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Uniform Protected Series Act

(UPSA)

Caution State Law Variances!

SECTION 104. POWERS AND DURATION OF PROTECTED SERIES.

(a) A protected series of a series limited liability company has the capacity to sue and be sued in its own name.

 

Reporter's Comment to Subsection (a) – The capacity stated here distinguishes a series limited liability company and its protected series from the protected cell captive insurance companies [PCC] discussed in Pac Re 5-AT v. Amtrust N. Am., Inc., No. CV-14-131-BLG-CSO, 2015 WL 2383406, at *4 (D. Mont. May 13, 2015) (stating that "absent a statutory grant to the contrary, a protected cell does not have the capacity to sue and be sued independent of the larger PCC").

 

JayNote: Section 104(a) further emphasizes that a protected series is a separate juridical entity from the series organization, and effectively its "own person" at for purposes of maintaining or defending legal actions. As to the Reporter's Comment, note that a protected cell captive that utilizes a series LLC under the UPSA would have the capacity to sue and be sued independent of the larger captive organization, notwithstanding the Pac Re 5-AT decision.

 

Section 104(a) cannot be toggled off.

 

(b) Except as otherwise provided in subsections (c) and (d), a protected series of a series limited liability company has the same powers and purposes as the company.

 

Reporter's Comment to Subsection (b) – Under this provision, if the operating agreement of a series limited liability company restricts the company's power, purpose, or both, the restriction applies to each protected series of the company. The provision is a default rule.

 

JayNote: This is an extrapolation provision which tells us that a protected series has basically the powers and purposes of the series organization itself, i.e., if the series organization can do something, then presumably the protected series can do that too.

 

Further note that this provision can be toggled off: A protected series may have lesser powers and purposes than the series organization (though not greater).

 

(c) A protected series of a series limited liability company ceases to exist not later than when the company completes its winding up.

 

Reporter's Comment to Subsection (c) – A protected series may not exist outside the context of the series limited liability company that established the protected series, except as a result of a merger under Section 604 (in which a protected series may be "relocated" from a series limited liability company that does not survive the merger to the series limited liability company that does). Generally, an organization's disappearance as a result of a merger is not treated as a dissolution, and the merger does not effect the winding up of the organization. See, e.g., Uniform Business Organization Code (2015), Section 2-206(b) ("Except as otherwise provided in the organic law or organic rules of a merging entity, a merger under this [part] does not give rise to any rights that an interest holder, governor, or third party would have upon a dissolution, liquidation, or winding up of the merging entity.")

 

JayNote: A protected series is an appendage of the series organization and cannot exist in the absence of the series organization. Thus, if the series organization terminates, all the protected series of that organization likewise terminate. Note that this provision significantly denigrates the concept of a protected series as an independent stand-on-its-own-two-feet separate juridical "person", and instead paints a protected series as simply an appendage of the series organization.

 

Section 104(c) cannot be toggled off.

 

(d) A protected series of a series limited liability company may not:

(1) be a member of the company;

(2) establish a protected series; [or]

 

Reporter's Comment to Subsections (d)(1)-(2) – These provisions preclude structures that would be painfully Byzantine or would push the extrapolation construct beyond any understandable application. For a discussion of the extrapolation construct, see Prefatory Note, Part 6. However, these provisions do not prevent a protected series of a series limited liability company from being a manager of the company or a protected-series manager of another protected series of the company or acting otherwise as an agent for the company or other protected series.

 

Reporter's Comment - Section 104(c) provides that a protected series cannot exist on its own; therefore, a protected series is not entirely distinct from the series limited liability company on whose existence the protected series depends. Section 501(1) reflects this reality by stating that the dissolution of a series limited liability company causes the dissolution of each of the company's protected series. Section 502(d) reflects this reality by providing that a series limited liability company has not completed its own winding up until the company has completed the winding up of each of the protected series of the company.

 

JayNote: Well, the concept of a series LLC where one series organization can create a bunch of protected series is difficult enough by itself. If you start trying to conceptualize structures where one protected series can create another like so many amoeba or where there is cross-ownership, then such things can only be understood after a healthy dose of tequila, peyote and mescaline. Which is to say that the Drafting Committee didn't want series LLCs to go down the rabbit hole into the surreal world where protected series can grow and multiply on their own and marry and interbreed. Thus, the prohibition of § 104(d) which had near-unanimous support within the Drafting Committee for the aforementioned quite practical reasons.

 

Section 104(d) cannot be toggled off by drafting the Operating Agreement otherwise.

 

(3) except as permitted by law of this state other than this ACT, have a purpose or power that the law of this state other than this ACT prohibits a limited liability company from doing or having; or

 

Reporter's Comment to Subsection (d)(3) – A limited liability company may not use a protected series to evade a requirement of other law. This provision's introductory language – "[e]xcept as permitted by law of this state …" – refers to situations in which state law authorizes a protected series of a series limited liability company to operate under the auspices of a license obtained or regulatory filing made by the company in the company's name.

 

JayNote: This provision prevents "license multiplying" using a series LLC. For example, suppose a state has a law that says that an LLC can have only one liquor license. To form a Series LLC with many protected series so that the single liquor license can then be extended to numerous locations would violate § 104(d)(3), unless state law otherwise allowed.

 

(4) [insert other provisions].

 

Reporter's Comment to Subsection (d) – The prohibitions stated in this subsection leave available a wide range of activities and affairs. For example, subject to a contrary provision in the operating agreement, every protected series, like every limited liability company, has the power to make contracts and own real and other property. These powers are key attributes to the concept of a legal person, are possessed by every limited liability company regardless of its state of organization, and therefore, under this provision, are possessed by every protected series established under this act.

 

Reporter's Comment to Subsections (a), (c) & (d) – These provisions are non-variable. See Section 107(a)(3)-(5).

 

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.

 

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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.

 

SERIES LLC COURT OPINIONS

 

UPSA COURT OPINIONS

 

None

 

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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 ... 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?

 

 

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CONTACT JAY ADKISSON

 

Contact Jay Adkisson:

 

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

 

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