The NJ Revised Uniform
Limited Liability Company Act went into effect as of March 18, 2013. It applies to LLC’s formed on or after March
18, 2012 and LLC’s formed prior to March 18, 2013 which elect to be subject to
the revised Act. It applies to all New Jersey LLC’s beginning on April 1,
Some of the major changes of the revised Act are:
Operating Agreements no longer have to be in writing. They may be oral, written or implied based on the way the LLC has operated.
No right to buy-out for the resigning member. Under the old LLC Act, the resigning owner is entitled to receive the fair value of his or her interest as of the date of resignation. Under the revised Act, the resigning member only has rights as an economic interest holder (ie. retains his or her equity interest and right to distributions but no longer has voting interest). LLC owners who did not address this issue in their written Operating Agreements, thus relying on the buy-out provisions of the old LLC Act, should consider amending their Operating Agreements to address valuation and purchase rights of resigning members.
Allocation of profits and losses and distributions. Allocations of profits and losses are on a per capita basis and distributions are on a per capita basis unless the members agree otherwise. Under the old LLC Act allocations and distributions were on the basis of the agreed value of members’ contributions to the company.
Remedies for oppressed minority owners. The Revised Act permits a member to seek a court order dissolving the company on the grounds that the persons in control of the company have acted illegally or fraudulently or in a manner that is oppressive and has been or will be harmful to the member. The Court may also appoint a custodian or provisional manager to manage the LLC, order the sale of certain membership interests and award legal fees and expenses to the injured party.
Duration of the LLC. Under the old LLC Act, the company has a
duration of 30 years. Under the Revised Act, an LLC can have a perpetual life.
Charging Order remedies. Click Here for More on Charging Orders.
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