MANDATORY PROVISIONS OF THE NEW UTAH REVISED UNIFORM LIMITED LIABILITY COMPANY ACT (Utah Code Ann. 48-3a-101 through 48-3a-1405)

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1 THE ATERIALS CONTAINED HEREIN SHOULD NOT BE CONSTRUED TO BE THE ACTION OR OPINION OF THE UTAH STATE BAR AND SHOULD NOT BE USED AS A SUBSTITUTE FOR INDIVIDUAL REVIEW AND ANALYSIS OF THE APPLICABLE CODE SECTIONS AS SET FORTH IN THE UTAH CODE ANNOTATED. THESE ATERIALS DO NOT REPRESENT TAX, ACCOUNTING OR LEGAL ADVICE AND USERS ARE RESPONSIBLE FOR OBTAINING SUCH ADVICE FRO THEIR OWN LEGAL COUNSEL. THESE ATERIALS ARE INTENDED FOR EDUCATIONAL AND INFORATIONAL PURPOSES ONLY. USERS ARE ADVISED TO USE AND REFER TO UTAH CODE ANN 48-3A-101 ET. AL. AND OTHER APPLICABLE SECTIONS OF THE UTAH CODE IN ALL INSTANCES RELATING TO UTAH LIITED LIABILITY COPANIES. SUBJECT TO UPDATES AND CORRECTIONS. ANDATORY PROVISIONS OF THE NEW UTAH REVISED UNIFOR LIITED LIABILITY COPANY ACT (Utah Code Ann. 48-3a-101 through 48-3a-1405) This table contains a list of all mandatory provisions contained in the New Utah Revised Uniform Limited Liability Company Act (effective 01/01/2014). andatory provisions are provisions in the new Act that the Act does not permit LLC members to validly override in their operating agreements. Some mandatory provisions have been subcategorized as either or. provisions are provisions that impose an affirmative duty on the LLC or on a member. provisions are provisions that impose a negative duty on the LLC or on a member or prohibit the LLC or a member from taking a specified action. Please note that: 1) Quotations of provisions of the Act are within quotation marks, while paraphrases of provisions are within brackets. 2) In direct quotations, the phrases limited liability company and a limited liability company have been changed to LLC and an LLC, respectively. Also, the terms Section and Subsection have been replaced with when the section referred to is unambiguous. 3) The master list of provisions is contained in Word Document ASTER TABLE OF CATEGORIZATION of New Utah LLC Act Provisions and Excel Document Categorization of New LLC Act. Both master lists contain all definitional, mandatory, default, self-enabling permissive, and non-self-enabling permissive provisions. The Excel master list also contains all Housekeeping provisions, or those provisions which detail various filing requirements, cannons of construction, etc. 4) Lists of the other sub-categories of provisions are contained in the following documents: a. Definitional provisions: Word Document New Utah LLC Act DEFINITIONAL Provisions. * Special thanks to Nettie Downs, Univ. of Pennsylvania, J.D. candidate 2014, and Kenneth C. Ashton, partner in the Business & Finance Group at Snell & Wilmer L.L.P. The views expressed herein are the authors and do not represent the views of Snell & Wilmer L.L.P. or its partners.

2 b. Default provisions: Word Document New Utah LLC Act DEFAULT Provisions. c. Self-enabling permissive provisions: Word Document New Utah LLC Act SELF- ENABLING Provisions. d. Non-self-enabling permissive provisions: Word Document New Utah LLC Act NON- SELF-ENABLING Provisions.

3 1 48-3a-103(1) Knowledge standard. "A person knows a fact if the person: (a) has actual knowledge of it; or (b) is deemed to know it under Subsection (4)(a) or law other than this chapter." Should this be a default provision? a-104(1) Nature of an LLC. "An LLC is an entity distinct from its member or members." a-105 Powers of an LLC. "An LLC has the capacity to sue and be sued in its own name and the power to do all things necessary or convenient to carry on its activities and affairs." a-106 Governing law. "[Utah law] governs: (1) the internal affairs of an LLC; and (2) the liability of a member as member and a manager as manager for the debts, obligations, or other liabilities of an LLC." a-112(1) Scope of the operating agreement. [Except as otherwise provided, the operating agreement governs: (a) relations among members as members and between members and the LLC; (b) rights and duties of the manager(s); (c) activities and affairs of the LLC; and (d) the means and conditions of amending the operating agreement.] a-112(3) [List of actions for which an operating agreement may not engage] a-304 Liability of members and managers. [A debt, obligation, or other liability of an LLC is solely the debt, obligation, or other liability of the LLC and not of the members or managers. Failure to observe management formalities is not a ground for imposing liability on a member or manager.] a-401(2) Becoming a member. "If an LLC is to have more than one member upon formation, those persons become members as agreed by the persons before the formation of the LLC. The organizer acts on behalf of the persons in forming the LLC and may be, but need not be, one of the persons." a-501 Nature of transferable interest. "A transferable interest is personal property." a-502(8) Obligations of transferees who become members. "If a member transfers a transferable interest to a person that becomes a member with respect to the transferred interest, the transferee is liable for the member's obligations under 48-3a-403 and 48-3a-406(3) known to the transferee when the transferee becomes a member." a-602 Events causing dissociation. [This provision outlines various mandatory, default and non-self-enabling permissive ways that will trigger the dissociation of a member.] a-803 Proper plaintiff. [A derivative action to enforce a right of an LLC may be maintained only by a person that is a member at the time the action is commenced and was a member when the conduct giving rise to the action occurred or whose status as a member devolved on the

4 person by operation of law or pursuant to the operating agreement from a person that was a member at the time of the conduct.] a- 806(1),(2) Proceeds and expenses. [Any proceeds of a derivative action belong to the LLC and not the plaintiff, although the court may award the plaintiff reasonable expenses.] a-1007 Alternative means of approval of transactions. "Except as otherwise provided in the organic law or organic rules..., approval of a transaction under this part by the unanimous vote or consent of its interest holders satisfies the requirements of this part for approval of the transaction." a-1026(1) Effect of merger. [This provision outlines the effects of a merger.] a-1026(2) Effect of merger. "Except as otherwise provided in the organic law or organic rules of a merging entity, the merger does not give rise to any rights that an interest holder, governor, or third party would have upon a dissolution, liquidation, or winding up of the merging entity." a- 1026(3)-(4) Effect of merger. [This provision outlines the effect of a merger on either persons who did not have interest holder liability and now do or persons who no longer hold an interest in a domestic merging entity to which the persons had interest holder liability.] a-1036(1) Effect of interest exchange. [This provision outlines the effects of an interest exchange.] a-1046(1) Effect of conversion. [This provision outlines the effects of a conversion.] a-1056(1) Effect of domestication. [This provision outlines the effects of domestication.] a-1105(1) Providing a professional service. "[A] professional services company may provide a professional service in this state only through an individual licensed or otherwise authorized in this state to provide the professional service." a-1105(2) Providing a professional service. "Subsection (1) does not: (a) require an [employee] to be licensed to perform a service for the professional services company if a license is not otherwise required; (b) prohibit a licensed individual from providing a professional service in the individual's professional capacity although the individual is a member, manager, employee, or agent of a professional services company; or (c) prohibit an individual licensed in another state from providing a professional service for a professional services company in this state if not prohibited by the regulating board." a-1109(3) anagement of professional services company. "A professional services company...may render a professional service in this state only through a member, manager, or employee who is licensed or registered by this state to

5 render the professional service." a-1110(1) Restriction on transfer by member. "Except as [otherwise] provided..., a member of a professional services company may sell or transfer the member's interest in the...company only to: (a) the professional services company; or (b) an individual who is licensed or registered by this state to provide the same type of professional service..., or who otherwise satisfies the requirements of 48-3a-1109(1) or (2)." a- 1112(1)(a) a- 1112(1)(b) Conversion to nonprofessional company. [A professional services company converts into an LLC when all members entitled to vote on any matter consent not to be a professional services company.] Conversion to nonprofessional company. [A professional services company converts into an LLC when no member of the company is licensed or registered for the professional service for which the company is organized.] a-1112(2) Conversion to nonprofessional company. "A professional services company converted as provided in Subsection (1) shall...operate as and be treated as an LLC." a-1206 Series distributions. [This provision provides rules governing series distributions, including: proportionality of distributions, rights to distributions, limitations on distributions, and distribution violations.] a-1303 Ceasing to be a low-profit LLC. [This provision outlines how a low-profit LLC can lose its low-profit status, the effects of the loss of low-profit status, and affirmative duties placed on the former low-profit LLC upon loss of status.] a-108(1) a-108(2) a-111(1) a-112(2) a-113(1) a-113(2) LLC name. [The name of an LLC must contain the words "limited liability company" or the abbreviation "L.L.C.", "LLC", "L.C.", or "LC". "Limited" may be abbreviated as "Ltd." and "company" may be abbreviated as "Co.".] LLC name. [The name of an LLC must be distinguishable on the records of the division from other names recorded by or reserved with the division.] Registered agent. [Each LLC shall designate and maintain a registered agent in this state.] Absence of terms in the operating agreement. "To the extent the operating agreement does not provide for a matter described in Subsection (1), this chapter governs the matter." Enforceability of the operating agreement. "An LLC is bound by and may enforce the operating agreement, whether or not the LLC has itself manifested assent to the operating agreement." [This provision contains both a mandatory and self-enabling permissive provision.] embers' assent to the operating agreement. "A person that becomes a member of an LLC is deemed to assent to

6 the operating agreement." a- 114(2)(a) Obligation to transferee or dissociated person. [An amendment to the operating agreement made after a person becomes a transferee or is dissociated as a member is effective with regard to any debt, obligation, or other a- 201(2)(a) a-201(4) a-202(2) a-202(3) a-202(4) a- 203(1)(a) a- 203(1)(b) a- 203(1)(c) a- 203(1)(e) liability of the LLC or its members to that person.] Certificate of organization requirements. [A certificate of organization must state the name; street and mailing address of the principal office; information required by (1); if the LLC is a low-profit LLC, a statement that the LLC is a low-profit LLC; if the LLC is a professional services company, the information required by 48-3a-1103; and if the LLC will have one or more limited liability series per 48-3a-1201(2), notice of the limitation on liability per 48-3a-1202.] Formation of an LLC. "An LLC is formed when the LLC's certificate of organization becomes effective and at least one person becomes a member." Amendment or restatement of certificate of organization. [To amend its certificate of organization, an LLC must deliver to the division for filing an amendment stating: [the name, date of initial filing, and changes the amendment makes to the certificate.] Restatement of certificate of organization. "To restate its certificate of organization, an LLC must deliver to the division for filing a restatement designated as such in its heading." Duty to amend, change, or correct. "If a member of a member-managed LLC, or a manager of a managermanaged LLC, knows that any information in a filed certificate of organization was inaccurate when...filed or has become inaccurate due to changed circumstances, the member or manager shall promptly: (a) cause the certificate to be amended; or (b) if appropriate, deliver to the division for filing a statement of change or a statement of correction." Who must sign an LLC document. [A record delivered to the division for filing, when signed on behalf of an LLC, must be signed by a person authorized by the LLC.] Who must sign an LLC document. "An LLC's initial certificate of organization must be signed by at least one person acting as an organizer." Who must sign on behalf of a winding up LLC. [A record delivered on behalf of a dissolved LLC that has no member must be signed by the person winding up the LLC's activities and affairs.] Signing documents. "Any other record delivered on behalf of a person to the division for filing must be signed by that person." ["Other record[s]" presumably refers to records

7 which are not signed on behalf of the LLC, are not the initial certificate of organization, are not signed on behalf of an LLC that is winding up, and are not statements of denial.] a-205(1) a-205(3) a-207(2) a a-302(2) a-404(1) a-409(1) a-409(4) a- 409(9)(c) Filing requirements. [To be filed by the division pursuant to this chapter, a record must be received by the division, comply with this chapter, and (a) be required or permitted; (b) by physically delivered in written form; (c) be written in English letters or Arabic or Roman numerals; (d) be signed by an authorized person; and (e) state the name and capacity of each individual who signed it.] Filing fees. [When a record is delivered to the division for filing, any fee required must be paid in a manner permitted by the division or by the applicable law.] Requirements of withdrawal of filed record. "A statement of withdrawal must: (a) be signed by each person that signed the record being withdrawn, except as otherwise agreed by those persons; (b) identify the record to be withdrawn; and (c) if signed by fewer than all the persons that signed the record being withdrawn, state that the record is withdrawn in accordance with the agreement of all the persons that signed the record." Annual report. [This provision requires each LLC to file an annual report with the division containing specific information, and it sets forth procedural rules relating to annual reports.] Statement of authority. [To amend or cancel a statement of authority filed by the division, an LLC must deliver to the division for filing an amendment or cancellation that contains the information listed in this provision.] Distributions before dissolution. "Any distributions made by an LLC before its dissolution and winding up must be in equal shares among members and persons dissociated as members, except to the extent necessary to comply with a transfer or charging order." Duties of loyalty and care. [A member of a membermanaged LLC owes to the LLC and the other members the duties of loyalty and care.] Good faith and fair dealing. "A member shall discharge the duties and obligations under this chapter or under the operating agreement and exercise any rights consistently with the contractual obligation of good faith and fair dealing." Good faith and fair dealing. [In manager-managed LLCs, both managers and members shall discharge the duties and obligations under this chapter or under the operating agreement and exercise any rights consistently with the contractual obligation of good faith and fair dealing.] a-701(4) Events causing dissolution. [An LLC is dissolved and its See Section 48-3a-112(3)(e) and (4) See Section 48-3a-112(3)(f) See Section 48-3a-112(3)(f) and (4)

8 activities and affairs must be wound up upon court order dissolving the LLC on the grounds that: (a) the LLC's activities and affairs are unlawful; or (b) the LLC could not reasonably continue in conformity with the certificate of organization and the operating agreement.] a-701(5) Events causing dissolution. [An LLC is dissolved and its activities and affairs must be wound up upon court order dissolving the LLC on the grounds that the LLC's management (a) has, is, or will act in an illegal or fraudulent manner; or (b) has, is, or will act in an a-701(6) a-801(2) a a-805(2) a-805(5) a-1003(1) a- 1022(1)(a)- (g), (2) a- 1025(1)-(4) a- 1032(1)(a)-(f), oppressive manner that would directly harm the plaintiff.] Events causing dissolution. [An LLC is dissolved and its activities and affairs must be wound up upon the signing and filing of a statement of administrative dissolution by the division under 48-3a-708(3).] Pleading requirements for a direct action. "A member maintaining a direct action under this section must plead and prove an actual or threatened injury that is not solely the result of an injury suffered or threatened to be suffered by the LLC." Pleading requirements for a derivative action. [In a derivative action, the complaint must state with particularity either information regarding the plaintiff's demand or why demand should be excused as futile.] Composition of special litigation committee. "A special litigation committee must be composed of one or more disinterested and independent individuals, who may be members." Duty to file special litigation committee determination. [After making a determination under Subsection (4), a special litigation committee shall file with the court a statement of its determination and its report supporting its determination and shall serve each party with a copy of the determination and report.] Required notice or approval. "A domestic or foreign entity that is required to give notice to, or obtain the approval of, a governmental agency or officer of this state to be a party to a merger must give the notice or obtain the approval to be a party to an interest exchange, conversion, or domestication." Plan of merger requirements. [This provision lists the requirements for a plan of merger. This provision is also self-enabling permissive because it permits the plan of merger to contain any other provisions not prohibited by law.] Statement of merger requirements. [This provision outlines the requirements for a statement of merger.] Plan of interest exchange requirements. [This provision lists the requirements for a plan of interest exchange. This

9 (2) provision is also self-enabling permissive because it permits the plan of interest exchange to contain any other provisions not prohibited by law.] a- 1035(1)-(2) a- 1042(1)(a)- (g), (2) a- 1045(1)-(2), (4) a- 1052(1)(a)- (g), (2) a- 1055(1)-(2), (4) a-1102(1) a a- 1104(1)(b) a- 1104(1)(c) a-1104(3) a-1106(1) a-1112(4) Statement of interest exchange requirements. [This provision outlines the requirements for a statement of interest exchange.] Plan of conversion requirements. [This provision lists the requirements for a plan of conversion. This provision is also self-enabling permissive because it permits the plan of conversion to contain any other provisions not prohibited by law.] Statement of conversion requirements. [This provision outlines the requirements for a statement of conversion.] Plan of domestication requirements. [This provision lists the requirements for a plan of domestication. This provision is also self-enabling permissive because it permits the plan of domestication to contain any other provisions not prohibited by law.] Statement of domestication requirements. [This provision outlines the requirements for a statement of domestication.] Conflicting provisions. "If a conflict arises between this part and another provision of this chapter, this part controls." Certificate of organization requirements. "The certificate of organization of a professional services company shall: (1) comply with 48-3a-201; and (2) contain [a proper name, description and address information]." Professional service company name limitations. [The name of a professional services company must conform with any rule made by the relevant regulating board.] Professional service company name limitations. [The name of a professional services company must contain the words "professional limited liability company" or "P.L.L.C." or "PLLC" in its certificate of organization and a document filed with the division.] Professional service company name limitations. "[ 108 and 906] do not prevent the use of a name otherwise prohibited if the name is: (a) the personal name of an individual member or individual former member ; or (b) the name of an individual who was associated with a predecessor of the professional services company." Limit of one profession. "A professional services company organized to provide a professional service under this part may provide only: (a) one specific type of professional service; and (b) [ancillary services]." Conversion to nonprofessional company. "If a professional services company is converted or reconverted under this

10 section, the...company shall file a certificate of amendment to the certificate of organization with the division within a reasonable time after the conversion or reconversion to reflect the changes." a-1302 Requirements of a low-profit LLC. [This provision lists a-108(4) a-108(6) a-108(8) a- 112(3)(a) a- 112(3)(b) a- 112(3)(c)(i) a- 112(3)(c)(ii) a- 112(3)(d) a- 112(3)(e) a- 112(3)(f) (first clause) a- 112(3)(g) the formation requirements for a low-profit LLC.] LLC name distinction standard. [In determining whether a name is the same as or not distinguishable from the name of another entity, words, phrases, or abbreviations indicating the type of entity may not be taken into account (i.e. "Inc.", "PC", "PA", "Ltd.", "RLLP", "LLC", etc.).] LLC name. "The division may not approve for filing a name that implies that an LLC is an agency of this state or any of its political subdivisions, if it is not actually such a legally established agency or subdivision." LLC name. "The name of an LLC...may not contain: (a) the words [association, corporation, incorporated, partnership, limited partnership;] (b) any word or abbreviation that is of like import to the words listed in Subsection (8)(a); (c) without the written consent of the United States Olympic Committee, the words: [Olympic, Olympiad, or Citius Altius Fortius;] and (d) without the written consent of the Division of Consumer Protection...the words [university, college, institute or institution]." may not...vary an LLC's capacity under 48-3a-105 to sue and be sued in its own name." may not...vary the law applicable under 48-3a-106." may not...vary any requirement, procedure, or other provision of this chapter pertaining to...registered agents." may not...vary any requirement, procedure, or other provision of this chapter pertaining to...the division, including provisions pertaining to records authorized or required to be delivered to the division for filing under this chapter." may not...vary the provisions of 48-3a-204." may not...eliminate the duty of loyalty or the duty of care, except as otherwise provided in Subsection (4)." may not...eliminate the contractual obligation of good faith and fair dealing under 48-3a-409(4)." may not...relieve or exonerate a person from liability for

11 conduct involving bad faith, willful misconduct, or recklessness." a- 112(3)(h) (first clause) a- 112(3)(i) a- 112(3)(j) a- 112(3)(k) a- 112(3)(l) (first clause) a- 112(3)(m) a- 112(3)(n) a- 112(4)(c)(iii) (second clause) a- 114(2)(b) a- 405(1)(a) a- 405(1)(b) may not...unreasonably restrict the duties and rights under 48-3a but the operating agreement may impose reasonable restrictions on the availability and use of information obtained under that section and may define appropriate remedies, including liquidated damages, for a breach of any reasonable restriction on use." may not...vary the causes of dissolution specified in 48-3a-701(4)(a) and (5)." may not...vary the requirement to wind up the LLC's activities and affairs as specified in 48-3a-703(1), (2)(a), and (5)." may not...unreasonably restrict the right of a member to maintain an action under Part 8, Action By embers." may not...vary the provisions of 48-3a-805." may not...vary the right of a member to approve a merger, interest exchange, conversion, or domestication under 48-3a-1023(1)(b), 48-3a-1033(1)(b), 48-3a-1043(1)(b), or 48-3a-1053(1)(b)." may not...except as otherwise provided in 48-3a-113 and 48-3a-114(2), restrict the rights under this chapter of a person other than a member or manager." Duty of care. [The operating agreement may not authorize intentional misconduct or knowing violation of law.] Obligation to transferee or dissociated person. "[A]n amendment to the operating agreement made after a person becomes a transferee or is dissociated as a member...is not effective to the extent the amendment imposes a new debt, obligation, or other liability on the transferee or person dissociated as a member." Limitation on distributions. "An LLC may not make a distribution...if after the distribution: (a) the LLC would not be able to pay its debts as they become due in the ordinary course of [its] activities and affairs." Limitation on distributions. "An LLC may not make a distribution...if after the distribution:...(b) the LLC's total assets would be less than the sum of its total liabilities plus, unless the operating agreement permits otherwise, the

12 amount that would be needed, if the LLC were to be dissolved and wound up at the time of the distribution, to satisfy the preferential rights upon dissolution and winding up of members and transferees whose preferential rights are superior to those of persons receiving the distribution." [Note that this "mandatory provision also contains a nonself-enabling permissive provision.] a-806(3) a-1003(2) a-1102(2) a- 1104(1)(a) a-1106(2) a a-1110(3) a- 1201(4)(a) a- 1201(4)(b) Derivative action. "A derivative action on behalf of an LLC may not be voluntarily dismissed or settled without [court] approval." Required notice or approval. "Property held for a charitable purpose...immediately before a transaction under this part becomes effective may not, as a result of the transaction, be diverted from the objects for which it was donated...unless...the entity obtains an appropriate order of the district court specifying the disposition of the property." Phase out of series. "Notwithstanding the other provisions of this part, on and after January 1, 2016: (a) a professional services company may not designate series of transferable interests; and (b) an LLC may not form a professional services company as a series of the LLC." Professional service company name limitations. [The name of a professional services company may not contain language implying it is formed for a purpose not authorized by its certificate of organization or 1106.] Limit of one profession. [A professional services company may not engage in a business other than providing the services that it was organized to provide and any ancillary services.] Activity limitations. "A professional services company may not do anything that an individual licensed to practice the profession that the professional services company is organized to provide is prohibited from doing." Restriction on transfer by member. "The person to whom an interest is transferred under Subsection (2) may continue to hold the interest for a reasonable period, but may not participate in a decision concerning the providing of a professional service." Series of transferable interests. "[P]roperty and assets of a series may not be transferred to the LLC generally or another series if the transfer impairs the ability of the series...to pay its debts existing at the time of the transfer unless fair value is given to the transferring series for the property or assets transferred." Series of transferable interests. "[A] tax or other liability of the LLC generally or of a series may not be assigned by the series...to the LLC generally or to another series within the LLC if the assignment impairs a creditor's right and ability to fully collect an amount due when owed."

13 a- Series of transferable interests. "[A] professional services 1201(5)(a) company may not designate a series of transferable a- 1201(5)(b) interests." Series of transferable interests. "[An] LLC may not form a professional services company as a series of the LLC."