New law brings changes for Kentucky business owners
by Stites & Harbison, PLLC
Kentucky Senate Bill 150, also known as the “2010 Kentucky Business Entities Act,” was signed into law by Governor Beshear on April 13, 2010 and will become effective on July 15, 2010. Included among the provisions of the Act are the following:
- Elimination of the 60-day grace period for late delivery of annual reports beginning in 2011, meaning that beginning in 2011 the Kentucky Secretary of State may administratively dissolve any LLC, corporation, limited partnership or limited liability partnership that does not deliver its annual report to the Secretary of State on or before June 30th, 2011;
- Express obligations of good faith and fair dealing with respect to all parties to a Kentucky LLC’s operating agreement, including the LLC’s members and managers, in the discharge of all of their duties and the exercise of all of their rights related to that LLC, obligations which cannot be eliminated in the LLC’s operating agreement;
- Confirmation that a Kentucky LLC’s operating agreement may provide that a member’s LLC interest may be reduced, eliminated, subordinated, forfeited or sold as a result of that member failing to meet an obligation under the LLC’s operating agreement;
- Clarification of the nature of the duty of care and duty of loyalty owed by members and managers of a Kentucky LLC to the LLC and its members, unless provided otherwise in the LLC’s operating agreement;
- Default procedures allowing a member of a member-managed Kentucky LLC to resign from that LLC by giving 30 days written notice to that LLC and prohibiting a member of a manager-managed Kentucky LLC from resigning from that LLC without the consent of all of the other members of that LLC, unless otherwise provided by the LLC’s operating agreement.
- Language providing that, unless provided otherwise in a Kentucky non-profit corporation’s articles of incorporation, a member of a Kentucky non-profit corporation may be found personally liable for the acts or debts of the corporation as a result of that member’s own acts or conduct;
- Confirmation that a member, manager, employee or agent of a Kentucky LLC may be held liable for his or her own negligence, wrongful acts, or misconduct;
- A mechanism for Kentucky professional limited liability companies and Kentucky professional service corporations to convert to “non-professional” limited liability companies and corporations, respectively, by simply making certain amendments to their Articles; and
- Language empowering a Kentucky circuit court to order a special meeting of a corporation’s board of directors upon application by at least 1/3 of the members of that corporation’s board of directors.
Kentucky business owners should consider whether now is a good time to review their effective operational documents and seek advice as to how the changes included in this Act might impact their companies. Stites & Harbison’s Business & Finance Group is available to help analyze how the 2010 Kentucky Business Entities Act might impact your business and to assist with developing any necessary or desired revisions to your operational documents.
If you should have any questions regarding these changes, please feel free to contact Tyson Adams at [email protected] or (502) 681-0331.