The Revised Uniform Limited Liability Company Act (the “New Jersey Revised Uniform LLC Act”), was enacted into law on September 19, 2012.  It will go into effect 180 days after enactment, which is March 18, 2013, and will apply to LLC’s formed on or after March 18, 2013 and LLC’s formed prior to March 18, 2013 which elect to be subject to the New Jersey Revised Uniform Act.  It will apply to all New Jersey LLC’s beginning on April 1, 2014.
 
The New Jersey Revised Uniform LLC Act generally conforms New Jersey’s limited liability company statute to the Revised Uniform Limited Liability Act, which was promulgated in 2006 (the “Re-ULLCA”). Along with New Jersey, Idaho, Iowa, Nebraska, Utah, Wyoming, the District of Colombia, and California have already adopted the Re-ULLCA.  Kansas, and Minnesota have introduced legislation to adopt to the Re-ULLCA to replace their existing LLC statutes.
 
Major Changes to the Current New Jersey LLC Act in the New Jersey Revised Uniform LLC Act
  1. The Operating Agreement– 
    • The New Jersey Revised Uniform LLC Act (Section 2) makes it clear that operating agreements governing an LLC may be oral, written or implied based on the way the LLC has operated.  This is a significant change, since the current LLC Act provides that an operating agreement must be in writing.
    • The New Jersey Revised Uniform LLC Act remains primarily a “default” statute, meaning that many of the provisions of the Act only apply if not otherwise addressed in the LLC’s Operating Agreement.  However, the New Jersey Revised LLC Act (Section 11(c)) provides a detailed list of items that cannot be amended by an operating agreement.  
  1. Statements of Authority– The New Jersey Revised Uniform LLC Act (Section 28) provides that an LLC can file a “statement of authority” with the “filing office” (the State Treasurer, or for authority relating to real estate transfers, with the office for recording transfers of the real estate — generally the County clerk’s office) authorizing certain people or entities to bind the LLC.  This may prove useful to address concerns that lenders and other third parties have regarding authorization to act on behalf of an LLC.
  2. No Right to Buy-Out Upon Withdrawal – The New Jersey Revised Uniform LLC Act removes the provision in the current LLC Act that provides that a resigning owner is entitled to receive the “fair value” of his or her interest upon resignation (essentially, a “put”).  This provision has caught many LLC owners who did not address this provision in the Company’s operating agreement by surprise.  Instead, the resigning owner will only have rights as an economic interest holder (which means the resigning owner will retain his or her equity interest but no longer having a voting interest).
  3. Remedies for Deadlock and Oppression-  The New Jersey Revised Uniform LLC Act (Section 48) provides remedies for oppressed minority owners of an LLC that mirror those found in the New Jersey Business Corporations Act.  According to the new provision, if a court finds that the managers or controlling members of an LLC have acted or are acting illegally or fraudulently, or have acted or acted in a manner that is oppressive and was, is or will be directly harmful to the minority owner, it may order that the LLC be dissolved or may appoint a custodian or one or more provisional managers to manage the LLC, and may also award expenses (including legal fees) to the injured party. 
  4. Domestication and Conversion-   The New Jersey Revised Uniform LLC Act (Sections 78 through86) allows for domestication (changing the State of formation of an LLC from another state to the State of New Jersey) and conversion of another form of entity (corporation, limited partnership, general partnership) to a New Jersey limited liability company.   This provision provides for increased flexibility to convert an entity to a New Jersey limited liability company without having to form a new entity.
These changes, as well as the overall conformity of the New Jersey Revised Uniform Act to the Re-ULLCA, will result in one more step to New Jersey being a more business-friendly state.  Based on these changes, it is advisable for owners of New Jersey limited liability companies to review and update their existing Operating Agreements to address the changes to the New Jersey Limited Liability Company Act.  
 
Rachel Lilienthal Stark is a Shareholder in Stark & Stark’s Business & Corporate Group in the firm’s Lawrenceville, New Jersey Office. For questions, or additional information, please contact Ms. Stark.