Maine's New Limited Liability Company Act

June 02, 2011

The 124th Maine State Legislature enacted into law a new Maine Limited Liability Company Act, which is expected to be amended by the 125th Maine State Legislature ("New Act"). The New Act goes into effect on July 1, 2011 and replaces in its entirety the current Act adopted in 1993 ("Current Act"). The following is an overview of some of the key changes in the New Act:

• Requirement of a Limited Liability Company Agreement. Under the New Act, a limited liability company cannot be formed absent the existence of a limited liability company agreement among all of its members governing the conduct of its business and affairs. Most current limited liability companies have such an agreement (known as an operating agreement under the Current Act). Limited liability companies formed on or after July 1, 2011 must have such an agreement, whether written or not, in order to be legally formed.
• Statement of Authority. The New Act eliminates the requirement that a limited liability company designate in its Certificate of Formation whether the company is member run or manager run. The authority to act on behalf of the company will be designated in the limited liability company agreement. In order to allow third parties (such as creditors) to determine who has authority to bind the company, the company should file a Statement of Authority with the Maine Secretary of State's office designating those individuals with authority to bind the company. Absent the filing of such a Statement, any member, manager, president or treasurer of a new limited liability company is deemed to have apparent authority to bind the company. There will be transition rules for existing limited liability companies.
• Maximum Flexibility. With few exceptions, the New Act allows the limited liability company agreement to override the default provisions of the New Act, thereby providing maximum flexibility in structuring the relationships among the members and between the members and the company. Under the New Act, it is now possible to draft a limited liability company agreement that better suits the contours of a particular venture and the requirements of its participants.
• Benefits to Third Parties. Under the New Act, the limited liability company agreement may provide rights to third party beneficiaries, such as creditors, who are not members of the company. The agreement cannot, however, impose any obligations upon third party beneficiaries.
• Charging Orders. Under the New Act, a creditor of a member may obtain a lien against the member's transferable interest by obtaining a charging order from a Court. A creditor that obtains a charging order is entitled only to the economic benefits of the member (i.e., distributions) and cannot vote the member's membership interest or participate in the management of the limited liability company.

For more information, please contact David Austin or your registered agent at Eaton Peabody 207-947-0111.