I. INTRODUCTION
The Nebraska Uniform Limited Liability Company Act (ULLCA) became effective on January 1, 2011. As a result, banks should revisit and review their lending practices in light of revisions contained within the ULLCA. For banks making loans to LLCs, changes to the rules governing the management of an LLC present new issues.
II. DEFAULT STATUTE AND POWER OF THE OPERATING AGREEMENT
One of the major differences between the ULLCA and the old LLC Act is that it expressly operates as a “default” statute, meaning most matters will be governed by the Operating Agreement entered into by the members of the LLC (with certain enumerated exceptions). The ULLCA will govern when the Operating Agreement is silent. The numerous default rules will therefore apply if the members have not entered into an Operating Agreement or if the Operating Agreement does not expressly address certain issues.
Provisions that an Operating Agreement cannot vary include the LLCs capacity to sue and be sued in its own name; the principle that Nebraska law governs the internal affairs of an LLC formed under the ULLCA; the power of the court to decree dissolution of the LLC; certain rights the members have to access LLC records, and with certain exceptions, the duty of loyalty, the duty of care and the obligations of good faith and fair dealing.
III. LENDER CONSIDERATIONS
Among the issues that lenders should consider are the following:
IV. MANAGEMENT OF LLCs
Under the provisions of the ULLCA, an LLC is deemed to be “member-managed” unless the Operating Agreement expressly provides to the contrary.
V. STATEMENT OF AUTHORITY
Under the ULLCA, an LLC, in its discretion, may file a “Statement of Authority” with the Nebraska Secretary of State and any county’s Register of Deeds. The Statement of Authority would conclusively provide whether or not an individual is authorized to legally bind an LLC. This is particularly important for lenders seeking to obtain signatures on loan documents (i.e., promissory notes, security agreements, financing statements and mortgages or trust deeds) and will simplify the process for determining whether an individual who signs such loan documents thereby binds the LLC and effectuates an authorized transaction on behalf of the LLC. While the Statement of Authority may be used in lieu of an LLC resolution, lenders should be aware that a Statement of Authority is subject to amendment or cancellation by the filing of an amendment or cancellation with the Secretary of State and that unless earlier cancelled, an effective Statement of Authority is cancelled by operation of law five years after the date on which the statement, or its most recent amendment, becomes effective.
VI. EFFECTIVE DATE AND APPLICATION OF ULLCA TO EXISTING LLCs
The ULLCA took effect on January 1, 2011, and applies to all LLCs formed on or after January 1, 2011. For LLCs that existed prior to January 1, 2011, the old LLC Act continues to govern the activities of such an LLC until January 1, 2013, unless the LLC has elected, in the manner provided in its Operating Agreement or by law for amending the Operating Agreement, to be subject to the ULLCA and a statement of election has been delivered to the Secretary of State for filing. While the law provides for a two-year grace period for LLCs that continue to be subject to the old LLC Act, lenders should obtain and review any pre-2011 LLCs Operating Agreement prior to any loan renewals to ensure that the default provisions of the ULLCA will not affect the LLC after the two-year grace period expires.