Minnesota Revised Uniform Limited Liability Company Act Makes Significant Changes to Minnesota LLC Law

Minnesota Revised Uniform Limited Liability Company Act Makes Significant Changes to Minnesota LLC Law


On January 1, 2018, Minnesota’s new LLC act, named Minnesota Revised Uniform Limited Liability Company Act (the “new LLC act”) will automatically govern all Minnesota LLCs, regardless of when they were created. LLCs formed after August 1, 2015 are already covered by the new act.

All owners of an interest in an LLC should be aware of the impending law change and should review the governing documents of their LLC to determine whether any adjustments are necessary.

The most significant changes related to organization include (1) simplified Articles of Organization; (2) the elimination of the member control agreement – now combined with the bylaws into one operating agreement; and (3) changes to the default rules pertaining to governance and distributions, which can be overridden by the operating agreement.

Under the new LLC act, the default governance rule is a member-managed LLC as opposed to a board-of-governors-managed LLC, which was the default under the prior act.  Importantly, under the new LLC act, both voting power and the allocation of distributions is determined per capita (per person) rather than per contribution. That means each member has equal voting rights in the management and conduct of the activities of the LLC, unless the LLC’s operating agreement provides otherwise.  Also, under the new LLC act, unless the operating agreement provides otherwise, distributions prior to termination of an LLC are to be on a “per capita” basis, or in equal shares among members.

Particularly, LLCs with members holding differing interest percentages should consider drafting or amending their operating agreement to avoid some of these new default rules.

Other substantive changes under the new LLC act, codified in chapter 322 C, include its enabling of the members to: (1) reduce or eliminate the duty of loyalty and the duty of care and to define the contractual obligation of good faith and fair dealing (all subject to the caveat that such limitations or definitions must not be “manifestly unreasonable”); (2) reduce the grounds for judicial relief of conduct; and (3) provide restraints and presumptions concerning derivative actions and special litigation committees.