H*4283 Session 110 (1993-1994)
H*4283(Rat #0583, Act #0448) General Bill, By R.A. Barber, R.S. Corning,
R.C. Fulmer, S.E. Gonzales, Harrison, Harvin, Jennings, Klauber, Quinn,
R. Smith, C.C. Wells, Wilder, D.A. Wright and Young-Brickell
Similar(S 824, S 1151)
A Bill to amend Title 33, Code of Laws of South Carolina, 1976, by adding
Chapter 43 relating to corporations so as to enact the "South Carolina Limited
Liability Company Act" which permits a limited liability company formed
pursuant to this Act to be treated as a partnership for tax purposes together
with the absence of individual liability of the members of the limited
liability company for its obligations, which provides for the manner in which
limited liability companies are formed, for relations between members and
managers to persons dealing with the limited liability companies, for the
rights and duties of members and managers, for finance matters, for
distributions and withdrawals, for the ownership and transfer of property, for
admission and withdrawal of members, for dissolution, for the manner in which
foreign limited liability companies may operate and are governed, for
professional services limited liability companies, for suits by and against
the limited liability companies, for the merger of domestic or foreign limited
liability companies and for miscellaneous provisions affecting the limited
liability companies including filing and other fees; to amend the 1976 Code by
adding Section 12-2-25 so as to provide for certain definitions for taxation
purposes incorporating references to limited liability companies; to amend
Section 33-41-20, relating to definitions in regard to the Uniform Partnership
Act, so as to define "registered limited liability partnership"; to amend
Section 33-41-210, relating to the definition of a partnership and its
application to limited partnerships, so as to include within this definition
registered limited liability partnerships; to amend Sections 33-41-370,
33-41-510, 33-41-960, 33-41-1010 and 33-41-1060, relating in general to the
liability of a partner and the rights and duties of a partner, so as to
further provide for this liability including providing that partners in
registered limited liability partnerships are not liable for the negligence,
wrongful acts, or misconduct committed by another partner or an employee,
agent, or representative of the partnership and that partners in registered
limited liability partnerships that render professional services are not
liable for the negligence, wrongful acts, misconduct or omissions of other
partners, agents, or employees of the registered limited liability partnership
unless the partner is at fault in appointing, supervising, or coordinating
with them; and to amend the 1976 Code by adding Sections 33-41-1110 through
33-41-1220 to provide for the way in which limited liability partnerships are
formed, for the way in which foreign limited liability partnerships are formed
and are governed, and for miscellaneous provisions affecting limited liability
partnerships.-amended title
06/03/93 House Introduced and read first time HJ-9
06/03/93 House Referred to Committee on Judiciary HJ-9
02/09/94 House Committee report: Favorable with amendment
Judiciary HJ-19
02/22/94 House Amended HJ-32
02/22/94 House Read second time HJ-84
02/23/94 House Read third time and sent to Senate HJ-23
02/24/94 Senate Introduced and read first time SJ-7
02/24/94 Senate Referred to Committee on Judiciary SJ-7
04/27/94 Senate Committee report: Favorable with amendment
Judiciary SJ-11
05/11/94 Senate Amended SJ-100
05/11/94 Senate Read second time SJ-101
05/11/94 Senate Ordered to third reading with notice of
amendments SJ-101
05/12/94 Senate Read third time and returned to House with
amendments SJ-28
05/16/94 House Non-concurrence in Senate amendment HJ-2
05/17/94 Senate Senate insists upon amendment and conference
committee appointed Sens. Stilwell, McConnell,
Passailaigue SJ-383
05/18/94 House Conference committee appointed Barber, Cromer &
Wilkes HJ-2
05/31/94 Senate Free conference powers granted SJ-35
05/31/94 Senate Free conference committee appointed Sens.
Stilwell, McConnell, Passailaigue SJ-35
05/31/94 Senate Free conference report received and adopted SJ-35
06/01/94 House Free conference powers granted HJ-19
06/01/94 House Free conference committee appointed Barber,
Cromer & Wilkes HJ-21
06/01/94 House Free conference report received and adopted HJ-21
06/01/94 House Ordered enrolled for ratification HJ-80
06/02/94 Ratified R 583
06/16/94 Signed By Governor
06/16/94 Effective date 06/16/94
06/28/94 Copies available
(A448, R583, H4283)
AN ACT TO AMEND TITLE 33, CODE OF LAWS OF SOUTH
CAROLINA, 1976, BY ADDING CHAPTER 43 RELATING TO
CORPORATIONS SO AS TO ENACT THE "SOUTH CAROLINA
LIMITED LIABILITY COMPANY ACT" WHICH PERMITS A
LIMITED LIABILITY COMPANY FORMED PURSUANT TO THIS
ACT TO BE TREATED AS A PARTNERSHIP FOR TAX PURPOSES
TOGETHER WITH THE ABSENCE OF INDIVIDUAL LIABILITY OF
THE MEMBERS OF THE LIMITED LIABILITY COMPANY FOR ITS
OBLIGATIONS, WHICH PROVIDES FOR THE MANNER IN WHICH
LIMITED LIABILITY COMPANIES ARE FORMED, FOR RELATIONS
BETWEEN MEMBERS AND MANAGERS TO PERSONS DEALING
WITH THE LIMITED LIABILITY COMPANIES, FOR THE RIGHTS
AND DUTIES OF MEMBERS AND MANAGERS, FOR FINANCE
MATTERS, FOR DISTRIBUTIONS AND WITHDRAWALS, FOR THE
OWNERSHIP AND TRANSFER OF PROPERTY, FOR ADMISSION
AND WITHDRAWAL OF MEMBERS, FOR DISSOLUTION, FOR THE
MANNER IN WHICH FOREIGN LIMITED LIABILITY COMPANIES
MAY OPERATE AND ARE GOVERNED, FOR PROFESSIONAL
SERVICES LIMITED LIABILITY COMPANIES, FOR SUITS BY AND
AGAINST THE LIMITED LIABILITY COMPANIES, FOR THE
MERGER OF DOMESTIC OR FOREIGN LIMITED LIABILITY
COMPANIES, AND FOR MISCELLANEOUS PROVISIONS
AFFECTING THE LIMITED LIABILITY COMPANIES INCLUDING
FILING AND OTHER FEES; TO AMEND THE 1976 CODE BY
ADDING SECTION 12-2-25 SO AS TO PROVIDE FOR CERTAIN
DEFINITIONS FOR TAXATION PURPOSES INCORPORATING
REFERENCES TO LIMITED LIABILITY COMPANIES; TO AMEND
SECTION 33-41-20, RELATING TO DEFINITIONS IN REGARD TO
THE UNIFORM PARTNERSHIP ACT, SO AS TO DEFINE
"REGISTERED LIMITED LIABILITY PARTNERSHIP"; TO
AMEND SECTION 33-41-210, RELATING TO THE DEFINITION OF A
PARTNERSHIP AND ITS APPLICATION TO LIMITED
PARTNERSHIPS, SO AS TO INCLUDE WITHIN THIS DEFINITION
REGISTERED LIMITED LIABILITY PARTNERSHIPS; TO AMEND
SECTIONS 33-41-370, 33-41-510, 33-41-960, 33-41-1010, AND
33-41-1060, RELATING IN GENERAL TO THE LIABILITY OF A
PARTNER AND THE RIGHTS AND DUTIES OF A PARTNER, SO AS
TO FURTHER PROVIDE FOR THIS LIABILITY INCLUDING
PROVIDING THAT PARTNERS IN REGISTERED LIMITED
LIABILITY PARTNERSHIPS ARE NOT LIABLE FOR THE
NEGLIGENCE, WRONGFUL ACTS, OR MISCONDUCT COMMITTED
BY ANOTHER PARTNER OR AN EMPLOYEE, AGENT, OR
REPRESENTATIVE OF THE PARTNERSHIP AND THAT PARTNERS
IN REGISTERED LIMITED LIABILITY PARTNERSHIPS THAT
RENDER PROFESSIONAL SERVICES ARE NOT LIABLE FOR THE
NEGLIGENCE, WRONGFUL ACTS, MISCONDUCT, OR OMISSIONS
OF OTHER PARTNERS, AGENTS, OR EMPLOYEES OF THE
REGISTERED LIMITED LIABILITY PARTNERSHIP UNLESS THE
PARTNER IS AT FAULT IN APPOINTING, SUPERVISING, OR
COOPERATING WITH THEM; AND TO AMEND THE 1976 CODE BY
ADDING SECTIONS 33-41-1110 THROUGH 33-41-1220 TO PROVIDE
FOR THE WAY IN WHICH LIMITED LIABILITY PARTNERSHIPS
ARE FORMED, FOR THE WAY IN WHICH FOREIGN LIMITED
LIABILITY PARTNERSHIPS ARE FORMED AND ARE GOVERNED,
AND FOR MISCELLANEOUS PROVISIONS AFFECTING LIMITED
LIABILITY PARTNERSHIPS.
Be it enacted by the General Assembly of the State of South Carolina:
Limited liability companies
PART I
Limited Liability Companies
SECTION 1. Title 33 of the 1976 Code is amended by adding:
"CHAPTER 43
South Carolina Limited Liability Company Act
Article 1
General Provisions
Section 33-43-101. Short Title.
This chapter shall be known and may be cited as the South Carolina
Limited Liability Company Act.
COMMENTARY
The provisions for the South Carolina Limited Liability Company Act
have been derived in part from:
(a) The November 19, 1992, draft version of the
"prototype" Limited Liability Company Act drafted by the
Working Group on the Prototype Limited Liability Company Act
Subcommittee on Limited Liability Companies, Committee on Partnerships
and Unincorporated Business Organizations, Section of Business Law,
American Bar Association. Versions of this "prototype"
statute, with explanatory commentary have been published in Larry E.
Ribstein & Robert R. Keatinge, Ribstein & Keatinge on Limited
Liability Companies, (Shepard's/McGraw-Hill, Inc. 1992); and
(b) The July 30, 1993, draft Limited Liability Company Act considered
by the National Conference of Commissioners On Uniform State Laws.
Subsequent versions of this act, with explanatory commentary, may be
obtained from the National Conference of Commissioners on Uniform State
Laws, 676 North St. Clair Street, Suite 1700, Chicago, Illinois, 60611.
(312) 915-0195.
Both of these draft statutes contain valuable commentary which may be
of assistance in interpreting and understanding the meaning of some of the
sections of this South Carolina Limited Liability Company Act.
Section 33-43-102. Definitions.
As used in this chapter, unless the context otherwise requires:
(A) `Articles of organization' means articles filed under Section
33-43-201, and those articles as amended or restated.
(B) `Corporation' means a corporation formed under the laws of any
state or foreign country.
(C) `Court' includes every court having jurisdiction in the case.
(D) `Deliver' includes mail.
(E) `Event of dissociation' means an event that causes a person to cease
to be a member as provided in Section 33-43-802.
(F) `Foreign limited liability company' means an organization that
is:
(1) an unincorporated association;
(2) organized under laws of a state other than the laws of this State, or
under the laws of any foreign country;
(3) organized under a statute pursuant to which an association may be
formed that affords to each of its members limited liability with respect to
the liabilities of the entity; and
(4) not required to be registered or organized under any statute of this
State other than this chapter.
(G) `Limited liability company' or `domestic limited liability company'
means an organization formed under this chapter.
(H) `Limited liability company interest' or `interest in the limited
liability company' means the member's right to share in profits and losses,
and right to share in distributions.
(I) `Limited partnership' means a limited partnership formed under the
laws of any state or foreign country.
(J) `Manager' or `managers' means, with respect to a limited liability
company that has set forth in its articles of organization that it is to be
managed by managers, the person or persons designated in accordance with
Section 33-43-401.
(K) `Member' or `members' means a person or persons who have been
admitted to membership in a limited liability company as provided in
Section 33-43-801 and who have not ceased to be members as provided in
Section 33-43-802.
(L) `Operating agreement' means any written agreement, originally
unanimously adopted by all the members of the limited liability company,
as to the conduct of the business and affairs of the limited liability
company. Provided, however, the failure of any limited liability company
to adopt an operating agreement shall not effect the legal existence of such
limited liability company.
(M) `Person' means an individual, a general partnership, a limited
partnership, a domestic or foreign limited liability company, a trust, an
estate, an association, a corporation, or any other legal entity.
(N) `Professional service' means a service that may be rendered lawfully
only by a person licensed or otherwise authorized by a licensing authority
in this State to render the service and that may not be lawfully rendered by
a business corporation under Chapters 1 through 17 of Title 33.
(O) `State' means a state, territory, or possession of the United States,
the District of Columbia, or the Commonwealth of Puerto Rico.
Section 33-43-103. Name.
(A) The name of each limited liability company must contain the words
`limited liability company' or `limited company' or the abbreviation
`L.L.C.', `L.C.', `LLC', `LC'. The word `limited' may be abbreviated as
`LTD.' and the word `company' may be abbreviated as `CO.'
(B) A limited liability company name may not be the same as or
deceptively similar to:
(1) the name filed with the Secretary of State of any limited liability
company, limited partnership, professional corporation, or corporation
existing under the laws of this State or foreign limited liability company,
foreign corporation, or foreign professional corporation authorized to
transact business in this State; or
(2) any name reserved or registered under Section 33-43-104, or any
reserved name for a corporation or professional corporation existing under
the laws of this State, or any registered name of either a foreign corporation
or foreign professional corporation authorized to transact business in this
State.
(C) The provisions of subsection (B) shall not apply if the applicant
files with the Secretary of State either of the following:
(1) the written consent of the holder of a reserved or registered name
or filed name to use a deceptively similar name if one or more words are
added, altered, or deleted to make the name distinguishable from the
reserved or registered or filed name; or
(2) a certified copy of a final decree of a court of competent
jurisdiction establishing the prior right of the applicant to the use of the
name of this State.
Section 33-43-104. Reservation and Registration of Name.
(A) A person may reserve the exclusive use of a `limited liability
company' name, including a designated name provided for in Section
33-43-1004 for a foreign limited liability company whose name is not
available, by delivering an application to the Secretary of State for filing.
The application must set forth the name and address of the applicant and
the name proposed to be reserved. If the Secretary of State finds that the
limited liability company name applied for is available, he shall reserve the
name for the applicant's exclusive use for a nonrenewable one hundred
twenty-day period.
(B) The owner of a reserved limited liability company name may
transfer the reservation to another person by delivering to the Secretary of
State a signed notice of the transfer that states the name and address of the
transferee.
(C) A foreign limited liability company may register its name that
satisfies the requirements of Section 33-43-103.
(D) A foreign limited liability company registers its name or a
designated name as provided in Section 33-43-1004 by delivering to the
Secretary of State for filing an application:
(1) setting forth its limited liability company name or a designated
name as provided in Section 33-43-1004, the state or country and date of its
organization, and a brief description of the nature of the business in which
it is engaged; and
(2) accompanied by a certificate of existence (or a document of
similar import) from the state or country of organization.
(E) The name is registered for the applicant's exclusive use upon the
effective date of the application.
(F) A foreign limited liability company whose registration is effective
may renew it for successive years by delivering to the Secretary of State for
filing a renewal application, which complies with the requirements of
subsection (D), between October first and December thirty-first of the
preceding year. The renewal application, when filed, renews the
registration for the following calendar year.
(G) A foreign limited liability company whose registration is effective
may qualify thereafter as a foreign limited liability company under the
registered name or consent in writing to the use of that name by a limited
liability company thereafter incorporated under this chapter or by another
foreign limited liability company thereafter authorized to transact business
in this State. The registration terminates when the domestic limited liability
company is incorporated or the foreign limited liability company qualifies
or consents to the qualification of another foreign limited liability company
under the registered name.
Section 33-43-105. Registered office and registered agent.
(A) A limited liability company and a foreign limited liability company
authorized to do business in South Carolina shall continuously maintain in
this State:
(1) a registered office that may, but need not, be the same as its place
of business; and
(2) a registered agent for service or process on the limited liability
company that is an individual resident of this State, a limited liability
company, a foreign limited liability company authorized to transact
business in this State, or a corporation formed under the laws of or
authorized to transact business in this State having a business office
identical with the registered office.
(B) A limited liability company or a foreign limited liability company
may change its registered office or registered agent by delivering to the
Secretary of State for filing a statement of change that sets forth:
(1) the name of the limited liability company;
(2) the street address of its current registered office;
(3) if the current registered office is to be changed, the street address
of the new registered office;
(4) the name of its current registered agent;
(5) if the current registered agent is to be changed, the name of the
new registered agent and the new agent's written consent (either on the
statement or attached to it) to the appointment; and
(6) that after the change or changes are made, the street addresses of
its registered office and the business office of its registered agent will be
identical.
(C) If a registered agent changes the street address of his business
office, he may change the street address of the registered office of any
limited liability company or foreign limited liability company for which he
is the registered agent by notifying the domestic or foreign limited liability
company in writing of the change and signing (either manually or in
facsimile) and delivering to the Secretary of State for filing a statement that
complies with the requirements of subsection (A) and recites that the
domestic or foreign limited liability company has been notified of the
change.
(D) A registered agent may resign his agency appointment by signing
and delivering to the Secretary of State for filing the signed original and
two exact or conformed copies of a statement or resignation. The statement
may include a statement that the registered office is also discontinued.
(1) After filing the statement, the Secretary of State shall mail one
copy to the registered office (if not discontinued) and the other copy to the
domestic or foreign limited liability company at its principal office.
(2) The agency appointment is terminated, and the registered office
discontinued if so provided, on the thirty-first day after the date on which
the statement was filed.
Section 33-43-106. Nature of business.
A limited liability company may be organized under this chapter for any
lawful purpose. If the purpose for which a limited liability company is
organized or its activities make it subject to a special provision of law, the
limited liability company shall also comply with that provision.
A limited liability company shall possess and may exercise all the
powers and privileges as an individual that are either necessary or
convenient including, but not limited to, those granted by this Chapter 43,
any other law, the articles of organization, and its operating agreement.
Article 2
Formation
Section 33-43-201. Formation.
Two or more persons may form a limited liability company by signing
articles of organization and delivering the signed articles to the Secretary of
State for filing. The persons who form a limited liability company must be
members of the limited liability company at the time of formation.
A copy of the articles of organization which is filed with the Secretary
of State and which is stamped `filed' and marked with the filing date is
conclusive evidence that all conditions precedent required to be performed
by the organizers have been satisfied and that the limited liability company
has been legally organized under this chapter.
Section 33-43-202. Articles of organization.
(A) The articles of organization shall set forth:
(1) a name for the limited liability company that satisfies the
requirements of Section 33-43-103;
(2) the street address of the initial registered office and the name of
the initial registered agent at that office as required by Section
33-43-105;
(3) the latest date upon which the limited liability company is to
dissolve;
(4) if management of the limited liability company is vested in a
manager or managers, a statement to that effect; and
(5) the name and signature of each person who is forming the limited
liability company and who will be an initial member.
(B) The articles of organization may set forth any other provision the
organizers determine to include, including any provisions that are required
or permitted to be set forth in the operating agreement.
(C) All provisions of the articles of organization shall be binding upon
the limited liability company, its members, and managers. Provided,
however, as among (or between) the members, the managers, and among
the members and managers, if an optional provision of the articles of
organization as permitted under subsection (B) is inconsistent with the
operating agreement for the limited liability company, the operating
agreement shall control.
Section 33-43-203. Amendment of articles of organization;
restatement.
(A) The articles of organization of a limited liability company may be
amended by filing articles of amendment with the Secretary of State. The
articles of amendment shall set forth:
(1) the name of the limited liability company;
(2) the date the articles of organization were filed; and
(3) the amendment to the articles of organization. (B) The articles of organization may be amended so long as the articles,
as amended, contain only provisions that may be lawfully contained in
articles of organization at the time of making the amendment.
(C) The articles of organization of a limited liability company must be
amended when:
(1) there is a change in the name of the limited liability company;
(2) there is a false or erroneous statement in the articles of
organization;
(3) there is a change in the time, as stated in the articles of
organization, for the dissolution of the limited liability company;
(4) a limited liability company which is authorized to be managed by
managers is no longer managed by managers;
(5) a limited liability company managed by members elects to be
managed by managers; and
(6) the members desire to make a change in any other statement in the
articles of organization in order for the articles to accurately represent the
agreement among them.
(D) Articles of organization may be restated at any time. Restated
articles of organization shall be filed with the Secretary of State and shall
be specifically designated as such in the heading and shall state either in the
heading or in an introductory paragraph the limited liability company's
present name, and, if it has been changed, all of its former names and the
date of the filing of its articles of organization.
Section 33-43-204. Execution of documents.
(A) Unless otherwise provided in any other section of this chapter, any
document required by this chapter to be filed with the Secretary of State
shall be executed:
(1) if management of the limited liability company is vested in one or
more managers by any manager;
(2) if management of the limited liability company is reserved to the
members by any member;
(3) if the limited liability company has not been formed by the persons
forming the limited liability company; or
(4) if the limited liability company is in the hands of a receiver,
trustee, or other court-appointed fiduciary by that fiduciary.
(B) The person executing the document shall sign it and state beneath or
opposite his signature the person's name and the capacity in which he
signs.
(C) The person executing the document may do so as an
attorney-in-fact. Powers of attorney relating to the execution of the
document need not be filed with the Secretary of State, but shall be retained
by the limited liability company.
Section 33-43-205. Filing with the Secretary of State.
Articles of incorporation or any other document to be filed pursuant to
this chapter shall be delivered to the office of the Secretary of State, duly
executed and accompanied by one exact or conformed copy. Should the
Secretary of State determine that a document conforms to the filing
provisions of this chapter, including the payment of all required fees, the
Secretary of State shall:
(1) endorse on each signed original and duplicate copy the word `filed'
and the date and time of the document's acceptance for filing;
(2) retain the signed original in the Secretary of State's files; and
(3) return the duplicate copy to the person who filed it or the person's
representative.
Section 33-43-206. Effect of delivery or filing of articles of
organization.
(A) A limited liability company is formed when the articles of
organization are filed by the Secretary of State.
(B) Each copy of the articles of organization stamped `filed' and marked
with the filing date is conclusive proof that all conditions precedent
required to be performed by the organizers have been complied with and
that the limited liability company has been legally organized and formed
under this chapter.
Article 3
Relations of Members and Managers To Persons
Dealing with the Limited Liability Company
Section 33-43-301. Agency power of members and managers.
(A) Except as provided in subsection (B), every member is an agent of
the limited liability company for the purpose of its business or affairs, and
the act of any member including, but not limited to, the execution in the
name of the limited liability company of any instrument, for apparently
carrying on in the usual way the limited liability company business or
businesses of the kind carried on by the limited liability company binds the
limited liability company, unless the member so acting has, in fact, no
authority to act for the limited liability company in the particular matter,
and the person with whom the member is dealing has knowledge of the fact
that the member has no such authority.
(B) If the articles of organization provide that management of the
limited liability company is vested in a manager or managers:
(1) no member, solely by reason of being a member, is an agent of the
limited liability company; and
(2) every manager is an agent of the limited liability company for the
purpose of its business or affairs, and the act of any manager including, but
not limited to, the execution in the name of the limited liability company of
any instrument, for apparently carrying on in the usual way the limited
liability company business or businesses of the kind carried on by the
limited liability company binds the limited liability company, unless the
manager so acting has, in fact, no authority to act for the limited liability
company in the particular matter, and the person with whom the manager is
dealing has knowledge of the fact that the manager has no such
authority.
(C) An act of a manager or a member which is not apparently for the
carrying on in the usual way the limited liability company business or
business of the kind carried on by the limited liability company does not
bind the limited liability company unless authorized in accordance with an
operating agreement or the articles of organization.
Section 33-43-303. Limited liability company charged with knowledge
of or notice to member or manager.
(A) Except as provided in subsection (B), notice to any member of any
matter relating to the business or affairs of the limited liability company,
and the knowledge of the member acting in the particular matter, acquired
while a member or known at the time of becoming a member, and the
knowledge of any other member who reasonably could and should have
communicated the knowledge to the acting member, operate as notice to or
knowledge of the limited liability company. However, (1) if any member
has knowledge of a matter and acts fraudulently toward the limited liability
company in respect to such information, the knowledge of the member shall
not be imputed to the limited liability company; and (2) if notice is given to
any member who is acting adversely to the limited liability company and
the notifier has knowledge of such adversity, such information shall not be
imputed to the limited liability company.
(B) If the articles of organization provide that management of the
limited liability company is vested in a manager or managers:
(1) notice to any manger of any matter relating to the business or
affairs of the limited liability company, and the knowledge of the manager
acting in the particular matter acquired while a manager known at the time
of becoming a manager, and the knowledge of any other manager who
reasonably could and should have communicated the knowledge to the
acting manager, operate as notice to or knowledge of the limited liability
company. However, (a) if any manager has knowledge of a matter and acts
fraudulently toward the limited liability company in respect to such
information, the knowledge of the manager shall not be imputed to the
limited liability company; and (b) if notice is given to any manager who is
acting adversely to the limited liability company and the notifier has
knowledge of such adversity, such information shall not be imputed to the
limited liability company; and
(2) notice to or knowledge of any member of a limited liability
company while the member is acting solely in the capacity of a member is
not notice to or knowledge of the limited liability company.
Section 33-43-304. Liability of members and managers to third
parties.
(A) A person who is a member or a manager of a limited liability
company is not liable, solely by reason of being a member or being a
manager, under a judgment, decree, or order of a court, or in any other
manner for a debt, obligation, or liability of the limited liability company,
whether arising in contract, tort, or otherwise or for the acts or omission of
any other member, manager, agent, or employee of the limited liability
company.
(B) Each individual who renders professional services on behalf of a
domestic or foreign limited liability company is liable for a negligent or
wrongful act or omission in which he personally participates to the same
extent as if he rendered the services as a sole practitioner. A member of a
domestic or foreign limited liability company which renders professional
services, as defined in Section 33-43-102(N), is not liable; however, for the
conduct of other members, managers, agents, or employees of the limited
liability company unless he is at fault in appointing, supervising, or
cooperating with them.
(C) A domestic or foreign limited liability company which renders
professional services, as defined in Section 33-43-102(N), whose members,
managers, agents, or employees perform professional services within the
scope of their employment or of their apparent authority to act for the
limited liability company is liable to the same extent those members,
managers, agents, or employees who render professional services on behalf
of the domestic or foreign limited liability company.
Section 33-43-305. Limited Liability Company Bound by Member's
Wrongful Act.
Where, by a wrongful act or omission or other actionable conduct of any
member, whether or not a manager, or any manager, acting in the ordinary
course of the business of the limited liability company, or otherwise with
authority, loss or injury is caused to any person, or any penalty is incurred,
the limited liability company is liable therefor to the same extent as the
member so acting or omitting to act.
Section 33-43-306. Limited Liability Company Bound by Member's
Breach of Trust.
(A) The limited liability company is bound to make good the loss where
a member, whether or not a manager, or any manager, acting within the
scope of his apparent authority, receives money or property of a person
who is not a member or manager of the limited liability company and
misapplies it.
(B) The limited liability company is bound to make good the loss where
in the course of its business it receives money or property of a third person
and the money or property so received is misapplied while it is in the
custody of the limited liability company.
Article 4
Rights and Duties of Members and Managers
Section 33-43-401. Management. (A) Unless the articles of organization vests management of the limited
liability company in a manager or managers, management of the business
or affairs of the limited liability company is vested in the members.
(B) If the articles of organization vest management of the limited
liability company in one or more managers, then the manager or managers
shall have exclusive power to manage the business and affairs of the
limited liability company except to the extent otherwise provided in an
operating agreement. Unless otherwise provided in an operating
agreement, managers:
(1) shall be designated, appointed, elected, removed, or replaced by a
vote, approval, or consent of more than one-half by number of the
members;
(2) except as provided in subsection (C) need not be members of the
limited liability company or natural persons; and
(3) unless they are sooner removed or sooner resign, shall hold office
until their successors shall have been elected and qualified.
(C) All of the managers of a limited liability company which renders a
professional service, as defined in Section 33-43-102(N), shall be
individuals who are authorized by law in this or another state to render a
professional service which is rendered by the limited liability company.
Section 33-43-402. Fiduciary duties of managers and members.
(A) Duties of loyalty.
A member shall:
(1) account to the limited liability company and hold for it as trustee
any property, profit, or benefit derived by the member in the conduct and
winding up of the limited liability company business or derived from a use
by the member of limited liability company property, including the
appropriation of a limited liability company opportunity;
(2) refrain from dealing with the limited liability company in the
conduct or winding up of the limited liability company business, as or on
behalf of a party having an interest adverse to the limited liability company
except upon full disclosure and approval in writing by more than one-half
by number of the disinterested members or as otherwise provided in the
articles of organization or an operating agreement; and,
(3) refrain from competing with the limited liability company in the
conduct of the limited liability company business before the dissolution of
the limited liability company.
In no event may the members, even by unanimous written consent
eliminate any of the duties imposed in paragraphs (1), (2), or (3) of this
subsection A, but with the unanimous written consent of all the members,
the members may specifically authorize specific types or categories of
permitted conduct so long as such are not manifestly unreasonable.
(B) Duty of care.
A member, in conducting and winding up the business of the limited
liability company, shall refrain from engaging in grossly negligent conduct,
intentional misconduct, and knowing violation of the law. Even with the
unanimous written consent of all the members, this duty of care may not be
reduced.
(C) Good faith and fair dealing.
A member shall discharge the duties to the limited liability company and
the other members under this act or under the operating agreement, and
exercise any rights consistent with the obligation of good faith and fair
dealing. In no event, even with the unanimous written consent of all the
members, may the members eliminate the obligation of good faith and fair
dealing, but they may by unanimous written consent determine the
standards by which performance of the obligation is to be measured, if such
standards are not manifestly unreasonable.
(D) A member does not violate a duty or obligation under this act or
under the operating agreement merely because the member's conduct
furthers the member's own interest.
(E) This section applies to a person winding up the limited liability
company business as the personal or legal representative of the last
surviving member as if the person were a member.
(F) The standards of conduct expressed in this Section 33-43-402 are
applicable to all members in a member-managed limited liability company.
In a manger-managed limited liability company:
(1) the managers shall be held to the same standards of conduct set
forth in (A) through (E);
(2) a member who is not a manager shall have no duties to the limited
liability company or to other members solely by reason of being a member;
and,
(3) only the members shall have the right to specifically authorize
conduct as provided in subsections (A), (B), and (C).
Section 33-43-403. Voting.
(A) Unless otherwise provided in an operating agreement or this
chapter, and subject to subsection (B), the affirmative vote, approval, or
consent of more than one-half by number of the members, if management
of the limited liability company is vested in the members, or of the
managers if the management of the limited liability company is vested in
managers, shall be required to decide any matter connected with the
business of the limited liability company.
(B) Unless otherwise provided in writing in an operating agreement, the
affirmative vote, approval, or consent of all members shall be required
to:
(1) amend an operating agreement or articles of organization; or
(2) authorize a manager or member to do any act on behalf of the
limited liability company that contravenes a written operating agreement,
including any written provision thereof which expressly limits the purpose,
business, or affairs of the limited liability company or the conduct
thereof.
Section 33-43-404. Indemnification of members and managers.
An operating agreement or a court may provide for indemnification of a
member or manager for judgments, settlements, penalties, fines, or
expenses incurred in a proceeding to which a person is a party because the
person is or was a member or manager to the same extent, upon the same
terms and limitations, and according to the same procedures as is provided
for indemnification of directors of business corporations in Article 5,
Chapter 8 of Title 33, and as may be amended from time to time.
Section 33-43-405. Records and information.
(A) A limited liability company shall keep at its principal place of
business the following:
(1) a current and a past list, setting forth the full name and last known
mailing address of each member and manager, if any, set forth in
alphabetical order;
(2) a copy of the articles of organization, all amendments thereto, and
all other documents filed with the Secretary of State, together with
executed copies of any powers of attorney pursuant to which the articles of
amendment or any filed document has been executed;
(3) copies of the limited liability company's federal, state, and local
tax returns and financial statements, if any, for the six most recent years or,
if those returns and statements were not prepared for any reason, copies of
the information and statements provided to, or which should have been
provided to, the members to enable them to prepare their federal, state, and
local tax returns for the period;
(4) copies of any effective written operating agreements, and all
amendments thereto, and copies of any written operating agreements no
longer in effect;
(5) unless contained in writing in an operating agreement:
(a) a writing setting out the amount of cash, if any, and a statement
of the agreed value of other property or services, if any, contributed by each
member and the times at which or events upon the happening of which any
additional contributions are to be made by each member;
(b) a writing stating events, if any, upon the happening of which the
limited liability company is to be dissolved and its affairs wound up;
and
(c) other writings prepared pursuant to a requirement, if any, in any
operating agreement.
(B) Upon reasonable request, a member or personal representative of
any deceased member or of any member under legal disability, at the
member's own expense, may inspect and copy during ordinary business
hours any limited liability company record, wherever the record is
located.
(C) At the request of any member, or the personal representative of any
deceased member or of any member under legal disability, the limited
liability company shall provide:
(1) to the extent the circumstances render it just and reasonable, true
and full information of all things affecting the members, and
(2) in writing, a description of the particular membership rights owned
by that member as of the date the limited liability company makes the
statement, which statement must describe the member's
(i) right to vote;
(ii) right to share in profits and losses;
(iii) right to share in distributions;
(iv) restrictions on the member's right to assign any or all of his
interest in the limited liability company pursuant to Section 33-43-406;
and
(v) any assignment of the member's interest then in effect other than
a security interest.
(D) Upon reasonable request and for a proper purpose, a former member
(including the estate of a deceased member) may at his or her own expense,
inspect and copy during ordinary business hours any limited liability
company record pertaining to the period during which he was a
member.
(E) Failure of the limited liability company to keep or maintain any of
the records or information required pursuant to this section shall not be
grounds for imposing liability on any member or manager for the debts and
obligations of the limited liability company.
Section 33-43-406. Restrictions on the transfer of any rights in the
member's interest.
(A) Transfer or assignment of any rights in a member's interest in a
limited liability company may be restricted, provided, however, such
restriction is not binding unless the member either is a party to the
agreement imposing the restriction or voted in favor of the restriction.
(B) A written restriction on the transfer or assignment of all or part of
the rights of the member's interest (which may be entered into for any
reason) that is noted conspicuously in a requested statement of membership
rights may be enforced against the owner of the interest or a successor or
transferee of the owner, including a pledgee or legal representative. Unless
noted conspicuously in a requested statement of membership interest, a
restriction is ineffective against a person without knowledge of the
restriction.
(C) A would-be assignee or transferee is entitled to rely on a statement
of membership rights issued by the limited liability company under Section
33-43-405(C). A restriction on the assignment or transfer of all or a part of
the member's interest, which is otherwise valid and in effect at the time of
the issuance of a statement of membership rights but which is not reflected
in that statement, is ineffective against an assignee or transferee who takes
an assignment or receives a transfer in reliance on the statement of
membership rights.
Article 5
Finance
Section 33-43-501. Contributions to capital.
A limited liability company interest may be issued in exchange for
anything of value including, cash, property, services rendered, or a
promissory note, or other written obligation to contribute cash or property
or to perform services.
Section 33-43-502. Liability for contributions.
(A) A promise by a member to contribute to the limited liability
company is not enforceable unless set forth in a writing signed by the
member.
(B) Unless otherwise provided in an operating agreement, a member is
obligated to the limited liability company to perform any enforceable
promise to contribute cash or property or to perform services, even if the
member is unable to perform because of death, disability, or other
reason.
(C) If a member does not make the required contribution of property or
services, the member is obligated, at the option of the limited liability
company, to contribute cash equal to that portion of value of the stated
contribution that has not been made.
(D) Unless otherwise provided in an operating agreement, the obligation
of a member to make a contribution may be compromised only with the
unanimous consent of the members.
(E) Notwithstanding the compromise, a creditor of a limited liability
company who extends credit or otherwise acts in reliance on that obligation
after the member signs a writing which reflects the obligation and before
the compromise may enforce the original obligation.
Section 33-43-503. Allocation of profits and losses.
Profits and losses of a limited liability company shall be allocated
among the members in the manner provided in the operating agreement. If
the operating agreement does not so provide, profits and losses shall be
allocated on a per capita basis.
Section 33-43-504. Remuneration.
A member is not entitled to remuneration for services performed for the
limited liability company, except as provided in an operating agreement
and except for reasonable compensation for services rendered in winding
up the business of the limited liability company.
Article 6
Distribution
Section 33-43-601. Sharing of interim distributions.
Except as otherwise provided in Sections 33-43-602 and 33-43-905,
distributions of cash or other assets of a limited liability company shall be
shared among the members and among classes of members in the manner
provided in writing in an operating agreement. If an operating agreement
does not so provide in writing, each member shall share on a per capita
basis in any distribution. A member is entitled to receive distributions
described in this section from a limited liability company to the extent and
at the times or upon the happening of the events specified in an operating
agreement or at the times determined by the members or managers pursuant
to Section 33-43-403.
Section 33-43-602. Distributions on an event of dissociation.
(A) Upon the occurrence of an event of dissociation under Section
33-43-802 which does not result in winding up, other than an event of
dissociation described in Section 33-43-802(A)(3)(b) or Section
33-43-802(A)(2), a dissociating member is entitled to receive any
distribution which the member was entitled to receive prior to the event of
dissociation. The dissociating member shall also receive any other amount
as provided in an operating agreement. If an operating agreement does not
provide the amount of, or a method for determining the distribution to a
dissociating member, the member shall additionally receive the fair value
of the member's interest in the limited liability company as of the date of
dissociation determined as provided in subsection (B) and based upon the
member's right to share in distributions from the limited liability
company.
(B) The `fair value' of the dissociating member's interest shall be
determined on the basis of the amount that would be paid by a willing
buyer to a willing seller, neither being under any compulsion to buy or sell,
and with knowledge of all relevant facts. Interest must be paid from the
date of dissociation to the date of payment.
(C) Damages for wrongful dissociation under Section 33-43-803 and all
other amounts owing, whether or not presently due, from the dissociated
member to the limited liability company, must be offset against the buyout
price as determined in subsection (A). If damages and other amounts
owing exceed the amount owed under subsection (A), interest must be paid
on such excess from the date the amount owed becomes due to the date of
payment.
(D) Unless otherwise provided in an operating agreement and subject to
the provisions of subsections (E) and (G), if no agreement for the purchase
of a dissociated member's interest is reached within one hundred twenty
days after a written demand for payment, the limited liability company shall
pay, or cause to be paid, in cash to the dissociated member or his personal
representative the amount the limited liability company estimates to be the
price to be paid according to subsection (B) and accrued interest, reduced
by any offsets and accrued interest under subsection (C).
(E) If a deferred payment is authorized under subsection (G)(1), or the
limited liability company reasonably and in good faith determines deferred
payment may be made pursuant to subsection (G)(2), the limited liability
company may tender a written offer to pay the amount it estimates to be the
price owed under subsection (B) and accrued interest, reduced by any
offsets under subsection (C), stating the amount of payment, the amount
and type of security for payment, and the other terms and conditions of the
obligation.
(F) The payment or tender required by subsection (D) or (E) must be
accompanied by the following:
(1) a statement of limited liability company's assets and liabilities as
of the date of dissociation;
(2) the latest available limited liability company balance sheet and
income statement, if any;
(3) an explanation of how the estimated amount of payment was
calculated; and
(4) a written notice that the payment is in full satisfaction of the
obligation to purchase unless, within one hundred twenty days after the
written notice, the dissociated member commences an action to determine
the price, any offsets under subsection (C), or other terms of the
reacquisition obligation.
(G) A deferred payment may be made only according to the following
conditions:
(1) A member who wrongfully dissociates before the expiration of the
duration of the limited liability company is not entitled to payment for any
portion of the buyout price until the expiration of the then stated duration
unless the member establishes to the satisfaction of the court that earlier
payment will not cause undue hardship to the business of the limited
liability company. The court shall determine the extent and manner to
which such deferred payment is secured and the amount, if any, of interest
to be paid on the deferred payment.
(2) A member who dissociates, but not wrongfully, before the
expiration of the limited liability company, is entitled to payment of the
buyout price within one hundred twenty days after the member, of his
representative, gives written demand to the limited liability company.
Provided, however, if the operating agreement does not require immediate
payment, the limited liability company may request an order for deferral of
payment which the court may only grant if the limited liability company
establishes by clear and convincing evidence that deferred payment is
necessary in order to prevent undue hardship to the business of the limited
liability company. The court shall determine the length of deferral, the
extent and manner to which the deferred payment is secured, and a
reasonable fixed or variable rate of interest which shall be regularly paid on
the deferred amount. Unless the limited liability company demonstrates by
clear and convincing evidence that providing adequate security in regard to
a deferred payment to a member who does not wrongfully dissociate will
cause undue hardship to the business of the limited liability company, such
deferred payment shall be adequately secured.
(H) A dissociated member may maintain an action against the limited
liability company, pursuant to Section 33-43-1203 to determine the value of
that member's interest, any offsets under subsection (C), or other terms.
The action must be commenced within one hundred twenty days after the
limited liability company has tendered payment or an offer to pay, or within
one year after written demand for payment if no payment or offer to pay is
tendered. The court shall determine the fair market value using the formula
in subsection (B), any offset due under subsection (C), and accrued interest,
and enter judgment for any additional payment or refund. If deferred
payment is authorized under subsection (G), the court shall also determine
the security for payment and other terms of the obligation to purchase. The
court may assess reasonable attorney's fees and the fees and expenses of
appraisers or other experts for a party to the action, in amounts the court
finds equitable, against any other party, if the court finds that the other
party acted arbitrarily, vexatiously, or not in good faith, including the
limited liability company's failure to tender payment or an offer to pay or to
comply with the requirement of subsection (F), or any unsupported or
unreasonable request to defer payment pursuant to subsection (G)(2).
Section 33-43-603. Distribution in kind.
Unless otherwise provided in an operating agreement:
(A) A member, regardless of the nature of the member's contribution,
has no right to demand and receive any distribution from the limited
liability company in any form other than cash.
(B) A member may not be compelled to accept from the limited liability
company a distribution of any asset in kind to the extent that the percentage
of the asset distributed to the member exceeds the percentage that the
member would have shared in a cash distribution equal to the value of the
property at the time of distribution.
Section 33-43-604. Restrictions on distributions.
(A) No distribution may be made if, after giving effect to the
distribution:
(1) the limited liability company would not be able to pay its debts as
they become due in the usual course of business; or
(2) the limited liability company's assets would be less than the sum of
its liabilities plus, unless otherwise provided in an operating agreement, the
amount that would be needed, if the limited liability company were to be
dissolved at the time of the distribution, to satisfy the preferential rights of
other members upon dissolution which are superior to the rights of the
member receiving the distribution.
(B) The limited liability company may base a determination that a
distribution is not prohibited under subsection (A) either on:
(1) financial statements prepared on the basis of accounting practices
and principles that are reasonable under the circumstances; or
(2) a fair valuation or other method that is reasonable under the
circumstances.
(C) The effect of a distribution under subsection (A) is measured:
(1) in the case of distribution by purchase or other acquisition of the
member's interest in the limited liability company, as of the date money or
other property is transferred or debt incurred by the limited liability
company;
(2) in the case of any other distribution of indebtedness, as of the date
the indebtedness is distributed;
(3) in all other cases, as of (i) the date the distribution is authorized if
the payment occurs within one hundred twenty days after the date of
authorization, or (ii) the date the payment is made if it occurs more than
one hundred twenty days after the date of authorization.
(D) A limited liability company's indebtedness to a member incurred by
reason of a distribution made in accordance with this section is at parity
with the limited liability company's indebtedness to its general, unsecured
creditors except to the extent subordinated by agreement.
Section 33-43-605. Liability upon wrongful distribution.
(A) A member or manager who votes for or assents to a distribution in
violation of an operating agreement or Section 33-43-604 is personally
liable to the limited liability company for the amount of the distribution that
exceeds the amount that could have been distributed without violating
Section 33-43-604 or an operating agreement if it is established that such
member or manager did not comply with Section 33-43-604 or the
operating agreement and in so voting or assenting violated the standards
imposed by Section 33-43-402.
(B) Each member or manager held liable under subsection (A) for a
wrongful distribution is entitled to contribution:
(1) from each other member or manager who could be held liable
under subsection (A) for the wrongful distribution; and
(2) from each member for the amount the member received in
violation of Section 33-43-604 or an operating agreement.
(C) A proceeding under this section is barred unless it is commenced
within two years after the date on which the effect of the distribution is
measured under Section 33-43-604.
Article 7
Ownership and Transfer of Property
Section 33-43-701. Ownership of limited liability company
property.
(A) Property transferred to or otherwise acquired by a limited liability
company is property of the limited liability company and not of the
members individually.
(B) Property is limited liability company property if acquired:
(1) in the name of the limited liability company; or
(2) in the name of one or more members or managers with an
indication in the instrument transferring title to the property of:
(i) the person's capacity as a member or manager, or
(ii) of the existence of a limited liability company, but without an
indication of the name of the limited liability company.
(C) Property is acquired in the name of the limited liability company by
a transfer to:
(1) the limited liability company in its name; or
(2) one or more members or managers in their capacity as either
members or managers in the limited liability company, if the name of the
limited liability company is indicated in the instrument transferring title to
the property.
(D) Property is presumed to be limited liability company property if
purchased with limited liability company assets, even if not acquired in the
name of the limited liability company or of one or more members with an
indication in the instrument transferring title to the property of the person's
capacity as a member or of the existence of a limited liability company.
(E) Property acquired in the name of one or more of the members,
without an indication in the instrument transferring title to the property of
the person's capacity as a member or of the existence of a limited liability
company and without use of limited liability company assets, is presumed
to be separate property, even if used for limited liability company
purposes.
Section 33-43-702. Transfer of property.
(A) Except as provided in subsection (D), property of the limited
liability company held in the name of the limited liability company, as
provided in Section 33-43-701(C), may be transferred by an instrument of
transfer executed by any member in the name of the limited liability
company.
(B) Property of the limited liability company that is held in the name of
one or more members or managers with an indication in the instrument
transferring the property to them of their capacity as members or managers
of a limited liability company or of the existence of a limited liability
company, if the name of the limited liability company is not indicated, may
be transferred by an instrument of transfer executed by the persons in
whose name title is held.
(C) Property of the limited liability company held in the name of one or
more persons other than the limited liability company without an indication
in the instrument transferring title to the property to them of their capacity
as members or managers of a limited liability company or of the existence
of a limited liability company, may be transferred free of any claims of the
limited liability company or the other members by the persons in whose
name title is held to a transferee who gives value without having notice that
it is property of the limited liability company.
(D) If the articles of organization provide that management of the
limited liability company is vested in a manager or managers:
(1) title to property of the limited liability company that is held in the
name of the limited liability company, as provided in Section
33-43-701(C), may be transferred by an instrument of transfer executed by
any manager in the name of the limited liability company; and
(2) a member, solely by reason of being a member, shall not have
authority to transfer property of the limited liability company.
Section 33-43-703. Nature of limited liability company interest.
A limited liability company interest is personal property.
Section 33-43-704. Assignment of limited liability company
interest.
(A) Unless otherwise provided in writing in an operating agreement:
(1) a limited liability company interest is assignable in whole or in
part;
(2) an assignment entitles the assignee to receive, to the extent
assigned, only the distributions to which the assignor would be entitled;
(3) an assignment of a limited liability company interest does not
dissolve the limited liability company or entitle the assignee to participate
in the management and affairs of the limited liability company or to
become or exercise any rights of a member;
(4) until the assignee of a limited liability company interest becomes a
member, the assignor continues to be a member and to have the power to
exercise any rights of a member, subject to the other members' right to
remove the assignor pursuant to Section 33-43-802(A)(3)(b);
(5) until an assignee of a limited liability company interest becomes a
member, the assignee has no liability as a member solely as a result of the
assignment; and
(6) the assignor of a limited liability company interest is not released
from his liability as a member solely as a result of the assignment.
(B) Unless otherwise provided in an operating agreement, the pledge of,
or granting of a security interest, lien, or other encumbrance in or against,
any or all of the limited liability company interest of a member is not an
assignment and shall not cause the member to cease to be a member or to
cease to have the power to exercise any rights or powers of a member.
Section 33-43-705. Rights of judgment creditor.
On application to a court of competent jurisdiction by any judgment
creditor of a member, the court may charge the member's limited liability
company interest with payment of the unsatisfied amount of judgment with
interest. To the extent so charged, the judgment creditor has only the rights
of an assignee of the member's limited liability company interest. This
chapter does not deprive any member of the benefit of any exemption laws
applicable to his limited liability company interest.
Section 33-43-706. Right of assignee to become a member.
(A) An assignee of a limited liability company interest may become a
member only if the other members unanimously consent at the time of the
assignment. A member's consent may be withheld for any reason
whatsoever. The consent of a member may be evidenced in any manner
specified in writing in an operating agreement, but in the absence of such
specification, consent shall be evidenced by a written instrument dated and
signed by the member.
(B) An assignee who becomes a member has, to the extent assigned, the
rights and powers, and is subject to the restrictions and liabilities, of a
member under the articles of organization, any operating agreement, and
this chapter. An assignee who becomes a member also is liable for any
obligations of the assignor to make contributions under Section 33-43-502.
However, the assignee is not obligated for liabilities of which the assignee
had no knowledge at the time he became a member and which could not be
ascertained from any written records of the limited liability company kept
pursuant to Section 33-43-405.
(C) Unless otherwise provided in writing in an operating agreement, an
assignor is not released from his liability to the limited liability company
under Section 33-43-502, whether or not an assignee of a limited liability
company interest becomes a member.
(D) Unless otherwise provided in writing in an operating agreement, a
member who assigns his entire limited liability company interest ceases to
be a member or to have the power to exercise any rights of a member when
the assignee becomes a member with respect to the entire assigned
interest.
Article 8
Admission and Withdrawal of Members
Section 33-43-801. Admission of members.
(A) Subject to subsections (B) and (C), a person may become a member
in a limited liability company:
(1) in the case of a person acquiring a limited liability company
interest directly from the limited liability company, upon compliance with
an operating agreement or, if an operating agreement does not so provide in
writing, upon the written consent of all members; and
(2) in the case of an assignee of a limited liability company interest, as
provided in Section 33-43-706.
(B) The effective time of admission of a member to a limited liability
company shall be the later of:
(1) the date the limited liability company is formed; or
(2) the time provided in an operating agreement or, if no such time is
provided therein, then when the person's admission is reflected in the
records of the limited liability company.
(C) A domestic limited liability company formed in South Carolina and
which renders professional service, as is defined in Section 33-43-102(N),
may only admit as members:
(1) individuals who are authorized by law in this or another state to
render a professional service the limited liability company practices;
(2) general partnerships in which all the partners are licensed in one or
more states to practice a professional service which the limited liability
company practices, and at least one partner is authorized by law in this
State to render such professional service;
(3) professional corporations, domestic or foreign, authorized by law
in this State to render a professional service which the limited liability
company practices; and
(4) another foreign or domestic limited liability company in which all
of the members are licensed in one or more states to practice a professional
service which the limited liability company practices, and at least one
member is authorized by law in this State to render such professional
services.
If a licensing authority with jurisdiction over a professional considers it
necessary to prevent violations of the ethical standards of the profession,
the authority by rule may restrict or condition, or revoke in part, the
authority of limited liability companies subject to its jurisdiction to permit
persons or organizations to be members of limited liability companies.
Section 33-43-802. Events of dissociation.
(A) A person ceases to be a member of a limited liability company upon
the occurrence of one or more of the following events:
(1) the member withdraws by voluntary act from the limited liability
company;
(2) the member ceases to be a member of the limited liability company
as provided in Section 33-43-706;
(3) the member is removed as a member;
(a) in accordance with an operating agreement or,
(b) unless otherwise provided in writing in the operating agreement,
when a member assigns all of his interest in the limited liability company,
by an affirmative vote of a majority in interest of the members who have
not assigned their interests;
(4) the member;
(a) makes an assignment for the benefit of creditors,
(b) files a voluntary petition in bankruptcy,
(c) is adjudicated a bankrupt or insolvent,
(d) files a petition or answer seeking for the member any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution, or similar relief under any statute, law, or regulation,
(e) files an answer or other pleading admitting or failing to contest
the material allegations of a petition filed against the member in any
proceeding of this nature or,
(f) seeks, consents to, or acquiesces in the appointment of a trustee,
receiver, or liquidator of the member or of all or any substantial part of the
member's properties;
(5) if within one hundred twenty days after the commencement of any
proceeding against the member seeking reorganization, arrangement,
composition, readjustment, liquidation, dissolution, or similar relief under
any statute, law, or regulation, the proceeding has not been dismissed, or if
within one hundred twenty days after the appointment without his consent
or acquiescence of a trustee, receiver, or liquidator of the member or of all
or any substantial part of his properties, the appointment is not vacated or
stayed or if within one hundred twenty days after the expiration of any stay,
the appointment is not vacated;
(6) in the case of a member who is an individual;
(a) the member's death or,
(b) the entry of an order by a court of competent jurisdiction
adjudicating the member to be an incapacitated person so that he lacks
sufficient understanding or capacity to make or communicate responsible
decisions concerning his person or property.
(7) in the case of a member which is a trust or is acting as a member
by virtue of being a trustee of a trust, the termination of the trust, but not
merely the substitution of a new trustee;
(8) in the case of a member that is a separate limited liability
company, the dissolution and commencement of winding up of the separate
limited liability company;
(9) in the case of a member that is a corporation, the filing of a
certificate of its dissolution or the equivalent for the corporation, or the
lapse of ninety days after notice to the corporation of revocation without a
reinstatement of its charter;
(10) in the case of an estate, the distribution by the fiduciary of the
estate's entire interest in the limited liability company;
(11) in the case of a member which is a partnership, the dissolution
and commencement of winding up of the partnership;
(12) on application by the limited liability company or another
member, the member's expulsion by judicial decree because,
(a) the member engaged in wrongful conduct that adversely and
materially affected the limited liability company business;
(b) the member wilfully or persistently committed a material breach
of the operating agreement or of a duty owed to the limited liability
company or the other members under Section 33-43-402 or any other
agreement between the member and the limited liability company or other
members;
(c) it is unlawful to carry on the limited liability company business
with the member; or,
(d) the member engaged in conduct relating to the limited liability
company business which makes it not reasonably practicable to carry on the
business with that member, or;
(13) if the member is not an individual, partnership, limited liability
company, corporation, trust, or estate; upon termination of the member.
(B) The members may provide in writing in an operating agreement for
other events the occurrence of which shall result in a person ceasing to be a
member of the limited liability company.
Section 33-43-803. Member's wrongful dissociation.
(A) A member's dissociation is wrongful only if:
(1) it is in breach of a written provision of the operating agreement;
or
(2) before the expiration of the stated duration of the limited liability
company the member withdraws by express will as provided in Section
33-43-802(A)(1), unless either: (i) the withdrawal follows the dissociation
of another member which results in a dissolution of the limited liability
company under Section 33-43-901, or (ii) the withdrawal is permitted by a
written provision of the operating agreement;
(3) the member is expelled by judicial decree;
(4) the member is removed as a member in accordance with an
operating agreement as provided in Section 33-43-802(A)(3)(a); or,
(5) in the case of a member who is not an individual, trust, other than
a business trust, or estate, the member is expelled or otherwise dissociated
because it wilfully dissolved or terminated.
(B) A wrongfully dissociating member is liable to the limited liability
company and to the other members for damages caused by the dissociation
including the reasonable costs of obtaining replacement of the services the
withdrawn member was obligated to perform. The limited liability
company may offset the damages against the amount otherwise
distributable to the wrongfully dissociating member in addition to pursuing
any remedies provided for in an operating agreement or otherwise available
under applicable law.
Article 9
Dissolution
Section 33-43-901. Dissolution.
A limited liability company is dissolved and its affairs shall be wound
up only upon the happening of the first to occur of the following:
(A) at the time or upon the occurrence of events specified in writing in
the articles of organization or an operating agreement;
(B) the written consent of all members;
(C) an event of dissociation of a member, unless, (1) within ninety days
after a member dissociation a majority in interest of the remaining members
(or any greater percentage as provided in the operating agreement) agree in
writing to continue the business of the limited liability company (`a
majority in interest' shall require the majority vote of both those members
owning a majority of the capital and also those holding a majority of the
profits and losses) and, (2) there are then two or more members of the
limited liability company remaining;
(D) entry of a decree of judicial dissolution under Section 33-43-902 or
Section 33-43-1105; or,
(E) administrative dissolution pursuant to Section 33-43-901.1.
Section 33-43-901.1. Grounds for administrative dissolution.
(A) The Secretary of State shall commence a proceeding under Section
33-43-901.2 to dissolve a limited liability company administratively if:
(1) the limited liability company does not pay when they are due any
taxes, interest, or penalties imposed by law of this State;
(2) the limited liability company is without a registered agent or
registered office in this State; or
(3) the limited liability company does not notify the Secretary of State
that its registered agent or registered office has been changed, that its
registered agent has resigned, or that its registered office has been
discontinued.
(B) The Secretary of State shall dissolve a limited liability company
under Section 33-43-901.2(C) if he is notified by the Department of
Revenue and Taxation that the limited liability company has failed to file a
required tax return within sixty days of the notice they are delinquent.
Section 33-43-901.2. Procedure for and effect of administrative
dissolution.
(A) If the Secretary of State determines that grounds exist under Section
33-43-901(A) for dissolving a limited liability company, he shall mail
written notice of his determination to the limited liability company.
(B) If the limited liability company does not correct each ground for
dissolution or demonstrate to the reasonable satisfaction of the Secretary of
State that each ground determined by the Secretary of State does not exist
within sixty days after the notice required by subsection (A) was mailed,
the Secretary of State shall dissolve the limited liability company
administratively by signing a certificate of dissolution that recites the
grounds for dissolution and its effective date. The Secretary of State shall
file the original of the certificate and send a copy to the limited liability
company by registered or certified mail addressed to its registered agent at
its registered office.
(C) If the Secretary of State is notified by the Department of Revenue
and Taxation that the limited liability company has failed to file a required
tax return within sixty days of the notice they are delinquent, the Secretary
of State shall dissolve the limited liability company administratively by
signing a certificate of dissolution that recites the grounds for dissolution
and its effective date. The Secretary of State shall file the original of the
certificate and send a copy to the limited liability company by registered or
certified mail addressed to its registered agent at its registered office.
(D) A limited liability company dissolved administratively may wind up
its business and affairs pursuant to the provisions of Section 33-43-904,
distribute its assets as provided in Section 33-43-905, file articles of
dissolution pursuant to Section 33-43-906, and notify claimants pursuant to
Section 33-43-907 and Section 33-43-908.
(E) The administrative dissolution of a limited liability company does
not terminate the authority of its registered agent.
Section 33-43-901.3. Reinstatement following administrative
dissolution.
(A) A limited liability company dissolved administratively under
Section 33-43-901.2 may apply to the Secretary of State for reinstatement
at any time after the effective date of dissolution and prior to the latest date
upon which the limited liability company is to dissolve as set forth in the
dissolved limited liability company's articles of organization. The applicant
must:
(1) recite the name of the limited liability company and the effective
date of its administrative dissolution;
(2) state that the grounds for dissolution either did not exist or have
been eliminated;
(3) state that the limited liability company's name satisfies the
requirements of Section 33-43-103; and
(4) contain a certificate from the South Carolina Department of
Revenue and Taxation reciting that all taxes, penalties, and interest owed
by the limited liability company, whether assessed or not, have been
paid.
(B) If the Secretary of State determines that the application contains the
information required by subsection (A) and that the information is correct,
he shall cancel the certificate of dissolution and prepare a certificate of
reinstatement that recites his determination and the effective date of
reinstatement, file the original of the certificate, and send a copy to the
limited liability company.
(C) When the reinstatement is effective, it relates back to and takes
effect as of the effective date of the administrative dissolution, and the
limited liability company resumes carrying on its business as if the
administrative dissolution had never occurred.
Section 33-43-901.4. Appeal from denial of reinstatement.
(A) If the Secretary of State denies a limited liability company's
application for reinstatement following administrative dissolution, he shall
send a written notice that explains the reasons for denial to the limited
liability company by registered or certified mail addressed to its registered
agent at its registered office.
(B) The limited liability company may appeal the denial of
reinstatement to the court of common pleas for Richland County within
thirty days after the notice of denial was received. The limited liability
company appeals by petitioning the court to set aside the dissolution and
attaching to the petition copies of the Secretary of State's certificate of
dissolution, the limited liability company's application for reinstatement,
and the Secretary of State's notice of denial.
(C) The court may summarily order the Secretary of State to reinstate
the dissolved limited liability company or may take other action the court
considers appropriate.
(D) The court's final decision may be appealed as in other civil
proceedings.
Section 33-43-902. Judicial dissolution.
On application by or for a member, the court of common pleas in the
county of the principal place of business may decree dissolution of a
limited liability company whenever it is not reasonably practicable to carry
on the business of the limited liability company.
Section 33-43-903. Winding up.
Unless otherwise provided in writing in an operating agreement:
(A) The business or affairs of the limited liability company may be
wound up by the members or managers who have authority pursuant to
Section 33-43-401 to manage the limited liability company before
dissolution, and who have not wrongfully dissociated. Provided, however,
that upon the application of any member, a member's legal representative,
or assignee, the court of common pleas may order, if one or more of such
members or managers has engaged in wrongful conduct or upon other
cause shown, judicial supervision of the winding up.
(B) The persons winding up the business or affairs of the limited
liability company may, in the name of, and for and on behalf of, the limited
liability company:
(1) preserve the limited liability company business or property as a
going concern for a reasonable time;
(2) prosecute and defend suits;
(3) settle and close the business of the limited liability company;
(4) dispose of and transfer the property of the limited liability
company;
(5) discharge the liabilities of the limited liability company;
(6) distribute to the members any remaining assets of the limited
liability company; and,
(7) perform other necessary acts, including settlement of disputes by
mediation or arbitration.
Section 33-43-904. Agency power of managers or members after
dissolution.
(A) Except as provided in subsections (C), (D), and (E), after
dissolution of the limited liability company, each of the members or
managers having authority to wind up the limited liability company's
business and affairs can bind the limited liability company:
(1) by any act appropriate for winding up the limited liability
company's affairs or completing transactions unfinished at dissolution;
and
(2) by any transaction that would have bound the limited liability
company if it had not been dissolved, if the other party to the transaction
does not have notice of the dissolution.
(B) The filing of the articles of dissolution shall be presumed to
constitute notice of dissolution for purposes of subsection (A)(2).
(C) An act of a member which is not binding on the limited liability
company pursuant to subsection (A) is binding if it is otherwise authorized
by the limited liability company.
(D) An act of a member which would be binding under subsection (A)
or would be otherwise authorized but which is in contravention of a
restriction on authority shall not bind the limited liability company to
persons having knowledge of the restriction.
(E) If the articles of organization vest management of the limited
liability company in managers, a manager shall have the authority of a
member provided for in subsection (A), and no member shall have such
authority if the member is acting solely in the capacity of a member.
Section 33-45-905. Distribution of assets. Upon the winding up of a limited liability company, the assets shall be
distributed as follows:
(A) payment, or adequate provision for payment, shall be made to
creditors including, to the extent permitted by law, members who are
creditors in satisfaction of liabilities of the limited liability company;
(B) unless otherwise provided in writing in an operating agreement, to
members or former members in satisfaction of liabilities for distributions
under Sections 33-43-601 and 33-43-602; and
(C) unless otherwise provided in writing in an operating agreement, to
members and former members first for the return of their contributions and
second in proportion to the members' respective rights to share in
distributions from the limited liability company prior to dissolution.
Section 33-43-906. Articles of dissolution.
After the dissolution of the limited liability company pursuant to Section
33-43-901, the limited liability company may file articles of dissolution
with the Secretary of State which set forth:
(A) the name of the limited liability company;
(B) the date of filing of its articles of organization and all amendments
thereto;
(C) the reason for filing the articles of dissolution;
(D) the effective date (which shall be a date certain) of the articles of
dissolution if they are not to be effective upon the filing; and
(E) any other information the members or managers filing the certificate
shall deem proper.
Section 33-43-907. Known claims against dissolved limited
liability.
(A) Upon dissolution, a limited liability company may dispose of the
known claims against it by filing articles of dissolution pursuant to Section
33-43-906 and following the procedures described in this section.
(B) The limited liability company shall notify its known claimants in
writing of the dissolution at any time after the effective date of dissolution.
The written notice must:
(1) describe information that must be included in a claim;
(2) provide a mailing address where a claim may be sent;
(3) state the deadline, which may not be fewer than one hundred
twenty days after the later of the date of the written notice or the filing of
articles of dissolution pursuant to Section 33-43-906, by which the limited
liability company must receive the claim; and
(4) state that the claim will be barred if not received by the
deadline.
(C) A claim against the limited liability company is barred:
(1) if a claimant who was given written notice under subsection (B)
does not deliver the claim to the limited liability company by the
deadline;
(2) if a claimant whose claim was rejected by the limited liability
company does not commence a proceeding to enforce the claim within
ninety days after the date of the rejection notice. (D) For purposes of this section, `claim' does not include a contingent
liability or a claim based on an event occurring after the effective date of
dissolution.
Section 33-43-908. Unknown claims against dissolved limited liability
company.
(A) A limited liability company may publish notice of its dissolution
pursuant to this section which requests that persons with claims against the
limited liability company present them in accordance with the notice.
(B) The notice must:
(1) be published once in a newspaper of general circulation in the
county where the limited liability company's principal office (or, if none in
this State, its registered office) is located;
(2) describe the information that must be included in a claim and
provide a mailing address where the claim may be sent; and
(3) state that a claim against the limited liability company will be
barred unless a proceeding to enforce the claim is commenced within five
years after the publication of the notice.
(C) If the limited liability company publishes a newspaper notice in
accordance with subsection (B) and files articles of dissolution pursuant to
Section 33-43-906, the claim of each of the following claimants is barred
unless the claimant commences a proceeding to enforce the claim against
the limited liability company within five years after the later of the
publication date of the newspaper notice or the filing of the articles of
dissolution:
(1) a claimant who did not receive written notice under Section
33-43-907; or
(2) a claimant whose claim was timely sent to the limited liability
company but not acted on.
(D) A claim may be enforced under this section:
(1) against the limited liability company to the extent of its
undistributed assets; or
(2) if the assets have been distributed in liquidation, against a member
of the limited liability company to the extent of his pro rata share of the
claim or of the assets of the limited liability company distributed to him in
liquidation, whichever is less, but a member's total liability for all claims
under this section may not exceed the total amount of assets distributed to
him.
Article 10
Foreign Limited Liability Companies
Section 33-43-1001. Law governing.
(A) Subject to the Constitution of South Carolina and except as
provided in subsection (B), the laws of the State or other jurisdiction under
which a foreign limited liability company is organized shall govern the
organization and internal affairs, and authority of its managers and
members of a foreign limited liability company transacting business in
South Carolina.
(B) A foreign limited liability company that has obtained a certificate of
authority to transact business in South Carolina pursuant to Chapter 43 of
Title 33 and its members and managers have no greater rights and
privileges than a domestic limited liability company and its members and
managers with respect to transactions and relationship with persons who
are not members. The certificate of authority does not authorize the foreign
limited liability company to exercise any powers or engage in any business
that a domestic limited liability company is forbidden to exercise or engage
in by the laws of this State.
Section 33-43-1002. Application for certificate of authority.
(A) A foreign limited liability company may apply for a certificate of
authority to transact business in this State by delivering an application to
the Secretary of State for filing. The application must set forth:
(1) the name of the foreign limited liability company that satisfies the
requirements of Section 33-43-1004;
(2) the name of the state or country under which it is organized;
(3) its date of organization and the latest date upon which the limited
liability company is to dissolve;
(4) the street address of its proposed registered office in this State and
the name of its proposed registered agent at that office;
(5) if management of the limited liability company is vested in a
manager or managers, a statement to that effect.
(B) The foreign limited liability company shall deliver with the
completed application a certificate of existence (or a document of similar
import) duly authenticated by the Secretary of State or other official having
custody of limited liability company records in the state or country under
which law it is organized.
(C) If the foreign limited liability company renders `professional
services' as defined in Section 33-43-102(N), a statement that all of its
members are licensed in one or more states to render the professional
services which the foreign limited liability company practices and that one
or more of its members is licensed in South Carolina to render such
professional services.
Section 33-43-1003. Issuance of registration.
(A) If the Secretary of State finds that an application for registration
conforms to the provisions of this article and all requisite fees have been
paid, the Secretary shall:
(1) endorse on each signed original and duplicate copy the word `filed'
and the date and time of its acceptance for filing;
(2) retain the signed original in the Secretary of State's files; and
(3) return the duplicate copy to the person who filed it or the person's
representative.
(B) If the Secretary of State is unable to make the determination
required for filing by subsection (A) at the time any documents are
delivered for filing, the documents are deemed to have been filed at the
time of delivery if the Secretary of State subsequently determines that:
(1) the documents as delivered conform to the filing provisions of this
act; or
(2) within twenty days after notification of nonconformance is given
by the Secretary of State to the person who delivered the documents for
filing for the person's representative, the documents are brought into
conformance.
(C) If the filing and determination requirements of this act are not
satisfied within the time prescribed in subsection (B)(2), the documents
shall not be filed.
Section 33-43-1004. Name.
No certificate of registration shall be issued to a foreign limited liability
company unless the name of such company satisfies the requirements of
Section 33-43-103. If the name under which a foreign limited liability is
registered in the jurisdiction of its formation does not satisfy the
requirements of Section 33-43-103, to obtain or maintain a certificate of
registration the foreign limited liability company may use a designated
name that is available, and which satisfies the requirements of Section
33-43-103.
Section 33-43-1005. Amendments.
(A) The application for registration of a foreign limited liability
company is amended by filing articles of amendment with the Secretary of
State signed by a person with authority to do so under the laws of the State
or other jurisdiction of its formation. The articles of amendment shall set
forth:
(1) the name of the foreign limited liability company;
(2) the date the original application for registration was filed; and
(3) the amendment to the application for registration.
(B) the application for registration may be amended in any way,
provided that the application for registration, as amended, contains only
provisions that may be lawfully contained in an application for registration
at the time of the amendment.
(C) A foreign limited liability company authorized to transact business
in South Carolina must obtain an amended certificate of authority from the
Secretary of State if it changes:
(1) its limited liability company name;
(2) the period of its duration;
(3) the state or country of its organization;
(4) from a member managed limited liability company to a limited
liability company managed by managers;
(5) from a limited liability company managed by managers to a
limited liability company managed by its members; An amended certificate of authorization must also be obtained if:
(6) there is a false or erroneous statement in the original filed
application for a certificate of authority.
Section 33-43-1006. Cancellation of registration.
(A) A foreign limited liability company authorized to transact business
in this State may cancel its registration upon procuring from the Secretary
of State a certificate of cancellation. In order to procure such certificate,
the foreign limited liability company shall deliver to the Secretary of State
an application for cancellation, which shall set forth:
(1) the name of the foreign limited liability company and the state or
other jurisdiction under the laws of which it is formed;
(2) that the foreign limited liability company is not transacting
business in this State;
(3) that the foreign limited liability company surrenders its certificate
of registration to transact business in this State;
(4) that the foreign limited liability company revokes the authority of
its registered agent for service of process in this State and consents that
service of process in any action, suit, or proceeding based upon any cause
of action arising in this State may thereafter be made on such foreign
limited liability company by service thereof upon the Secretary of State;
and
(5) an address to which a person may mail a copy of any process
against the foreign limited liability company.
(B) The application for cancellation shall be in the form and manner
designated by the Secretary of State and shall be executed on behalf of the
foreign limited liability company by a person with authority to do so under
the laws of the State or other jurisdiction of its formation, or, if the foreign
limited liability company is in the hands of a receiver, trustee, or other
court-appointed fiduciary by that fiduciary.
(C) A cancellation does not terminate the authority of the Secretary of
State to accept service of process on the foreign limited liability company
with respect to causes of action arising out of the doing of business in this
State.
Section 33-43-1007. Transaction of business without registration.
(A) A foreign limited liability company transacting business in this
State may not maintain an action, suit, or proceeding in a court of this State
until it has registered in this State.
(B) The failure of a foreign limited liability company to register in this
State does not:
(1) impair the validity of any contract or act of the foreign limited
liability company;
(2) affect the right of any other party to the contract to maintain any
action, suit, or proceeding on the contract; or
(3) prevent the foreign limited liability company from defending any
action, suit, or proceeding in any court of this State.
(C) A foreign limited liability company, by transacting business in this
State without registration, appoints the Secretary of State as its agent for
service of process with respect to a cause of action arising out of the
transaction of business in this State.
(D) A foreign limited liability company which transacts business in this
State without registration shall be liable to the State for the years or parts
thereof during which it transacted business in this State without registration
in an amount equal to all fees which would have been imposed by this
chapter upon that foreign limited liability company had it duly registered,
and all penalties imposed by this chapter, the Attorney General may bring
proceedings to recover all amounts due this State under the provisions of
this section.
(E) A foreign limited liability company which transacts business in this
State without registration shall be subject to a civil penalty, payable to the
State of ten dollars per day, not to exceed one thousand dollars per
year.
(F) The civil penalty set forth in subsection (E) may be recovered in an
action brought within a court by the Attorney General. Upon a finding by
the court that a foreign limited liability company has transacted business in
this State in violation of this chapter, the court shall issue, in addition to the
imposition of a civil penalty, an injunction restraining further transactions
of the business of the foreign limited liability company and the further
exercise of any limited liability company's rights and privileges in this
State. The foreign limited liability company shall be enjoined from
transacting business in this State until all civil penalties plus any interest
and court costs which the court may assess have been paid and until the
foreign limited liability company has otherwise complied with the
provisions of this article.
(G) A member or manager of a foreign limited liability company is not
liable for the debts and obligations of the limited liability company solely
because the limited liability company transacted business in this State
without registration.
Section 33-43-1008. Authority to transact business required.
(A) A foreign limited liability company may not transact business in this
State until it obtains a certificate of authority from the Secretary of
State.
(B) The following activities, among others, do not constitute transacting
business within the meaning of subsection (A):
(1) maintaining, defending, or settling any proceeding;
(2) holding meetings of the members or managers or carrying on other
activities concerning internal affairs;
(3) maintaining bank accounts;
(4) selling through independent contractors;
(5) soliciting or obtaining orders, whether by mail or through
employees or agents or otherwise, if the orders require acceptance outside
this State before they become contracts;
(6) creating or acquiring any indebtedness, mortgages, and security
interests in real or personal property;
(7) securing or collecting any debts or enforcing mortgages, security
interests, or any other rights in property securing debts;
(8) owning, without more, real or personal property;
(9) conducting an isolated transaction that is completed within thirty
days and that is not one in the course of repeated transactions of like
nature;
(10) transacting business in interstate commerce;
(11) is a member or manager of a limited liability company or foreign
limited liability company that is transacting business within this State.
(C) A foreign limited liability company which renders a professional
service is not required to obtain a certificate of authority to transact
business in this State unless it maintains or intends to maintain an office in
this State for the conduct of business or professional practice.
(D) The list of activities in subsection (B) is not exhaustive.
Article 11
Professional Services Limited Liability Companies
Section 33-43-1101. Rendering professional services.
(A) A domestic or foreign limited liability company may render
professional services in this State only through individuals licensed or
otherwise authorized in this State to render the services.
(B) Subsection (A) does not:
(1) require an individual employed by a limited liability company to
be licensed to perform services for the limited liability company if a license
is not required otherwise;
(2) prohibit a licensed individual from rendering professional services
in his individual capacity although he is a member or manager of a
domestic or foreign limited liability company which also renders
professional services; or,
(3) prohibit an individual licensed in another state from rendering
professional services for a domestic or foreign limited liability company in
this State if not prohibited by the licensing authority.
Section 33-43-1102. Confidential relationships.
(A) The relationship between an individual rendering professional
services as a member, manager, agent, or employee of a domestic or foreign
limited liability company which renders professional services, as defined in
Section 33-43-102(N), and his client or patient, is the same as if the
individual were rendering the services as a sole practitioner.
(B) The relationship between a domestic or foreign limited liability
company which renders professional services, as defined in Section
33-43-102(N), and the client or patient for whom its employees, members,
managers, or agents are rendering professional services is the same as that
between the client or patient and the person providing the service.
Section 33-43-1103. Privileged communications.
A privilege applicable to communications between an individual
rendering professional services and the person receiving the services
recognized under the statute or common law of this State is not affected by
this chapter. The privilege applies to a domestic or foreign professional
limited liability company which renders professional services, as defined in
Section 33-43-102(N), and to its employees, members, managers, and
agents in all situations in which it applies to communications between an
individual rendering professional services on behalf of the limited liability
company (which renders professional services) and the person receiving the
services.
Section 33-43-1104. Purposes.
(A) Except to the extent authorized by subsection (B), a South Carolina
limited liability company whose purpose is to render professional services,
may only: (i) render professional services within a single profession, and
(ii) render services ancillary to the professional services. It may not engage
in other business activities except as authorized by subsection (B).
(B) A limited liability company may render professional services in two
or more professions and engage in any lawful business authorized by
Section 33-43-106, to the extent the combination of professional purposes
or of professional and business purposes is authorized by the licensing law
of this State applicable to each profession in the combination. A limited
liability company whose purpose is to render professional services may
invest its funds in real estate, mortgages, securities, or any other type of
investment.
Section 33-43-1105. Judicial dissolution.
The Attorney General may commence a proceeding to dissolve a limited
liability company which renders professional services if:
(1) the Secretary of State or a licensing authority with jurisdiction over
the limited liability company which renders professional services serves
written notice on the limited liability company that it has violated or is
violating a provision of this chapter (other than the provisions specified in
Section 33-43-901.1, a violation of which gives the Secretary of State
authority to administratively dissolve the limited liability company);
(2) the limited liability company does not correct each alleged
violation, or demonstrate to the reasonable satisfaction of the Secretary of
State or licensing authority that this did not occur, within sixty days after
service of the notice is perfected; and
(3) the Secretary of State or licensing authority certifies to the Attorney
General a description of the violation, that it notified the limited liability
company of the violation, and that the limited liability company did not
correct it, or demonstrate that it did not occur, within sixty days after
service of notice.
Article 12
Suits By and Against the Limited
Liability Company
Section 33-43-1201. Actions by and against the limited liability
company.
(A) A limited liability company may sue and be sued in the name of the
limited liability company.
(B) A member or a manager of a limited liability company is not a
proper party to a proceeding by or against a limited liability company
except when:
(1) the object of the proceeding is to determine or enforce a member
or manager's right against, or liability to, the limited liability company as
provided in Section 33-43-1203; or
(2) the proceeding involves a claim of personal liability or
responsibility of that member or manager and that claim has some basis
other than the member or manager's status as a member or manager.
Section 33-43-1202. Service of process.
(A) The registered agent appointed by a limited liability company or a
foreign limited liability company shall be an agent of a limited liability
company or foreign limited liability company upon whom any process,
notice, or demand required or permitted by law to be served upon the
limited liability company or foreign limited liability company may be
served.
(B) If a limited liability company or foreign limited liability company
fails to appoint or maintain a registered agent in this State or its registered
agent cannot with reasonable diligence be found at the registered office, the
Secretary of State shall be an agent of such limited liability company or
foreign limited liability company upon whom any such process, notice, or
demand may be served. Service on the Secretary of State of any process,
notice, or demand shall be made by delivering to and leaving with the
Secretary of State duplicate copies of the process, notice, or demand. If the
process, notice, or demand is served on the Secretary of State, the Secretary
of State shall immediately forward one of the copies by registered mail to
the limited liability company or foreign limited liability company at its
registered office. Service on the Secretary of State shall be returnable in
not less than thirty days.
(C) The Secretary of State shall keep a record of all process, notices,
and demands, served pursuant to this section and record the time and the
action taken regarding the services.
(D) This section shall not limit or affect the right to serve any process,
notice, or demand required or permitted by law to be served upon a limited
liability company or foreign limited liability company in any other manner
permitted by law.
Section 33-43-1203. Remedies of the limited liability company and
members.
(A) A limited liability company, may maintain an action against a
member or manager for a breach of the operating agreement, or for the
violation of a duty to the limited liability company causing harm to the
limited liability company.
(B) A member may maintain an action against the limited liability
company, a manager, or a member for legal or equitable relief, including an
accounting as to limited liability company business, for any breach of the
operating agreement, or for the violation of a duty to the member or limited
liability company causing harm to the member or limited liability
company.
Article 13
Merger-Domestic or Foreign
Section 33-43-1301. Merger.
(A) Unless otherwise provided in writing in an operating agreement, one
or more limited liability companies may merge with another domestic or
foreign limited liability company as the merger agreement shall
provide.
(B) Interests in a domestic or foreign limited liability company that is a
party to the merger may be exchanged for or converted into cash, property,
obligations, rights, or interests in the surviving domestic or foreign limited
liability company.
Section 33-43-1302. Approval of merger.
(A) Unless otherwise provided in writing in an operating agreement,
each domestic or foreign limited liability company that is a party to a
proposed merger shall approve the merger agreement by the consent of all
the members. In no event shall the agreement be approved by less than
fifty-one percent of the members of each domestic and foreign limited
liability company.
(B) Each domestic and foreign limited liability company that is a party
to the merger shall have such rights to abandon the merger as are provided
for in the merger agreement or in the laws applicable to each domestic and
foreign limited liability company.
Section 33-43-1303. Plan of merger.
(A) Each domestic and foreign limited liability company shall enter into
a written plan of merger, which shall be approved in accordance with
Section 33-43-1302.
(B) The plan of merger shall set forth:
(1) the name of each limited liability company that is a party to the
merger and the name of the surviving limited liability company into which
each limited liability company proposes to merge;
(2) the terms and conditions of the proposed merger;
(3) the manner and basis of converting the interests in each limited
liability company into interests of the surviving limited liability company,
in whole or part, or into cash or other property;
(4) such amendments to the articles of organization of the surviving
limited liability company as are desired to be effected by the merger, or that
no such changes are desired;
(5) such other provisions relating to the proposed merger as are
considered necessary or desirable.
(C) For purposes of Section 33-43-1303, the term `limited liability
company' shall include both domestic and foreign limited liability
companies.
Section 33-43-1304. Articles of merger.
(A) The surviving limited liability company shall deliver to the
Secretary of State articles of merger executed by each constituent limited
liability company setting forth:
(1) the name and jurisdiction of formation or organization of each
limited liability company which is to merge;
(2) that an agreement of merger has been approved and executed by
each limited liability company which is a party to the merger;
(3) the name of the surviving or resulting limited liability
company;
(4) the future effective date of the merger (which shall be a date or
time certain) if it is not to be effective upon the filing of the articles of
merger;
(5) that the agreement of merger is on file at a place of business of the
surviving limited liability company, and the address of that place of
business;
(6) that a copy of the agreement of merger will be furnished by the
surviving limited liability company, on request and without cost, to any
person holding an interest in any limited liability company which is to
merge; and
(7) if the surviving or resulting limited liability company is not a
limited liability company organized under the laws of this State, a
statement that such surviving limited liability company:
(a) agrees that it may be served with process in this State in any
proceeding for enforcement of any obligation of any limited liability
company party to the merger that was organized under the laws of this
State, as well as for enforcement of any obligation of the surviving limited
liability company or the new limited liability company arising from the
merger; and
(b) appoints the Secretary of State as its agent for service of process
in any such proceeding, and the surviving limited liability company or the
new limited liability company shall specify the address to which a copy of
the process shall be mailed to it by the Secretary of State.
(B) A merger takes effect upon the later of the effective date of the
filing of the articles of merger or the date set forth in the articles of
merger.
(C) The articles of merger shall be executed by a limited liability
company that is a party to the merger in the manner provided for in Section
33-43-204 and shall be filed with the Secretary of State in the manner
provided for in Section 33-43-205.
(D) Articles of merger shall constitute articles of dissolution for a
limited liability company which is not the surviving limited liability
company in the merger.
(E) An agreement of merger approved in accordance with Sections
33-43-1302 and 33-43-1303 may affect any amendment to an operating
agreement or affect the adoption of a new operating agreement for a limited
liability company if it is the surviving limited liability company in the
merger. An approved agreement of merger may also provide that the
operating agreement of any constituent limited liability company to the
merger (including a limited liability company formed for the purpose of
consummating a merger) shall be the operating agreement of the surviving
or resulting limited liability company. Any amendment to an operating
agreement or adoption of a new operating agreement made pursuant to this
subsection (E) shall be effective at the effective time or date of the
merger.
(F) For purposes of this section, except with respect to subsections
(A)(7) and (D), the term `limited liability company' shall include both
domestic and foreign limited liability companies.
Section 33-43-1305. Effects of merger.
A merger has the following effects:
(A) The limited liability companies that are parties to the merger
agreement shall be a single entity.
(B) Each limited liability company to the merger agreement, except the
surviving limited liability company, shall cease to exist.
(C) All property real, personal, and mixed, and all debts due on
whatever account, including promises to make capital contributions, and all
other choses in action, and all and every other interest of belonging to or
due to each of the constituent limited liability companies shall be vested in
the surviving limited liability company without further act or deed.
(D) The title to all real estate and any interest therein, vested in any such
constituent limited liability company shall not revert or be in any way
impaired by reason of such merger.
(E) The surviving limited liability company shall thenceforth be liable
for all liabilities and obligations of each of the constituent limited liability
companies so merged and any claim existing or action or proceeding
pending by or against any such constituent limited liability company may
be prosecuted as if such merger had not taken place, or the surviving
limited liability company may be substituted in the action.
(F) Neither the rights of creditors nor any liens on the property of any
constituent limited liability company shall be impaired by the merger.
(G) The interests in a limited liability company and the former holders
thereof are entitled only to the rights provided in the merger agreement or
the rights otherwise provided by law.
For purposes of this section, the term `limited liability company' shall
include both domestic and foreign limited liability companies.
Article 14
Miscellaneous Provisions
Section 33-43-1401. Filing, service, and copying fees.
(A) The Secretary of State shall collect the following fees when the
following documents described in this subsection are delivered to him for
filing:
(1) Articles of organization of a domestic limited liability company:
one hundred and ten dollars.
(2) Articles of amendment to the articles of organization of a domestic
limited liability company: one hundred and ten dollars.
(3) Articles of merger involving a domestic or foreign limited liability
company: one hundred and ten dollars.
(4) Application by a foreign limited liability company for a certificate
of authority to do business in South Carolina: one hundred and ten
dollars.
(5) Amendment by a foreign limited liability company of its
certificate of authority: one hundred and ten dollars.
(6) Restated articles of organization of a limited liability company
filed with an amendment to the articles of organization: ten dollars.
(7) Application for reservation of a limited liability company name:
twenty-five dollars.
(8) Notice of transfer of a reserved limited liability company name:
ten dollars.
(9) Annual application for registration (or renewal) of a foreign
limited liability company name: ten dollars.
(10) Statement of change of registered office or registered agent, or
both: Ten dollars.
(11) Articles of dissolution: ten dollars.
(12) Articles of revocation of dissolution: ten dollars.
(13) Application for reinstatement after administrative dissolution:
twenty-five dollars.
(14) Application for certificate of withdrawal: ten dollars.
(15) Application for certificate of existence or authorization: ten
dollars.
(16) Any other document required or permitted to be filed pursuant to
this Chapter 43 of Title 33: two dollars.
(B) The Secretary of State shall collect a fee of ten dollars each time
process is served on him under Chapter 43 of this Tile 33. The party to a
proceeding causing service of process is entitled to recover this fee as costs
if he prevails in the proceeding.
(C) The Secretary of State shall collect the following fees for copying
and certifying the copy of any filed document relating to a domestic or
foreign limited liability company:
(1) for copying, one dollar for the first page and fifty cents for each
additional page; and,
(2) two dollars for each certificate.
Section 33-43-1402. Execution by judicial act.
Any person who is adversely affected by the failure or refusal of any
person to execute and file any articles or other documents to be filed under
this chapter may petition the court of common pleas in the county where
the registered office of the limited liability company is located to direct the
execution and filing of the articles or other documents. If the court finds
that it is proper for the articles or other documents to be executed and filed
and that there has been failure or refusal to execute and file such
documents, it shall order the Secretary of State to file the appropriate
articles or other documents.
Section 33-43-1403. Notice.
(A) Notice under this chapter must be in writing unless oral notice is
reasonable under the circumstances.
(B) Notice may be communicated in person; by telephone, telegraph,
teletype, facsimile transmission, or other form of wire or wireless
communication; or by mail or private carrier. If these forms of personal
notice are impracticable, notice may be communicated by a newspaper of
general circulation in the area, where published; or by radio, television, or
other form of public broadcast communication.
(C) Written notice by a domestic or foreign limited liability company to
its members, if in a comprehensible form, is effective when mailed, if
mailed postpaid and correctly addressed to the member's address shown in
the limited liability company's current record of members.
(D) In addition to Section 33-43-303, written notice to a domestic or
foreign limited liability company (authorized to transact business in this
State) may be addressed to its registered agent at its registered office.
(E) Except as provided in subsection (C), written notice, if in a
comprehensible form, is effective at the earliest of the following:
(1) when received;
(2) five days after its deposit in the United States mail, as evidenced
by the postmark, if mailed postpaid and correctly addressed;
(3) on the date shown on the return receipt, if sent by registered or
certified mail, return receipt requested, and the receipt is signed by or on
behalf of the addressee.
(F) Oral notice is effective when communicated if communicated in a
comprehensible manner.
(G) If Chapter 43 prescribes notice requirements for particular
circumstances, those requirements govern. If the articles of organization or
the operating agreement prescribe notice requirements, not inconsistent
with this section or other provisions of Chapter 43, those requirements
govern.
Section 33-43-1404. Rules of construction.
(A) It is the policy of this chapter to give maximum effect to the
principle of freedom of contract and to the enforceability of operating
agreements.
(B) Unless displaced by particular provisions of this chapter, the
principles of law and equity supplement this chapter.
(C) Rules that statutes in derogation of the common law are to be
strictly construed shall have no application to this chapter.
Section 33-43-1405. Jurisdiction of the circuit court.
The circuit courts shall have jurisdiction to enforce the provisions of this
chapter.
Section 33-43-1406. Severability.
If any provision of this chapter or its application to any person or
circumstances is held invalid, the invalidity does not affect other provisions
or applications of this chapter which can be given effect without the invalid
provision or application. To this end, the provisions of this chapter are
severable.
Section 33-43-1407. Interstate application.
A limited liability organized and existing under this chapter may
conduct its business, carry on its operations, and have and exercise the
powers granted by this chapter in any state or foreign country.
Section 33-43-1408. The term `partnership' includes the term `limited
liability company'.
Except (1) as otherwise required by the context, (2) as inconsistent with
the provisions of this chapter, and (3) for this chapter, Chapters 41 and 42
of Title 33, and Title 12, the term `partnership' or `general partnership',
when used in any other statute or in any regulation, includes and also
means `limited liability company'.
Section 33-43-1409. The General Assembly of South Carolina has
power to provide regulations regarding Chapter 43 of this title and to
amend or repeal all or any part of Chapter 43 of Title 33 or its regulations
at any time; and all domestic and foreign limited liability companies subject
to Chapter 43 of this title are governed by the amendment or
repeal."
Definitions incorporating references to limited liability
companies
SECTION 2. The 1976 Code is amended by adding:
"Section 12-2-25. Limited liability companies.
(A) As used in this title and unless otherwise required by the
context:
(1) `Partnership' includes a limited liability company taxed for South
Carolina income tax purposes as a partnership.
(2) `Partner' includes any member of a limited liability company taxed
for South Carolina income tax purposes as a partnership.
(3) `Corporation' includes a limited liability company or professional
or other association taxed for South Carolina income tax purposes as a
corporation.
(4) `Shareholder' includes any member of a limited liability company
taxed for South Carolina income tax purposes as a corporation."
PART II
Registered Limited Liability Partnerships
Definition of registered limited liability partnership
SECTION 3. Section 33-41-20 of the 1976 Code is amended to read:
"Section 33-41-20. As used in this chapter:
(1) `Court' includes every court and judge having jurisdiction in the
case;
(2) `Business' includes every trade, occupation, or profession;
(3) `Bankrupt' includes a bankrupt under the Federal Bankruptcy Act or
an insolvent under any state insolvent act;
(4) `Conveyance' includes every assignment, lease, mortgage, or
encumbrance;
(5) `Real property' includes land and any interest or estate in land;
and
(6) `Registered limited liability partnership' includes a partnership
formed pursuant to an agreement governed by the laws of this State,
registered under Section 33-41-1110 and complying with Sections
33-41-1120 and 33-41-1130."
Definition of partnership revised
SECTION 4. Section 33-41-210 of the 1976 Code is amended to read:
"Section 33-41-210. A `partnership' is an association of two or
more persons to carry on as co-owners a business for profit and includes,
for all purposes of the laws of this State, a registered limited liability
partnership. However, any association formed under any other statute of
this State or any statute adopted by authority, other than the authority of
this State, is not a partnership under this chapter unless the association
would have been a partnership in this State before the adoption of this
chapter on February 13, 1950.
This chapter shall apply to limited partnerships except insofar as the
statutes relating to the partnerships are inconsistent with the provisions of
this chapter."
Partner's liability revised
SECTION 5. Section 33-41-370 of the 1976 Code is amended to read:
"Section 33-41-370. (A) Except as provided by subsection (B),
all partners are liable jointly and severally for everything chargeable to the
partnership.
(B) Subject to subsections (C) and (D), a partner in a registered limited
liability partnership is not liable directly or indirectly, including by way of
indemnification, contribution, or otherwise, for debts, obligations, and
liabilities chargeable to the partnership arising from negligence, wrongful
acts, or misconduct committed while the partnership is a registered limited
liability partnership and in the course of the partnership business by another
partner or an employee, agent, or representative of the partnership.
(C) Subsection (B) shall not affect the liability of a partner in a
registered limited liability partnership for his own negligence, wrongful
acts, or misconduct, or that of a person under his direct supervision and
control.
(D) Each individual who renders professional services on behalf of a
registered limited liability partnership is liable for a negligent or wrongful
act or omission in which he personally participates to the same extent as if
he rendered the services as a sole practitioner. A partner of a registered
limited liability partnership which renders professional services, as defined
in Section 33-19-103(7), is not liable for the negligence, wrongful acts,
misconduct, or omissions of other partners, agents, or employees of the
registered limited liability partnership unless he is at fault in appointing,
supervising, or cooperating with them."
Partner's contribution requirement revised
SECTION 6. Section 33-41-510(1) of the 1976 Code is amended to
read:
"(1) each partner shall be repaid his contributions, whether by
way of capital or advances to the partnership property, and share equally in
the profits and surplus remaining after all liabilities, including those to
partners, are satisfied. Except as provided in Section 33-41-370(B), each
partner shall contribute toward the losses, whether of capital or otherwise,
sustained by the partnership according to his share in the profits;"
Liability upon dissolution revised
SECTION 7. Section 33-41-960 of the 1976 Code is amended to read:
"Section 33-41-960. When the dissolution is caused by the act,
death, or bankruptcy of a partner, each partner is liable to his copartners for
his share of any liability created by a partner acting for the partnership as if
the partnership had not been dissolved unless:
(1) the dissolution being by act of a partner, the partner acting for the
partnership had knowledge of the dissolution;
(2) the dissolution being by the death or bankruptcy of a partner, the
partner acting for the partnership had knowledge or notice of the death or
bankruptcy; or
(3) the liability is for a debt, obligation, or liability for which the
partner is not liable as provided in Section 33-41-370(B)."
Obligations revised
SECTION 8. Section 33-41-1010(4) of the 1976 Code is amended to
read:
"(4) The individual property of a deceased partner must be liable
for those obligations of the partnership incurred while he was a partner and
for which he was liable under Section 33-41-370 but subject to the prior
payment of his separate debts."
Settlement of accounts rules revised
SECTION 9. Section 33-41-1060 of the 1976 Code is amended to
read:
"Section 33-41-1060. In settling accounts between the partners
after dissolution the following rules must be observed, subject to any
agreement to the contrary:
(1) the assets of the partnership are:
(a) the partnership property and
(b) the contributions of the partners specified in item (4);
(2) the liabilities of the partnership shall rank in order of payment, as
follows:
(a) those owing to creditors other than partners,
(b) those owing to partners other than for capital and profits,
(c) those owing to partners in respect of capital, and
(d) those owing to partners in respect of profits;
(3) the assets must be applied in the order of their declaration in item
(1) to the satisfaction of the liabilities;
(4) except as provided in Section 33-41-370(B):
(a) the partners shall contribute, as provided by Section 33-41-510,
the amount necessary to satisfy the liabilities; and
(b) if any, but not all, of the partners are insolvent or, not being
subject to process, refuse to contribute, the other partners shall contribute
their share of the liabilities and, in the relative proportions in which they
share the profits, the additional amount necessary to pay the liabilities;
(5) an assignee for the benefit of creditors or any person appointed by
the court shall have the right to enforce the contributions specified in item
(4);
(6) any partner or his legal representative shall have the right to enforce
the contributions specified in item (4) to the extent of the amount which he
has paid in excess of his share of the liability;
(7) the individual property of a deceased partner must be liable for the
contributions specified in item (4);
(8) when partnership property and the individual properties of the
partners are in possession of a court for distribution, partnership creditors
shall have priority on partnership property and separate creditors on
individual property, saving the rights of lien or secured creditors as
provided by law; and
(9) when a partner has become bankrupt or his estate is insolvent the
claims against his separate property must rank in the following order:
(a) those owing to separate creditors,
(b) those owing to partnership creditors, and
(c) those owing to partners by way of contribution."
Formation, governing, and regulation of limited liability
partnerships
SECTION 10. Title 33, Chapter 41 of the 1976 Code is amended by
adding:
"Section 33-41-1110. (A) To become and to continue as a
registered limited liability partnership, a partnership shall file with the
Secretary of State an application or a renewal application, as the case may
be, stating the name of the partnership; the address of its principal office, if
the partnership's principal office is not located in this State; the address of a
registered office, and the name and address of a registered agent for service
of process in this State, which the partnership will be required to maintain;
the number of partners; a brief statement of the business in which the
partnership engages, and that the partnership applies for status or renewal
of its status, as the case may be, as a registered limited liability
partnership.
(B) The application or renewal application must be executed by a
majority in interest of the partners or by one or more partners authorized to
execute an application or renewal application.
(C) The application or renewal application must be accompanied by a
fee of one hundred dollars.
(D) The Secretary of State shall register as a registered limited liability
partnership and shall renew the registration of any registered limited
liability partnership, any partnership that submits a completed application
or renewal application with the required fee.
(E) Registration is effective for one year after the date an application is
filed unless voluntarily withdrawn pursuant to Section 33-41-1190.
Registration, whether pursuant to an original application or a renewal
application, as a registered limited liability partnership is renewed if during
the sixty-day period preceding the date the application or renewal
application otherwise would have expired the partnership files with the
Secretary of State a renewal application. A renewal application expires one
year after the date an original application would have expired if the last
renewal of the application had not occurred.
(F) The status of a partnership as a registered limited liability
partnership may not be affected by changes after the filing of an application
or a renewal application in the information stated in the application or
renewal application.
(G) The Secretary of State may provide forms for application or for
renewal of registration.
Section 33-41-1120. The name of a registered limited liability
partnership must contain the words `Registered Limited Liability
Partnership' or the abbreviation `L.L.P.' as the last words or letters of its
name.
Section 33-41-1130. (A)(1) A registered limited liability partnership
shall carry at least $100,000 of liability insurance, beyond the amount of
any applicable deductible, of a type that is designed to cover the kinds of
negligence, wrongful acts, and misconduct for which liability is limited by
Section 33-41-370(B) and which insures the partnership and its
partners.
(2) A registered liability partnership which renders professional
services, as defined in Section 33-19-103(7), shall carry such additional
insurance of the type described in item (1) of this subsection as may be
required by the appropriate licensing authority. Professional service
licensing authorities may prescribe additional insurance only on the
profession as a whole, and not only on individual service providers.
(B) If a registered limited liability partnership is in compliance with the
requirements of subsection (A), the requirements of this section shall not be
admissible or in any way made known to a jury in determining an issue of
liability for or extent of the debt or obligation or damages in question.
(C) A registered limited liability partnership is considered to be in
compliance with subsection (A) if the partnership provides $100,000, or
such higher amount as required by the appropriate licensing authority
pursuant to subsection (A)(2), of funds specifically designated and
segregated for the satisfaction of judgments against the partnership or its
partners based on the kinds of negligence, wrongful acts, and misconduct
for which liability is limited by Section 33-41-370(B) by:
(1) deposit in trust or in bank escrow of cash, bank certificates of
deposit, or United States Treasury obligations; or
(2) a bank letter of credit or insurance company bond.
(D) Nothing in this section shall be construed to:
(1) limit the amount of damages for which a:
(a) registered limited liability partnership is liable with respect to the
kinds of negligence, wrongful acts, or misconduct for which liability is
limited by Section 37-41-370(B); or
(b) partner of a registered limited liability partnership is liable under
Section 33-41-370; or
(2) constitute a determination of the adequacy of capitalization of a
registered limited liability partnership for any purpose.
Section 33-41-1140. A limited liability partnership organized and
existing under this chapter may conduct its business, carry on its
operations, and have and exercise the powers granted by this chapter in any
state or foreign country.
Section 33-41-1150. (A) Subject to the Constitution of South Carolina
and except as provided in subsection (B), the laws of the State or other
jurisdiction under which a foreign limited liability partnership is organized
shall govern the organization and internal affairs, the liability of partners
for debts, obligations, and liabilities chargeable to the partnership, and the
authority of partners of a foreign limited liability partnership transacting
business in South Carolina.
(B) A foreign limited liability partnership that has obtained a certificate
of authority to transact business in South Carolina pursuant to Chapter 41
of Title 33 and its partners have no greater rights and privileges than a
domestic limited liability partnership and its partners with respect to
transactions and relationship with persons who are not members. The
certificate of authority does not authorize the foreign limited liability
partnership to exercise any powers or engage in any business in which a
domestic limited liability partnership is forbidden to exercise or engage by
the laws of this State.
(C) An individual who renders professional services in this State on
behalf of a foreign limited liability partnership is liable as set forth in
Section 33-41-370(D).
Section 33-41-1160. (A) A foreign limited liability partnership may
apply for a certificate of authority to transact business in this State by
delivering an application to the Secretary of State for filing. The
application must set forth:
(1) the name of the foreign limited liability partnership that satisfies
the requirements of Section 33-41-1120;
(2) the name of the state or country under which it is organized;
(3) its date of organization;
(4) the street address of its proposed registered office in this State and
the name of its proposed registered agent at that office; and
(5) a statement that the foreign limited liability partnership has
liability insurance of the amount and type described in Section
33-41-1130(A)(1) or segregated funds as described in Section
33-41-1130(C) in an amount equal to or greater than the amount specified
in Section 33-41-1130(A)(1).
(B) The foreign limited liability partnership shall deliver with the
completed application a certificate of existence (or a document of similar
import) duly authenticated by the Secretary of State or other official having
custody of limited liability partnership records in the state or country under
which law it is organized.
(C) If the foreign limited liability partnership renders `professional
services' as defined in Section 33-19-103(7), the application required by
subsection (A) must also contain a statement that:
(1) all of its partners are licensed in one or more states to render the
professional services which the foreign limited liability partnership
practices and that one or more of its partners is licensed in South Carolina
to render such professional services; and
(2) the foreign limited liability partnership is in compliance with the
requirements of Section 33-41-1130(A)(2); provided, however, that to the
extent any such requirements are determined by reference to the number of
licensed partners or individuals, such determination shall be made on the
basis of the number of partners or individuals who render professional
services in South Carolina.
(D) The Secretary of State shall collect a fee of one hundred dollars
when a foreign limited liability partnership delivers to him for filing an
annual or renewal application for a certificate to transact business in this
State.
Section 33-41-1170. (A) If the Secretary of State finds that an
application for a certificate of authority to transact business in this State
conforms to the provisions of this article and all requisite fees have been
paid, the Secretary shall:
(1) endorse on each signed original and duplicate copy the word `filed'
and the date and time of its acceptance for filing;
(2) retain the signed original in the Secretary of State's files; and
(3) return the duplicate copy to the person who filed it or the person's
representative.
(B) If the Secretary of State is unable to make the determination
required for filing by subsection (A) at the time any documents are
delivered for filing, the documents are considered to have been filed at the
time of delivery if the Secretary of State subsequently determines that:
(1) the documents as delivered conform to the filing provisions of this
act; or
(2) within twenty days after notification of nonconformance is given
by the Secretary of State to the person who delivered the documents for
filing for the person's representative, the documents are brought into
conformance.
(C) If the filing and determination requirements of this act are not
satisfied within the time prescribed in subsection (B)(2), the documents
shall not be filed.
(D) A certificate of authority to transact business in this State is
effective for one year after the date the application is filed unless
voluntarily withdrawn pursuant to Section 33-41-1190. Registration,
whether pursuant to an original application or a renewal application, as a
registered limited liability partnership is renewed if, during the sixty-day
period preceding the date the application or renewal application otherwise
would have expired, the partnership files with the Secretary of State a
renewal application. A renewal application expires one year after the date
an original application would have expired if the last renewal of the
application had not occurred.
Section 33-41-1180. (A) The application for a foreign limited liability
partnership's certificate of authority to transact business in this State is
amended by filing articles of amendment with the Secretary of State signed
by a person with authority to do so under the laws of the State or other
jurisdiction of its formation. The articles of amendment shall set forth:
(1) the name of the foreign limited liability partnership;
(2) the date the original application for registration was filed; and
(3) the amendment to the application for registration.
(B) The application for a certificate to transact business in this State
may be amended in any way, provided that the application, as amended,
contains only provisions that may be lawfully contained in an application
for a certificate to transact business in this State at the time of the
amendment.
(C) A foreign limited liability partnership authorized to transact
business in South Carolina must obtain an amended certificate of authority
from the Secretary of State if it changes:
(1) its limited liability partnership name;
(2) the street address of its registered office in this State or the name
of its registered agent at that office; or
(3) the state or country of its organization.
An amended certificate of authorization must also be obtained if there is
a false or erroneous statement in the original filed application for a
certificate of authority.
(D) The Secretary of State shall collect a fee of one hundred dollars
when a foreign limited liability partnership delivers to him for filing an
amendment to a certificate to transact business in this State.
Section 33-41-1190. (A) A foreign limited liability partnership
authorized to transact business in this State may cancel its registration upon
procuring from the Secretary of State a certificate of cancellation. In order
to procure such certificate, the foreign limited liability partnership shall
deliver to the Secretary of State an application for cancellation, which shall
set forth:
(1) the name of the foreign limited liability partnership and the state or
other jurisdiction under the laws of which it is formed;
(2) that the foreign limited liability partnership is not transacting
business in this State;
(3) that the foreign limited liability partnership surrenders its
certificate of authority to transact business in this State;
(4) that the foreign limited liability partnership revokes the authority
of its registered agent for service of process in this State and consents that
service of process in any action, suit, or proceeding based upon any cause
of action arising in this State may thereafter be made on such foreign
limited liability partnership by service thereof upon the Secretary of State;
and
(5) an address to which a person may mail a copy of any process
against the foreign limited liability partnership.
(B) The application for cancellation shall be in the form and manner
designated by the Secretary of State and shall be executed on behalf of the
foreign limited liability partnership by a person with authority to do so
under the laws of the State or other jurisdiction of its formation, or if the
foreign limited liability partnership is in the hands of a receiver, trustee, or
other court-appointed fiduciary by that fiduciary.
(C) A cancellation does not terminate the authority of the Secretary of
State to accept service of process on the foreign limited liability partnership
with respect to causes of action arising out of the transaction of business in
this State.
Section 33-41-1200. (A) A foreign limited liability partnership
transacting business in this State may not maintain an action, suit, or
proceeding in a court of this State until the Secretary of State has issued it a
certificate of authority to transact business in this State.
(B) The failure of a foreign limited liability partnership to register in
this State does not:
(1) impair the validity of any contract or act of the foreign limited
liability partnership;
(2) affect the right of any other party to the contract to maintain any
action, suit, or proceeding on the contract; or
(3) prevent the foreign limited liability partnership from defending
any action, suit, or proceeding in any court of this State.
(C) A foreign limited liability partnership, by transacting business in
this State without registration, appoints the Secretary of State as its agent
for service of process with respect to a cause of action arising out of the
transaction of business in this State.
(D) A foreign limited liability partnership which transacts business in
this State without a certificate of authority shall be liable to the State for the
years or parts thereof during which it transacted business in this State
without a certificate of authority in an amount equal to all fees which
would have been imposed by this chapter upon that foreign limited liability
partnership had it duly registered, and all penalties imposed by this chapter.
The Attorney General may bring proceedings to recover all amounts due
this State under the provisions of this section.
(E) A foreign limited liability partnership which transacts business in
this State without a certificate of authority shall be subject to a civil
penalty, payable to the State of ten dollars per day, not to exceed one
thousand dollars per year.
(F) The civil penalty set forth in subsection (E) may be recovered in an
action brought within a court by the Attorney General. Upon a finding by
the court that a foreign limited liability partnership has transacted business
in this State in violation of this chapter, the court shall issue, in addition to
the imposition of a civil penalty, an injunction restraining further
transactions of the business of the foreign limited liability partnership and
the further exercise of any limited liability partnership's rights and
privileges in this State. The foreign limited liability partnership shall be
enjoined from transacting business in this State until all civil penalties plus
any interest and court costs which the court may assess have been paid and
until the foreign limited liability partnership has otherwise complied with
the provisions of this article.
(G) A partner of a foreign limited liability partnership is not liable for
the debts and obligations of the limited liability partnership solely because
the limited liability partnership transacted business in this State without
registration.
Section 33-41-1210. (A) A foreign limited liability partnership may not
transact business in this State until it obtains a certificate of authority from
the Secretary of State.
(B) The following activities, among others, do not constitute transacting
business within the meaning of subsection (A):
(1) maintaining, defending, or settling any proceeding;
(2) holding meetings of the partners or carrying on other activities
concerning internal affairs;
(3) maintaining bank accounts;
(4) selling through independent contractors;
(5) soliciting or obtaining orders, whether by mail or through
employees or agents or otherwise, if the orders require acceptance outside
this State before they become contracts;
(6) creating or acquiring any indebtedness, mortgages, and security
interests in real or personal property;
(7) securing or collecting any debts or enforcing mortgages, security
interests, or any other rights in property securing debts;
(8) owning, without more, real or personal property;
(9) conducting an isolated transaction that is completed within thirty
days and that is not one in the course of repeated transactions of like nature;
and
(10) transacting business in interstate commerce.
(C) A foreign limited liability partnership which renders a professional
service is not required to obtain a certificate of authority to transact
business in this State unless it maintains or intends to maintain an office in
this State for the conduct of business or professional practice.
(D) The list of activities in subsection (B) is not exhaustive.
Section 33-41-1220. The General Assembly of South Carolina has
power to provide regulations regarding Chapter 41 of this title and to
amend or repeal all or any part of Chapter 41 of Title 33 or its regulations
at any time; and all domestic and foreign limited liability partnerships
subject to Chapter 41 of this title are governed by the amendment or
repeal."
PART III
Effective Date
Time effective
SECTION 11. This act takes effect upon approval by the Governor.
Approved the 16th day of June, 1994. |