Uniform Protected Series Act
Caution State Law Variances!
SECTION 602. PROTECTED SERIES MAY NOT BE PARTY TO ENTITY TRANSACTION.
A protected series may not:
(1) be an acquiring, acquired, converting, converted, merging, or surviving entity;
JayNote: The concept of the protected series is technically difficult enough without allowing protected series to create their own protected series or merge like so much bacteria in a poorly maintained gas station restroom. Moreover, allowing such activities could turn protected series into an impossibly confusing shell game against investors and creditors alike. For these and other reasons, the Drafting Committee determined after lengthy discussion to ban mergers of protected series outright (it was not seriously questioned that protected series should be utterly banned from procreating their own spawn of protected series). This ban is embodied in section 602.
Paragraph (1) of that section says that a protected series cannot itself be a party to an acquisition, conversion or merger.
(2) participate in a domestication; or
Reporter's Comment to Paragraphs (1) and (2) – Uniform Limited Liability Company Act (2006) (Last Amended 2013), Section 1001 defines the terms listed in Paragraph (1) but with regard to domestications refers to a domesticating or domesticated limited liability company. Hence the need for Paragraph (2).
JayNote: Paragraph (2) of § 602 says that a protected series cannot participate in a domestication, which in English means that once it has been formed in State A, the protected series cannot convert to a State B entity.
(3) be a party to or be formed, organized, established, or created in a transaction substantially like a merger, interest exchange, conversion, or domestication.
Reporter's Comment to Section 602 - The protected series is still novel, and this act is the first to comprehensively address the multitude of issues raised by the construct. Juxtaposing protected series with entity transactions raises a plethora of additional issues. For example, during the Drafting Committee's discussions of this subject, a commissioner created a set of Power Point slides diagramming 11 possible merger transactions involving protected series. Adding conversions, domestications, and interest exchanges would have added countless more permutations.
The Drafting Committee decided to move slowly in this area and to provide a very narrow channel for entity transactions involving protected series. As its first step in creating the narrow channel, the Committee rejected allowing a protected series itself to be a party to any entity transaction.
JayNote: What if, since the entire concept of protected series is relatively new, some really bright person comes up with a transaction that isn't technically any of an acquisition, conversion, merger or domestication, etc., but which has the practical effect of one of those prohibited transactions? In that event, paragraph (3) of § 602 attempts a catchall provision that would similarly prohibit "like" transactions.
C O M M O N P A G E F O O T E R
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