This is a status report provided by the New Jersey State Bar Association on recently passed and pending legislation, regulations, gubernatorial nominations and/or appointments of interest to lawyers, as well as the involvement of the NJSBA as amicus in appellate court matters. To learn more, visit njsba.com.
The state Senate Commerce Committee heard testimony on a measure that revises the law concerning partnerships, limited partnerships and limited liability companies and could make it easier for companies to do business in the Garden State.
The bill, S134 (Diegnan)/A3821 (Greenwald), was drafted by New Jersey State Bar Association members of the Business Law Section. Robert Frawley testified on behalf of the Association.
“This bill builds upon the Revised Uniform Limited liability Company Act (RULLCA) and improves New Jersey law regarding partnerships and limited partnerships by allowing these entities to convert to other types of business entities with ease,” said the NJSBA.
The bill fixes an anomaly in existing law. It provides reciprocal enabling legislation to authorize a general partnership to convert to other types of business entities with ease. Now, the law permits the conversion, but the enabling statute to handle the conversion has not yet been changed.
The bill also provides for the same conversion for limited partnerships to limited liability companies or other types of business entities, and vice versa. It further simplifies the process and paperwork required from merging two entities – which must be done now – to a simple conversion as is done in many other states.
“The ease of conversion will ultimately make New Jersey a more desirable state for businesses to operate,” said the NJSBA.
Several other clarifications are also recommended in the pending bill regarding formation and operation of limited liability companies. The measure clarifies how an LLC may use a name that does not comply with the statute if, for example, the name is not available because it is being used by another company. The bill proposes to simply require a formal signed record of consent.
Another amendment would make clear that an LLC is not required to have a member when it files a certificate of formation, similar to applicable law now regarding business corporations. Currently, corporations are not required to name a shareholder when filing a certificate of incorporation. Further, the bill clarifies when an LLC is required to indemnify a member, manager, or other company agent and amends RULLCA to clarify the protection of members and managers when they rely on information and records of the LLCs and the reports of its employees and agents.
A final amendment would fix an inadvertent error concerning a creditor’s bar of claims against a dissolved LLC. The current law has a five-year bar against claims, but does not include the six months’ notice provision, which follows prior law at N.J.S.A 42:2B-49.1. The amendment would clarify that a claim against a dissolved LLC must be received not less than six months following publication of notice of dissolution, rather than five years.
The bill was not posted for a vote, but the NJSBA will continue to advocate for its passage.