Caution State Law Variances!
Protected Series Agreements And Forms
The mind-boggling complexity of a protected series structure inherently requires a lot of agreements and forms to make it work properly. As shown by the illustration above, notions of "best practices" would recommend at least the following documents for each protected series structure:
1. Protected Series Organization Operating Agreement
Commonly known as the "Master Agreement", this document is basically a standard LLC operating agreement that contains numerous additional provisions relating to the formation, management and termination of the protected series agreement, how members of the series organization may be associated with a particular protected series, and numerous default provisions.
2. Protected Series Organization Subscription Agreement
As with any LLC, it is preferred that members have a Subscription Agreement which formalizes the member's relationship to the series organization.
3. Organization/Series Agreement
For each protected series that is created by the series organization, there should be an agreement between the series organization and the protected series which defines the powers and limitations of the latter.
4. Protected Series Operating Agreement
Since each protected series is essentially a mini-LLC in its own right (prompting jokes among the UPSA drafting committee that a protected series was essentially a "Mini-Me" of the series organization), each protected series should have its own operating agreement that defines the rights and responsibilities of its associated members and the handling of its assets and operations.
5. Protected Series Subscription Agreement
Just as the series organization should have a subscription agreement with each of its members, each protected series should have a discrete subscription agreement with each of its associated members.
6. Record Of Asset Association
Arguably, with a protected series, the maintenance of a "record" which clearly, unambiguously, and contemporaneously memorializes that particular assets have been associated with the particular protected series. In the absence of such a record, or where the record is something other than clear, unambiguous and contemporaneous, the asset does not qualify as an "associated asset" and thus becomes subject to the judgment enforcement efforts of creditors of not just the protected series, but also those of any other protected series and the series organization -- in other words, the "internal walls" of the protected series structure simply do not exist with such "non-associated assets".
The failure to have any of these documents will not ipso facto destroy the protected series structure, but without these documents there may be extremely deleterious consequences suffered by any or all of the series organization, the various protected series, and all their members and assets.
These are not all the documents that may be required for a protected series structure, of course, since there may be additional documents that will be required under particular circumstances, such as agreements for particular persons to serve as managers of either the series organization or the protected series.
Suffice it to say that drafting these documents is not for the feint-of-heart or those who are inexperienced with drafting protected series agreements and records. Inexperienced or "I can figure anything out" planners should make sure that they have high E&O limits and that their policies are fully paid up.
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.
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Protected Series Agreements and Forms -- A list of the "best practices" agreements and records that all protected series structures should have.
UPSA COURT OPINIONS
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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 ... MRP Recovery Claims, Series LLC v. USAA General Indemnity Co., 2018 WL 5112998 (S.D.Fla., Oct. 19, 2018).
2020.03.17 ... Series LLC Not Allowed To Play Pea-Shell Game In City Of Urbana Opinion
2020.02.16 ... Talisman Casualty Denied Diversity Jurisdiction Of Protected Cell Series LLC In National WW II Museum Case
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: 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
Now available for purchase directly from the ABA at https://goo.gl/faZzY6
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