As reported in our December Corporate Alert, the New Jersey Revised Uniform Limited Liability Company Act took effect on March 18, 2013. The Act represents the first set of significant changes to the law governing New Jersey limited liability companies. The Act applies immediately to all limited liability companies formed on or after March 18, 2013. The Act will not be effective for limited liability companies formed prior to March 18, 2013 until April 1, 2014.
The changes covered by the Act include:
- Perpetual Duration -- Under the prior law, the maximum term of a limited liability company was 30 years unless otherwise provided in the certificate of formation. The Act eliminates the maximum term and provides for perpetual duration.
- Management Structure -- The Act provides for greater management structure flexibility than the prior law. In this regard, the Act provides for alternative management structures such as a board of directors and officers.
- Fiduciary Duties -- The Act permits operating agreements to alter the fiduciary duty of care, if not "manifestly unreasonable" (except that intentional misconduct or knowing violations of law cannot be authorized), and to alter any other fiduciary duty. The prior law did not provide for the alteration of fiduciary duties.
- Indemnification -- Unlike the prior law, the Act provides for mandatory indemnification of members and managers, unless the operating agreement expressly provides otherwise.
- Withdrawal -- As a clarification to the prior law, the Act provides that a disassociated member has the rights of an economic interest holder, but is no longer entitled to receive fair value of its limited liability company interest as of the date of withdrawal.