The Revised Uniform Limited Liability Company Act (the “New Jersey Revised Uniform LLC Act”), was enacted into law on September 19, 2012 and went into effect on March 18, 2013.  It applies to LLC’s formed on or after March 18, 2013 and LLC’s formed prior to March 18, 2013 which elected to be subject to the New Jersey Revised Uniform Act.  It will apply to all New Jersey LLC’s beginning on April 1, 2014.

One interesting change to the New Jersey LLC laws in the New Jersey Revised Uniform LLC Act is 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). 

How does this affect those doing business with New Jersey limited liability companies?

If a statement of authority has been filed, third parties are charged with knowledge of any limitation of authority provided in the statement of authority.  So, for example, if, prior to the New Jersey Revised Uniform LLC Act, a member or manager of a New Jersey LLC signed a contract on behalf of the LLC, and the other party was told that the member or manager had authority to sign, the other party to the contract could rely on the “apparent authority” of the member or manager to enforce the contract, even if the member or manager did not have actual authority to sign.  Now, if a the statement of authority is filed indicating that the member or manager’s authority is limited, the third party would be charged with that knowledge and can no longer rely on “apparent authority” to enforce the contract.

From a contracting party’s perspective, this means that prior to entering into an important contract, it is imperative to conduct a search to confirm that no statement of authority is of record.  From an LLC’s perspective, filing a statement of authority could protect the LLC from claims of “apparent authority” if there is a possibility that persons other than those with authority may enter into transactions.

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.