Section 322B.313 Assignment of Governance Rights
322B.313 ASSIGNMENT OF GOVERNANCE RIGHTS.
Subdivision 1.Transfer of governance rights restricted.
A member's governance rights are assignable, in whole or in part, only as provided in this section.
Subd. 2.When unanimous consent required.
Subject to subdivision 6, a member may, without the consent of any other member, assign governance rights, in whole or in part, to another person already a member at the time of the assignment. Except as otherwise set forth in the articles of organization or a member control agreement, any other assignment of any governance rights is effective only if all the members, other than the member seeking to make the assignment, approve the assignment by unanimous written consent.
Subd. 3.Effect on membership.
When an assignment of governance rights is effective under subdivision 2:
(1) if the assignment is not a security interest, the assignee becomes a member, if not already a member; and
(2) if the assignor does not retain any governance rights, the assignor ceases to be a member.
Subd. 4.Effect on liability for contributions and illegal distributions.
When an assignment other than a security interest is effective under subdivision 2, unless the written consent under subdivision 2 otherwise provides:
(1) the assignee is liable in proportion to the interest assigned for the obligations of the assignor under sections 322B.40 (including liability for unperformed promises that have been reflected as contributions in the required records) and 322B.55 existing at the time of transfer, except to the extent that, at the time the assignee became a member, the liability was unknown to the assignee, and could not be ascertained from the required records; and
(2) the assignor is not released from liability to the limited liability company for obligations of the assignor existing at the time of transfer under sections 322B.40 and 322B.55.
Subd. 5.Consequences of ineffective assignment.
If any purported or attempted assignment of governance rights is ineffective for failure to obtain the consent required in subdivision 2:
(1) the purported or attempted assignment is ineffective in its entirety; and
(2) any assignment of financial rights that accompanied the purported or attempted assignment of governance rights is void.
Subd. 6.Restrictions on assignment of governance rights.
Restrictions on the transfer of governance rights may be imposed following the same procedures and under the same conditions as stated in section 322B.31, subdivision 3, for restricting the transfer of financial rights.
Subd. 7.Security interest.
Subject to subdivision 6, a member may grant a security interest in a complete membership interest or governance rights without obtaining the consent required by subdivision 2. However, a secured party may not take or assign ownership of governance rights without first obtaining the consent required by subdivision 2. If a secured party has a security interest in both member's financial rights and governance rights, including a security interest in a complete membership interest, this subdivision's requirement that the secured party obtain the consents required by subdivision 2 applies only to taking or assigning ownership of the governance rights and does not apply to taking or assigning ownership of the financial rights. Notwithstanding any provision of law, articles of organization, member control agreement, bylaws, other agreement, resolution, or action to the contrary, a security interest in a member's full membership interest or governance rights may be foreclosed and otherwise enforced, and a secured party may assign a member's complete membership interest or governance rights in accordance with chapter 336, all without the consent or approval of the member whose full membership interest or governance rights are the subject of the security interest.
History:
1992 c 517 art 2 s 29; 1993 c 137 s 36; 1996 c 361 s 16; 1997 c 10 art 2 s 4; 1999 c 85 art 2 s 14-16,96