7-1-810 - Limited liability companies.
7-1-810. Limited liability companies.
(1) Notwithstanding any other provision of this title and subject to Subsection (8), if theconditions of this section are met, the following may be organized as or convert to a limitedliability company under Title 48, Chapter 2c, Utah Revised Limited Liability Company Act:
(a) an industrial bank chartered under Chapter 8, Industrial Banks;
(b) an industrial loan company as defined in Section 7-8-21; or
(c) any of the following if the institution is an S Corporation, as defined in Section 1361,Internal Revenue Code, immediately before becoming a limited liability company:
(i) a bank chartered under Chapter 3, Banks;
(ii) a savings and loan association chartered under Chapter 7, Savings and LoanAssociations Act; or
(iii) a depository institution holding company.
(2) (a) Before an institution described in Subsection (1) may organize as or convert to alimited liability company, the institution shall obtain approval of the commissioner.
(b) (i) To obtain the approval under this section from the commissioner, the institutionshall file a request for approval with the commissioner at least 30 days before the day on whichthe institution becomes a limited liability company.
(ii) If the commissioner does not disapprove the request for approval within 30 days fromthe day on which the commissioner receives the request, the request is considered approved.
(iii) When taking action on a request for approval filed under this section, thecommissioner may:
(A) approve the request;
(B) approve the request subject to terms and conditions the commissioner considersnecessary; or
(C) disapprove the request.
(3) To approve a request for approval, the commissioner shall find:
(a) for an institution described in Subsection (1) that is required to be insured by a federaldeposit insurance agency, that the institution:
(i) will operate in a safe and sound manner;
(ii) has the following characteristics:
(A) the institution is not subject to automatic termination, dissolution, or suspensionupon the happening of some event other than the passage of time;
(B) the exclusive authority to manage the institution is vested in a board of managers ordirectors that:
(I) is elected or appointed by the owners;
(II) is not required to have owners of the institution included on the board;
(III) possesses adequate independence and authority to supervise the operation of theinstitution; and
(IV) operates with substantially the same rights, powers, privileges, duties, andresponsibilities as the board of directors of a corporation;
(C) neither state law, nor the institution's operating agreement, bylaws, or otherorganizational documents provide that an owner of the institution is liable for the debts,liabilities, and obligations of the institution in excess of the amount of the owner's investment;and
(D) (I) neither state law, nor the institution's operating agreement, bylaws, or other
organizational documents require the consent of any other owner of the institution in order forany owner to transfer an ownership interest in the institution, including voting rights; and
(II) the institution is able to obtain new investment funding if needed to maintainadequate capital; and
(iii) is able to comply with all legal and regulatory requirements for an insured depositoryinstitution under applicable federal and state law; and
(b) for an institution described in Subsection (1) that is not required to be insured by afederal deposit insurance agency, that the institution will operate in a safe and sound manner.
(4) An institution described in Subsection (3)(a) that is organized as a limited liabilitycompany shall maintain the characteristics listed in Subsection (3)(a)(ii) during such time as it isauthorized to conduct business under this title as a limited liability company.
(5) (a) All rights, privileges, powers, duties, and obligations of an institution described inSubsection (1) that is organized as a limited liability company and its members and managersshall be governed by Title 48, Chapter 2c, Utah Revised Limited Liability Company Act, except:
(i) the following sections do not apply to an institution that is described in Subsection(3)(a):
(A) Subsection 48-2c-402(2)(a)(ii);
(B) Section 48-2c-604;
(C) Section 48-2c-703;
(D) Section 48-2c-708;
(E) Subsection 48-2c-801(2);
(F) Section 48-2c-1102;
(G) Section 48-2c-1104; and
(H) Subsections 48-2c-1201(2) through (5); and
(ii) as otherwise provided in this title.
(b) Notwithstanding Subsection (5)(a), for an institution that is described in Subsection(3)(a):
(i) for purposes of transferring a member's interests in the institution, a member's interestin the institution shall be treated like a share of stock in a corporation; and
(ii) if a member's interest in the institution is transferred voluntarily or involuntarily toanother person, the person who receives the member's interest shall obtain the member's entirerights associated with the member's interest in the institution including:
(A) all economic rights; and
(B) all voting rights.
(c) An institution described in Subsection (3)(a) may not by agreement or otherwisechange the application of Subsection (5)(a) to the institution.
(6) Unless the context requires otherwise, for the purpose of applying this title to aninstitution described in Subsection (1) that is organized as a limited liability company:
(a) a citation to Title 16, Chapter 10a, Utah Revised Business Corporation Act, includesthe equivalent citation to Title 48, Chapter 2c, Utah Revised Limited Liability Company Act;
(b) "articles of incorporation" includes a limited liability company's articles oforganization as that term is used in Section 48-2c-403;
(c) "board of directors" includes one or more persons who have, with respect to aninstitution described in Subsection (1), authority substantially similar to that of a board ofdirectors of a corporation;
(d) "bylaws" includes a limited liability company's operating agreement as that term isdefined in Section 48-2c-102;
(e) "corporation" includes a limited liability company organized under Title 48, Chapter2c, Utah Revised Limited Liability Company Act;
(f) "director" includes any of the following of a limited liability company:
(i) a manager;
(ii) a director; or
(iii) other person who has with respect to the institution described in Subsection (1),authority substantially similar to that of a director of a corporation;
(g) "dividend" includes distributions made by a limited liability company under Title 48,Chapter 2c, Part 10, Distributions;
(h) "incorporator" includes the organizers of a limited liability company as provided inTitle 48, Chapter 2c, Part 4, Formation;
(i) "officer" includes any of the following of an institution described in Subsection (1):
(i) an officer; or
(ii) other person who has with respect to the institution described in Subsection (1)authority substantially similar to that of an officer of a corporation;
(j) "security," "shares," or "stock" of a corporation includes:
(i) a membership interest in a limited liability company as provided in Title 48, Chapter2c, Part 7, Members; and
(ii) any certificate or other evidence of an ownership interest in a limited liabilitycompany; and
(k) "stockholder" or "shareholder" includes an owner of an interest in an institutiondescribed in Subsection (1) including a member as provided in Title 48, Chapter 2c, Part 7,Members.
(7) In accordance with Title 63G, Chapter 3, Utah Administrative Rulemaking Act, thecommissioner shall make rules governing the form of a request for approval filed under thissection.
(8) A depository institution organized under the laws of this state may not be organizedas or converted to a series of members, managers, or interests in a limited liability company asprovided in Section 48-2c-606.
Amended by Chapter 382, 2008 General Session