The North Carolina Limited Liability Company Act underwent some substantial changes in 2014.
Additionally, the New LLC Act that took effect on January 1, 2014 applies to the North Carolina LLC’s formed before, on, or after January 1, 2014.
This article is the first in a series meant to provide information for NC LLC owners on some of the differences between the old LLC Act and the new LLC Act.
For example, in contrast to the old LLC Act, the new LLC Act could allow for an oral or implied agreement to amend the written Operating Agreement if the written Operating Agreement is silent on this issue.
Suppose an LLC formed in 1999 has a written Operating Agreement which does not contain language requiring amendments be in writing. Even though the requirement does not exist in the Operating Agreement, to be enforceable, modifications or amendments to the Operating Agreement would have to be in writing under the old LLC Act.
An example of an unenforceable oral amendment for this 1999 LLC might be:
In 2000, the members and company officials orally agree to change the profit sharing delineated in the 1999 Operating Agreement. For the next period of time, profit sharing is paid in accordance with the oral agreement.
However, without new agreement, oral or otherwise, the company official reverted to the original profit sharing plan as provided for in the Operating Agreement.
Outcome: The member is barred from asserting the oral agreement in 2000 altered the 1999 written Operating Agreement profit sharing provision under the old LLC Act.
The new LLC Act has changed the default rule that required all Operating Agreement amendments be in written form. So, if the above oral amendment to the 1999 LLC Operating Agreement was made in 2015 it could be enforceable, assuming the 1999 Operating Agreement is silent on oral amendments.
The above is only one example of the differences between the old LLC Act and new LLC Act. If you have questions about the parameters of your North Carolina LLC’s operating agreement in light of the new LLC Act, the business attorneys at Coward, Hicks & Siler are here to help provide answers. Let our experience be your business’s trusted guide. Our corporate and business transaction attorneys are available in all of our Western NC office locations.