North Dakota Code 10-32.1-102 – Series of members, managers, transferable interests or assets – General powers of series – Governing authority – Distributions – Termination of series
1. An operating agreement of a limited liability company regulated under this chapter and not under chapter 10-06.1, 10-31, or 10-36 may establish or provide for the establishment of a designated series of members, managers, transferable interests, or assets that:
Terms Used In North Dakota Code 10-32.1-102
- Amendment: A proposal to alter the text of a pending bill or other measure by striking out some of it, by inserting new language, or both. Before an amendment becomes part of the measure, thelegislature must agree to it.
- Assets: (1) The property comprising the estate of a deceased person, or (2) the property in a trust account.
- Contract: A legal written agreement that becomes binding when signed.
- following: when used by way of reference to a chapter or other part of a statute means the next preceding or next following chapter or other part. See North Dakota Code 1-01-49
- Intangible property: Property that has no intrinsic value, but is merely the evidence of value such as stock certificates, bonds, and promissory notes.
- Liabilities: The aggregate of all debts and other legal obligations of a particular person or legal entity.
- Obligation: An order placed, contract awarded, service received, or similar transaction during a given period that will require payments during the same or a future period.
- Organization: includes a foreign or domestic association, business trust, corporation, enterprise, estate, joint venture, limited liability company, limited liability partnership, limited partnership, partnership, trust, or any legal or commercial entity. See North Dakota Code 1-01-49
- Person: means an individual, organization, government, political subdivision, or government agency or instrumentality. See North Dakota Code 1-01-49
- Property: includes property, real and personal. See North Dakota Code 1-01-49
- State: when applied to the different parts of the United States, includes the District of Columbia and the territories. See North Dakota Code 1-01-49
- Tort: A civil wrong or breach of a duty to another person, as outlined by law. A very common tort is negligent operation of a motor vehicle that results in property damage and personal injury in an automobile accident.
- Trustee: A person or institution holding and administering property in trust.
a. Has separate rights, powers, or duties with respect to specified property or obligations of the limited liability company or profits and losses associated with specified property or obligations; or
b. Has a separate business purpose or investment objective.
2. A series established in accordance with subsection 1 may carry on any business, purpose, or activity which is not prohibited by this chapter. A series may not carry on any business, purpose, or activity that is required to meet the requirements under chapter 10-06.1, 10-31, or 10-36.
3. Subject to subsection 4, if an operating agreement establishes or provides for the establishment of a particular series:
a. The debts, obligations, or other liabilities of the particular series, whether arising in contract, tort, or otherwise, are enforceable against the assets of the series only and not against:
(1) The assets of the limited liability company generally or any other series thereof; or
(2) A member of the limited liability company.
b. The debts, obligations, or other liabilities of the limited liability company generally or any other series thereof, whether arising in contract, tort, or otherwise, are not enforceable against the assets of the particular series.
4. The limitations on liabilities in subsection 3 apply if:
a. The records for the particular series accounting for the assets of the series are separately maintained from the records accounting for the assets of the limited liability company or any other series thereof. Records that reasonably identify the assets of a particular series, including by specific listing, category, type, quantity, computational or allocational formula or procedure such as a percentage or share of assets, or by any other method in which the identity of the assets is objectively determinable, is deemed to account for the assets of the particular series separately from the assets of the limited liability company or any other series thereof; b. The operating agreement specifically provides for the limitations on liabilities; or
c. Notice of the limitations on liabilities of the particular series is included in the articles of organization. Notice is sufficient whether or not the limited liability company has established or referenced any particular series in the notice.
5. This section, an operating agreement, or articles of organization may not restrict:
a. A series or limited liability company on behalf of a series from agreeing in the operating agreement or otherwise that any debt, obligation, or other liability of the limited liability company generally or any other series thereof is enforceable against the assets of the series; b. A limited liability company from agreeing in the operating agreement or otherwise that any debt, obligation, or other liability of a series is enforceable against the assets of the limited liability company generally; or
c. Notwithstanding section 10-32.1-26, a member or manager from agreeing in the operating agreement or otherwise to be personally liable for any debt, obligation, or other liability of a series.
6. A series established under this section may, in its own name, contract, hold title to assets including real, personal and intangible property, grant liens and security interests, and sue or be sued. A series may:
a. Have separate rights, powers, or duties with respect to specified property or obligation of the limited liability company or profit and loss associated with any specified property or obligation; b. Carry on a lawful purpose regardless of whether for profit, except for the purpose of acting as a financial institution or acting as an insurer; or
c. Hold assets directly or indirectly, including in the name of the series or the name of the limited liability company.
7. An operating agreement that establishes or provides for the establishment of a series may:
a. Provide for classes or groups of members or managers of the series having the relative rights, powers, and duties specified in the operating agreement; b. Provide for and specify the future creation of additional classes or groups of members or managers of the series having the relative rights, powers, and duties as may be established, including rights, powers, and duties senior to existing classes and groups of members or managers of the series; c. Provide for the taking of an action, including the amendment of the operating agreement, without the vote or approval of a member, manager, class, or group of members or managers of the series; d. Provide that a member, class, or group of members of a series do not have voting rights; and
e. Grant to all or certain identified members, managers, class, or group of members or managers of the series the right to vote on a matter separately or with all or any class or group of members or managers of the series. Voting by members or managers may be on a per capita, number, financial interest, class, group, or other basis.
8. The management of a series is vested as follows:
a. In the members of the series pursuant to subsection 2 of section 10-32.1-39. A member shall cease to be a member of a series upon the divestment of all the member’s transferable interests of the series. The fact a person ceases to be a member of a particular series must not by itself cause the person to cease to be a member of the limited liability company or any other series thereof or cause the termination of the series, regardless of whether the person was the last remaining member of the series; or
b. If the operating agreement provides for the management of the series in whole or in part by a manager, the management must be vested in one or more managers who must be chosen as provided in the operating agreement and who must hold the offices and have the responsibilities as specified in the agreement. A manager ceases to be a manager of a series as provided in an operating agreement and subject to subdivision e of subsection 3 of section 10-32.1-39. The fact a person ceases to be a manager of a particular series must not by itself cause the person to cease to be a manager of the limited liability company or any other series thereof.
9. Notwithstanding section 10-32.1-30 and subject to subsections 10 and 12, if a member of a series becomes entitled to receive a distribution, the member has the status of, and is entitled to all remedies available to, a creditor of the series with respect to the distribution. An operating agreement may provide for the establishment of a record date for allocations and distributions associated with a series.
10. Notwithstanding subsection 1 of section 10-32.1-31, a limited liability company may make a distribution with respect to a series established under this section unless the total assets of the series after the distribution would be less than the sum of its total liabilities plus the amount that would be needed, if the series were to be dissolved, wound up, and terminated at the time of the distribution, to satisfy the preferential rights upon winding up and termination of members whose preferential rights are superior to those of the persons receiving the distribution. A member that receives a distribution knowing the distribution was made in violation of this subsection is personally liable to the series for the amount of the distribution.
a. This subsection does not affect an obligation or liability of a member under an agreement or other applicable law for the amount of a distribution, except an action under this subsection must be subject to subsection 5 of section 10-32.1-32.
b. For purposes of this subsection, “distribution” does not include amounts constituting reasonable compensation for present or past services or reasonable payments made in the ordinary course of business under a bona fide retirement plan or other benefits program.
11. Subject to section 10-32.1-51, a series established under this section may be terminated and its affairs wound up without causing the dissolution of the limited liability company. The termination of the series does not affect the limitations on liabilities of the series as provided in subsection 3. A series is terminated and its affairs must be wound up upon the occurrence of any of the following:
a. The dissolution of the limited liability company under section 10-32.1-51; b. The time or happening of events specified in the operating agreement; c. The vote or consent of members of the series who own more than two-thirds of the interests in the profits of the series; or
d. On application by a member or manager of the series, the entry of a court order terminating the series on the grounds the series is not reasonably practicable to carry on the purposes of the series in conformity with the operating agreement.
12. A person winding up the affairs of a series may, in the name of the limited liability company and for and on behalf of the limited liability company and the series, take any action with respect to the series as authorized by section 10-32.1-51. The person shall provide for the claims and obligations of the series and distribute the assets of the series as provided in section 10-32.1-54. Any action taken in accordance with this subsection does not affect the liability of members and does not impose liability on a liquidating trustee appointed in accordance with this subsection. Notwithstanding section 10-32.1-51, the following persons may wind up the affairs of a series:
a. A manager of the series who has not wrongfully terminated the series; b. If the series has no manager who qualifies under subdivision a, the members of the series or a person approved by the members; c. The members who own more than fifty percent of the interests in the profits of the series; or
d. On application of a member or manager of the series or a personal representative or assignee of the member or manager, and upon cause shown, a court or a liquidating trustee appointed by the court.
13. A foreign limited liability company doing business in this state and governed by an operating agreement that establishes or provides for the establishment of a designated series of members, managers, transferable interests, or assets shall state the following on its certificate of authority:
a. That the operating agreement of the foreign limited liability company establishes or provides for the establishment of series having separate rights, powers, or duties with respect to specified property or obligations of the foreign limited liability company or profits and losses associated with specified property or obligations; b. If any debt, obligation, or other liability of any particular series, whether arising in contract, tort, or otherwise, is enforceable against the assets of the particular series only and not against the assets of the foreign limited liability company generally or any other series thereof; and
c. If any debt, obligation, or other liability of the foreign limited liability company generally or any other series thereof, whether arising in contract, tort, or otherwise, is enforceable against the assets of the particular series.
14. The secretary of state may adopt rules reasonable and necessary to address requirements related to the secretary of state for registration and continuing existence of the series limited liability companies established under this section.