Adkisson's

Uniform Protected Series Act

(UPSA)

Caution State Law Variances!

 

Protected Series Act - Contents Of Act

(Prefatory Note Below)

 

 

ARTICLE 1. GENERAL PROVISIONS

 

     SECTION 101. SHORT TITLE.

 

     SECTION 102. DEFINITIONS.

 

     SECTION 103. NATURE OF PROTECTED SERIES.

 

     SECTION 104. POWERS AND DURATION OF PROTECTED SERIES.

 

     SECTION 105. GOVERNING LAW.

 

     SECTION 106. RELATION OF OPERATING AGREEMENT, THIS ACT, AND LIMITED LIABILITY COMPANY ACT.

 

     SECTION 107. ADDITIONAL LIMITATIONS ON OPERATING AGREEMENT.

 

     SECTION 108. RULES FOR APPLYING LIMITED LIABILITY COMPANY ACT TO SPECIFIED PROVISIONS OF ACT.

 

 

ARTICLE 2. ESTABLISHING PROTECTED SERIES

 

     SECTION 201. PROTECTED SERIES DESIGNATION; AMENDMENT.

 

     SECTION 202. NAME.

 

     SECTION 203. REGISTERED AGENT.

 

     SECTION 204. SERVICE OF PROCESS, NOTICE, DEMAND, OR OTHER RECORD.

 

     SECTION 205. CERTIFICATE OF GOOD STANDING FOR PROTECTED SERIES.

 

     SECTION 206. INFORMATION REQUIRED IN ANNUAL BIENNIAL REPORT; EFFECT OF FAILURE TO PROVIDE.

 

 

ARTICLE 3. ASSOCIATED ASSET; ASSOCIATED MEMBER; PROTECTED-SERIES TRANSFERABLE INTEREST; MANAGEMENT; RIGHT OF INFORMATION

 

     SECTION 301. ASSOCIATED ASSET.

 

     SECTION 302. ASSOCIATED MEMBER.

 

     SECTION 303. PROTECTED-SERIES TRANSFERABLE INTEREST.

 

     SECTION 304. MANAGEMENT.

 

     SECTION 305. RIGHT OF PERSON NOT ASSOCIATED MEMBER OF PROTECTED SERIES TO INFORMATION CONCERNING PROTECTED SERIES.

 

 

ARTICLE 4. LIMITATION ON LIABILITY AND ENFORCEMENT OF CLAIMS

 

     SECTION 401. LIMITATIONS ON LIABILITY.

 

     SECTION 402. CLAIM SEEKING TO DISREGARD LIMITATION OF LIABILITY.

 

     SECTION 403. REMEDIES OF JUDGMENT CREDITOR OF ASSOCIATED MEMBER OR PROTECTED-SERIES TRANSFEREE.

 

     SECTION 404. ENFORCEMENT AGAINST NON-ASSOCIATED ASSET.

 

 

ARTICLE 5. DISSOLUTION AND WINDING UP OF PROTECTED SERIES

 

     SECTION 501. EVENTS CAUSING DISSOLUTION OF PROTECTED SERIES.

 

     SECTION 502. WINDING UP DISSOLVED PROTECTED SERIES.

 

     SECTION 503. EFFECT OF REINSTATEMENT OF SERIES LIMITED LIABILITY COMPANY OR REVOCATION OF VOLUNTARY DISSOLUTION.

 

 

ARTICLE 6. ENTITY TRANSACTIONS RESTRICTED

 

     SECTION 601. DEFINITIONS.

 

     SECTION 602. PROTECTED SERIES MAY NOT BE PARTY TO ENTITY TRANSACTION.

 

     SECTION 603. RESTRICTION ON ENTITY TRANSACTION INVOLVING PROTECTED SERIES.

 

     SECTION 604. MERGER AUTHORIZED; PARTIES RESTRICTED.

 

     SECTION 605. PLAN OF MERGER.

 

     SECTION 606. STATEMENT OF MERGER.

 

     SECTION 607. EFFECT OF MERGER.

 

     SECTION 608. APPLICATION OF SECTION 404 AFTER MERGER.

 

 

ARTICLE 7. FOREIGN PROTECTED SERIES

 

     SECTION 701. GOVERNING LAW.

 

     SECTION 702. NO ATTRIBUTION OF ACTIVITIES CONSTITUTING DOING BUSINESS OR FOR ESTABLISHING JURISDICTION.

 

     SECTION 703. REGISTRATION OF FOREIGN PROTECTED SERIES.

 

     SECTION 704. DISCLOSURE REQUIRED WHEN FOREIGN SERIES LIMITED LIABILITY COMPANY OR FOREIGN PROTECTED SERIES PARTY TO PROCEEDING.

 

 

ARTICLE 8. MISCELLANEOUS PROVISIONS

 

     SECTION 801. UNIFORMITY OF APPLICATION AND CONSTRUCTION.

 

     SECTION 802. RELATION TO ELECTRONIC SIGNATURES IN GLOBAL AND NATIONAL COMMERCE ACT.

 

     SECTION 803. TRANSITIONAL PROVISIONS.

 

     SECTION 804. SAVINGS CLAUSE.

 

     SECTION 805. SEVERABILITY CLAUSE.

 

     SECTION 806. REPEALS; CONFORMING AMENDMENTS.

 

     SECTION 807. EFFECTIVE DATE.

 

 

PREFATORY NOTE TO UNIFORM PROTECTED SERIES ACT

Part 1. The Protected Series Construct

Part 2. "Protected Series" as the Term of Art

Part 3. The Import of the Protected Series Construct

Part 4. Growing Popularity of Series Limited Liability Companies

Part 5. Structure of the Act – A Module to be Enacted as Part of an Enacting State's Current Limited Liability Company Act

Part 6. Extrapolation – Leveraging by Analogy the Rules of an Enacting State's Limited Liability Company Act

A. The Need for and Meaning of "Extrapolation"

B. An Additional Benefit – Parallelism in Concept and Terminology

Part 7. Non-Liability and Non-Recourse Rules and the Act's Novel Approach to Horizontal Shields

A. The Two-Fold Nature of a Liability Shield

B. Horizontal Shields – Non-Liability and Non-Recourse Rules Distinguished to Create an Important Inducement to Good Recordkeeping

C. The Novel and Important Inducement – "Asset by Asset Exposure"

Part 8. Overcoming the Shields

Part 9. Traditional and Internal Shields Compared in Tabular Form

Part 10. Clarity and Safeguards of this Act Compared to Current Protected Series Statutes

 

Part 1. The Protected Series Construct

As provided by statutes in 13 states, the District of Columbia, and Puerto Rico,FN1 the protected series construct has the following aspects:FN2

  • an identifiable set of assets segregated within a limited liability company ("a series limited liability company");FN3
  • the assets:
  • comprise a protected series, which is empowered to conduct activities in its own name;
  • must be identified by thorough recordkeeping that distinguishes them from assets of the series limited liability company and assets of any other protected series of the company;FN4
  • are obligated solely to persons asserting claims pertaining to activities related to the segregated assets; and
  • are not available to persons asserting claims arising from the activities of the series limited liability company or any other protected series of the company;
  • one or more members of the series limited liability company may be associated with the protected series, but not necessarily; and
  • distributions arising from the assets and activities go to:
  • the members associated with the protected series, if any; or
  • if the series has no associated members, the series limited liability company.

 

FN1 -- As of September 17, 2017, the following statutes provide for protected series within a limited liability company. ALA. CODE secs. 10A-5A-11.01-.16 (2015); DEL. CODE ANN. tit. 6, sec.18-215 (West 2015); D.C. CODE ANN. sec.29-802.06 (2015); 805 ILL. COMP. STAT. ANN. 180/37-40 (West 2014); IND. CODE ANN. sec. 23-18.1-1-1 to 23-18.1-1-7-4 (West); IOWA CODE ANN. secs. 489.1201-1206 (West 2014); KAN. STAT. ANN. sec. 17-76, 143 (West 2014); MO. REV. STAT. sec. 347.186. (2014); MONTANA CODE ANN. sec. 35-8-304 (West 2013); NEV. REV. STAT. ANN. sec. 86.296 (West 2014); OKLA. ST. ANN. tit. 18, secs. 2005(B), 2054.4 (West 2014); TENN. CODE ANN. sec. 48-249-309 (West 2014); TEX. BUS. ORGS. CODE ANN. secs.101.601-622 (West 2013); UTAH CODE ANN. secs. 48-3a-1201 to 1209 (West 2014); P.R. LAWS ANN. tit. 14, sec. 3967 (2011).

 

FN2 -- Existing statutes refer to "series" rather than "protected series." Part 2 of this Note explains why this act and its commentary use the latter label.

 

FN3 -- Delaware law authorizes protected series within a limited partnership, Del. Code Ann. tit. 6, sec.17-218 (2015), but few Delaware limited partnerships provide for protected series. Statutory trusts also have series, but those series differ fundamentally from the protected series authorized by this act. For example, while "[a] series of a statutory trust is not an entity separate from the statutory trust," Uniform Statutory Trust Entity Act (2009) (Last Amended 2013), Section 401(b), and "may not sue or be sued in its own name," Id. Section 403(a), "[a] protected series has the capacity to sue and be sued in its own name," Uniform Limited Liability Company Act (2006) (Last Amended 2013), Section 104(a), and "is a person distinct from … the [limited liability] company [and any other]… protected series of the company." Id. Section 103(1)-(2).

 

FN4 -- The recordkeeping is not part of the public record, although some assets might be titled in the name of a protected series. See Section 301(e). The act contains an important and novel inducement to accurate recordkeeping. See Part 7-C of this Note.

 

FN5 -- Allowing a non-member of a series limited liability company to be associated with a protected series of the company would cause daunting complexity while producing very little (if any) benefit. See Section 302(a), cmt.

Thus, a series limited liability company contains "internal shields" – i.e., asset partitions reserving the assets of each protected series solely to creditors of that protected series. These "horizontal" shields are conceptually and practically quite different from the traditional, "vertical" shield that protects the owners of an organization from automatic, status-based liability for the organization's obligations.

 

Part 2. "Protected Series" as the Term of Art

Following long-standing practice with statutory trusts and investment companies, existing protected series statutes use "series" as the term of art for the construct just described. However, outside that context, "series" has an established and very different meaning with regard to bonds, corporate stock, etc. As a result, using "series" to label the new construct is quite confusing.FN6 To avoid confusion, this act uses the term "protected series" – both to signal a different meaning and to call attention to the internal, horizontal shields which are the construct's defining characteristic.

 

FN6 -- For example, lists of limited liability company acts with "series" provisions have often included the statutes of Minnesota, North Dakota, and Wisconsin. Although these acts did (in the case of Minnesota and North Dakota) and do (in the case of Wisconsin) refer to "series," the word has nothing to do with asset partitioning and internal shields. The three acts have used "series" to describe a category of ownership interest analogous to a series of stock. See Minn. Stat. sec. 322B.03, subd. 44, repealed 2014 Minn. Laws ch. 157, art. 1; ND Stat. sec. 10-32.1-02(48), repealed 2015 North Dakota Laws Ch. 87; Wis. Stat. sec. 183.0504 (2017).

 

Part 3. The Import of the Protected Series Construct

The protected series:

  • pushes the conceptual envelope of entity law by providing for a quasi-distinct legal person existing within an overarching entity;
  • establishes a new type of liability shield, the "internal" or "horizontal" shield. Rather than protecting the owners of an organization from status-based liability for the organization's debts, obligations, and other liabilities (the "vertical shield"), the internal/horizontal shields:
  • protect the assets of one protected series from the creditors of the series limited liability company and the creditors of any other protected series of the company; and
  • provide comparable protection for the assets of the series limited liability company itself.

 

Part 4. Growing Popularity of Series Limited Liability Companies

It is not possible to determine the number of series limited liability companies and protected series in existence in the United States, because under most protected series statutes a limited liability company can establish a protected series without making a corresponding public filing. The only item on the public record will be a statement that the company has the capacity to establish protected series. However, anecdotal evidence suggests heavy usage, especially under the Delaware statute.FN7

 

FN7 -- An ABA Advisor to the Drafting Committee reports having established approximately 1500 series limited liability companies under Delaware law.

 

Better data is available from Illinois, where the law requires a public filing to establish a protected series. As of January 1, 2017, more than 27,000 protected series were active under Illinois law.

The growing popularity is also reflected in the following chart,FN8 which shows the increasing number of U.S. jurisdictions that provide for the creation of protected series:

 

FN8 -- Compiled by legislative counsel to the Uniform Law Commission.

 

year of enactment | name of enacting jurisdictions | total number of enactments in the year | cumulative total of jurisdictions with protected series provisions

1996 | Delaware | 1 | 1

2004 | Oklahoma | 1 | 2

2005 | Illinois, Nevada, Tennessee | 3 | 5

2008 | Iowa | 1 | 6

2009 | Puerto Rico, Texas | 2 | 8

2011 | District of Columbia | 1 | 9

2012 | Kansas | 1 | 10

2013 | Missouri, Montana, Utah | 3 | 13

2014 | Alabama | 1 | 14

2016 | Indiana | 1 | 15

 

Several other jurisdictions are reported as very interested in providing for protected series and as awaiting the conclusion of this project. In 2017, protected series proponents in two states contemplated enacting a non-final version of the uniform act – i.e., before the Drafting Committee had finished its work and the Uniform Law Commission had given final approval to the act. Eventually, in both states, the proponents decided to wait for the 2018 legislative session.

Although the widespread use and growing popularity of the protected series construct are undeniable, the causes are not well understood. For the most part, the legal and business relationships established through protected series can also be established with various structures involving several limited liability companies.

Some situations have been identified in which protected series provide a unique benefit, but these situations involve very specialized types of arrangements and cannot account for widespread use and popularity. Some proponents note a potential convenience in some regulatory environments: With the approval of the relevant regulator, a series limited liability company makes one regulatory filing or holds a single license, and various protected series of the company function under the aegis of that filing or license.

Another explanation is that the series limited liability company provides the first ever off-the-shelf template for establishing a structure of affiliated businesses. It is debatable whether such a template increases economic efficiency, provides traps for the unwary, or both. What is not in doubt is that the protected series construct is now an established part of U.S. business law.

Also not in doubt is that current statutes leave many very practical questions unanswered and lack important safeguards to protect the public in general and creditors in particular.

 

Part 5. Structure of the Act – A Module to be Enacted as Part of an Enacting State's Current Limited Liability Company Act

A protected series is inevitably connected with a limited liability company. Accordingly, existing provisions for protected series are inserts into a jurisdiction's existing limited liability company act. This act takes the same approach and is designed to work with any existing limited liability company act.

 

FN9 -- See Section 104(c) (stating that "[a] protected series of a series limited liability company ceases to exist not later than when the company completes its winding up").

 

Part 6. Extrapolation – Leveraging by Analogy the Rules of an Enacting State's Limited Liability Company Act

 

A. The Need for and Meaning of "Extrapolation"

A protected series is a business organization,FN10 analogous in almost all respects to a limited liability company. All limited liability company acts provide rules governing a limited liability company's existence, including:

  • non-variable provisions delineating the relationship of a company and its members with third parties;
  • non-variable provisions pertaining to internal affairs (i.e., matters inter se the company, its members, agents, and transferees of its members); and
  • variable provisions ("default rules") that govern issues of internal affairs unless the operating agreement provides otherwise.FN11

 

FN10 -- This act provides that "a protected series of a series limited liability company has the same powers and purposes as the company," Section 104(b), and many limited liability company acts permit a limited liability company to have, in the words of the uniform act, "any lawful purpose, regardless of whether for profit." Uniform Limited Liability Company Act (2006) (Last Amended 2013), Section 108(b). To date, however, using a series limited liability company for non-business purposes is rare, if extant at all.

 

FN11 -- See, e.g., Uniform Limited Liability Company Act (2006) (Last Amended 2013), Sections 105(b) (pertaining to default rules for inter se matters) and 503 (delineating the rights of a creditor of a member or transferee). A protected series does not have its own operating agreement. Rather, the operating agreement of a series limited liability company governs the internal affairs of a protected series of the company. See Section 106, cmt.

 

A statute providing for protected series needs the same three sets of rules at the "protected series level." This act meets that need in four ways, by:

  • stating the rule directly and in a self-contained way, e.g., Section 301 (stating requirements for associating an asset with a protected series or series limited liability company);
  • expressly applying a rule from the limited liability company act of an enacting state, e.g., Section 403 (applying the charging order provision of the enacting state's limited liability company act to judgment creditors of associated members and protected-series transferees);
  • stating the rule in part directly and in part by analogizing to the rule applicable at the "limited liability company level" – i.e., to a limited liability company under an enacting state's limited liability company act; e.g., Section 106(d) (providing that, if the operating agreement of a series limited liability company does not address a matter involving internal affairs, then the act governs to the extent applicable, and otherwise the default rules of the limited liability company act apply by analogy); and
  • stating the rule solely by analogy to the rule applicable at the series limited liability company level, e.g., Sections 106(b) (providing that if the limited liability company act "restricts the power of an operating agreement, the restriction applies" by analogy "to a matter" at the protected series level); 501(4)(B) (providing for dissolution of a protected series by judicial order "on application by an associated member or protected-series manager of the protected series ….to the same extent, in the same manner, and on the same grounds the court would enter an order dissolving a limited liability company on application by a member of or a person managing the company").

This Note and the act's official comments label the analogy approach as "extrapolation,"FN12 and the mechanics of extrapolation are straightforward. Extrapolation occurs only when expressly invoked by some provision of this act and, when invoked, proceeds according to the following paradigm:

  • a protected series is treated as if it were a separate limited liability company;
  • any associated member of the protected series is treated as if it were a member of the separate, hypothetical company;
  • any protected-series transferee of the protected series is treated as if it were a transferee of the separate, hypothetical company;
  • any protected-series transferable interest of the protected series is treated as if it were a transferable interest of the separate, hypothetical company;
  • a series manager of the protected series is treated as if it were a manager of the separate, hypothetical company;
  • any asset of the protected series is treated as if it were an asset of the separate, hypothetical company, whether or not the asset is an associated asset of the protected series; and
  • any creditor or other obligee of the protected series is treated as if it were a creditor or obligee of the separate, hypothetical company.

Extrapolation provides two significant advantages. First, the approach avoids burdening this act with lengthy provisions largely duplicative of provisions in the relevant limited liability company act. Second, where appropriate the approach imports to the protected series level the same policy choices reflected at the limited liability company level.

 

FN12 -- Merriam Webster defines "extrapolate" in relevant part to mean "to infer (values of a variable in an unobserved interval) [i.e., issues at the protected series level] from values within an already observed interval [i.e., default rules at the limited liability company level"], http://www.merriam-webster.com/dictionary/extrapolate, last visited 5/17/16.

 

B. An Additional Benefit – Parallelism in Concept and Terminology

Extrapolation has an additional benefit. The approach makes possible parallelism in concept and terminology.

 

concept | defined term pertaining to series limited liability company | defined term pertaining to a protected series

person with both governance and economic rights | member

 | associated member

economic rights

 | transferable interest (rights to distributions from the series limited liability company) | protected-series transferable interest (rights to distributions from a protected series)

owner of solely economic rights | transferee | protected-series transfereeFN13

owned assets | property of the series limited liability company | assets of a protected series --

 |  | associated asset/non-associated asset of a protected seriesFN14

 

FN13 -- Although a series limited liability company may own a protected-series transferable interest of a protected series of the company, the defined term, "protected-series transferee," does not include the company. See Section 303(d), cmt.

 

FN14 -- A protected series can own an asset without the asset being associated with the protected series. This act labels this category of property as a "non-associated asset." Only an associated asset is protected by the internal shields of a protected series. See Sections 301 and 404.

 

Part 7. Non-Liability and Non-Recourse Rules and the Act's Novel Approach to Horizontal Shields

A. The Two-Fold Nature of a Liability Shield

An entity's traditional liability shield – i.e., the vertical shield – protects an entity's owners from automatic, status-based liability for the entity's debts and thereby protects each owner's personal assets from creditors of the entity. Thus, the shield has two parts: a non-liability rule (no status-based liability) and a non-recourse rule (no creditor recourse against assets). This distinction is immaterial in the context of a vertical shield but is essential to understanding this act's novel approach to horizontal shields.

 

B. Horizontal Shields – Non-Liability and Non-Recourse Rules Distinguished to Create an Important Inducement to Good Recordkeeping

Like the traditional "vertical shield," a protected series' horizontal shield contains both a non-liability rule and a non-recourse rule. This act treats these rules separately to create an important inducement to good recordkeeping.

  • under the non-liability rule (Section 401(b)):
  • a protected series is not liable for the debts of the series limited liability company or any other protected series of the company and vice versa.
  • under the non-recourse rule (Sections 301 and 404):
  • only an associated asset of a protected series is shielded against collection efforts of judgment creditors of the series limited liability company or of any other protected series of the company, and the same is true for assets of the company; and
  • association is accomplished by creating and maintaining required records.FN15

 

FN15 -- See Section 301(b)-(c).

 

C. The Novel and Important Inducement – "Asset by Asset Exposure" under Sections 404 and 301

Thus, even when the non-liability rule is firmly in place for a protected series,FN16 the non-recourse rule for each asset of the protected series is subject to challenge on the grounds that: (i) the relevant records are deficient; (ii) the asset is therefore non-associated; and (iii) as a result the asset is "up for grabs" not only by a creditor of the protected series but also by any judgment creditor of the series limited liability company and any judgment creditor of any other protected series of the company.FN17

 

FN16 -- Like the non-liability rule of a vertical shield, the non-liability rule of a horizontal shield is subject to "piercing" claims. See Section 402.

 

FN17 -- The situation is the same for assets of the series limited liability company itself.

 

EXAMPLE: Conference, LLC, a series limited liability company, has two protected series, Conference, LLC – Protected Series Alpha ("Alpha") and Conference, LLC – Protected Series Beta ("Beta"). Beta has several valuable assets, each of which has been properly documented and thereby associated with Beta (Section 301) since first acquired by Beta. A judgment creditor of Alpha attempts to levy on an associated asset of Beta. The attempt will fail for two reasons: (i) the attempt is an effort to hold Beta liable for Alpha's debts, which contravenes the non-liability rule; and (ii) the non-recourse rule protects Beta's associated assets from claims except for claims asserted by Beta's creditors.

EXAMPLE: Same facts, except that, when Alpha's judgment creditor attempts to levy on Beta's property, one of Beta's assets is a "non-associated asset." Although Beta is not liable on the judgment against Alpha and the asset remains Beta's property, under Section 404 the asset is nonetheless subject to levy by the judgment creditor of Alpha.FN18

 

FN18 -- If a judgment creditor of Alpha or the series limited liability company successfully levies on the asset, Beta may have an unjust enrichment claim against the judgment debtor and a damage action against the person responsible for the recordkeeping that, being deficient, caused the item to be non-associated.

 

This asset-by-asset exposure does not exist under any current protected series statutes, because no current statute treats the non-liability and non-recourse rules separately with regard to horizontal shields. Moreover, no current statute contemplates situations in which recordkeeping is inadequate as to some assets and not others. Thus, this act's inducement to good recordkeeping is unique.

 

Part 8. Overcoming the Shields

"Piercing the veil" is the foremost doctrine for overcoming the traditional, vertical shield separating an entity from its owners. When a creditor succeeds with a piercing claim, the shield falls in toto. That is, all the owner's non-exempt assets are available to the judgment creditor of the entity.

The piercing doctrine (and any related theories that conflate an organization and its owners) apply to the vertical shield between a series limited liability company and its members and to the vertical shield between a protected series and its associated members. Likewise, the piercing doctrine (and related theories of affiliate liability) will apply to the internal, horizontal shields – i.e., in the proper circumstances, a court will disregard the internal shields, negate the non-liability rule, and thus render the non-recourse rule moot. For a detailed discussion of this issue, see Section 402, cmt.

 

Part 9. Traditional and Internal Shields Compared in Tabular Form

 

type of shield | what the shield separates | non-liability rule | non-recourse rule | rules for overcoming the shield

traditional, vertical corporate/LLC liability shield | an entity from its owners | stated expressly | unstated, but ineluctably implied | piercing – shield overcome in toto

internal, horizontal shields in a series limited liability company | one set of assets/ operations from other sets of assets/operations | stated expressly | stated expressly but applicable only as to associated assets | piercing – shield overcome in toto "asset by asset" exposure under Section 404

 

Part 10. Clarity and Safeguards of this Act Compared to Current Protected Series Statutes

In comparison with existing statutes, this act provides far greater transparency to the public and far greater clarity as to the myriad legal questions raised by the protected series concept. The following chart identifies 21 key issues and compares this act with the seminal Delaware provision on protected series and with the protected series provisions of Illinois and Texas, the two most clearly developed statutes from across the non-uniform spectrum of current law.FN19

 

FN19 -- Analysis current as of November 6, 2017, provided by legislative counsel to the Uniform Law Commission.

 

Provisions Protecting Creditors or Providing Certainty | UPSA | Delaware | Illinois | Texas

Is a separate public filing necessary to establish each protected series? | Yes; sec. 201(b) | No | Yes; 805 ILL. COMP. STAT. 180/37-40(d) | No

Is protected series defined as a legal person? | Yes; secs. 102(7), 103 | Yes; DEL. CODE ANN. tit. 6, sec. 18-101(12) | No | No

Is the duration of protected series expressly limited to the duration of series limited liability company? | Yes; sec. 104(b)(1) | No | Yes; 805 ILL. COMP. STAT. 180/37-40(m) | Yes; TEX. BUS. ORGS. CODE sec. 101.616(1)

Must name of protected series include name of series limited liability company? | Yes; sec. 202(b) | No | Yes; 805 ILL. COMP. STAT. 180/37-40(c) | No

Does the statute specify rules for disregarding the internal shields that protect the assets of one protected series from the creditors of another, other than a general recordkeeping requirement? | Yes; sec. 402 | No | No | No

Are there "asset by asset" consequences for assets not properly associated with a protected series, even if the internal shields remain in place? | Yes; sec. 404 | No | No | No

Does the statute make it ineffective to associate property after a claim against the property has been made? | Yes; sec. 404 | No | No | No

Do special recordkeeping requirements apply to transfers between a series limited liability company and a protected series of the company and between protected series of the company? | Yes; sec. 301(b)(3) and (c)(3) | No | No | No

If the statute expressly permits associated assets to be held by a nominee, etc., does the statute limit permission in any way? | Yes; sec. 301(e) | No; DEL. CODE ANN. tit. 6, sec. 18-215(b) | No; 805 ILL. COMP. STAT. 180/37-40(b) | No; TEX. BUS. ORGS. CODE sec. 101.603(a)

Does the statute address specifically the rights of judgment creditors of associated members? | Yes; 403 | No | No | No

Does the statute expressly and directly require membership in the limited liability company as prerequisite to being associated member of protected series? | Yes; sec. 302(a) | No | No | No

Does the statue address how provisions in the limited liability company act apply at the protected series level? | Yes; secs. 106(d), 108, 304(c) and (f), 501(4)(A), 502(a), and 503(2) | No | Yes; 805 ILL. COMP. STAT. 180/37-40(j) | Yes; TEX. BUS. ORGS. CODE secs. 101.609, 101.617

Does the statute address whether associated members of a protected series have veto rights to operating agreement amendments affecting the protected series? | Yes; sec. 304(e) | No | No | No

Does the statute contain rules for protected series that the operating agreement cannot vary? | Yes; sec. 107 | No | No | Yes, but limitation applies only to requirements for maintaining internal shields; TEX. BUS. ORGS. CODE sec. 101.054(a)(2) (referring to TEX. BUS. ORGS. CODE sec. 101.602(b))

Does the statute provide for registering foreign protected series to do business in the state? | Yes; sec. 604 | No | Yes; 805 ILL. COMP. STAT. 180/37-40(o) | No

Does the statute require foreign protected series doing business in the state to comply with same name requirements as domestic protected series? | Yes; sec. 604(c) | No | Yes; 805 ILL. COMP. STAT. 180/37-40(c) | No

Does the statute require a foreign protected series to disclose either (i) information regarding the foreign series limited liability company and other foreign protected series of the company comparable to the information available from the public record regarding a domestic protected series or (ii) the identity of an individual who has this information? | Yes; secs. 704, 703(b)(2) | No | No | No

Does the statute permit a court to apply to a foreign protected series an enacting state's law regarding liability shields? | Yes; secs. 404(c), 404(e) | No | No | No

Does the statute expressly address whether the series limited liability company may own an interest in a protected series of the company? | Yes; sec. 303(a) | No | No | No

 

 

 

 

UPSA AND WEBSITE CONTENTS

 

ARTICLE 1. GENERAL PROVISIONS

SECTION 101. SHORT TITLE.     SECTION 102. DEFINITIONS.     SECTION 103. NATURE OF PROTECTED SERIES.    SECTION 104. POWERS AND DURATION OF PROTECTED SERIES.     SECTION 105. GOVERNING LAW.     SECTION 106. RELATION OF OPERATING AGREEMENT, THIS ACT, AND LIMITED LIABILITY COMPANY ACT.     SECTION 107. ADDITIONAL LIMITATIONS ON OPERATING AGREEMENT.     SECTION 108. RULES FOR APPLYING LIMITED LIABILITY COMPANY ACT TO SPECIFIED PROVISIONS OF ACT.

 

ARTICLE 2. ESTABLISHING PROTECTED SERIES

SECTION 201. PROTECTED SERIES DESIGNATION; AMENDMENT.     SECTION 202. NAME.     SECTION 203. REGISTERED AGENT.     SECTION 204. SERVICE OF PROCESS, NOTICE, DEMAND, OR OTHER RECORD.     SECTION 205. CERTIFICATE OF GOOD STANDING FOR PROTECTED SERIES.     SECTION 206. INFORMATION REQUIRED IN ANNUAL BIENNIAL REPORT; EFFECT OF FAILURE TO PROVIDE.

 

ARTICLE 3. ASSOCIATED ASSET; ASSOCIATED MEMBER; PROTECTED-SERIES TRANSFERABLE INTEREST; MANAGEMENT; RIGHT OF INFORMATION

SECTION 301. ASSOCIATED ASSET.     SECTION 302. ASSOCIATED MEMBER.     SECTION 303. PROTECTED-SERIES TRANSFERABLE INTEREST.     SECTION 304. MANAGEMENT.     SECTION 305. RIGHT OF PERSON NOT ASSOCIATED MEMBER OF PROTECTED SERIES TO INFORMATION CONCERNING PROTECTED SERIES.

 

ARTICLE 4. LIMITATION ON LIABILITY AND ENFORCEMENT OF CLAIMS

SECTION 401. LIMITATIONS ON LIABILITY.     SECTION 402. CLAIM SEEKING TO DISREGARD LIMITATION OF LIABILITY.     SECTION 403. REMEDIES OF JUDGMENT CREDITOR OF ASSOCIATED MEMBER OR PROTECTED-SERIES TRANSFEREE.     SECTION 404. ENFORCEMENT AGAINST NON-ASSOCIATED ASSET.

 

ARTICLE 5. DISSOLUTION AND WINDING UP OF PROTECTED SERIES

SECTION 501. EVENTS CAUSING DISSOLUTION OF PROTECTED SERIES.     SECTION 502. WINDING UP DISSOLVED PROTECTED SERIES.     SECTION 503. EFFECT OF REINSTATEMENT OF SERIES LIMITED LIABILITY COMPANY OR REVOCATION OF VOLUNTARY DISSOLUTION.

 

ARTICLE 6. ENTITY TRANSACTIONS RESTRICTED

SECTION 601. DEFINITIONS.     SECTION 602. PROTECTED SERIES MAY NOT BE PARTY TO ENTITY TRANSACTION.     SECTION 603. RESTRICTION ON ENTITY TRANSACTION INVOLVING PROTECTED SERIES.     SECTION 604. MERGER AUTHORIZED; PARTIES RESTRICTED.     SECTION 605. PLAN OF MERGER.     SECTION 606. STATEMENT OF MERGER.     SECTION 607. EFFECT OF MERGER.     SECTION 608. APPLICATION OF SECTION 404 AFTER MERGER.

 

ARTICLE 7. FOREIGN PROTECTED SERIES

SECTION 701. GOVERNING LAW.     SECTION 702. NO ATTRIBUTION OF ACTIVITIES CONSTITUTING DOING BUSINESS OR FOR ESTABLISHING JURISDICTION.     SECTION 703. REGISTRATION OF FOREIGN PROTECTED SERIES.     SECTION 704. DISCLOSURE REQUIRED WHEN FOREIGN SERIES LIMITED LIABILITY COMPANY OR FOREIGN PROTECTED SERIES PARTY TO PROCEEDING.

 

ARTICLE 8. MISCELLANEOUS PROVISIONS

SECTION 801. UNIFORMITY OF APPLICATION AND CONSTRUCTION.     SECTION 802. RELATION TO ELECTRONIC SIGNATURES IN GLOBAL AND NATIONAL COMMERCE ACT.     SECTION 803. TRANSITIONAL PROVISIONS.     SECTION 804. SAVINGS CLAUSE.     SECTION 805. SEVERABILITY CLAUSE.     SECTION 806. REPEALS; CONFORMING AMENDMENTS.     SECTION 807. EFFECTIVE DATE.

 

- - - - -

 

Protected Series Agreements and Forms -- A list of the "best practices" agreements and records that all protected series structures should have.

 

SERIES LLC COURT OPINIONS

 

UPSA COURT OPINIONS

 

None

 

- - - - -

 

NON-UPSA COURT OPINIONS

 

191212 ... Ohio ... Delaware Act .. MSP Recovery Claims, Series LLC v. Phoenix Ins. Co., 2019 WL 6770981 (N.D. Ohio, 2019).

 

181019 ... Florida ... Delaware Act ... MRS Recovery Claims, Series LLC v. USAA General Indemnity Co., 2018 WL 5112998 (S.D.Fla., Oct. 19, 2018).

 

180605 ... North Dakota ... Nevada Act ... Flaten v. Couture, 912 N.W.2d 330, 2018 ND 136 (2018).

 

Updated List

 

SERIES LLC ARTICLES BY JAY ADKISSON

 

2019.01.28 ... Understanding The Protected Series Act: Article 8 And Final Thoughts

2018.11.24 ... Understanding The Protected Series Act: Treating Out-Of-State Series

2018.11.18 ... Understanding The Protected Series Act: Mergers

2018.10.29 ... Understanding The Protected Series Act: Dissolution And Winding Up Of Protected Series

2018.10.21 ... Understanding The Protected Series Act: Liability Limitations And Claims

2018.08.30 ... Understanding The Protected Series Act: Assets, Members And Management

2018.08.28 ... Understanding The Protected Series Act: Creating A Protected Series And Service Of Process

2018.07.18 ... Understanding The Protected Series Act: The Framework of UPSA - Part 2 of a Series

2018.06.18 ... Understanding The Protected Series Act: What Is A Protected Series?

 

 

More articles on Series LLCs by Jay Adkisson click here

THE CHARGING ORDER PRACTICE GUIDE BY JAY ADKISSON

 

The Charging Order Practice Guide: Understanding Judgment Creditor Rights Against LLC Members, by Jay D. Adkisson (2018), published by the LLCs, Partnerships and Unincorporated Entities Committee of the Business Law Section of the American Bar Association

Click here for more information

 

Now available for purchase at https://goo.gl/faZzY6

MORE INFORMATIONAL WEBSITES BY JAY ADKISSON

 

  • Jay Adkisson - More about Jay D. Adkisson, background, books, articles, speaking appearances.

 

  • Captive Insurance - Licensed insurance companies formed by the parent organization to handle the insurance and risk management needs of the business, by the author of the book Adkisson's Captive Insurance Companies.

 

  • Asset Protection - The all-time best-selling book on asset protection planning by Jay Adkisson and Chris Riser.

 

  • Collecting On A Judgment - An explanation of common creditor remedies, strategies and tactics to enforce a judgment, including a discussion of common debtor asset protection strategies.

 

  • Voidable Transactions - Discussion of the Uniform Voidable Transactions Act (a/k/a 2014 Revision of the Uniform Fraudulent Transfers Act) and fraudulent transfer law in general.

 

  • Private Retirement Plans - An exploration of a unique creditor exemption allowed under California law which can be very beneficial but is often misused.

 

  • Charging Orders - The confusing remedy against a debtor's interest in an LLC or partnership is explained in reference to the Uniform Partnership Act, the Uniform Limited Partnership Act, and the Uniform Limited Liability Company Act.

 

  • California Enforcement of Judgments Law - Considers the topic of judgment enforcement in California, including the California Enforcement of Judgments Law and other laws related to California creditor-debtor issues.

 

  • Anti-SLAPP Laws - A collection of and commentary about Anti-SLAPP laws and significant court decisions on the subject within the United States, and special treatment of the California Anti-SLAPP Act.

 

CONTACT JAY ADKISSON

 

Contact Jay Adkisson:

 

Phone: 702-953-9617     Fax: 877-698-0678     jay [at] jayad.com

 

Unless a dire emergency, please send me an e-mail first in lieu of calling to set up a telephone appointment for a date an time certain.

 

Las Vegas Office: 6671 S. Las Vegas Blvd., Suite 210, Las Vegas, NV 89119, Ph: 702-953-9617, Fax: 877-698-0678. By appointment only.

 

Newport Beach Office: 100 Bayview Circle, Suite 210, Newport Beach, California 92660. Ph: 949-200-7773, Fax: 877-698-0678. By appointment only.

 

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© 2019 by Jay D. Adkisson. All rights reserved. No part of this website may be copied in whole or in any part without the express written permission of Jay D. Adkisson. Nothing herein is any advertisement or offer by the firm to practice in any jurisdiction where no attorney of the firm is licensed to practice law. This website does not give any legal advice or opinion, and is no substitute for the advice and counsel of an attorney consulted in the relevant jurisdiction. Other. Questions about this website should be directed to jay [at] jayad.com, by phone to 702-953-9617 or by fax to 877-698-0678. This website is http://www.protectedseriesact.com