The New Jersey Revised Uniform Limited Liability Company Act (the "Act") was recently enacted. The Act represents the first set of significant changes to the law governing New Jersey limited liability companies. The Act will take effect on March 18, 2013 and will apply to all limited liability companies formed after this date. However, 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 current law, the maximum term of a limited liability company is 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 current 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 current law does not provide for the alteration of fiduciary duties.
- Indemnification -- Unlike the current law, the Act provides for mandatory indemnification of members and managers, unless the operating agreement expressly provides otherwise.
- Withdrawal -- As a clarification to the current 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.