Effective as of January 1, 2014, Utah has a new and updated limited liability company statute: the Utah Revised Uniform Limited Liability Company Act (the “New LLC Act”). The New LLC Act is a complete revision of Utah statutes governing limited liability companies, and includes new filing requirements, new fiduciary duties and standards, new constructive notice of authority/limitations of authority provisions, new merger and consolidation provisions, new provisions regarding duties to “refrain from competing”, etc.
In some respects, the New LLC Act takes a pro-member (owner) stance by imposing stronger and better defined fiduciary duties on management, greater ability to constrain the legal authority of management relative to third parties, and more protection of the underlying business enterprise through default non-compete provisions. From that perspective, members (owners) have greater protections under the New LLC Act.
On the other hand, the New LLC Act permits its default provisions to be superseded by pro-management provisions in the LLC’s Operating Agreement. Thus, while closely-held, family-controlled LLCs may well be comfortable with many of the New LLC Act’s default provisions, investor-driven, venture-backed and joint-ventured LLC’s will want to focus carefully on the terms of the Operating Agreement in order to allocate rights, duties and risks in a more management- and investment-friendly manner.
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