The purpose of this blog is to alert you that a new Arizona Limited Liability Company Act has been enacted and its applicability is just around the corner. The newly-enacted statutory provisions signed by Arizona’s governor in April, 2018 will be effective for new limited liability companies formed on and after September 1, 2019. In addition, it will apply to all limited liability companies formed prior to September 1, 2019 commencing September 1, 2020. This will be the first of a number of blogs over coming months commenting on important statutory provisions.
The new statutory provisions will significantly expand codified rules over the limited liability company statutes that have been in place since 1992. For example, new ARS § 29-3105 titled Operating agreement, scope, function and limitation, ARS § 29-3106 titled Operating agreement; effect on limited liability company and persons becoming member; preformation agreement and ARS §29-3107 titled Operating agreement; amendment; effect on third parties and relationship to records effective on behalf of limited liability company go into considerable detail in excess of three pages of text. In contrast, the current ARS §29-682 titled Operating agreement provides approximately one-half page of text to the subject and demonstrates how the current statutory scheme establishes more of a “default” approach in that many statutory provisions would only apply if the operating agreement were silent on the subject. The new statutory language will modify the current approach.
As an example, ARS § 29-3105 (C) sets out 13 specific points that an operating agreement may not alter. Under the current law, there are very few matters the operating agreement could not change, and some persons were of the view that there were no limitations.
Another example is the new ARS § 29-3106 (B) which provides “A person that becomes a member is deemed to assent to the operating agreement.” This is probably going to be a helpful change. It should preclude a member from disavowing an operating agreement by saying that he, she or it did not sign the original operating agreement or a counterpart signature page. In coming blogs, we will address other points contained in the new Arizona Limited Liability Company Act in order to inform our clients and others interested what lies ahead.
Disclaimer: This blog is for information purposes only. Legal advice is provided only through a formal, written attorney/client agreement.