What is the Connecticut Limited Liability Company Act?
If you are making plans to form a limited liability company (LLC), or if you currently have an LLC, it is important to know more about the new Connecticut Limited Liability Company Act, or the Connecticut Uniform Limited Liability Company Act.
The law took effect on July 1, 2017. This new Connecticut LLC Act is derived from the Uniform Limited Liability Company Act and replaced the old Connecticut Limited Liability Company Act.
Our experienced Connecticut business law attorneys want to provide you with more information about the new Connecticut LLC Act and its applicability to your business.
The first thing to know about the new LLC Act is that while its legal principles apply to all LLC’s, even those formed prior to the date that the law took effect, or July 1, 2017, the new LLC Act does not require the members of LLC’s formed prior to July 1, 2017, to adopt new governing documents, such as an operating agreement.
This is because statute specifies that the new law does not “impair the obligations of any contract existing on, or affect any action or proceedings begun or right accrued before July 1, 2017. . .” In other words, if you already had an LLC with an operating agreement that was executed before July 1, 2017, then the new LLC Act will not change the terms of your operating agreement, or require that you enter into a new agreement.
However, we think that this is an excellent time to refresh your LLC’s governing documents, to take advantage of the clarity and modernization provided by the new LLC Act. Our experienced Connecticut business law attorneys can help you do this.
If you formed an LLC on or after July 1, 2017, or if you are planning to form an LLC and to execute an operating agreement, then you will need to do so within the boundaries of the new LLC Act.
Scope of the New Connecticut LLC Act
According to the specific terms of the statute, the new CT LLC Act governs the following:
- Internal affairs of a limited liability company; and
- Liability of a member as a member and a manager as a manager for the debts, obligations, or other liability of a limited liability company.
Terms of an Operating Agreement Under the New LLC Act
Anyone who forms an LLC, especially if there is more than one member, will also need to create and execute an operating agreement.
The new LLC Act in Connecticut specifies that the operating agreement governs all of the following:
- Relations among the members;
- Rights and duties
under the Act of a manager;
- Activities and affairs of the company; and
- Conditions and means for amending the operating agreement.
The new law prohibits operating agreements from containing certain items, including, but not limited to, the following:
- Change an LLC’s capacity to sue or be sued in its own name;
- Alter the duty of care or loyalty, except that the operating agreement may:
- specify the method by which a specific act or transaction that would otherwise violate the duty of loyalty may be authorized or ratified;
- if not manifestly unreasonable, alter or eliminate certain aspects of the duty of loyalty; identify specific types or categories of activities that do not violate the duty of loyalty; alter the duty of care (without authorizing conduct involving bad faith or knowing violation of the law); and alter or eliminate any other fiduciary duty.
- Relieve an individual from liability for conduct involving bad faith or knowing violation of law; or
- Unreasonably restrict the right of a member to maintain an action.
There are additional prohibitions for operating agreements under the new Act that a Connecticut business law attorney can discuss with you.
Contact a Business Lawyer in Connecticut
If you have questions about forming an LLC or your rights and obligations under the new Connecticut Limited Liability Company Act, one of our experienced business law attorneys can assist you.
Contact Stanger Law today for more information.