in accordance
             237      with accepted practice, any additional person who would be identified as an owner on that
             238      record if it had been maintained in accordance with accepted practice shall be included as a
             239      holder of record.
             240          (35) "Subscriber" means a person who subscribes for shares in a corporation, whether
             241      before or after incorporation.
             242          (36) "Voting group" means all shares of one or more classes or series that under the
             243      articles of incorporation or this chapter are entitled to vote and be counted together collectively
             244      on a matter at a meeting of shareholders. All shares entitled by the articles of incorporation or


             245      this chapter to vote generally on the matter are for that purpose a single voting group.
             246          Section 2. Section 16-10a-103 is amended to read:
             247           16-10a-103. Notice.
             248          (1) (a) Notice given under this chapter must be in writing unless oral notice is
             249      reasonable under the circumstances.
             250          (b) Notice by electronic transmission is written notice.
             251          (2) (a) [Notice] Subject to compliance with any requirement that notice be in writing,
             252      notice may be communicated in person, by telephone, by any form of electronic
             253      [communication] transmission, or by mail or private carrier.
             254          (b) If [these] the forms of personal notice listed in Subsection (2)(a) are impracticable,
             255      notice may be communicated by:
             256          (i) a newspaper of general circulation in the county, or similar subdivision, in which
             257      the corporation's principal or registered office is located[, or by];
             258          (ii) radio[,];
             259          (iii) television[,]; or
             260          (iv) other form of public broadcast communication in the county or subdivision.
             261          (3) (a) Written notice by a domestic or foreign corporation to its shareholders or
             262      directors, if in a comprehensible form, is effective as to each shareholder or director:
             263          (i) when mailed, if addressed to the shareholder's or director's address shown in the
             264      corporation's current record of [shareholders.] the shareholder or director; or
             265          (ii) when electronically transmitted to the shareholder or director, in a manner and to
             266      an address provided by the shareholder or director in an unrevoked consent.
             267          (b) Consent under Subsection (3)(a)(ii) is considered revoked if:
             268          (i) the corporation is unable to deliver by electronic transmission two consecutive
             269      notices transmitted by the corporation based on that consent; and
             270          (ii) the corporation's inability to deliver notice by electronic transmission under
             271      Subsection (3)(b)(i) is known by the:
             272          (A) corporation's secretary;
             273          (B) an assistant secretary or transfer agent of the corporation; or
             274          (C) any other person responsible for providing notice.
             275          (c) Notwithstanding Subsection (3)(b), a corporation's failure to treat consent under


             276      Subsection (3)(a) as revoked does not invalidate any meeting or other act.
             277          (d) Delivery of a notice to shareholders may be excused in accordance with Subsection
             278      16-10a-705 (5).
             279          (4) Written notice to a domestic or foreign corporation authorized to transact business
             280      in this state may be addressed to [its] the corporation's:
             281          (a) registered agent at its registered office; or [to the corporation's]
             282          (b) secretary at its principal office.
             283          (5) Except as provided in Subsection (3), written notice, if in a comprehensible form, is
             284      effective at the earliest of the following:
             285          (a) when received;
             286          (b) five days after it is mailed; or
             287          (c) on the date shown on the return receipt if sent by registered or certified mail, return
             288      receipt requested, and the receipt is signed by or on behalf of the addressee.
             289          (6) Oral notice is effective when communicated if communicated in a comprehensible
             290      manner.
             291          (7) Notice by publication is effective on the date of first publication.
             292          (8) (a) If this chapter prescribes notice requirements for particular circumstances, those
             293      requirements govern.
             294          (b) If articles of incorporation or bylaws prescribe notice requirements, not inconsistent
             295      with this section or other provisions of this chapter, those requirements govern.
             296          Section 3. Section 48-2a-104 is amended to read:
             297           48-2a-104. Registered agent.
             298          (1) (a) A limited partnership shall continuously maintain in this state an agent for
             299      service of process on the limited partnership.
             300          (b) The agent required by this Subsection (1) shall be:
             301          (i) an individual resident of this state;
             302          (ii) a domestic corporation; [or]
             303          (iii) a domestic limited liability company;
             304          [(iii)] (iv) a foreign corporation authorized to do business in this state; or
             305          (v) a foreign limited liability company authorized to do business in this state.
             306          (2) (a) The registered agent of a limited partnership may resign by filing with the


             307      division a notice of resignation signed by the resigning agent.
             308          (b) After receipt of the notice of resignation under Subsection (2)(a), the division shall
             309      provide a copy of the notice of resignation to each general partner of the limited partnership at
             310      the address set forth in the limited partnership's certificate for each general partner.
             311          (c) The appointment of a registered agent ends 30 days after the division receives the
             312      notice of resignation required by this Subsection (2).
             313          (3) (a) A limited partnership may change the limited partnership's registered agent in
             314      this state by filing with the division a notice of change of registered agent.
             315          (b) The notice of change of registered agent required by this Subsection (3) shall:
             316          (i) state:
             317          (A) the name of the limited partnership;
             318          (B) the name of the limited partnership's registered agent before the change of
             319      registered agent; and
             320          (C) the name of the limited partnership's registered agent after the change of registered
             321      agent; and
             322          (ii) include the new registered agent's written consent to the appointment:
             323          (A) on the notice of change of registered agent; or
             324          (B) in a document accompanying the notice of change of registered agent.
             325          (c) A registered agent may change the registered agent's street address by:
             326          (i) notifying the limited partnership in writing of the change; and
             327          (ii) filing with the division a notice of change of address that:
             328          (A) is signed by the registered agent;
             329          (B) includes the information required by Subsection (3)(b); and
             330          (C) states that the registered agent notified the limited partnership as required by
             331      Subsection (3)(c)(i).
             332          (d) A notice that is required under this section to be filed with the division shall be
             333      filed no later than 30 days after the change for which notice under this section is required.
             334          Section 4. Section 48-2a-201 is amended to read:
             335           48-2a-201. Certificate of limited partnerships.
             336          (1) In order to form a limited partnership a certificate of limited partnership must be
             337      executed and filed with the division[. The certificate shall set], setting forth:


             338          (a) the name of the limited partnership;
             339          (b) the name, street address, and signature of the agent for service of process required
             340      to be maintained by Section 48-2a-104 ;
             341          (c) a statement that the director of the division is appointed the agent of the limited
             342      partnership for service of process if:
             343          (i) the agent has resigned[,];
             344          (ii) the agent's authority has been revoked[,]; or
             345          (iii) the agent cannot be found or served with the exercise of reasonable diligence;
             346          (d) the street address of the limited partnership's principal place of business where the
             347      records required to be maintained by Section 48-2a-105 are to be kept;
             348          (e) the name and business address of each general partner;
             349          (f) (i) the latest date upon which the limited partnership is to dissolve, if the duration of
             350      the limited partnership is to be limited; or
             351          (ii) a statement to the effect that the limited partnership is to have perpetual duration;
             352      and
             353          (g) any other matters the general partners determine to include.
             354          (2) A limited partnership is formed:
             355          (a) at the time of the filing of the certificate of limited partnership with the division as
             356      evidenced by the stamped copy returned by the division pursuant to Subsection 48-2a-206
             357      (1)[,]; or
             358          (b) at any later time specified in the certificate of limited partnership.
             359          Section 5. Section 48-2c-102 is amended to read:
             360           48-2c-102. Definitions.
             361          As used in this chapter:
             362          (1) "Bankruptcy" includes bankruptcy under federal bankruptcy law or under Utah
             363      insolvency law.
             364          (2) "Business" includes any lawful trade, occupation, profession, business, investment,
             365      or other purpose or activity, whether or not that trade, occupation, profession, business,
             366      investment, purpose, or activity is carried on for profit.
             367          (3) "Capital account," unless otherwise provided in the operating agreement, means the
             368      account, as adjusted from time to time, maintained by the company for each member to reflect:


             369          (a) the value of all contributions by that member[,];
             370          (b) the amount of all distributions to that member or the member's assignee[,];
             371          (c) the member's share of profits, gains, and losses of the company[,]; and
             372          (d) the member's share of the net assets of the company upon dissolution and winding
             373      up that are distributable to the member or the member's assignee.
             374          (4) "Company," "limited liability company," or "domestic company" means a limited
             375      liability company organized under or subject to this chapter.
             376          (5) "Designated office" means the street address in this state where the records required
             377      to be maintained by Section 48-2c-112 are kept.
             378          (6) (a) "Distribution" means a direct or indirect transfer by a company of money or
             379      other property, except:
             380          (i) an interest in the company[,]; or
             381          (ii) incurrence of indebtedness by a company, to or for the benefit of members in the
             382      company in respect of any interest in the company.
             383          (b) "Distribution" does not include amounts constituting reasonable compensation for
             384      present or past services or reasonable payments made in the ordinary course of business
             385      pursuant to a bona fide retirement plan or other benefits program.
             386          (7) "Division" means the Division of Corporations and Commercial Code of the Utah
             387      Department of Commerce.
             388          (8) "Entity" includes:
             389          (a) a domestic or foreign corporation;
             390          (b) a domestic or foreign nonprofit corporation;
             391          (c) a company or foreign company;
             392          (d) a profit or nonprofit unincorporated association;
             393          (e) a business trust;
             394          (f) an estate;
             395          (g) a general partnership or a domestic or foreign limited partnership;
             396          (h) a trust;
             397          (i) a state;
             398          (j) the United States; or
             399          (k) a foreign government.


             400          (9) (a) "Filed with the division" means that a statement, document, or report:
             401          (i) complies with the requirements of Section 48-2c-207 ; and
             402          (ii) has been accepted for filing by the division [and].
             403          (b) "Filed with the division" includes filing by electronic means approved by the
             404      division.
             405          (10) "Foreign company" means a limited liability company organized under a law other
             406      than the laws of this state.
             407          (11) "Interest in the company" means a member's economic rights in the company
             408      including:
             409          (a) the right to receive distributions from the company; and
             410          (b) the right to receive a portion of the net assets of the company upon dissolution and
             411      winding up of the company.
             412          (12) "Manager" means a person elected or otherwise designated by the members to
             413      manage a manager-managed company pursuant to Part 8, Management.
             414          (13) "Manager-managed company" means a company whose management is vested in
             415      managers pursuant to Part 8, Management.
             416          (14) "Member" means a person with an ownership interest in a company and with the
             417      rights and obligations specified under this chapter.
             418          (15) "Member-managed company" means a company whose management is vested in
             419      its members pursuant to Part 8, Management.
             420          (16) (a) "Operating agreement" means any written agreement of the members:
             421          (i) concerning the business or purpose of the company and the conduct of its affairs[,];
             422      and
             423          (ii) which complies with Part 5[. An operating], Operating Agreements.
             424          (b) "Operating agreement" includes any written amendments agreed to by all members
             425      or other writing adopted in any other manner as may be provided in the operating agreement.
             426          (17) "Person" means an individual or entity.
             427          (18) "Proceeding" means any administrative, judicial or other trial, hearing, or other
             428      action, whether civil, criminal, or investigative, the result of which may be that a court,
             429      arbitrator, or governmental agency may enter a judgment, order, decree, or other determination
             430      which, if not appealed or reversed, would be binding upon any person subject to the


             431      jurisdiction of that court, arbitrator, or governmental agency.
             432          (19) "Professional services" is as defined in Part 15, Professions.
             433          (20) "Profits interest" means that portion of the company's profits to be allocated to an
             434      individual member upon any allocation of profits.
             435          (21) "Profits interests" or "interests in profits" with respect to a company means the
             436      total interests of all of the company's members in the company's profits.
             437          [(20)] (22) "Signed," "signs," or "signature" means a manual signature or authorized
             438      facsimile [thereof] of the signature and any electronic or digital signature approved by the
             439      division.
             440          [(21)] (23) "State" means:
             441          (a) a state, territory, or possession of the United States[,];
             442          (b) the District of Columbia[,]; or
             443          (c) the Commonwealth of Puerto Rico.
             444          Section 6. Section 48-2c-110 is amended to read:
             445           48-2c-110. Powers.
             446          Each company organized and existing under this chapter may:
             447          (1) sue or be sued, institute or defend any action, or participate in any proceeding in its
             448      own name;
             449          (2) purchase, take, receive, lease, or otherwise acquire, own, hold, improve, use, or
             450      otherwise deal in or with real or personal property or an interest in real or personal property,
             451      wherever situated;
             452          (3) sell, convey, assign, encumber, mortgage, pledge, create a security interest in, lease,
             453      exchange or transfer, or otherwise dispose of all or any part of its property or assets;
             454          (4) lend money to and otherwise assist its members, managers, and employees;
             455          (5) purchase, take, receive, subscribe for, or otherwise acquire, own, hold, vote, use,
             456      employ, sell, mortgage, lend, pledge, or otherwise dispose of, or otherwise use or deal in or
             457      with:
             458          (a) shares or other interests in any entity or obligations of any person; or
             459          (b) direct or indirect obligations of the United States or any other government, state,
             460      territory, governmental district, or municipality or of any instrumentality of any of them;
             461          (6) (a) make contracts or guarantees or incur liabilities[,];


             462          (b) borrow money at such rates of interest as the company may determine[,];
             463          (c) issue its notes, bonds, or other obligations[,]; or
             464          (d) secure any of its obligations by mortgage or pledge of all or any part of its property,
             465      franchises, and income;
             466          (7) (a) lend money for any lawful purpose[,];
             467          (b) invest or reinvest its funds[,]; or
             468          (c) take and hold real or personal property as security for the payment of funds so
             469      loaned or invested;
             470          (8) conduct its business and maintain offices and exercise the powers granted by this
             471      chapter within this state, and in any state, territory, district, or possession of the United States,
             472      or in any foreign country;
             473          (9) elect or appoint managers and agents of the company, define their duties, and fix
             474      their compensation;
             475          (10) make and alter an operating agreement as allowed by Part 5, Operating
             476      Agreements;
             477          (11) make donations for the public welfare or for charitable, scientific, religious, or
             478      educational purposes;
             479          (12) indemnify or hold harmless any person;
             480          (13) cease its activities and cancel its certificate of organization;
             481          (14) transact any lawful business [which] that the members or the managers find to be
             482      in aid of governmental policy;
             483          (15) pay pensions and establish pension plans, profit-sharing plans, and other incentive
             484      plans for any or all of its members, managers, and employees;
             485          (16) be a promoter, incorporator, organizer, general partner, limited partner, member,
             486      associate, or manager of any corporation, partnership, limited partnership, limited liability
             487      company, joint venture, trust, or other enterprise or entity;
             488          (17) render professional services, if each member of a company who renders
             489      professional services in Utah is licensed or registered to render those professional services
             490      pursuant to applicable Utah law; and
             491          (18) have and exercise the same powers as an individual, and all powers necessary or
             492      convenient to effect or carry out any or all of the purposes for which the company is organized.


             493          Section 7. Section 48-2c-120 is amended to read:
             494           48-2c-120. Articles of organization and operating agreement.
             495          (1) A company's articles of organization or operating agreement may not:
             496          (a) restrict a right to inspect and copy records under Section 48-2c-113 ;
             497          (b) reduce the duties of members or managers under Section 48-2c-807 ;
             498          (c) eliminate the obligation of good faith and fair dealing, except that the members by
             499      written agreement may determine the standards by which the performance of the obligation is
             500      to be measured, if the standards are not manifestly unreasonable;
             501          (d) vary any filing requirement under this chapter;
             502          (e) vary any requirement under this chapter that a particular action or provision be
             503      reflected in a writing;
             504          (f) vary the right to expel a member based on any event specified in Subsection
             505      48-2c-710 (3);
             506          (g) vary the remedies under Section 48-2c-1210 for judicial dissolution of a company;
             507          (h) except as allowed by Section 48-2c-1103 or any other provision of law, restrict
             508      rights of, or impose duties on, persons other than the members, their assignees and transferees,
             509      the managers, and the company, without the consent of those persons; or
             510          (i) eliminate or limit the personal liability of [a manager] any person vested with
             511      management authority to the company or its members for damages for any breach of duty in the
             512      capacity where a judgment or other final adjudication adverse to the manager establishes that
             513      the manager's acts or omissions:
             514          (A) were in bad faith [or];
             515          (B) involved gross negligence [or];
             516          (C) involved willful misconduct; or [that]
             517          (D) the manager personally gained a financial profit or other advantage to which the
             518      manager was not legally entitled.
             519          (2) The articles of organization and operating agreement may:
             520          (a) vary the requirement under Section 48-2c-1104 that, if all of the other members of
             521      the company other than the member proposing to dispose of the member's interest do not
             522      approve of the proposed transfer or assignment by unanimous written consent, the transferee of
             523      the member's interest shall have no right to participate in the management of the business or


             524      affairs of the company or to become a member; and
             525          (b) vary the requirement under Section 48-2c-703 that, after the filing of the original
             526      articles of organization, a person may be admitted as an additional member only upon the
             527      written consent of all members.
             528          Section 8. Section 48-2c-121 is amended to read:
             529           48-2c-121. Scope of notice.
             530          (1) Articles of organization that have been filed with the division constitute notice to a
             531      third [persons, as well as] person, and to members and managers of the company:
             532          (a) that the company is a limited liability company formed under the laws of this state;
             533      and
             534          (b) of all statements set forth in the articles of organization [which] that are:
             535          (i) required by Subsection 48-2c-403 (1) to be set forth in articles of organization; and
             536          (ii) expressly permitted to be set forth in the articles of organization by Subsection
             537      48-2c-403 (4).
             538          (2) The filing with the division of any annual report required by Section 48-2c-203
             539      constitutes notice to a third [persons] person, as well as to members and managers of the
             540      company, of the information set forth in the annual report which is required by Section
             541      48-2c-203 to be set forth in an annual report.
             542          (3) The filing with the division of any statement allowed by Section 48-2c-122 is
             543      notice to a third [persons] person, as well as to members and managers of the company, of the
             544      information set forth in that statement which is expressly permitted to be set forth in that
             545      statement by Section 48-2c-122 .
             546          (4) The filing with the division of a certified copy of a court order under Subsection
             547      48-2c-809 (5) is notice of the contents of the order to:
             548          (a) a third person;
             549          (b) members of the company; and
             550          (c) managers of the company.
             551          Section 9. Section 48-2c-203 is amended to read:
             552           48-2c-203. Annual report.
             553          (1) (a) Each company and each foreign company authorized to transact business in this
             554      state shall file an annual report with the division:


             555          (i) during the month of its anniversary date of formation, in the case of domestic
             556      companies; or
             557          (ii) during the month of the anniversary date of being granted authority to transact
             558      business in this state, in the case of foreign companies authorized to transact business in this
             559      state.
             560          (b) The annual report required by Subsection (1)(a) shall set forth:
             561          (i) the name of the company; [and]
             562          (ii) the state or country under the laws of which it is formed; and [shall set forth]
             563          (iii) any change in:
             564          [(i)] (A) for a domestic company only, the street address of its designated office;
             565          [(ii)] (B) for a foreign company only, the street address of its principal office;
             566          [(iii)] (C) the street address of its registered office in this state;
             567          [(iv)] (D) the name of the agent for service of process at the address listed in
             568      Subsection (1)(b)(iii)(c);
             569          [(v)] (E) if the street address or legal name of any manager in a manager-managed
             570      company [or], any member in a member-managed company, or any person with management
             571      authority of a foreign company[,] has changed, the new street address or legal name of the
             572      manager, member, or other person; and
             573          [(vi)] (F) the identity of the persons constituting the managers in a manager-managed
             574      company or members in a member-managed company or other person with management
             575      authority of a foreign company.
             576          (2) (a) The annual report required by Subsection (1) shall:
             577          (i) be made on forms prescribed and furnished by the division; and
             578          (ii) contain information that is given as of the date of signing the annual report.
             579          (b) The annual report forms shall include a statement notifying the company that
             580      failure to file the annual report will result in:
             581          (i) the dissolution of the [organization] company, in the case of a domestic company;
             582      or
             583          (ii) the revocation of authority to transact business in this state in the case of a foreign
             584      company.
             585          (3) The annual report shall be signed by:


             586          (a) (i) any manager in a manager-managed company [or members];
             587          (ii) any member in a member-managed company; or
             588          (iii) any other person with management authority; and
             589          (b) if the registered agent has changed since the filing of the articles of organization or
             590      last annual report, by the new registered agent.
             591          (4) (a) If the annual report conforms to the requirements of this chapter, the division
             592      shall file the report.
             593          (b) If the annual report does not conform to the requirements of this chapter, the
             594      division shall mail the report, first class postage prepaid, to the registered agent of the company
             595      for any necessary corrections at the street address for the registered agent most recently
             596      furnished to the division by notice, annual report, or other document.
             597          (c) If the division returns an annual report in accordance with Subsection (4)(b), the
             598      penalties for failure to file the report within the time prescribed in this section do not apply, as
             599      long as the annual report is corrected and returned to the division within 30 days from the date
             600      the nonconforming report was mailed to the registered agent of the company.
             601          Section 10. Section 48-2c-401 is amended to read:
             602           48-2c-401. Organizer.
             603          (1) (a) One or more [individuals 18 years of age or older may form a company under
             604      this chapter by] persons may act as organizers of a company by signing and filing with the
             605      division articles of organization that meet the requirements of Section 48-2c-403 .
             606          (b) An organizer who is a natural person must be 18 years of age or older.
             607          (c) The [individuals] persons acting as [organizer] organizers may[, but need not,] be
             608      members or managers of the company at the time of formation or after formation has occurred.
             609          (2) (a) The signing of the articles of organization constitutes an affirmation by the
             610      organizers that:
             611          (i) the company has one or more members; and[,]
             612          (ii) if the company is manager-managed, the person or persons named as managers in
             613      the articles of organization have consented to serve as managers of the company.
             614          (b) At or prior to filing articles of organization for a company, the organizer or
             615      organizers shall prepare a writing to be held with the records of the company [which] that sets
             616      forth[: (a)] for each company that is not to be member-managed, the name and street address of


             617      each initial member of the company[; and].
             618          [(b) if the articles of organization provide that the company is manager-managed, the
             619      name and street address of each initial manager.]
             620          Section 11. Section 48-2c-403 is amended to read:
             621           48-2c-403. Articles of organization.
             622          (1) The articles of organization of a company shall set forth:
             623          (a) the name of the company;
             624          (b) the business purpose for which the company is organized;
             625          (c) the name and street address of its initial registered agent as required by Section
             626      48-2c-302 ;
             627          (d) the signature of [its] the company's initial registered agent;
             628          (e) a statement that the director of the division is appointed the agent of the company
             629      for service of process if:
             630          (i) the agent has resigned[,];
             631          (ii) the agent's authority has been revoked[,]; or
             632          (iii) the agent cannot be found or served with the exercise of reasonable diligence;
             633          (f) the street address of the company's designated office or a statement that the
             634      company's registered office shall be its designated office;
             635          (g) the name and street address of each organizer who is not a member or manager;
             636          (h) if the company is to be manager-managed:
             637          (i) a statement that the company is to be managed by a manager or managers; and
             638          (ii) the names and street addresses of the initial managers; and
             639          (i) if the company is to be member-managed:
             640          (i) a statement that the company is to be managed by its members; and
             641          (ii) the names and street addresses of the initial members.
             642          (2) If the company is to be manager-managed, the articles of organization do not need
             643      to state the name or address of any member, except as required by Part 15, Professions.
             644          (3) It is not necessary to include in the articles of organization any of the powers
             645      enumerated in this chapter.
             646          (4) The articles of organization may contain any other provision not inconsistent with
             647      law, including[, but not limited to]:


             648          (a) a provision limiting or restricting:
             649          (i) the business in which the company may engage [or];
             650          (ii) the powers that the company may exercise[,]; or
             651          (iii) both Subsections (4)(a)(i) and (ii);
             652          (b) a statement of whether there are limitations on the authority of managers or
             653      members to bind the company and, if so, what the limitations are, set out in detail and not with
             654      reference to any other document; or
             655          (c) a statement of the period of duration of the company, which may be as long as 99
             656      years from the date the articles of organization, or the latest of any amendments to the articles
             657      of organization effecting a change in the period of duration, were filed with the division.
             658          (5) If the articles of organization of a company do not specify a period of duration, the
             659      period of duration for that company is 99 years from the date the articles of organization were
             660      filed with the division, unless the period of duration is extended by an amendment to the
             661      articles of organization as permitted by this chapter.
             662          Section 12. Section 48-2c-408 is amended to read:
             663           48-2c-408. Certificate of amendment to articles of organization.
             664          (1) A company amending its articles of organization shall deliver to the division for
             665      filing a certificate of amendment [which] that includes:
             666          (a) the name of the company;
             667          (b) the text of each amendment adopted;
             668          (c) if the amendment provides for restructuring the ownership of the company or an
             669      exchange or reclassification of the members' interests in the company, provisions for
             670      implementing the amendment if not contained in the text of the amendment itself;
             671          (d) the date each amendment was adopted by the members;
             672          (e) a statement that each amendment was adopted by the members and any managers,
             673      as required by Section [ 48-2c-802 ] 48-2c-803 or 48-2c-804, or as otherwise required by the
             674      articles of organization or operating agreement; and
             675          (f) the signature required by Section 48-2c-204 .
             676          (2) Unless otherwise provided in the articles of organization [or], the operating
             677      agreement, or in Section 48-2c-803 or 48-2c-804 , each amendment to the articles of
             678      organization of a company must be approved by all [of the] members and any managers and, if


             679      there are classes of members, by all of the members of each class.
             680          (3) A company shall deliver the certificate of amendment required by Subsection (1) to
             681      the division for filing within 60 days after adoption of the amendment.
             682          (4) Upon the filing with the division of a certificate of amendment, the articles of
             683      organization shall be amended as set forth in the certificate of amendment.
             684          Section 13. Section 48-2c-501 is amended to read:
             685           48-2c-501. Initial agreement.
             686          The initial operating agreement of a company, if one is adopted, shall be adopted by
             687      unanimous consent of the members.
             688          Section 14. Section 48-2c-702 is amended to read:
             689           48-2c-702. Initial members.
             690          (1) In connection with the formation of a company, a person becomes a member of the
             691      company upon the earliest to occur of the following:
             692          (a) when the person signs the articles of organization as a member;
             693          (b) when the person signs the operating agreement as a member; or
             694          (c) when:
             695          (i) the person evidences the intent to become a member, either orally, in writing, or by
             696      other action such as transferring property or paying money to the company for an interest in the
             697      company; and
             698          (ii) the person's admission as a member is reflected in the records of the company or is
             699      otherwise acknowledged by the company.
             700          (2) Notwithstanding [the provisions of] Subsection (1), a person [shall] may not
             701      become a member of a company prior to formation of the company.
             702          Section 15. Section 48-2c-803 is amended to read:
             703           48-2c-803. Management by members.
             704          In a member-managed company, each member shall be subject to the duties described
             705      in Section 48-2c-807 and, unless otherwise provided in this chapter [or], in the articles of
             706      organization, or an operating agreement:
             707          (1) the affirmative vote, approval, or consent of members holding a majority of profits
             708      interests in the company shall be required to decide any matter connected with the business of
             709      the company;


             710          (2) the affirmative vote, approval, or consent of all members shall be required to:
             711          (a) amend the articles of organization, except to make ministerial amendments
             712      including:
             713          (i) amendments made only to reflect actions previously taken with the requisite
             714      approval, such as a change in managers under Section 48-2c-804 ; or
             715          (ii) to change an address;
             716          (b) amend the operating agreement, except to make ministerial amendments, including:
             717          (i) amendments made only to reflect actions previously taken with the requisite
             718      approval, such as a change in managers under Section 48-2c-804 ; or
             719          (ii) to change an address; or
             720          (c) (i) authorize a member or any other person to do any act on behalf of the company
             721      that contravenes the articles of organization or operating agreement; and [thereafter]
             722          (ii) after authorizing an act under Subsection (2)(c)(i) to terminate the authority so
             723      granted; and
             724          (3) the affirmative vote, approval, or consent of members holding 2/3 of the profits
             725      interests in the company shall be required to bind the company to any of the following actions:
             726          (a) (i) authorizing a member or any other person to do any act on behalf of the
             727      company that is not in the ordinary course of the company's business, or business of the kind
             728      carried on by the company[,]; and [thereafter]
             729          (ii) after authorizing an act under Subsection (3)(a)(i) to terminate the authority so
             730      granted;
             731          (b) making a current distribution to members;
             732          (c) resolving any dispute connected with [carrying on in the usual way the business of
             733      the company] the usual and regular course of the company's business;
             734          (d) making a substantial change in the business purpose of the company;
             735          (e) a conversion of the company to another entity;
             736          (f) a merger in which the company is a party to the merger;
             737          (g) any sale, lease, exchange, or other disposition of all or substantially all of the
             738      company's property other than in the usual and regular course of the company's business;
             739          (h) any mortgage, pledge, dedication to the repayment of indebtedness, whether with or
             740      without recourse, or other encumbering of all or substantially all of the company's property


             741      [whether or not] other than in the usual and regular course of the company's business; or
             742          (i) any waiver of a liability of a member under Section 48-2c-603 .
             743          Section 16. Section 48-2c-803.1 is enacted to read:
             744          48-2c-803.1. Individual profits interest.
             745          For the purpose of determining compliance with a provision of this chapter that
             746      conditions rights, consents, or actions on the participation of members holding a certain
             747      percentage of the company's profits interests, unless otherwise provided in the articles of
             748      organization or the operating agreement, each member's profits interest shall be determined
             749      based on the members' capital account balances on the date on which compliance is measured.
             750          Section 17. Section 48-2c-804 is amended to read:
             751           48-2c-804. Management by managers.
             752          In a manager-managed company, each manager and each member shall be subject to
             753      [the provisions of] Section 48-2c-807 and:
             754          (1) (a) the initial managers shall be designated in the articles of organization;
             755      [thereafter,] and
             756          (b) after the initial managers, the managers shall be those persons identified in
             757      documents filed with the division including:
             758          (i) amendments to the articles of organization [as well as];
             759          (ii) the annual reports required under Section 48-2c-203 ; and
             760          (iii) the statements required or permitted under Section 48-2c-122 ;
             761          (2) when there is a change in the management structure from a member-managed
             762      company to a manager-managed company, the managers shall be those persons identified in the
             763      certificate of amendment to the articles of organization that makes the change;
             764          (3) each manager who is a natural person must have attained the age of majority under
             765      the laws of this state;
             766          (4) no manager shall have authority to do any act in contravention of the articles of
             767      organization or the operating agreement, except as provided in Subsection (6)(g);
             768          (5) a manager who is also a member shall have all of the rights of a member;
             769          (6) unless otherwise provided in the articles of organization or operating agreement of
             770      the company:
             771          (a) except for the initial managers, each manager shall be elected at any time by the


             772      members holding at least a majority of the profits interests in the company, and any vacancy
             773      occurring in the position of manager shall be filled in the same manner;
             774          (b) the number of managers:
             775          (i) shall be fixed by the members in the operating agreement; or [if the operating
             776      agreement fails to designate the number of managers, the number of managers]
             777          (ii) shall be the number designated by members holding at least a majority of the
             778      profits interests in the company if the operating agreement fails to designate the number of
             779      managers;
             780          (c) each manager shall serve until the earliest to occur of:
             781          (i) the manager's death, withdrawal, or removal [or];
             782          (ii) an event described in Subsection 48-2c-708 (1)(f); or[,]
             783          (iii) if membership in the company is a condition to being a manager, an event
             784      described in Subsection 48-2c-708 (1)(d) or (e);
             785          (d) a manager need not be a member of the company or a resident of this state;
             786          (e) any manager may be removed with or without cause by the members, at any time,
             787      by the decision of members owning a majority of the profits interests in the company;
             788          (f) there shall be only one class of managers; and
             789          (g) approval by [the requisite number of members, as well as all of the managers, shall
             790      be required as to all matters described in Subsections 48-2c-803 (2) and (3)]:
             791          (i) all of the members and all of the managers shall be required for matters described in
             792      Subsection 48-2c-803 (2); and
             793          (ii) members holding 2/3 of the profits interests in the company, and 2/3 of the
             794      managers shall be required for all matters described in Subsection 48-2c-803 (3).
             795          Section 18. Section 48-2c-807 is amended to read:
             796           48-2c-807. Duties of managers and members.
             797          (1) [Unless otherwise provided in the articles of organization or an operating
             798      agreement, a] A member or manager shall not be liable or accountable in damages or otherwise
             799      to the company or the members for any action taken or failure to act on behalf of the company
             800      unless the act or omission constitutes:
             801          (a) gross negligence [or];
             802          (b) willful misconduct[.]; or


             803          (c) a breach of a higher standard of conduct that would result in greater exposure to
             804      liability for the member or manager that is established in the company's articles of organization
             805      or operating agreement.
             806          (2) [Unless otherwise provided in an operating agreement, each] Each member and
             807      manager [must] shall account to the company and hold as trustee for it any profit or benefit
             808      derived by that person without the consent of members holding a majority interest in profits in
             809      the company, or a higher percentage of interests in profits provided for in the company's
             810      articles of organization or operating agreement, from:
             811          (a) any transaction connected with the conduct of the company's business or winding
             812      up of the company; or
             813          (b) any use by the member or manager of company property, including[, but not limited
             814      to,] confidential or proprietary information of the company or other matters entrusted to the
             815      person in the capacity of a member or manager.
             816          (3) [A] Unless otherwise provided in a company's articles of organization or operating
             817      agreement, a member of a manager-managed company who is not also a manager owes no
             818      fiduciary duties to the company or to the other members solely by reason of acting in the
             819      capacity of a member.
             820          Section 19. Section 48-2c-903 is amended to read:
             821           48-2c-903. Capital accounts.
             822          (1) (a) A capital account shall be maintained for each member.
             823          (b) The capital account of each member represents that member's share of the net assets
             824      of the company.
             825          (c) Except as otherwise provided in the articles of organization or operating agreement,
             826      the capital accounts of all members shall be adjusted, either increased or decreased, to reflect
             827      the revaluation of company assets, including intangible assets such as goodwill, on the
             828      company's books in connection with any of the following events:
             829          [(a)] (i) a capital contribution, other than a de minimis contribution, made by or on
             830      behalf of a new member or an additional capital contribution, other than a de minimis
             831      contribution, made by or on behalf of an existing member;
             832          [(b)] (ii) a distribution, other than a de minimis amount, made in partial or complete
             833      redemption of a member's interest in the company; [or]


             834          [(c)] (iii) the dissolution and winding up of the company[.];
             835          (iv) a merger of the company; or
             836          (v) the grant of an interest in the company other than a de minimis interest, on or after
             837      May 6, 2004, as consideration for the provision of services to or for the benefit of the company
             838      by:
             839          (A) an existing member acting in the capacity of a member; or
             840          (B) a new member acting in a member capacity or in anticipation of becoming a
             841      member.
             842          (2) Upon any [such] revaluation event[,] under Subsection (1):
             843          (a) the book value of company assets shall be adjusted to fair market value; and
             844          (b) unrealized income, gain, loss, or deduction inherent in [such] those company assets
             845      that have not been previously reflected in the members' capital accounts shall be allocated to
             846      the members' capital accounts.
             847          Section 20. Section 48-2c-1103 is amended to read:
             848           48-2c-1103. Rights of creditor of member.
             849          (1) (a) On application to a court of competent jurisdiction by any judgment creditor of
             850      a member or of a member's assignee, the court may charge the interest in the company of the
             851      member or assignee with payment of the unsatisfied amount of the judgment plus interest.
             852      [The court]
             853          (b) A court charging the interest of a member or assignee under Subsection (1)(a) may
             854      then or later appoint a receiver of the share of distributions due or to become due to the
             855      judgment debtor in respect of the interest in the company. [The]
             856          (c) A judgment creditor and receiver under this section shall have only the rights of an
             857      assignee. [The]
             858          (d) A court may make all other orders, directions, accounts, and inquiries [the] a
             859      judgment debtor might [have made] make or [which] that the circumstances of the case may
             860      require.
             861          (2) (a) A charging order constitutes a lien on the judgment debtor's interest in the
             862      company. [The]
             863          (b) A court may order a foreclosure of the interest subject to [the] a charging order
             864      entered under this section at any time.


             865          (c) The purchaser at [the] a foreclosure sale under Subsection (2)(b) has only the rights
             866      of an assignee[.] if there are other members in the company.
             867          (d) Notwithstanding Subsection (2)(c), if the member whose interest is charged under
             868      this section is the sole member of the company when the judgment creditor's claim first arose:
             869          (i) the purchaser at a foreclosure sale acquires all rights of the member, including
             870      voting rights; and
             871          (ii) the member is considered to have consented to the admission of the purchaser as a
             872      member of the company.
             873          (3) Unless otherwise provided in the articles of organization or operating agreement for
             874      the company, at any time before foreclosure an interest charged may be redeemed:
             875          (a) by the judgment debtor;
             876          (b) with property other than company property, by one or more of the other members;
             877      or
             878          (c) by the company with the consent of all of the members whose interests are not so
             879      charged.
             880          (4) This section does not deprive a member of a right under exemption laws with
             881      respect to the member's interest in a company.
             882          (5) This section provides the exclusive remedy by which a judgment creditor of a
             883      member or a member's assignee may satisfy a judgment out of the judgment debtor's interest in
             884      a company.
             885          (6) No creditor of a member shall have any right to obtain possession of, or otherwise
             886      exercise legal or equitable remedies with respect to, the property of the company.
             887          Section 21. Section 48-2c-1201 is amended to read:
             888           48-2c-1201. Events of dissolution.
             889          A company organized under this chapter shall be dissolved upon the occurrence of any
             890      of the following events:
             891          (1) when the period fixed for the duration of the company, pursuant to Subsection
             892      48-2c-403 (4)(c) or (5), expires;
             893          (2) at such times as the company fails to have at least one member;
             894          (3) by written agreement signed by all members;
             895          (4) upon the occurrence of a dissolution event specified in the articles of organization


             896      or operating agreement;
             897          [(5) when the company is not the successor company in the merger or consolidation of
             898      two or more companies;]
             899          [(6)] (5) upon administrative dissolution under Section 48-2c-1207 , subject to right of
             900      reinstatement under Section 48-2c-1208 ; or
             901          [(7)] (6) upon entry of a decree of judicial dissolution under Section 48-2c-1213 .
             902          Section 22. Section 48-2c-1204 is amended to read:
             903           48-2c-1204. Articles of dissolution.
             904          (1) After any event of dissolution, other than the events described in Subsection
             905      48-2c-1201 [(6) or (7)] (5) or (6), the company, or a person acting for the company, shall deliver
             906      to the division for filing articles of dissolution setting forth:
             907          (a) the name of the company;
             908          (b) (i) the address of the company's designated office; or[,]
             909          (ii) if [none] a designated office is to be maintained, a statement that the company will
             910      not maintain a designated office[,]; and[,]
             911          (iii) if different from the address of the designated office or if no designated office is to
             912      be maintained, the address to which service of process may be mailed pursuant to Section
             913      48-2c-308 ;
             914          (c) the effective date of the dissolution;
             915          (d) the event causing the dissolution;
             916          (e) if dissolution occurred by written agreement of the members, a statement to that
             917      effect; and
             918          (f) any additional information the division determines is necessary or appropriate.
             919          (2) A company is dissolved upon the effective date of dissolution set forth in its articles
             920      of dissolution.
             921          Section 23. Section 48-2c-1207 is amended to read:
             922           48-2c-1207. Procedure for and effect of administrative dissolution.
             923          (1) If the division determines that one or more grounds exist under Section 48-2c-1206
             924      for dissolving a company, it shall mail to the company written notice of:
             925          (a) the division's determination that one or more grounds exist for dissolving the
             926      company; and


             927          (b) the grounds for dissolving the company.
             928          (2) (a) If the company does not correct each ground for dissolution, or demonstrate to
             929      the reasonable satisfaction of the division that each ground does not exist, within 60 days after
             930      mailing the notice provided in Subsection (1), the division shall administratively dissolve the
             931      company.
             932          (b) If a company is dissolved under Subsection (2)(a), the division shall mail written
             933      notice of the administrative dissolution to the dissolved company at its designated office,
             934      stating the date of dissolution specified in Subsection (2)(d).
             935          (c) The division shall mail a copy of the notice of administrative dissolution including
             936      a statement of the grounds for the administrative dissolution, to:
             937          (i) the registered agent of the dissolved company; or
             938          (ii) if there is no registered agent of record, or if the mailing to the registered agent is
             939      returned as undeliverable, at least one member if the company is member-managed or one
             940      manager of the company if the company is manager-managed, at their addresses as reflected on
             941      the notice, annual report, or document most recently filed with the division.
             942          (d) A company's effective date of administrative dissolution is five days after the date
             943      the division mails the written notice of dissolution under Subsection (2)(b).
             944          (e) On the effective date of dissolution, any assumed names filed on behalf of the
             945      dissolved company under Title 42, Chapter 2, Conducting Business Under Assumed Name, are
             946      canceled.
             947          (f) Notwithstanding Subsection (2)(e), the name of the company that is dissolved and
             948      any assumed names filed on its behalf are not available for two years from the effective date of
             949      dissolution for use by any other person:
             950          (i) transacting business in this state; or
             951          (ii) doing business under an assumed name under Title 42, Chapter 2, Conducting
             952      Business Under Assumed Name.
             953          (g) Notwithstanding Subsection (2)(e), if the company that is dissolved is reinstated in
             954      accordance with Section 48-2c-1208 , the registration of the name of the company and any
             955      assumed names filed on its behalf are reinstated back to the effective date of dissolution.
             956          (3) (a) Except as provided in Subsection (3)(b), a company administratively dissolved
             957      under this section continues its existence but may not carry on any business except:


             958          (i) the business necessary to wind up and liquidate its business and affairs under Part
             959      13 [of this chapter], Winding Up; and
             960          (ii) to give notice to claimants in the manner provided in Sections 48-2c-1305 and
             961      48-2c-1306 .
             962          (b) If the company is reinstated in accordance with Section 48-2c-1208 , business
             963      conducted by the company during a period of administrative dissolution is unaffected by the
             964      dissolution.
             965          (4) The administrative dissolution of a company does not terminate the authority of its
             966      registered agent.
             967          (5) (a) Upon the administrative dissolution of a company, the director of the division
             968      shall be an additional agent of the dissolved company for purposes of service of process.
             969          (b) Service of process on the director of the division under this Subsection (5) is
             970      service on the dissolved company.
             971          (c) Upon receipt of process under this Subsection (5), the director of the division shall
             972      send a copy of the process to the dissolved company at its designated office and a copy of the
             973      process to the registered agent of the dissolved company.
             974          (6) A notice mailed under this section shall be:
             975          (a) mailed first-class, postage prepaid; and
             976          (b) addressed to the most current mailing address appearing on the records of the
             977      division for:
             978          (i) the designated office of the company, if the notice is required to be mailed to the
             979      company;
             980          (ii) the registered agent of the company, if the notice is required to be mailed to the
             981      registered agent; or
             982          (iii) any member if the company is member-managed, or to any manager of the
             983      company if the company is manager-managed, if the notice is required to be mailed to a
             984      member or manager of the company.
             985          Section 24. Section 48-2c-1211 is amended to read:
             986           48-2c-1211. Procedure for judicial dissolution.
             987          (1) (a) A proceeding by the attorney general or director of the division to dissolve a
             988      company shall be brought in [either]:


             989          (i) the district court of the county in this state in which the designated office or, if it has
             990      no designated office in this state, its registered office is or was last located[,]; or
             991          (ii) the district court of Salt Lake County.
             992          (b) A proceeding brought by any other party named in Section 48-2c-1210 shall be
             993      brought in the district court of the county in this state where the company's designated office
             994      or, if it has no designated office in this state, its registered office is or was last located.
             995          (2) It is not necessary to make any member or manager a party to a proceeding to
             996      dissolve a company unless relief is sought against them [individually] personally.
             997          (3) A court in a proceeding brought to dissolve a company may:
             998          (a) issue [injunctions,] an injunction;
             999          (b) appoint a receiver or custodian pendente lite with all powers and duties the court
             1000      directs[,];
             1001          (c) take other action required to preserve the company's assets wherever located[,]; and
             1002          (d) carry on the business of the company until a full hearing can be held.
             1003          Section 25. Section 48-2c-1404 is amended to read:
             1004           48-2c-1404. Approval of conversion.
             1005          (1) Any conversion involving a foreign subject entity must be permitted by the laws
             1006      governing the foreign subject entity.
             1007          (2) Any filing required to effect the conversion and the change in domicile of a
             1008      surviving domestic company under the laws of each jurisdiction governing the foreign subject
             1009      entity shall be timely made.
             1010          (3) Prior to filing articles of conversion with the division[,]:
             1011          (a) the conversion must first be approved in the manner provided for by applicable law
             1012      or by the document, instrument, agreement, or other writing[, as the case may be,] that governs
             1013      the internal affairs of the subject entity, as appropriate[,]; and
             1014          (b) the new operating agreement, if any, for the domestic company must be approved
             1015      by the same authorization required to approve the conversion.
             1016          (4) If applicable law, or the document, instrument, agreement, or other writing[, as the
             1017      case may be,] that governs the internal affairs of the subject entity, does not provide for the
             1018      manner of approving the conversion, [then] unanimous consent of the owners of the subject
             1019      entity shall be required to approve the conversion and the new operating agreement.


             1020          Section 26. Section 48-2c-1406 is amended to read:
             1021           48-2c-1406. Approval of company conversion to other entity.
             1022          (1) (a) A domestic company may convert to any subject entity upon the authorization
             1023      of the conversion in accordance with this section.
             1024          (b) If [the] an operating agreement specifies the manner of authorizing a conversion of
             1025      [the] a company, the conversion shall be authorized as specified in the operating agreement.
             1026          (c) If the operating agreement does not specify the manner of authorizing a conversion
             1027      of the company and does not prohibit a conversion of the company, the conversion shall be
             1028      authorized in the same manner as specified in the operating agreement for authorizing a merger
             1029      that involves the company as a constituent party to the merger.
             1030          (d) If the operating agreement does not specify the manner of authorizing a conversion
             1031      of the company or a merger that involves the company as a constituent party and does not
             1032      prohibit a conversion of the company, the conversion must be authorized by unanimous
             1033      consent of all members.
             1034          (2) A converted domestic company shall, upon conversion to a subject entity, be
             1035      considered the same entity as the subject entity and the rights, privileges, powers, and interests
             1036      in property of the domestic company, as well as the debts, liabilities, and duties of the domestic
             1037      company, [shall] may not, for any purpose of the laws of this state, be considered, as a
             1038      consequence of the conversion, to have been transferred to the subject entity to which the
             1039      domestic company has converted.
             1040          (3) (a) Unless otherwise agreed, the conversion of a domestic company to another
             1041      entity, pursuant to this section, [shall] does not require the domestic company to wind up its
             1042      affairs or to pay its liabilities or distribute its assets under this chapter.
             1043          (b) In connection with conversion of a domestic company to another entity under this
             1044      section, all interests in, or securities of or rights in the domestic company which is to be
             1045      converted may be:
             1046          (i) exchanged for or converted into cash, property, interests in, or securities of or rights
             1047      in the entity into which the domestic company is converted; or[,]
             1048          (ii) in addition to or in lieu [thereof] of an exchange or conversion described in
             1049      Subsection (3)(b)(i), may be exchanged for or converted into cash, property, interests in, or
             1050      securities of or rights in another entity.


             1051          (4) A conversion of a domestic company into a foreign subject entity must be:
             1052          (a) permitted by the statutes governing the foreign subject entity;
             1053          (b) approved in the manner required by the statutes described in Subsection (4)(a); and
             1054          (c) accompanied by any filing in the foreign jurisdiction required by the statutes
             1055      described in Subsection (4)(a).




Legislative Review Note
    as of 2-7-05 4:51 PM


Based on a limited legal review, this legislation has not been determined to have a high
probability of being held unconstitutional.

Office of Legislative Research and General Counsel


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