Caution State Law Variances!
SECTION 302. ASSOCIATED MEMBER.
(a) Only a member of a series limited liability company may be an associated member of a protected series of the company.
Reporter's Comment to Subsection (a) – The requirement stated here is integral to this act; allowing a non-member to be associated with a protected series would oust the operating agreement from its fundamental role, or at the very least make that role extraordinarily complex. See also Section 102(3) (defining "associated member" as "a member that meets the requirements under Section 302.") (emphasis added).
Under this subsection, any event causing a member's dissociation from a series limited liability company ipso facto ends the person's status as an associated member of any protected series company. The operating agreement can specify other events causing a member to cease being an associated member of a protected series.
This act does not prescribe the fate of the protected-series transferable interest of person who ceases to be an associated member of a protected series. That fate depends, first, on the operating agreement and, if the operating agreement is silent, then per Sections 106(d)(2) and 108 on the default rule provided by an enacting state's limited liability company act. The typical result is to freeze in the person as a transferee of its own transferable interest. For a discussion of the lot of a "bare naked assignee" at the limited liability company level, see Uniform Limited Liability Company Act (2006) (Last Amended 2013), Section 107(b), cmt.
JayNote: If one recalls the tranche characterization of protected series, this makes perfect sense. The holder of a tranche of equity is a holder of equity in the company generally, that equity being the particular tranche held. Thus, a member of a protected series must be a member of the series organization, but the converse is not true: A member of the series organization need not be a member of any protected series, i.e., that member can suffice to hold a general tranche of equity in the company but not a particularized tranche.
Again, however, note that there is no requirement that all the members of the series organization have the same rights and privileges, i.e., be equal members in the barnyard.
(b) A member of a series limited liability company becomes an associated member of a protected series of the company if the operating agreement or a procedure established by the agreement states:
(1) that the member is an associated member of the protected series;
(2) the date on which the member became an associated member; and
Reporter's Comment to Subsection (b)(2) – Following Uniform Limited Liability Company Act (2006) (Last Amended 2013), Section 401(d), this provision permits a member to be an associated member of a protected series without having an economic interest in the protected series.
(3) any protected-series transferable interest the associated member has in connection with becoming or being an associated member.
Reporter's Comment to Subsection (b) – Because this provision addresses how a member becomes an associated member, extrapolation for internal affairs (Sections 106(d) and 108) does not apply. In contrast, extrapolation will determine the consequences of a member ceasing to be an associated member of a protected series, unless the operating agreement addresses the matter.
JayNote: The reference to "Operating Agreement" in subsection (b) is to the Operating Agreement for the series organization, as defined in ULLCA § 102(13), and not to any separate Operating Agreement for the Protected Series itself. The upshot of subsection (b) is that the Operating Agreement for the series organization must set out (presumably in an Appendix or Exhibit to that document), a list of the protected series that have been created, a list of the members associated with particular series and the dates of their association, and describe the amount and quality of the interest in the protected series held by each associated member. If the requirements of subsection (b) are not met, then the putative member is not a member of the protected series at all, i.e., the attempted association of the member fails.
(c) If a person that is an associated member of a protected series of a series limited liability company is dissociated from the company, the person ceases to be an associated member of the protected series.
Legislative Note: If an enacting state's limited liability company act does not permit a "non-economic member," the state should determine whether to apply a parallel requirement at the protected series level, and, if so, change subsection (b)(2) by stating the requirement directly and substituting "the" for "any".
JayNote: Subsection (c) states the logical conclusion of subsection (a), to wit: If a person is no longer a member of the series organization, then they immediately at that time cease to be a member of any protected series as well.
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?
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