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A new statute, RSA 304-C, governing limited liability companies in New Hampshire went into to effect January 1, 2013. The new act, which entirely modifies the law governing LLCs in New Hampshire, is designed to be user-friendly by providing an “off the shelf” operating agreement designed with small businesses in mind. The new act also preserves the flexibility for more sophisticated LLCs to adopt operating agreements that address their specific needs.
The new act contains several provisions which are beneficial to most LLCs, including:
Duty of Loyalty
The new act contains a default “duty of loyalty” provision which applies to the members of the LLC. Members have a duty not to compete against the LLC, and not to usurp business opportunities, etc. These provisions may prove problematic for LLCs which are primarily investment vehicles, such as real estate holding companies, where the members may be involved in other, unrelated business entities. Technically, under the new act, participation in multiple holding companies could be a violation of the duty of loyalty if the real estate holding companies are competing in the same market. Existing LLC members should consider whether they should amend their existing operating agreement to address this issue.
While the new statute goes into effect for LLCs formed after January 1, 2013, the act will not immediately affect LLCs formed prior to this date. Existing LLCs will be governed by the old act until January 1, 2014 and existing LLCs have the option to opt-in to the new act prior to January 1, 2014 by a unanimous vote of LLC members.
In many instances it will be advantageous to opt-in to the new act prior to its 2014 effective date. A thorough review of current business and operating agreements is recommended in order to determine the effects of the new act on a LLC, and whether it makes sense to opt-in to the new act.
Roy W. Tilsley, Jr. was a member of the drafting committee for the new act and is familiar with all of the changes. For more information, or to discuss your LLC affairs and operating agreements, please contact Roy at firstname.lastname@example.org or at 603 623-8700.