CHAPTER 1. CORPORATIONS GENERALLY

Article 1. Formation.

Article 2. Organization, Bylaws, and Meetings [Repealed.]

Article 1. Powers.

Article 2. Limitations [Repealed.]

Article 3. Merger, Consolidation, Sale of Assets [Repealed.]

Article 4. Amendment of Articles.

Article 1. Capital Stock.

Article 2. Uniform Stock Transfer Act.

Article 3. Stockholders' Duties and Liabilities.

Article 4. Rights of Dissenting Stockholders.

Article 1. Annual Reports [Repealed.]

Article 2. Production of Books, Documents and Correspondence.

Article 3. Miscellaneous [Repealed.]

Article 1. Winding Up Affairs of a Corporation [Repealed.]

Article 2. Voluntary Liquidation through County Court [Repealed.]

Article 3. Voluntary Dissolution [Repealed.]

Article 4. Miscellaneous [Repealed.]

History

Statutory revision. 2011, No. 78 (Adj. Sess.), § 2 provides: "The legislative council, in its statutory revision authority under 2 V.S.A. § 424, is directed to replace the term 'commissioner of banking, insurance, securities, and health care administration' in the Vermont Statutes Annotated wherever it appears with the term 'commissioner of financial regulation'; and to replace the term 'department of banking, insurance, securities, and health care administration' wherever it appears with the term 'department of financial regulation.'"

Cross References

Cross references. Business corporations, see Title 11A.

Incorporation of professional persons, see § 801 et seq. of this title.

Nonprofit corporations, see Title 11B.

Scrip corporations, see § 921 et seq. of this title.

Worker cooperative corporations, see § 1081 et seq. of this title.

Subchapter 1. Citation and Application

§§ 1-4. Repealed. 1971, No. 237 (Adj. Sess.), § 100.

History

Former §§ 1-4. Former §§ 1-4, relating to citation of the chapter, was derived from V.S. 1947, § 5753; P.L. § 5786; G.L. § 4893; 1915, No. 141 , § 1.

Former § 2, relating to corporations formed prior to 1915, was derived from V.S. 1947, §§ 5830-5834; 1947, No. 202 §§ 5931; P.L. §§ 5856-5860; G.L. §§ 4945-4949; 1915, No. 141 , § 42.

Former § 3, relating to charters, was derived from V.S. 1947, § 5864; P.L. § 5887; G.L. § 4974; 1917, No. 254 , § 4860; 1915, No. 141 , § 42; P.S. § 4263; V.S. § 3686; R.L. § 3257; G.S. 86, § 22; 1851, No. 45 , § 1.

Former § 4, relating to public service companies, was derived from V.S. 1947, § 5835; P.L. § 5861; G.L. § 1915, No. 163 , § 8.

Subchapter 2. Formation, Bylaws, and Meetings

ARTICLE 1. Formation

§ 41. Repealed. 1971, No. 237 (Adj. Sess.), § 100.

History

Former § 41. Former § 41, relating to the general purposes of formation, was derived from V.S. 1947, § 5754; 1947, No. 202 , § 5853; P.L. § 5787; 1927, S., No. 6, § 1; G.L. § 4894; 1915, No. 141 , § 2; 1908, No. 103 ; P.S. § 4287; 1906, No. 116 , § 1; V.S. § 3704; 1892, No. 60 , § 1; 1888, No. 105 ; 1888, No. 111 ; 1888, No. 122 ; 1888, No. 127 ; 1886, No. 99 ; 1884, No. 105 , § 1; 1882, No. 72 ; R.L. §§ 3276, 3664; 1878, No. 79 ; 1878, No. 80 ; 1876, No. 100 ; 1874, No. 19 ; 1874, No. 21 ; 1874, No. 22 ; 1870, No. 6 , § 2; 1869, No. 36 ; 1867, No. 53 ; G.S. 86, § 42; G.S. 90, § 1; 1853, No. 71 , § 2; R.S. 81, § 1; R. 1797, p. 474, § 1; R. 1787, p. 1.

§ 42. Specific purposes.

Subject to the provisions of this title, one or more persons may form a private corporation for the specific purposes and in the manner following:

  1. To operate a regional clearinghouse and a cooperative loan plan, commonly called a central fund, or either, for those banks in the State which become stockholders or members of the corporation.  Such corporations may be organized only with the consent of the Commissioner of Financial Regulation, with or without capital stock.
    1. In addition to the powers conferred by this chapter, they shall have:
      1. all the powers necessary or convenient for carrying out the purposes herein set forth, including the power to receive deposits of funds from a member bank and to administer the same, and to require such deposits from all member banks in uniform percentages, but not in excess of three percent, of the total deposits of any one bank;
      2. to assist member banks when they are temporarily in need of cash or hold investments which cannot readily be liquidated;
      3. to borrow money and to pledge its assets as security therefor;
      4. to issue scrip to the extent and with such security and under such regulations as the Commissioner of Financial Regulation, with the consent of the Governor, may approve;
      5. to make loans to member banks and to guarantee the performance of any obligation of a member bank;
      6. to establish reserves, and to take over from member banks property, securities, or investments for the purpose of managing, liquidating, exchanging, or adjusting the same.
    2. Such corporations shall not be subject to the provisions of 8 V.S.A. chapters 1, 3, 21, 29, and 8 V.S.A. part 3 and 9 V.S.A. chapter 131; but their articles of association and bylaws shall be subject to the approval of the Commissioner of Financial Regulation.  They shall only invest their funds in securities approved by the Commissioner of Financial Regulation and shall be subject to inspection and examination by the Commissioner or his or her representative the same as State banks.
    3. Any bank organized under the laws of this State and any national bank in the State, with the approval of the Comptroller of the Currency, may become a stockholder or member of such a corporation under the terms and conditions prescribed in its charter or bylaws.  Such bank may subscribe for and hold shares in the capital stock of such a corporation, may make the required deposits hereinabove provided for and to the extent the Commissioner of Financial Regulation may approve, and may invest in and hold debentures or other obligations of such corporation.  A director or executive officer of a bank which is a stockholder of such corporation shall be eligible to the office of director of such corporation.
  2. To operate a corporation for the rehabilitation of individuals and families by enabling them to secure subsistence and gainful employment from the soil, from coordinate and affiliated industries and enterprises and otherwise, and to receive and administer money for that purpose which may become available from any source.  Such corporations shall have all the powers of corporations organized under this chapter and in addition thereto may loan money and secure the payment thereof by mortgage, pledge, or lien, insure or guarantee any indebtedness incurred by others, and become secured for so doing by mortgage, pledge, or lien.  Such corporations shall not be organized for profit, and shall not be subject to taxation, nor shall any stock or indebtedness of such corporations or any evidence thereof be taxable to any holder thereof under any provision of law.  The capital stock of such corporations may be with or without par value and the amount thereof, notwithstanding the provisions of this title, may be less than $500.00 and in case the stock has no par value then the number of shares of such stock may be less than ten, representing less than $500.00.  The Governor may designate any such corporation as his or her agent or an agency of the State to carry on rehabilitation activities within the State. Such corporations shall not be subject to the provisions of 8 V.S.A. chapters 1, 3, 21, and 29 and 8 V.S.A. part 3 and 9 V.S.A. chapter 131, or to the provisions of section 131 of this title.

    Amended 1969, No. 286 (Adj. Sess.), § 3, ratified 1971, No. 51 , § 19; 1989, No. 225 (Adj. Sess.), § 25(b); 1995, No. 180 (Adj. Sess.), § 38(a); 2011, No. 78 (Adj. Sess.), § 2, eff. April 2, 2012.

History

Source. V.S. 1947, § 5755. 1947, No. 202 , § 5854. 1935, No. 156 , § 1. P.L. § 5787. 1927, S., No. 6, § 1. G.L. § 4894. 1915, No. 141 , § 2. 1908, No. 103 . P.S. § 4287. 1906, No. 116 , § 1. V.S. § 3704. 1892, No. 60 , § 1. 1888, No. 105 . 1888, No. 111 . 1888, No. 122 . 1888, No. 127 . 1886, No. 99 . 1884, No. 105 , § 1. 1882, No. 72 . R.L. §§ 3276, 3664. 1878, No. 79 . 1878, No. 80 . 1876, No. 100 . 1874, No. 19 . 1874, No. 21 . 1874, No. 22 . 1870, No. 6 , § 2. 1869, No. 36 . 1867, No. 53 . G.S. 86, § 42. G.S. 90, § 1. 1853, p. 71, § 2. R.S. 81, § 1. R. 1797, p. 474, § 1. R. 1787, p. 1.

Reference in text. 8 V.S.A. chapters 21 and 29, referred to in subdiv. (1)(B) and (2), were repealed, respectively, by 1969, No. 64 , § 8, eff. Jan. 1, 1970, and 1969, No. 138 , § 5, eff. April 23, 1969.

Section 131 of this title, referred to in subdiv. (2), was repealed by 1971, No. 237 (Adj. Sess.), § 100, eff. Jan. 1, 1973.

Amendments--2011 (Adj. Sess.). Subdivs. (1), (1)(A)(iv), (1)(B), (1)(C): Substituted "Commissioner of Financial Regulation" for "Commissioner of Banking, Insurance, Securities, and Health Care Administration".

Amendments--1995 (Adj. Sess.) Subdiv. (1): Substituted "Commissioner of Banking, Insurance, Securities, and Health Care Administration" for "Commissioner of Banking, Insurance, Securities" wherever it appeared.

Amendments--1989 (Adj. Sess.). Subdiv. (1): Substituted "Commissioner of Banking, Insurance, and Securities" for "Commissioner of Banking and Insurance" wherever it appeared.

Amendments--1969 (Adj. Sess.). Deleted "of section 41" preceding "of this title" and substituted "one or more" for "such" preceding "persons" in the introductory paragraph, and in the fourth sentence of subdiv. (2), deleted "of section 261" preceding "of this title".

ANNOTATIONS

Analysis

1. Persons.

The word "persons" denotes natural persons only, and so the consolidation of several existing corporations into a new corporation cannot be accomplished by virtue of this section. State v. Rutland Railway, Light & Power Co., 85 Vt. 91, 81 A. 252 (1911).

2. Application to railroads.

This section is not applicable to railroad corporations. 1928-30 Op. Atty. Gen. 58.

§§ 43-49. Repealed. 1971, No. 237 (Adj. Sess.), § 100.

History

Former §§ 43-49. Former § 43, relating to articles of association, was derived from V.S. 1947, §§ 5756, 5757; P.L. § 5789; 1925, No. 81 , § 1; G.L. § 4895; 1915, No. 141 , § 3; P.S. §§ 4288, 4290, 4302; V.S. §§ 3705, 3707, 3719; 1892, No. 60 , §§ 2, 4, 16; 1884, No. 104 ; R.L. §§ 3277, 3281; 1874, No. 6 , § 14; 1874, No. 22 ; 1870, No. 6 , §§ 1, 14; G.S. 86, §§ 41, 56; 1853, No. 71 , §§ 1, 16.

Former § 44, relating to signing articles, was derived from V.S. 1947, § 5758; P.L. § 5789; 1925, No. 81 , § 1; G.L. § 4895; 1915, No. 141 , § 3; P.S. §§ 4288, 4290, 4302; V.S. §§ 3705, 3719; 1892, No. 60 , §§ 2, 4, 16; 1884, No. 104 ; R.L. §§ 3277, 3281; 1874, No. 6 , § 14; 1874, No. 22 ; 1870, No. 6 , §§ 1, 14; G.S. 86, §§ 41, 56; 1853, No. 71 , §§ 1, 16.

Former § 45, relating to recording articles, was derived from V.S. 1947, § 5763; 1947, No. 202 , § 5862; 1941, No. 139 , § 1; P.L. § 5794; G.L. § 4900; 1915, No. 141 , § 4; 1908, No. 103 ; P.S. §§ 4287, 4289; 1906, No. 116 , § 1; V.S. §§ 3704, 3706; 1892, No. 60 , §§ 1, 3; 1888, Nos. 105, 111, 122, 127; 1886, No. 99 ; 1884, No. 105 , § 1; 1882, No. 72 ; R.L. §§ 2278, 3276, 3664; 1878, Nos. 79, 80; 1876, No. 100 ; 1874, Nos. 19, 21, 22; 1870, No. 6 , §§ 2, 14; 1869, No. 36 ; 1867, No. 53 ; G.S. 86, §§ 42, 56; G.S. 90, § 1; 1853, No. 71 , §§ 2, 16; R.S. 81, § 1; R. 1797, p. 474, § 1; R. 1787, p. 1.

Former § 46, relating to corporate names, was derived from V.S. 1947, § 5759; P.L. § 5790; 1931, No. 94 , § 1; G.L. 4896; 1915, No. 141 , § 3; P.S. § 4288; V.S. § 3705; 1892, No. 60 , § 2; 1884, No. 104 ; R.L. § 3277; 1874, No. 22 ; 1870, No. 6 , § 14; G.S. 86, § 56; 1853, No. 71 , § 16, and amended by 1959, No. 262 , § 23.

Former § 47, relating to special requirements for cooperatives, was derived from V.S. 1947, § 5760.

Former § 48, relating to improper use of names, was derived from V.S. 1947, § 5761; P.L. § 5792; G.L. § 4898; 1915, No. 141 , § 5.

Former § 49, relating to corporate existence, was derived from V.S. 1947, § 5762; P.L. § 5793; G.L. 4899; 1915, No. 141 , § 3; P.S. § 4302; V.S. § 3719; 1892, No. 60 , § 16; R.L. § 3281; 1870, No. 6 , § 1; G.S. 86, § 41; 1853, No. 71 , § 1.

§ 50. Reorganization of corporations formed prior to 1915.

If the Secretary of State receives articles of association of a corporation to be formed under this chapter for the purpose of acquiring the assets and continuing the business of a corporation formed by special act or under the general laws of this State prior to April 1, 1915, and such fact is established by affidavit to his or her satisfaction, he or she shall record such articles of association of such corporation on payment of a fee of $15.00 and such corporation may assume the name of the corporation whose assets and business are to be so acquired.

Amended 1963, No. 37 , § 1; 1967, No. 278 (Adj. Sess.), § 3.

History

Source. V.S. 1947, § 5770. 1947, No. 202 , § 5869. P.L. § 5799. G.L. § 4905. 1915, No. 141 , § 43.

Amendments--1967 (Adj. Sess.). Substituted "$15.00" for "$10.00" following "on payment of a fee of".

Amendments--1963. Substituted "$10.00" for "$5.00" following "on payment of a fee of".

ARTICLE 2. Organization, Bylaws, and Meetings

§§ 61-67. Repealed. 1971, No. 237 (Adj. Sess.), § 100.

History

Former §§ 61-67. Former § 61, relating to meetings, was derived from V.S. 1947, §§ 5771, 5772; P.L. §§ 5800, 5801; G.L. §§ 4906, 4907; 1915, No. 141 , §§ 6, 7; P.S. §§ 4291, 4292; R. 1906, §§ 4142, 4143; V.S. §§ 3708, 3709; 1892, No. 60 , §§ 5, 6; R.L. § 3280; 1870, No. 6 , § 5; G.S. 86, § 45; 1853, No. 71 , § 5.

Former § 62, relating to bylaws, was derived from 1951, No. 120 , § 1; V.S. 1947, §§ 5773, 5774; P.L. § 5802; G.L. § 4908; 1915, No. 141 , § 8; P.S. § 4293; V.S. § 3710; 1892, No. 60 , § 7; R.L. § 3281; 1870, No. 6 , § 1; G.S. 86, § 41; 1853, No. 71 , § 1.

Former § 63, relating to stockholders' and directors' meetings, was derived from 1951, No. 120 , § 1; V.S. 1947, § 5774; P.L. § 5802; G.L. § 4908; 1915, No. 141 , § 8; P.S. § 4293; V.S. § 3710; 1892, No. 60 , § 7; R.L. § 3281; 1870, No. 6 , § 1; G.S. 86, § 41; 1853, No. 71 , § 1, and amended by 1963, No. 117 .

Former § 64, relating to quorum, voting and proxies, was derived from 1951, No. 122 ; V.S. 1947, §§ 5784, 5785; P.L. §§ 5811, 5812; 1933, No. 157 , § 5504; 1925, No. 79 , § 1; G.L. §§ 4917, 4918; 1915, No. 141 , § 14; P.S. § 4301; V.S. § 3718; 1892, No. 60 , § 15; R.L. § 3286; 1870, No. 6 , § 10; G.S. 86, § 50; 1853, No. 71 , § 10.

Former § 65, relating to procedures upon failure to hold annual meeting, was derived from V.S. 1947, § 5860; P.L. § 5883; G.L. § 4972; 1915, No. 141 , § 39; P.S. § 4294; V.S. § 3711; 1892, No. 60 , § 7.

Former § 66, relating to appointment of members of non-stock corporations, was derived from 1949, No. 134 , § 3; V.S. 1947, § 5861; P.L. § 5884; G.L. § 4973; 1915, No. 141 , § 40.

Former § 67, relating to death of an incorporator, was derived from V.S. 1947, § 5775; 1947, No. 202 , § 5874; P.L. § 5803; G.L. § 4909; 1908, No. 102 .

Subchapter 3. Powers and Amendments

ARTICLE 1. Powers

§§ 101-107. Repealed. 1971, No. 237 (Adj. Sess.), § 100.

History

Former §§ 101-107. Former § 101, relating to general powers, was derived from V.S. 1947, § 5786; P.L. § 5813; G.L. § 4919; 1915, No. 141 , § 15; P.S. §§ 4302-4304; V.S. §§ 3719-3721; 1892, No. 60 , §§ 16-18; R.L. §§ 3281, 3282; 1870, No. 6 , §§ 1, 9; G.S. 86, §§ 41, 47; 1853, No. 71 , §§ 1, 7.

Former § 102, relating to the power to confer degrees, was derived from V.S. 1947, § 5764; 1947, No. 202 , § 5863; 1941, No. 139 , § 2; P.L. § 5815; 1925, No. 80 ; G.L. § 4921; 1915, No. 141 , § 15; P.S. § 4320; R. 1906, § 4171; V.S. § 3740; 1892, No. 60 , § 35, and amended by 1967, No. 44 , § 2.

Former § 103, relating to power to take property in payment of debt, was derived from 1951, No. 123 , § 1; V.S. 1947, § 5787; P.L. § 5814; G.L. § 4920; 1915, No. 141 , § 16; P.S. §§ 4303, 4304; V.S. §§ 3720, 3721; 1892, No. 60 , §§ 17, 18; R.L. § 3282; 1870, No. 6 , § 9; G.S. 86, § 47; 1853, No. 71 , § 7.

Former § 104, relating to power to own corporate stock, was derived from 1951, No. 123 , § 2; V.S. 1947, § 5790; P.L. § 5818; G.L. § 4924; 1915, No. 141 , § 17, and amended by 1961, No. 27 .

Former § 105, relating to power to contract with its directors, was derived from V.S. 1947, § 5800; 1947, No. 202 , § 5899; P.L. § 5827; G.L. § 4927; 1915, No. 141 , § 26.

Former § 106, relating to power of an eleemosynary corporation to change locations, was derived from V.S. 1947, § 5801; P.L. § 5828; G.L. § 4928; 1917, No. 254 , § 4815; 1915, No. 244 .

Former § 107, relating to the power to make contributions, was derived from 1955, No. 81 , § 1; V.S. 1947, § 5786(8), as added by 1953, No. 88 , and repealed by 1955, No. 81 , § 3.

§ 108. Banks, trust and mutual insurance companies.

A corporation organized under the provisions of 8 V.S.A. chapter 202 or 203, to conduct the business of a financial institution, and a mutual insurance company organized under the provisions of 8 V.S.A. chapter 101, may make such contributions for religious, charitable, scientific, literary, or educational purposes as are authorized by its directors or trustees to an amount not to exceed five percent of its net income for the previous calendar year computed in the manner specified by the Internal Revenue Code in effect during the year applicable for corporations. Contributions in excess of the five percent of the net income may be made by a vote of its stockholders, depositors, or members.

Amended 1967, No. 74 , eff. April 6, 1967; 2011, No. 21 , § 10.

History

Source. 1955, No. 81 , § 2.

Reference in text. 8 V.S.A. chapter 21, referred to in this section, was repealed by 1969, No. 68 , § 8, eff. Jan. 1, 1970.

Amendments--2011. Substituted "chapter 202 or 204" for "chapter 21" and "financial institution" for "savings bank having no capital stock or of a trust company" in the first sentence; and inserted "depositors" following "stockholders" in the second sentence.

Amendments--1967. Substituted "Internal Revenue Code" for "Vermont franchise tax law" preceding "in effect during the year applicable" in the first sentence and added second sentence.

ARTICLE 2. Limitations

§§ 131-133. Repealed. 1971, No. 237 (Adj. Sess.), § 100.

History

Former §§ 131-133. Former § 131, relating to holding companies, was derived from V.S. 1947, § 5791; P.L. § 5819; G.L. § 4925; 1915, No. 141 , § 18.

ARTICLE 3. Merger, Consolidation, Sale of Assets

§§ 161-168. Repealed. 1971, No. 237 (Adj. Sess.), § 100.

History

Former §§ 161-168. Former § 161, relating to solvent corporations, was derived from V.S. 1947, § 5792; 1943, No. 115 , § 1; P.L. § 5820; 1919, No. 125 , § 1; G.L. § 4926; 1915, No. 141 , § 22, and amended by 1963, No. 35 , § 1.

Former § 162, relating to procedure, was derived from V.S. 1947, § 5793; 1943, No. 115 , § 2; P.L. § 5821; 1919, No. 125 , § 1; G.L. § 4926; 1915, No. 141 , § 22, and amended by 1963, No. 35 , § 2.

Former § 163, relating to sale of acquired stock, was derived from V.S. 1947, § 5794; P.L. § 5822; 1919, No. 125 , § 1; G.L. § 4926; 1915, No. 141 , § 22, and amended by 1959, No. 262 , § 24.

Former § 164, relating to insolvent corporations, was derived from V.S. 1947, § 5795; 1943, No. 115 , § 3; P.L. § 5823; 1919, No. 125 , § 1; G.L. § 4926; 1915, No. 141 , § 22.

Former § 165, relating to rights of purchasing insolvent corporations, was derived from V.S. 1947, § 5796; 1943, No. 115 , § 4; P.L. § 5824; 1919, No. 125 , § 1; G.L. § 4926; 1915, No. 141 , § 22.

Former § 166, relating to rights of creditors, was derived from V.S. 1947, § 5797; 1943, No. 115 , § 5; P.L. § 5825; 1919, No. 125 , § 1; G.L. § 4926; 1915, No. 141 , § 22, and amended by 1971, No. 185 (Adj. Sess.), § 26.

Former § 167, relating to recording of contracts, was derived from V.S. 1947, § 5798; 1943, No. 115 , § 6; P.L. § 5826; 1919, NO. 125, § 1; G.L. § 4926; 1915, No. 141 , § 22.

Former § 168, relating to fees, was derived from V.S. 1947, § 5799; 1947, No. 202 , § 5898; 1943, No. 115 , § 7.

ARTICLE 4. Amendment of Articles

§§ 191-195. Repealed. 1971, No. 237 (Adj. Sess.), § 100.

History

Former §§ 191-195. Former § 191, relating to amendments generally, was derived from 1951, No. 181 , § 1; V.S. 1947, § 5765; 1937, No. 162 , § 1; P.L. § 5795; 1933, No. 157 , § 5487; 1925, No. 77 ; 1921, No. 146 , § 1; G.L. § 4901; 1915, No. 141 , § 21; 1912, No. 157 ; 1910, No. 144 ; P.S. §§ 4317-4319; 1906, § 4170; 1904, No. 89 , § 1; 1898, No. 68 , § 1; V.S. § 3734; 1892, No. 60 , § 32.

Former § 192, relating to voting, was derived from 1951, No. 119 ; V.S. 1947, § 5766; 1937, No. 162 , § 1; P.L. § 5795; 1933, No. 157 , § 5487; 1925, No. 81 , § 2; 1925, No. 77 ; 1921, No. 146 , § 1; G.L. § 4901; 1915, No. 141 , § 21; 1912, No. 157 ; 1910, No. 144 ; P.S. §§ 4317-4319; 1906, § 4170; 1904, No. 89 , § 1; 1898, No. 68 , § 1; V.S. § 3734; 1892, No. 60 , § 32.

Former § 193, relating to certificates of amendment, was derived from 1951, No. 118 , § 2; V.S. 1947, § 5767; P.L. § 5796; G.L. § 4902; 1915, No. 141 , § 21.

Former § 194, relating to recording amendments, was derived from V.S. 1947, § 5768; 1947, No. 202 , § 5867; P.L. § 5797; G.L. § 4903; 1915, No. 141 , § 21; 1912, No. 157 ; 1910, No. 144 ; P.S. §§ 4317, 4319; R. 1906, § 4170; 1904, No. 89 , § 1; V.S. § 3734; 1892, No. 60 , § 32.

Former § 195, relating to amendments affecting existing liability, was derived from V.S. 1947, § 5769; P.L. § 5798; G.L. § 4904; 1915, No. 141 , § 21.

§ 196. Power of historical corporations to amend articles.

  1. A corporation, not organized for profit, existing either by special act under the general law, formed for the purpose of erecting and maintaining monuments for the commemoration of historical events, or for the purpose of caring for and maintaining an historical monument owned by the State or located on its land, may, by vote of a majority of its members, amend its charter or articles of association so as to include therein the following powers:
    1. to own, establish, manage, and maintain a museum for the preservation of historical objects;
    2. to maintain and preserve other historical monuments and markers;
    3. to provide or remove limitations as to the number of its members; and
    4. to provide for the payment of membership dues and for different classes of memberships with varying rates of dues.
  2. When such amendment is adopted, a certificate thereof shall be sent to the Secretary of State, executed by the president and clerk, or by a majority of the directors or trustees.  The Secretary shall, without fee, record the same if it conforms generally to provisions of this chapter.

History

Source. V.S. 1947, §§ 5862, 5863. P.L. §§ 5885, 5886. 1933, No. 157 , §§ 5577, 5578. 1927, No. 85 , § 1. 1925, No. 78 .

Subchapter 4. Directors and Officers

§§ 221-230. Repealed. 1971, No. 237 (Adj. Sess.), § 100.

History

Former §§ 221-230. Former § 221, relating to the board of directors, was derived from V.S. 1947, § 5779; P.L. § 5806; G.L. § 4912; 1915, No. 141 , § 10; 1910, No. 143 , § 2; P.S. §§ 4249, 4300; V.S. §§ 3677, 3717; 1892, No. 60 , § 14; 1886, No. 79 ; R.L. §§ 3252, 3283-3285; 1870, No. 6 , §§ 6-8; G.S. 86, §§ 1, 46, 48, 51; 1854, No. 23 ; 1853, No. 71 , §§ 6, 8, 11.

Former § 222, relating to the board of trustees, was derived from 1951, No. 120 , § 2; V.S. 1947, § 5780; 1945, No. 136 , § 1; P.L. § 5807; G.L. § 4913; 1915, No. 141 , § 11; 1910, No. 143 , § 2; P.S. § 4300; V.S. § 3717; 1892, No. 60 , § 14; 1886, No. 79 ; R.L. §§ 3283-3285; 1870, No. 6 , §§ 6-8; G.S. 86, §§ 46, 48, 51; 1853, No. 71 , §§ 6, 8, 11.

Former § 223, relating to the executive committee, was derived from V.S. 1947, § 5781; P.L. § 5808; G.L. § 4914; 1915, No. 141 , § 12; 1910, No. 143 , § 2.

Former § 224, relating to the president and treasurer, was derived from 1955, No. 41 ; V.S. 1947, § 5782; P.L. § 5809; G.L. § 4915; 1915, No. 141 , § 13; 1910, No. 143 , § 2; P.S. § 4300; V.S. § 3717; 1892, No. 60 , § 14; 1886, No. 79 ; R.L. §§ 3283-3285; 1870, No. 6 , §§ 6-8; G.S. 86, §§ 46, 48, 51; 1853, No. 71 , §§ 6, 8, 11.

Former §§ 225 and 226, relating to compensation of officers and misappropriation of funds, were derived from V.S. 1947, § 5783; P.L. § 5810; G.L. § 4916; 1915, No. 141 , § 25; P.S. §§ 4262, 5768; V.S. §§ 3685, 4952; 1884, No. 105 , § 3.

Former § 227, relating to liability of directors, was derived from V.S. 1947, § 5827; P.L. § 5853; G.L. § 4942; 1915, No. 141 , §§ 24, 29.

Former § 228, relating to liability of directors for paying dividends, was derived from V.S. 1947, § 5824; P.L. § 5850; 1933, No. 157 , § 5542; G.L. § 4939; 1915, No. 141 , § 24; 1910, No. 143 , § 8; P.S. § 4306; V.S. § 3723; 1892, No. 60 , § 20; 1886, No. 79 ; R.L. § 3287; 1870, No. 6 , S 19; G.S. 86, § 61; 1853, No. 71 , § 21.

Former § 229, relating to election and qualifications of clerks, was derived from V.S. 1947, § 5776; P.L. § 5804; G.L. § 4910; 1915, No. 141 , § 9; P.S. §§ 4257, 4295; R. 1906, § 4108; V.S. §§ 3680, 3681, 3712; 1892, No. 60 , § 8; R.L. §§ 3267, 3268; G.S. 86, §§ 6, 7; R.S. 79, §§ 4, 5; 1817, pp. 103, 104, and amended by 1961, No. 25 .

Former § 230, relating to the duties of the clerk, was derived from V.S. 1947, §§ 5777, 5778; 1937, No. 163 , § 1; P.L. § 5805; G.L. § 4911; 1915, No. 141 , § 30; P.S. §§ 4260, 4296, 4316; V.S. §§ 3683, 3713, 3733; 1892, No. 60 , §§ 9, 15; R.L. §§ 3270, 3294; 1870, No. 6 , § 15; G.S. 86, § 9; R.S. 79, § 7; 1815, p. 30, and amended by 1963, No. 37 , § 3; 1967, No. 278 (Adj. Sess.), § 5.

§ 231. Acknowledgments by stockholder or officer.

A person legally qualified to take acknowledgments shall not be disqualified to take such acknowledgments to an instrument in which a corporation is a party, by reason of his or her being a stockholder in or an officer or employee of such corporation.

History

Source. V.S. 1947, § 5828. P.L. § 5854. G.L. § 4943. 1917, No. 95 , § 1.

Cross References

Cross references. Appointment of notaries public, see 24 V.S.A. § 441.

Subchapter 5. Stock and Stockholders

ARTICLE 1. Capital Stock

§§ 261-272. Repealed. 1971, No. 237 (Adj. Sess.), § 100.

History

Former §§ 261-272. Former § 261, relating to capital stock requirements, was derived from V.S. 1947, § 5802; 1941, No. 140 ; 1937, No. 30 , § 2; P.L. § 5829; 1925, No. 81 , § 3; G.L. § 4929; 1915, No. 141 , § 3; 1910, No. 143 , § 4; P.S. § 4311; V.S. § 3728; 1892, No. 60 , §§ 25, 26; R.L. §§ 3288, 3289; 1872, No. 21 ; 1870, No. 6 , §§ 3, 12; G.S. 86, §§ 43, 54; 1853, No. 71 , §§ 3, 14.

Former § 262 relating to shares of stock, was derived from V.S. 1947, § 5808; 1947, No. 202 , § 5907; P.L. 5834; 1927, No. 86 ; 1925, No. 81 , § 6.

Former § 263, relating to preferred stock, was derived from 1955, No. 112 , §§ 1, 2; V.S. 1947, §§ 5809, 5816; 1939, No. 173 ; P.L. §§ 5835, 5842; 1925, No. 81 , § 6; G.L. § 4934; 1915, No. 141 , § 32; 1910, No. 143 , § 4.

Former § 264, relating to provisions applying to non par value stock, was derived from V.S. 1947, § 5810; P.L. § 5836; 1925, No. 81 , § 6.

Former § 265, relating to stock subscriptions, was derived from V.S. 1947, § 5815; P.L. § 5841; 1931, No. 95 , § 1; G.L. § 4933; 1915, No. 141 , § 27.

Former § 266, relating to consideration for stock, was derived from V.S. 1947, § 5803; P.L. § 5830; 1925, No. 81 , § 4; G.L. § 4930; 1917, No. 142 ; 1915, No. 141 , § 19; 1910, No. 143 , §§ 6, 7; 1908, No. 116 , § 16; P.S. § 4312; V.S. § 3729; 1892, No. 60 , § 27; R.L. § 3290; 1874, No. 22 , § 2; 1870, No. 6 , § 14; G.S. 86, § 57; 1853, No. 71 , § 17.

Former § 267, relating to issuance of stock, was derived from V.S. 1947, § 5804; 1947, No. 202 , § 5903; P.L. § 5830; 1925, No. 81 , § 4; G.L. § 4930; 1917, No. 142 ; 1915, No. 141 , § 19; 1910, No. 143 , §§ 6, 7; 1908, No. 116 , § 16; P.S. § 4312; V.S. § 3729; 1892, No. 60 , § 27; R.L. § 3290; 1874, No. 22 , § 2; 1870, No. 6 , § 14; G.S. 86, § 57; 1853, No. 71 , § 17.

Former § 268, relating to failure to file an affidavit, was derived from V.S. 1947, § 5805; P.L. § 5831; 1925, No. 81 , § 4; G.L. § 4930; 1917, No. 142 ; 1915, No. 141 , § 19; 1910, No. 143 , §§ 6, 7; 1908, No. 116 , § 16; P.S. § 4312; V.S. § 3729; 1892, No. 60 , § 27; R.L. § 3290; 1874, No. 22 , § 2; 1870, No. 6 , § 14; G.S. 86, § 57; 1853, No. 71 , § 17.

Former § 269, relating to commencement of business, was derived from V.S. 1947, § 5806; P.L. § 5832; G.L. § 4931; 1915, No. 141 , § 20; 1910, No. 143 , § 3; P.S. §§ 4250, 4305; R. 1906, §§ 4106, 4156; V.S. §§ 3678, 3722; 1892, No. 60 , § 19; R.L. §§ 3253, 3278, 3279; 1874, Nos. 20, 22; 1870, No. 6 , §§ 14, 20; G.S. 86, §§ 56, 62; 1853, No. 71 , §§ 16, 22.

Former §§ 270-272, relating to changes in par value and non par value stock, were derived from 1951, No. 118 , § 4; V.S. 1947, § 5813; P.L. § 5839; 1925, No. 81 , § 9.

§ 273. Public service corporations, powers of Commission.

In authorizing the issue by a corporation, subject to its jurisdiction, of stock without par value as provided by section 262 of this title, the Public Utility Commission shall ascertain the amount of money that is reasonably necessary for the corporation for which such issue of stock has been authorized by the corporation. The Commission shall fix the number of additional shares to be issued and the price per share at such number and prices as in its opinion the public interests shall require, taking into consideration the outstanding securities of the corporation, the value of its property devoted to the public use, the principal market value of such additional shares, and any other pertinent matters.

Amended 1959, No. 329 (Adj. Sess.), § 39, eff. March 1, 1961; 2017, No. 53 , § 12.

History

Source. V.S. 1947, § 5814. 1947, No. 202 , § 5913. P.L. § 5840. 1925, No. 81 , § 10.

Reference in text. Section 262 of this title, referred to in this section, was repealed by 1971, No. 237 (Adj. Sess.), § 100, eff. Jan. 1, 1973.

2017. Substituted "Public Utility Commission" for "Public Service Board" in the first sentence and "Commission" for "Board" in the second sentence in accordance with 2017, No. 53 , § 12.

Amendments--1959 (Adj. Sess.). Substituted "Board" for "commission" following "Public Service" in the first sentence and preceding "shall fix the number" in the second sentence.

Cross References

Cross references. Matters supervised by the Public Service Board, see 30 V.S.A. § 101 et seq.

§ 274. Attachment and sale of stock.

Shares of the capital stock in a private corporation may be attached by actually seizing the certificate, or certificates, or by leaving a copy of the attachment with the clerk of such corporation, and such attachment shall be valid except as to holders for value. After receiving notice of the attachment, if the defendant transfers such stock or, if he or she has not previously transferred or pledged such stock, he or she refuses to deliver the same to the attaching officer on demand, he or she shall be liable for the conversion of the same. The purchaser of such stock at an execution sale shall cause the certificate, or certificates, of such stock with an attested copy of the execution and officers' return thereon to be left with the clerk of the corporation within 12 days after the sale, and the title of the stock so sold shall vest in the purchaser.

History

Source. V.S. 1947, § 5818. P.L. § 5844. 1923, No. 88 . G.L. § 4935. 1915, No. 141 , § 33. P.S. §§ 4270-4272. V.S. §§ 3693-3695. R.L. §§ 3262-3264. G.S. 86, §§ 5, 10, 11. 1852, No. 22 , §§ 1, 2. R.S. 79, §§ 3, 8. 1821, p. 80. 1815, p. 27.

Cross References

Cross references. Attachment generally, see 12 V.S.A. § 3251 et seq.

ANNOTATIONS

1. Subsequent attachment and execution.

The sale of railroad stock upon an execution against railroad company did not exempt it under this section from subsequent attachment and execution in other suits against the corporation, nor from the levy of an alias execution, issued for the unsatisfied balance of the judgment upon which the stock had already been sold; nor was there any distinction in that respect between debts against the corporation, which accrued before and those which accrued after the first sale of stock upon execution. Chandler v. Henry, 30 Vt. 330 (1857).

§ 275. Repealed. 1971, No. 237 (Adj. Sess.), § 100.

History

Former § 275. Former § 275, relating to transfer of stock, was derived from 1951, No. 124 ; V.S. 1947, § 5817; P.L. § 5843; 1933, No. 110 , § 1; 1923, No. 88 ; G.L. § 4935; 1915, No. 141 , § 33; P.S. §§ 4270-4272; V.S. §§ 3693-3695; R.L. §§ 3262-3264; G.S. 86, §§ 5, 10, 11; 1852, No. 22 , §§ 1, 2; R.S. 79, §§ 3, 8; 1821, p. 80; 1815, p. 27.

§ 276. Repealed. 1959, No. 262, § 37.

History

Former § 276. Former § 276, relating to lost or destroyed stock certificates, was derived from V.S. 1947, § 5820; P.L. § 5846; G.L. § 4937; 1915, No. 141 , § 35; P.S. §§ 4273-4275; V.S. §§ 3696-3698; R.L. §§ 3265, 3266; G.S. 86, §§ 20, 21; 1857, No. 40 , §§ 1, 2.

§ 277. Repealed. 1971, No. 237 (Adj. Sess.), § 100.

History

Former § 277. Former § 277, relating to pledges of stock and voting rights, was derived from V.S. 1947, § 5819; P.L. § 5845; G.L. § 4936; 1915, No. 141 , § 34.

ARTICLE 2. Uniform Stock Transfer Act

§§ 301-322. Repealed. 1966, No. 29, § 3.

History

Former §§ 301-322. Former §§ 301-322, relating to stock transfer, were derived from V.S. 1947, §§ 5865-5886; 1947, No. 103 , §§ 1-21.

ARTICLE 3. Stockholders' Duties and Liabilities

§§ 361-363. Repealed. 1971, No. 237 (Adj. Sess.), § 100.

History

Former §§ 361-363. Former § 361, relating to liability on fully paid shares of stock, was derived from V.S. 1947, § 5826; P.L. § 5852; G.L. § 4941; 1915, No. 141 , § 28.

Former § 362, relating to liability for improperly paid dividends, was derived from V.S. 1947, § 5825; P.L. § 5851; G.L. § 4940; 1915, No. 141 , § 24; P.S. § 4309; V.S. § 3726; 1892, No. 60 , § 23; 1886, No. 79 ; R.L. § 3293; 1870, No. 6 , § 18; G.S. § 60; 1853, No. 71 , § 20.

Former § 363, relating to surrendering certificates, was derived from 1951, No. 118 , § 3; 1949, No. 134 , § 1; V.S. 1947, § 5807; P.L. § 5833; 1925, No. 81 , § 5; G.L. § 4932; 1915, No. 141 , § 21.

ARTICLE 4. Rights of Dissenting Stockholders

§§ 381-383. Repealed. 1971, No. 237 (Adj. Sess.), § 100.

History

Former §§ 381-383. Former § 381, relating to the right to demand payment, was derived from V.S. 1947, § 5821; 1943, No. 115 , § 8; P.L. § 5847; 1919, No. 125 , § 2; G.L. § 4938; 1915, No. 141 , § 23.

Former § 382, relating to arbitration, was derived from V.S. 1947, § 5822; 1943, No. 115 , § 9; P.L. § 5848; 1919, No. 125 , § 2; G.L. § 4938; 1915, No. 141 , § 23.

Former § 383, relating to transfer of credit upon payment, was derived from V.S. 1947, § 5823; P.L. § 5849; 1919, No. 125 , § 2; G.L. § 4938; 1915, No. 141 , § 23.

Subchapter 6. Books, Records and Reports

ARTICLE 1. Annual Reports

§§ 421-423. Repealed. 1971, No. 237 (Adj. Sess.), § 100.

History

Former §§ 421-423. Former § 421, relating to reports to the secretary of state, was derived from 1955, No. 31 ; V.S. 1947, § 5858; P.L. § 5882; 1923, No. 89 , § 1; G.L. § 4971; 1917, No. 254 , § 4857; 1915, No. 141 , § 38, and amended by 1961, No. 77 , § 1; 1967, No. 278 (Adj. Sess.), § 6; 1969, No. 140 , § 1.

Former § 422, relating to penalties for failure to file, was derived from V.S. 1947, § 5859; 1947, No. 202 , § 5956; P.L. § 5882; 1923, No. 89 , § 1; G.L. § 4971; 1917, No. 254 , § 4857; 1915, No. 141 , § 38.

Former § 423, relating to dissolution for failure to file, was derived from 1949, No. 136 , § 1, and amended by 1969, No. 140 , § 2.

ARTICLE 2. Production of Books, Documents and Correspondence

§ 441. Corporation to produce books on notice.

  1. A corporation doing business within this State, whether organized under the laws of this or any other state or country, when notice therefor is served upon it according to the provisions of section 442 of this title, shall produce before any court, magistrate, grand jury, tribunal, or commission, acting under the authority of this State, all books, documents, correspondence, memoranda, papers, and data which may contain any information concerning any suit, proceedings, action, charge, or subject of inquiry pending before or to be determined by the court, magistrate, grand jury, tribunal, or commission, except a civil action in a Superior Court, and which have been made or kept at any time within this State, and are in the custody or control of the corporation in this State or elsewhere at the time of service of the notice upon it.
  2. When notice therefor is served upon it according to the provisions of section 442 of this title, the corporation shall produce before any court, magistrate, grand jury, tribunal, or commission acting under the authority of this State, all books, documents, correspondence, memoranda, papers, and data which may contain any information concerning any suit, proceedings, action, charge, or subject of inquiry pending before or to be determined by the court, magistrate, grand jury, tribunal, or commission, except a civil action in a Superior Court, and which in any way relate to or contain entries, data, or memoranda concerning any transaction within this State or with any party residing or having a place of business within this State, and which are in the custody or control of the corporation in this State or elsewhere at the time of service of notice upon it.

    Amended 1971, No. 185 (Adj. Sess.), § 27, eff. March 29, 1972; 1973, No. 193 (Adj. Sess.), § 3, eff. April 9, 1974; 2009, No. 154 (Adj. Sess.), § 64.

History

Source. V.S. 1947, §§ 5836, 5837. P.L. §§ 5862, 5863. 1919, No. 126 , §§ 1, 2. G.L. §§ 4951, 4952. P.S. §§ 4252, 4253. 1906, No. 75 , §§ 1, 2.

Amendments--2009 (Adj. Sess.) Subsecs. (a) and (b): Deleted "or the district court" following "superior court" and made minor changes in punctuation throughout the subsec.

Amendments--1973 (Adj. Sess.). Substituted "superior" for "county" following "except a civil action in a" in subsecs. (a) and (b).

Amendments--1971 (Adj. Sess.). Substituted "the" for "such" where it appeared and inserted "except a civil action in a county court or the district court" preceding "and which have been made or kept" in subsecs. (a) and (b).

Cross References

Cross references. Production of documents in civil actions, see V.R.C.P. 34.

ANNOTATIONS

Analysis

1. Constitutionality.

This section does not take property without due process of law since the law provides fees and mileage for witnesses, and any loss from inadequate fees is incident to the legitimate exercise of the powers of the government for the public good. In re Consolidated Rendering Co., 80 Vt. 55, 66 A. 790 (1907), aff'd, 207 U.S. 541, 28 S. Ct. 178, 52 L. Ed. 327 (1908).

This section does not violate the fourteenth amendment of the federal constitution by discriminating between corporations and natural persons, and denying to the former equal protection of the laws; it merely eliminates the pre-existing discrimination by requiring of a corporation what could formerly be demanded of a natural person by subpoena duces tecum. In re Consolidated Rendering Co., 80 Vt. 55, 66 A. 790 (1907), aff'd, 207 U.S. 541, 28 S. Ct. 178, 52 L. Ed. 327 (1908).

The provision of this section, authorizing a fine for contempt in case of refusal to produce documentary evidence when ordered, does not violate the fourteenth amendment of the federal constitution by depriving corporation of property without due process of law, since the proceedings for punishing the contempt are in accordance with the ordinary mode prescribed by law in such cases and adapted to the end to be attained. In re Consolidated Rendering Co., 80 Vt. 55, 66 A. 790 (1907), aff'd, 207 U.S. 541, 28 S. Ct. 178, 52 L. Ed. 327 (1908).

Section is not in violation of the eleventh article of the constitution of Vermont, relating to the search or seizure of property and the certainty of description in warrants therefor, since it restricts the order to such books and papers as contain information concerning the subject of inquiry, and leaves it for the tribunal to determine only what books and papers are needed and to describe them in the order as far as practicable. In re Consolidated Rendering Co., 80 Vt. 55, 66 A. 790 (1907), aff'd, 207 U.S. 541, 28 S. Ct. 178, 52 L. Ed. 327 (1908).

An order issued under this section, directing a corporation to produce certain documentary evidence before a grand jury, and contempt proceedings for a violation thereof, was not an infringement of the eleventh article of the constitution of Vermont relating to the search and seizure of property. In re Consolidated Rendering Co., 80 Vt. 55, 66 A. 790 (1907), aff'd, 207 U.S. 541, 28 S. Ct. 178, 52 L. Ed. 327 (1908).

An order issued under this section, directing a corporation to produce before a grand jury certain books and papers, and sufficiently describing them, has the force of a subpoena duces tecum, and where it requires no search by the corporation to find the books and papers demanded and entails no hardship to produce them, the order does not constitute an unreasonable search and seizure in violation of the eleventh article of the constitution of Vermont. In re Consolidated Rendering Co., 80 Vt. 55, 66 A. 790 (1907), aff'd, 207 U.S. 541, 28 S. Ct. 178, 52 L. Ed. 327 (1908).

Order issued against a corporation under this section, directing it to produce certain documentary evidence before a grand jury, and contempt proceedings for a violation thereof, were not contrary to the tenth article of the constitution of Vermont, which provides that no one can be compelled to give incriminating evidence against himself, since the corporation was not a party nor charged with any crime, but simply summoned to appear before the grand jury with the documentary evidence, where the privilege against self-incrimination could have been claimed if desired. In re Consolidated Rendering Co., 80 Vt. 55, 66 A. 790 (1907), aff'd, 207 U.S. 541, 28 S. Ct. 178, 52 L. Ed. 327 (1908).

2. Removal of documents from state.

If a foreign corporation doing business in this State, in anticipation of being called to produce its books and papers in a criminal proceeding, removes such books and papers from this to another state, it cannot be permitted to plead that act as an excuse for not obeying a subpoena to produce them. In re Consolidated Rendering Co., 80 Vt. 55, 66 A. 790 (1907), aff'd, 207 U.S. 541, 28 S. Ct. 178, 52 L. Ed. 327 (1908).

Books and papers of a foreign corporation doing business in this State which are required as evidence in legal proceedings here, though they have been removed to another state by the corporation, are still within the jurisdiction of Vermont's courts, since the corporation is within that jurisdiction and the books and papers are within the control of the corporation. In re Consolidated Rendering Co., 80 Vt. 55, 66 A. 790 (1907), aff'd, 207 U.S. 541, 28 S. Ct. 178, 52 L. Ed. 327 (1908).

§ 442. Notice for production.

Such notice to produce shall issue from the court, magistrate, tribunal, or commission before which the production is required. The notice shall describe in a general way what is required to be produced, and shall state the time when and place where the production is required. Service of the notice shall be made in the same manner as the law provides for the service of a summons upon such corporation, and shall give such corporation at least six days' time within which to comply. When such corporation has no officer, agent, or attorney to receive service of process as provided by law, service of the notice may be made upon the manager of its business within this State, or the person in charge of its property within this State, or upon its attorney within this State, or upon the Secretary of State, in the same manner as the law provides for the service of a summons.

History

Source. V.S. 1947, § 5838. P.L. § 5864. 1919, No. 126 , § 3. G.L. § 4953. P.S. § 4254. 1906, No. 75 , § 3.

Revision note. Deleted "writ of" preceding "summons" in the third and fourth sentences to conform the references to repeal of former 12 V.S.A. § 813 by 1971, No. 185 (Adj. Sess.), § 237, eff. March 29, 1972.

Cross References

Cross references. Service of process, see V.R.C.P. 4.

§ 443. Contempt.

When such corporation, without reasonable cause, neglects or refuses to comply with the requirement of such notice, it may be punished as for contempt by the court having jurisdiction in the premises to punish for contempt. Execution may issue for the collection of such fine as may be imposed for such contempt. The execution shall be served and all proceedings thereunder be governed according to the law relating to service and return of final process issuing from Superior Court.

Amended 1973, No. 193 (Adj. Sess.), § 3, eff. April 9, 1974.

History

Source. V.S. 1947, § 5839. P.L. § 5865. G.L. § 4954. P.S. § 4255. 1906, No. 75 , § 4.

Amendments--1973 (Adj. Sess.). Substituted "superior" for "county" preceding "court" in the third sentence.

Cross References

Cross references. Contempt, see 12 V.S.A. § 121 et seq.

ANNOTATIONS

Analysis

1. Constitutionality.

Section does not violate the fourteenth amendment of the federal constitution in depriving corporation of its property without due process of law by authorizing a fine for contempt in case of refusal to produce documentary evidence when ordered, since the proceedings indicated for punishing the contempt are in accordance with the ordinary mode prescribed by law in such cases and adapted to the end to be attained. In re Consolidated Rendering Co., 80 Vt. 55, 66 A. 790 (1907), aff'd, 207 U.S. 541, 28 S. Ct. 178, 52 L. Ed. 327 (1908).

2. Jurisdiction.

Under this section county court had jurisdiction to fine a foreign corporation doing business in this State for contempt in disobeying an order to produce its books and papers before a grand jury investigating an alleged breach of a criminal statute by citizens of this State in their dealings with the corporation in Vermont. In re Consolidated Rendering Co., 80 Vt. 55, 66 A. 790 (1907), aff'd, 207 U.S. 541, 28 S. Ct. 178, 52 L. Ed. 327 (1908).

3. Pleadings.

In contempt proceeding for failure to obey an order to produce certain documentary evidence before a grand jury, where the petition in the proceeding contained no allegation relating to any claim of privilege or any incriminating testimony, the question of privilege on account of the tendency to incriminate could not be raised by a motion to dismiss the petition, since a motion to dismiss was not issuable, and reached only defects apparent on the face of the strict record. In re Consolidated Rendering Co., 80 Vt. 55, 66 A. 790 (1907), aff'd, 207 U.S. 541, 28 S. Ct. 178, 52 L. Ed. 327 (1908).

§ 444. Injunction and receivership.

Upon petition therefor made by the State's Attorney of the county in which such judgment for contempt is rendered, or by the Attorney General, the Superior Court may enjoin a corporation which has been adjudged in contempt under section 443 of this title from further exercising its corporate functions within this State, and if necessary for the protection of the creditors of such corporation, shall appoint a receiver to take possession of the property and estate of such corporation situated within this State. The receiver shall take, hold, administer, and dispose of such property and estate under the orders and directions of such Superior Court. Such court or any presiding judge of the Superior Court may grant a temporary injunction, appoint a temporary receiver, or make such other interlocutory orders or decrees as may be required to carry out the provisions of this section.

Amended 1973, No. 193 (Adj. Sess.), § 3, eff. April 9, 1974.

History

Source. V.S. 1947, § 5840. P.L. § 5866. G.L. § 4955. P.S. § 4256. 1906, No. 75 , § 5.

Revision note. References to "court of chancery" and "chancellor" in the second and third sentences changed to "county court" and "presiding judge of the county court", respectively, pursuant to 1971, No. 185 (Adj. Sess.), § 236. See note under 4 V.S.A. § 219.

Amendments--1973 (Adj. Sess.). Substituted "superior" for "county" preceding "court" in the first, second and third sentences.

Cross References

Cross references. Injunctions, see V.R.C.P. 65.

Receivers, see V.R.C.P. 66.

ARTICLE 3. Miscellaneous

§§ 461-464. Repealed. 1971, No. 237 (Adj. Sess.), § 100.

History

Former §§ 461-464. Former § 461, relating to records, was derived from V.S. 1947, § 5854; P.L. § 5878; G.L. § 4967; 1915, No. 141 , § 31; P.S. § 4297; V.S. § 3714; 1892, No. 60 , § 10; 1884, No. 105 , § 2; R.L. §§ 3294, 3295; 1870, No. 6 , §§ 11, 15; G.S. 86, § 53; 1853, No. 71 , § 13.

Former § 462, relating to certified copies of records, was derived from V.S. 1947, § 5855; P.L. § 5879; G.L. § 4968; 1917, No. 254 , § 4854; 1915, No. 141 , § 31; P.S. §§ 4258, 4259, 4298, 4299; R. 1906, § 4110; V.S. §§ 3681, 3682, 3715, 3716; 1892, No. 60 , §§ 11, 12; 1884, No. 105 , § 2; R.L. §§ 3268, 3269, 3295; 1879, No. 6 , § 11; G.S. 86, §§ 7, 8, 53; 1853, No. 71 , § 13; R.S. 79, §§ 5, 6; 1817, p. 104.

Former § 463, relating to certified copies of records as evidence, was derived from V.S. 1947, § 5856; P.L. § 5880; G.L. § 4969; 1915, No. 141 , § 36.

Former § 464, relating to stock information on reports, was derived from V.S. 1947, § 5811; 1947, No. 202 , § 5910; P.L. § 5837; 1925, No. 81 , § 7.

Subchapter 7. Dissolution and Termination

ARTICLE 1. Winding Up Affairs of a Corporation

§§ 491-495. Repealed. 1971, No. 237 (Adj. Sess.), § 100.

History

Former §§ 491-495. Former § 491, relating to winding up affairs of a corporation, was derived from V.S. 1947, § 5841; P.L. § 5867; G.L. § 4956; P.S. § 4276; V.S. § 3699; R.L. § 3272; 1868, No. 8 ; G.S. 86, § 14; R.S. 79, § 17.

Former §§ 492 and 493, relating to receivers and receiverships, were derived from V.S. 1947, §§ 5842, 5843; P.L. §§ 5868, 5869; G.L. §§ 4957, 4958; P.S. §§ 4277, 4278; V.S. 3700, 3701; R.L. § 3273; G.S. 86, §§ 15, 16; 1848, No. 43 ; 1841, No. 10 ; R.S. 79, § 18.

Former § 494, relating to powers of the court, was derived from V.S. 1947, § 5844; P.L. § 5870; 1933, No. 157 , § 5562; G.L. § 4959; P.S. § 4279; V.S. § 3702; R.L. § 3274; G.L. 86, § 17; R.S. 79, § 19.

Former § 495, relating to distribution of funds, was derived from V.S. 1947, § 5845; P.L. § 5871; G.L. § 4960; P.S. § 4280; V.S. § 3703; R.L. § 3275; G.S. 86, § 18; R.S. 79, § 20.

ARTICLE 2. Voluntary Liquidation through County Court

§§ 511-516. Repealed. 1971, No. 237 (Adj. Sess.), § 100.

History

Former §§ 511-516. Former § 511, relating to procedure for voluntary liquidation, was derived from 1949, No. 135 ; V.S. 1947, § 5846; P.L. § 5872; G.L. § 4961; P.S. § 4281; V.S. § 3735; 1894, No. 57 , § 1.

Former § 512, relating to distribution of assets, was derived from V.S. 1947, § 5847; P.L. § 5873; G.L. § 4962; P.S. § 4282; V.S. § 3736; 1894, No. 57 , § 2.

Former § 513, relating to determinations of disputed claims, was derived from V.S. 1947, § 5848; P.L. § 5874; G.L. § 4963; P.S. § 4283; V.S. § 3737; 1894, No. 57 , § 3.

Former § 514, relating to barred claims, was derived from V.S. 1947, § 5849; P.L. § 5875; G.L. § 4964; P.S. § 4284; V.S. § 3738; 1894, No. 57 , § 4.

Former § 515, relating to powers of the court, was derived from V.S. 1947, § 5850; P.L. § 5876; G.L. § 4965; P.S. § 4285; V.S. § 3736; 1894, No. 57 , § 2.

Former § 516, relating to decree filed upon dissolution, was derived from V.S. 1947, § 5851; P.L. § 5877; G.L. § 4966; P.S. § 4286; V.S. § 3739; 1892, No. 60 , § 34.

ARTICLE 3. Voluntary Dissolution

§§ 531, 532. Repealed. 1971, No. 237 (Adj. Sess.), § 100.

History

Former §§ 531, 532. Former § 531, relating to procedure for voluntary dissolution, was derived from 1953, No. 28 , § 1; V.S. 1947, § 5852; 1947, No. 16 , § 9; P.L. § 1008; G.L. § 1054; P.S. § 772; R. 1906, § 705; 1902, No. 20 , § 57, and amended by 1959, No. 112 , § 1; 1971, No. 73 , § 1.

Former § 532, relating to further business transactions as being prohibited, was derived from 1953, No. 28 , § 2; V.S. 1947, § 5853; 1947, No. 16 , § 10; P.L. § 1009; G.L. § 1055; P.S. § 773; 1902, No. 20 , § 58, and amended by 1959, No. 112 , § 2.

ARTICLE 4. Miscellaneous

§§ 551, 552. Repealed. 1971, No. 237 (Adj. Sess.), § 100.

History

Former §§ 551, 552. Former § 551, relating to compulsory dissolution, was derived from V.S. 1947, § 5829; P.L. § 5855; G.L. § 4944; 1915, No. 141 , § 41; 1910, No. 143 , § 4; P.S. § 4321; V.S. § 3741; 1892, No. 60 , § 36; R.L. § 3298; 1870, No. 6 , § 22; G.S. 86, § 65; 1853, No. 71 , § 26.

Former § 552, relating to dissolution of an unorganized corporation, was derived from 1955, No. 48 .

Subchapter 8. Private Foundations

Cross References

Cross references. Immunity from personal liability of directors, officers, or trustees of nonprofit organizations, see 12 V.S.A. § 5781.

§ 561. Prohibited acts.

No corporation which is a "private foundation" as defined in section 509(a) of the Internal Revenue Code of 1986, shall:

  1. engage in any act of "self-dealing" (as defined in section 4941(d) of the Internal Revenue Code of 1986), which would give rise to any liability for the tax imposed by section 4941(a) of the Internal Revenue Code of 1986;
  2. retain any "excess business holdings" (as defined in section 4943(c) of the Internal Revenue Code of 1986), which would give rise to any liability for the tax imposed by section 4943(a) of the Internal Revenue Code of 1986;
  3. make any investment which would jeopardize the carrying out of any of its exempt purposes, within the meaning of section 4944 of the Internal Revenue Code of 1986, so as to give rise to any liability for the tax imposed by section 4944(a) of the Internal Revenue Code of 1986; and
  4. make any "taxable expenditures" (as defined in section 4945(d) of the Internal Revenue Code of 1986) which would give rise to any liability for the tax imposed by section 4945(a) of the Internal Revenue Code of 1986.

    1971, No. 112 , § 1.

History

Reference in text. Sections 509, 4941, 4943, 4944, and 4945 of the Internal Revenue Code of 1954, referred to in this section, are codified as, respectively, to 26 U.S.C. §§ 509, 4941, 4943, 4944, 4945.

Revision note. References to "the Internal Revenue Code of 1954" changed to "the Internal Revenue Code of 1986" to conform to redesignation of the Code pursuant to section (2)(a) of P.L. 99-514.

§ 562. Distributions required.

Each corporation which is a "private foundation" as defined in section 509 of the Internal Revenue Code of 1986 shall distribute, for the purposes specified in its articles of organization, for each taxable year, amounts at least sufficient to avoid liability for the tax imposed by section 4942(a) of the Internal Revenue Code of 1986.

1971, No. 112 , § 2.

History

Reference in text. Sections 509 and 4942 of the Internal Revenue Code of 1954, referred to in this section, are codified as, respectively, to 26 U.S.C. §§ 509, 4942.

Revision note. References to "the Internal Revenue Code of 1954" changed to "the Internal Revenue Code of 1986" to conform to redesignation of the Code pursuant to section (2)(a) of P.L. 99-514.

§ 563. Conformity with articles of association.

The provisions of sections 561 and 562 of this title shall not apply to any corporation to the extent that a court of competent jurisdiction shall determine that such application would be contrary to the terms of the articles of organization or other instrument governing such corporation or governing the administration of charitable funds held by it and that the same may not properly be changed to conform to such sections.

1971, No. 112 , § 3.

§ 564. Powers of Attorney General.

Nothing in this act shall impair the rights and powers of the courts or the Attorney General of this State with respect to any corporation.

1971, No. 112 , § 4.

§ 565. Trusts.

In the administration of any trust which is a "private foundation," as defined in section 509 of the Internal Revenue Code of 1986, a "charitable trust," as defined in section 4947(a)(1) of the Internal Revenue Code of 1986, or a "split-interest trust" as defined in section 4947(a)(2) of the Internal Revenue Code of 1986, the following acts shall be prohibited:

  1. engaging in any act of "self-dealing" (as defined in section 4941(d) of the Internal Revenue Code of 1986), which would give rise to any liability for the tax imposed by section 4941(a) of the Internal Revenue Code of 1986;
  2. retaining any "excess business holdings" (as defined in section 4943(c) of the Internal Revenue Code of 1954) which would give rise to any liability for the tax imposed by section 4943(a) of the Internal Revenue Code of 1986;
  3. making any investments which would jeopardize the carrying out of any of the exempt purposes of the trust, within the meaning of section 4944 of the Internal Revenue Code of 1986, so as to give rise to any liability for the tax imposed by section 4944(a) of the Internal Revenue Code of 1986; and
  4. making any "taxable expenditures" (as defined in section 4945(d) of the Internal Revenue Code of 1986) which would give rise to any liability for the tax imposed by section 4945(a) of the Internal Revenue Code of 1986;

    provided, however, that this section shall not apply either to those split-interest trusts or to amounts thereof which are not subject to the prohibitions applicable to private foundations by reason of the provisions of section 4947 of the Internal Revenue Code of 1986.

    1971, No. 112 , § 5.

History

Reference in text. Sections 509, 4941, 4943-4945, and 4947 of the Internal Revenue Code of 1954, referred to in this section, are codified as, respectively, to 26 U.S.C. §§ 509, 4941, 4943-4945, 4947.

Revision note. References to "the Internal Revenue Code of 1954" changed to "the Internal Revenue Code of 1986" to conform to redesignation of the Code pursuant to section (2)(a) of P.L. 99-514.

§ 566. Distribution required.

In the administration of any trust which is a "private foundation" as defined in section 509 of the Internal Revenue Code of 1986, or which is a "charitable trust" as defined in section 4947(a)(1) of the Internal Revenue Code of 1986, there shall be distributed, for the purposes specified in the trust instrument, for each taxable year, amounts at least sufficient to avoid liability for the tax imposed by section 4942(a) of the Internal Revenue Code of 1986.

1971, No. 112 , § 6.

History

Reference in text. Sections 509, 4942, and 4947 of the Internal Revenue Code of 1954, referred to in this section, are codified as, respectively, to 26 U.S.C. §§ 509, 4942, 4947.

Revision note. References to "the Internal Revenue Code of 1954" changed to "the Internal Revenue Code of 1986" to conform to redesignation of the Code pursuant to section (2)(a) of P.L. 99-514.

§ 567. Effect of trust instrument.

The provisions of sections 565 and 566 of this title shall not apply to any trust to the extent that a court of competent jurisdiction shall determine that such application would be contrary to the terms of the instrument governing such trust and that the same may not properly be changed to conform to such sections.

1971, No. 112 , § 7.

§ 568. Future federal amendments.

All references to sections of the Internal Revenue Code of 1986 shall include future amendments to such sections and corresponding provisions of future internal revenue laws.

1971, No. 112 , § 8.

History

Reference in text. The Internal Revenue Code of 1986, referred to in this section, is codified as 26 U.S.C. § 1 et seq.

Revision note. References to "the Internal Revenue Code of 1954" changed to "the Internal Revenue Code of 1986" to conform to redesignation of the Code pursuant to section (2)(a) of P.L. 99-514.

CHAPTER 3. INCORPORATION OF PROFESSIONAL PERSONS

Sec.

History

Prior law. Former chapter 3, relating to foreign corporations, was repealed by 1971, No. 237 (Adj. Sess.), § 100, eff. Jan. 1, 1973.

Citation. 1963, No. 218 , § 1, eff. July 3, 1963, provided: "This act may be cited as the 'Professional Corporation Act'."

Cross References

Cross references. Business corporations, see Title 11A.

Life insurance for associations and discretionary groups, see 8 V.S.A. § 3810a.

Partnerships, see § 1121 et seq. of this title.

Professions and occupations generally, see Title 26.

§ 801. Definitions.

As used herein, unless the context clearly indicates that a different meaning is intended:

  1. "Professional corporation" means a corporation organized under this chapter.
  2. "Professional service" means any type of personal service rendered to the public which requires as a condition precedent to the rendering of such service the obtaining of a license or other legal authorization, and which, prior to the passage of this chapter, could not, by reason of law, be performed by a corporation.

    1963, No. 218 , § 2, eff. July 3, 1963.

History

Revision note. Paragraph designations (a) and (b) were changed to (1) and (2) to conform with V.S.A. style.

§ 802. Articles of association.

One or more individuals, each of whom is licensed to render a professional service, may incorporate a professional corporation by filing articles of association with the Secretary of State. The articles of association shall meet the requirements of the general corporation law under chapter 17 of this title, except that the number of incorporators or directors may be the same as the number of individuals incorporating. In addition thereto, it shall contain the following:

  1. the profession to be practiced through the professional corporation;
  2. the names and residence addresses of all of the original shareholders, directors and officers of the professional corporation; and
  3. a certificate by the regulating board of the profession involved that each of the incorporators, directors, and shareholders is duly licensed to practice such profession.

    1963, No. 218 , § 3, eff. July 3, 1963; amended 1981, No. 64 ; 1983, No. 127 (Adj. Sess.), § 1.

History

Reference in text. Chapter 17 of this title, referred to in this section, was repealed by 1993, No. 85 , § 3(a), eff. Jan. 1, 1994. The subject matter is now covered by Title 11A.

Revision note. Paragraph designations (a), (b), and (c) were changed to (1), (2), and (3) to conform with V.S.A. style.

Amendments--1983 (Adj. Sess.). Substituted "17" for "1" following "chapter" in the second sentence of the unmarked paragraph.

Amendments--1981. Substituted "one" for "two" preceding "or more individuals" in the first sentence of the unmarked paragraph.

Cross References

Cross references. Issuance of certificates of licensure, see § 812 of this title.

§ 803. Applicability of general corporation law.

The general corporation law under chapters 1 and 17 of this title shall be applicable to professional corporations and they shall enjoy the powers and privileges and be subject to the duties, restrictions, and liabilities of other corporations, except where inconsistent with the letter and purpose of this chapter. This chapter shall take precedence in the event of any conflict with provisions of the general corporation law or other laws.

1963, No. 218 , § 4, eff. July 3, 1963.

History

Reference in text. Chapter 17 of this title, referred to in this section, was repealed by 1993, No. 85 , § 3(a), eff. Jan. 1, 1994. The subject matter is now covered by Title 11A.

Revision note. Reference to "chapter 1 of this title" changed to "chapters 1 and 17 of this title" to conform reference to repeal of certain provisions in chapter 1 and enactment of similar provisions in chapter 17.

ANNOTATIONS

1. Construction .

Ethical rule governing attorneys did not limit protection from vicarious liability afforded lawyers practicing law as a professional corporation, and therefore shareholder of law firm organized under Vermont Professional Corporation Act was not vicariously liable for allegedly defective title search conducted by another shareholder. Vanderhoof v. Cleary, 168 Vt. 555, 725 A.2d 917 (1998).

§ 804. Purpose for which incorporated.

A professional corporation may be organized pursuant to the provisions of this chapter only for the purpose of rendering one specific type of professional service and services ancillary thereto and shall not engage in any other business than rendering the professional service which it was organized to render and services ancillary thereto; provided, however, that a professional corporation may own real and personal property necessary or appropriate for rendering the type of professional services which it was organized to render and may make such investment of its funds as is applicable for other corporations.

1963, No. 218 , § 5, eff. July 3, 1963.

§ 805. Issuance and transfer of shares.

A professional corporation may issue the shares of its capital stock only to persons who are duly licensed to render the same specific professional service as those for which the corporation was organized. A shareholder may voluntarily transfer his or her shares in a professional corporation only to a person who is duly licensed to render the same specific professional services as those for which the corporation was organized. Any shares issued in violation of this section shall be null and void. The voluntary transfer of any shares in violation of this section shall be null and void. No shares may be transferred upon the books of the professional corporation or issued by it until there is presented to and filed with the corporation a certificate by the regulating board stating that the person to whom the transfer is to be made or the shares issued is duly licensed to render the same specific professional services as those for which the corporation was organized.

1963, No. 218 , § 6, eff. July 3, 1963.

§ 806. Officers, directors and shareholders.

No person may be an officer, director, or shareholder of a professional corporation who is not duly licensed to render the same specific professional services as those for which the corporation was organized. No person may be simultaneously an officer, director, or shareholder of more than one professional corporation.

1963, No. 218 , § 7, eff. July 3, 1963.

§ 807. Professional services through officers, employees, agents.

A professional corporation may render professional services only through its officers, employees, and agents, who are duly licensed to render such professional services. However, this provision shall not be interpreted to prohibit the employment by a professional corporation of clerks, secretaries, bookkeepers, technicians, and other assistants who are not usually and ordinarily considered by custom and practice to be rendering professional services to the public for which the license is required.

1963, No. 218 , § 8, eff. July 3, 1963.

§ 808. Professional relationship and liability.

This chapter does not alter the law involving liability of any person employed by the corporation arising out of professional services, and including the confidential relationship between the person rendering the professional service and the person receiving such professional service, if any, and all confidential relationship previously enjoyed under the laws of this state shall remain inviolate.

1963, No. 218 , § 9, eff. July 3, 1963.

§ 809. Professional regulation.

Nothing in this chapter shall restrict or limit in any manner the authority and duty of the regulating boards for the licensing of individual persons rendering professional services or the practice of the profession which is within the jurisdiction of such regulating board, notwithstanding the fact that such a person is an officer, director, shareholder, or employee of a professional corporation and rendering such professional services or engaging in the practice of such profession through such professional corporation.

1963, No. 218 , § 10, eff. July 3, 1963.

§ 810. Prohibited acts.

No professional corporation may do any act which is prohibited to be done by individual persons licensed to practice the profession which the professional corporation is organized to render.

1963, No. 218 , § 11, eff. July 3, 1963.

§ 811. Death or disqualification of shareholders.

The articles of association may provide for the purchase or redemption of the shares of any shareholder upon the death or disqualification of such shareholder, or the same may be provided in the bylaws or by private agreement. In the absence of a provision for the same in the articles of association or the bylaws or by private agreement, the professional corporation shall purchase the shares of a deceased shareholder or a shareholder no longer qualified to own shares in such corporation within 90 days after the death or disqualification of the shareholder, as the case may be. The price for such shares shall be the book value as of the end of the month immediately preceding the death or disqualification of the shareholder. Book value shall be determined from the books and records of the professional corporation in accordance with the regular method of accounting used by such corporation. If the corporation shall fail to purchase such shares by the end of said 90 days, then the executor or administrator or other person representative of a deceased shareholder or a disqualified shareholder may bring an action in the Superior Court for the county in which the principal office of the professional corporation is located for the enforcement of this provision. If the plaintiff obtains judgment in such action he shall be entitled to recover the book value of the shares involved and his costs. The professional corporation shall repurchase such shares without regard to restrictions upon the repurchase of shares provided by the general corporation law.

1963, No. 218 , § 12, eff. July 3, 1963; amended 1973, No. 193 (Adj. Sess.), § 3.

History

Amendments--1973 (Adj. Sess.). Substituted "Superior Court" for "county court" following "may bring an action in the" in the fifth sentence.

§ 812. Certificates.

The regulating boards of the respective professions described herein are hereby authorized and directed to issue the certificates required by subdivision 802(3) of this title. Such certificates shall be on forms prescribed and furnished by the Secretary of State.

1963, No. 218 , § 13, eff. July 3, 1963.

History

2010. Substituted "subdivision" for "section" preceding "802(3) of this title" to conform reference to V.S.A. style.

§ 813. Statutory policy.

This chapter shall be so construed as to effectuate its general purpose of making available to professional persons the benefits of the corporate form for the business aspects of their practices, while preserving the established professional aspects of the personal relationship between the professional person and those he or she serves.

1963, No. 218 , § 14, eff. July 3, 1963.

ANNOTATIONS

Cited. Vanderhoof v. Cleary, 168 Vt. 555, 725 A.2d 917 (1998).

CHAPTER 4. PROFESSIONAL CORPORATIONS

History

Transitional provisions. 2001, No. 77 (Adj. Sess.), § 2 provides: "All professional corporations incorporated in this state after the effective date [July 1, 2002] of this act shall be incorporated pursuant to 11 V.S.A. chapter 4."

Subchapter 1. General Provisions

§ 815. Short title.

This chapter shall be known and may be cited as the Vermont Professional Corporation Act.

Added 2001, No. 77 (Adj. Sess.), § 1.

§ 816. Application of Vermont Business Corporation Act.

Title 11A applies to professional corporations, both domestic and foreign, to the extent not inconsistent with the provisions of this chapter.

Added 2001, No. 77 (Adj. Sess.), § 1.

§ 817. Definitions.

In this chapter:

  1. "Disqualified person" means an individual or entity that for any reason is or becomes ineligible under this chapter to be issued shares by a professional corporation.
  2. "Domestic professional corporation" means a professional corporation incorporated under the laws of this State.
  3. "Foreign professional corporation" means a corporation or association for profit incorporated for the purpose of rendering professional services under a law other than the law of this State.
  4. "Licensing authority" means the officer, board, agency, court, or other authority in this State empowered to license or otherwise authorize the rendition of a professional service.
  5. "Professional corporation" means a corporation for profit, other than a foreign professional corporation, subject to the provisions of this chapter.
  6. "Professional service" means a service that may be lawfully rendered only by a person licensed or otherwise authorized by a licensing authority in this State to render the service, and may not be lawfully rendered by a corporation under Title 11A.
  7. "Qualified person" means an individual or general partnership that is eligible under this chapter to be issued shares by a professional corporation.

    Added 2001, No. 77 (Adj. Sess.), § 1.

Subchapter 2. Creation

§ 820. Election of professional corporation status.

  1. One or more persons may incorporate a professional corporation by delivering to the Secretary of State for filing articles of incorporation that state:
    1. it is a professional corporation; and
    2. its purpose is to render the specified professional service.
  2. A corporation incorporated under a general law of this State may elect professional corporation status by amending its articles of incorporation to comply with subsection (a) of this section and 11A V.S.A. chapter 10.

    Added 2001, No. 77 (Adj. Sess.), § 1.

History

Effective date. See note set out under chapter 4 of this title.

§ 821. Purposes.

  1. Except to the extent authorized by subsection (b) of this section, a corporation may elect professional corporation status under section 820 of this title, solely for the purpose of rendering professional services (including services ancillary to them) and solely within a single profession.
  2. A corporation may elect professional corporation status under section 820 of this title for the purpose of rendering professional service within two or more professions, and for the purpose of engaging in any lawful business authorized by 11A V.S.A. § 3.01, to the extent the combination of professional purposes or of professional and business purposes is authorized by the licensing law of this State applicable to each profession in the combination.

    Added 2001, No. 77 (Adj. Sess.), § 1.

§ 822. General powers.

  1. Except as provided in subsection (b) of this section, a professional corporation has the powers enumerated in 11A V.S.A. § 3.02.
  2. A professional corporation may be a promoter, general partner, member, associate, or manager of a partnership, joint venture, trust, or other entity, only if the entity is engaged solely in rendering professional service or in carrying on business authorized by the professional corporation's articles of incorporation.

    Added 2001, No. 77 (Adj. Sess.), § 1.

§ 823. Rendering professional services.

  1. A domestic or foreign corporation may render professional services in this State through individuals licensed or otherwise authorized in this State to render the services.
  2. Subsection (a) of this section does not:
    1. require an individual employed by a professional corporation to be licensed to perform services for the corporation if a license is not otherwise required;
    2. prohibit a licensed individual from rendering professional services in his or her individual capacity although the individual is a shareholder, director, officer, employee, or agent of a domestic or foreign professional corporation;
    3. prohibit an individual licensed under a law other than the law of this State from rendering professional services for a domestic or foreign professional corporation in this State if not prohibited by the licensing authority.

      Added 2001, No. 77 (Adj. Sess.), § 1.

§ 824. Prohibited activities.

  1. A professional corporation may not render any professional service or engage in any business other than the professional service and business authorized by its articles of incorporation.
  2. Subsection (a) of this section does not prohibit a professional corporation from investing its funds in real estate, mortgages, securities, or any other type of investment.

    Added 2001, No. 77 (Adj. Sess.), § 1.

§ 825. Corporate name.

  1. The name of a domestic professional corporation and of a foreign professional corporation authorized to transact business in this State, in addition to satisfying the requirements of 11A V.S.A. §§ 4.01 and 15.06:
    1. must contain the words "professional corporation," "professional association," "limited," or "service corporation" or the abbreviation "P.C.," "P.A.," "LTD.," or "S.C.";
    2. may not contain language stating or implying that it is incorporated for a purpose other than that authorized by section 821 of this title and its articles of incorporation; and
    3. must conform with any rule promulgated by the licensing authority having jurisdiction over a professional service described in the corporation's articles of incorporation.
  2. 11A V.S.A. §§ 4.01 and 15.06 do not prevent the use of a name otherwise prohibited by those sections, if it is the personal name of a shareholder or former shareholder of the domestic or foreign professional corporation or the name of an individual who was associated with a predecessor of the corporation.
  3. A person intending to operate a postsecondary school, as defined in 16 V.S.A. §§ 176 and 176a, shall apply for a certificate of approval from the State Board of Education prior to registering a name under this section.

    Added 2001, No. 77 (Adj. Sess.), § 1; amended 2003, No. 107 (Adj. Sess.), § 15.

History

Amendments--2003 (Adj. Sess.). Subsec. (c): Added.

Subchapter 3. Shares

§ 830. Issuance of shares.

  1. Except as provided in section 881 of this title, a professional corporation may issue shares, fractional shares, and rights or options to purchase shares only to:
    1. individuals who are authorized by law to render a professional service described in the corporation's articles of incorporation;
    2. an employee stock ownership plan as defined in section 4975(e)(7) of the Internal Revenue Code, if a majority of the voting trustees of the plan are professionals licensed to furnish the pertinent professional services, and the professional corporation's articles of incorporation or bylaws prohibit the direct issuance of ownership interests to anyone other than professionals licensed to furnish the pertinent professional services; or
    3. general partnerships in which all the partners are qualified persons with respect to the professional corporation, and in which at least one partner is authorized by law in this State to render a professional service described in the corporation's articles of incorporation.
  2. If a licensing authority with jurisdiction over a professional corporation considers it necessary to prevent violation of the ethical standards of the profession, the authority may, by rule, restrict or condition, or revoke in part, the authority of a professional corporation, subject to its jurisdiction, to issue shares. A rule promulgated under this section does not, of itself, make a shareholder of a professional corporation, at the time the rule becomes effective, a disqualified person.
  3. Shares issued in violation of this section or a rule promulgated under this section are void.

    Added 2001, No. 77 (Adj. Sess.), § 1.

History

Reference in text. Section 4975(e)(7) of the Internal Revenue Code, is codified as 26 U.S.C. § 4975(e)(7).

Effective date. See note set out under chapter 4 of this title.

§ 831. Notice of professional corporation status on shares.

  1. The following statement must appear conspicuously on each share certificate issued by a professional corporation:

    "The transfer of shares of a professional corporation is restricted by the Vermont Professional Corporation Chapter, and is subject to further restriction imposed from time to time by the licensing authority. Shares of a professional corporation are also subject to a statutory compulsory repurchase obligation."

  2. Within a reasonable time after the issuance or transfer of uncertificated shares of a professional corporation, the corporation shall send the shareholders a written notice, containing the statement required by subsection (a) of this section.

    Added 2001, No. 77 (Adj. Sess.), § 1.

§ 832. Share transfer restriction.

  1. A shareholder of a professional corporation may transfer or pledge shares, fractional shares, and rights or options for the purchase of shares of the corporation only to individuals, and general partnerships qualified under section 830 of this title to be issued shares.
  2. A transfer of shares made in violation of subsection (a) of this section, except one made by operation of law or court judgment, is void.

    Added 2001, No. 77 (Adj. Sess.), § 1.

§ 833. Compulsory acquisition of shares after death or disqualification of shareholder.

  1. A professional corporation must acquire (or cause to be acquired by a qualified person) the shares of its shareholder, at a price the corporation believes represents their fair value as of the date of death, disqualification, or transfer, if:
    1. the shareholder dies;
    2. the shareholder becomes a disqualified person, except as provided in subsection (c) of this section;
    3. the shares are transferred by operation of law or court judgment to a disqualified person, except as provided in subsection (c) of this section.
  2. If a price for the shares is fixed in accordance with the articles of incorporation or bylaws or by private agreement, that price controls. If the price is not so fixed, the corporation shall acquire the shares in accordance with section 834 of this title. If the disqualified person or the executor or administrator of the estate of a deceased shareholder rejects the corporation's purchase offer, either the disqualified person, the executor or administrator of the estate of a deceased shareholder, or the corporation may commence a proceeding under section 835 of this title to determine the fair value of the shares.
  3. This section does not require the acquisition of shares in the event of disqualification, if the disqualification lasts no more than five months from the date the disqualification or transfer occurs.
  4. This section and section 834 of this title do not prevent or relieve a professional corporation from paying pension benefits or other deferred compensation for services rendered to a former shareholder if otherwise permitted by law.
  5. A provision for the acquisition of shares contained in a professional corporation's articles of incorporation or bylaws, or in a private agreement, is specifically enforceable.

    Added 2001, No. 77 (Adj. Sess.), § 1.

§ 834. Acquisition procedure.

  1. If shares must be acquired under section 833 of this title, the professional corporation shall deliver a written notice to the executor or administrator of the estate of its deceased shareholder, or to the disqualified person or transferee, offering to purchase the shares at a price the corporation believes represents their fair value as of the date of death, disqualification, or transfer. The offer notice must be accompanied by the corporation's balance sheet for a fiscal year ending not more than 16 months before the effective date of the offer notice, an income statement for that year, a statement of changes in shareholder equity for that year, and the latest available interim financial statement, if any.
  2. The disqualified person or the executor or administrator of the estate of a deceased shareholder has 30 days from the effective date of the notice to accept the corporation's offer or demand that the corporation commence a proceeding under section 835 of this title to determine the fair value of the disqualified person's or the estate's shares. If the disqualified person or the executor or administrator of the estate of a deceased shareholder accepts the offer, the corporation shall make payment of the shares within 60 days from the effective date of the offer notice (unless a later date is agreed on) upon the disqualified person's or the executor or administrator of the estate of a deceased shareholder's surrender of shares to the corporation.
  3. After the corporation makes payment for the shares, the disqualified person or the estate of a deceased shareholder has no further interest in them.

    Added 2001, No. 77 (Adj. Sess.), § 1.

§ 835. Court action to appraise shares.

  1. If the disqualified person or the executor or administrator of the estate of a deceased shareholder does not accept the professional corporation's offer under subsection 834(b) of this title within the 30-day period, the disqualified person or the executor or administrator of the estate of a deceased shareholder, during the following 30-day period, may deliver a written notice to the corporation, demanding that it commence a proceeding to determine the fair value of the shares. The corporation may commence a proceeding at any time during the 60 days following the effective date of its offer notice. If it does not do so, the disqualified person or the executor or administrator of the estate of a deceased shareholder may commence a proceeding against the corporation to determine the fair value of his or her shares.
  2. The corporation, the disqualified person, or the executor or administrator of the estate of a deceased shareholder shall commence the proceeding in the Superior Court of the county where the corporation's principal office or, if none in this State, the corporation's registered office is located. The corporation shall make the disqualified person or the executor or administrator of the estate of a deceased shareholder a party to the proceeding as in an action against the shareholder's shares. The jurisdiction of the court in which the proceeding is commenced is plenary and exclusive.
  3. The court may appoint one or more persons as appraisers to receive evidence and recommend decision on the question of fair value. The appraisers have the power described in the order appointing them, or in any amendment to it.
  4. The disqualified person or the estate of a deceased shareholder is entitled to judgment for the fair value of the shareholder's shares determined by the court as of the date of death, disqualification, or transfer, together with interest from that date at a rate found by the court to be fair and equitable.
  5. The court may order the judgment paid in installments determined by the court.

    Added 2001, No. 77 (Adj. Sess.), § 1.

§ 836. Court costs and fees of experts.

  1. The court, in an appraisal proceeding commenced under section 835 of this title, shall determine all costs of the proceeding, including the reasonable compensation and expenses of appraisers appointed by the court, and shall assess the costs against the professional corporation. But the court may assess costs against the disqualified person or the estate of a deceased shareholder if the court finds the disqualified person or the executor or administrator of the estate of a deceased shareholder acted arbitrarily, vexatiously or not in good faith in refusing to accept the corporation's offer.
  2. The court may also assess the fees and expenses of counsel and experts for the disqualified person or the estate of a deceased shareholder against the corporation and in favor of the disqualified person or the estate of a deceased shareholder, if the court finds that the fair value of his or her shares substantially exceeded the amount offered by the corporation or that the corporation did not make an offer.

    Added 2001, No. 77 (Adj. Sess.), § 1.

§ 837. Cancellation of disqualified shares.

If the shares of a disqualified person or the estate of a deceased shareholder are not acquired under section 834 or 835 of this title within 10 months after the death of the shareholder or within five months after the disqualification or transfer, the professional corporation shall immediately cancel the shares on its books, and the disqualified person or the estate of a deceased shareholder has no further interest as a shareholder in the corporation, other than the right to payment of the fair value of the shares under section 834 or 835 of this title.

Added 2001, No. 77 (Adj. Sess.), § 1.

Subchapter 4. Governance

§ 840. Directors and officers.

Not fewer than one-half of the directors of a professional corporation and all of its officers, except the secretary and treasurer (if any), must be qualified persons with respect to the corporation, except as provided in section 881 of this title.

Added 2001, No. 77 (Adj. Sess.), § 1.

History

Effective date. See note set out under chapter 4 of this title.

§ 841. Voting of shares.

  1. Only a qualified person may be appointed a proxy to vote shares of a professional corporation.
  2. A voting trust with respect to shares of a professional corporation is not valid unless all of its trustees and beneficiaries are qualified persons. But, if a beneficiary who is a qualified person dies or becomes disqualified, a voting trust valid under this subsection continues to be valid for ten months after the date of death or for five months after the disqualification occurred.

    Added 2001, No. 77 (Adj. Sess.), § 1.

§ 842. Confidential relationship.

  1. The relationship between an individual rendering professional services as an employee of a domestic or foreign professional corporation and his or her client or patient is the same as if the individual were rendering the services as a sole practitioner.
  2. The relationship between a domestic or foreign professional corporation and the client or patient for whom its employee is rendering professional services is the same as that between the client or patient and the employee.

    Added 2001, No. 77 (Adj. Sess.), § 1.

§ 843. Privileged communications.

A privilege applicable to communications between an individual rendering professional services and the person receiving the services recognized under the statute or common law of the state is not affected by this chapter. The privilege applies to a domestic or foreign professional corporation and to its employees in all situations in which it applies to communications between an individual rendering professional services on behalf of the corporation and the person receiving the services.

Added 2001, No. 77 (Adj. Sess.), § 1.

§ 844. Responsibility for professional services.

  1. An obligation of a professional corporation, whether arising in contract, tort, or otherwise, is solely the obligation of the professional corporation.
  2. Except as otherwise provided by statute, if a domestic or foreign professional corporation is liable under subsection (a) of this section, every shareholder of the corporation is liable to the same extent as if he or she were a partner in a limited liability partnership pursuant to subsection 3226(c) of this title.

    Added 2001, No. 77 (Adj. Sess.), § 1.

Subchapter 5. Reorganization and Termination

§ 850. Merger.

  1. If all the shareholders of the disappearing and surviving corporations are qualified to be shareholders of the surviving corporation, a professional corporation may merge with another domestic or foreign professional corporation or with a domestic or foreign business corporation.
  2. If the surviving corporation is to render professional services in this State, it must comply with this chapter.

    Added 2001, No. 77 (Adj. Sess.), § 1.

History

Effective date. See note set out under chapter 4 of this title.

§ 851. Termination of professional activities.

If a professional corporation ceases to render professional services, it must amend its articles of incorporation to delete references to rendering professional services and to conform its corporate name to the requirements of 11A V.S.A. § 4.01. After the amendment becomes effective, the corporation may continue in existence as a business corporation under Title 11A, and it is no longer subject to this chapter.

Added 2001, No. 77 (Adj. Sess.), § 1.

§ 852. Judicial dissolution.

The Attorney General may commence a proceeding under 11A V.S.A. §§ 14.30-14.33 to dissolve a professional corporation, if:

  1. the Secretary of State or a licensing authority with jurisdiction over a professional service described in the corporation's articles of incorporation serves written notice on the corporation under 11A V.S.A. § 5.04 that it has violated or is violating a provision of this chapter;
  2. the corporation does not correct each alleged violation, or demonstrate to the reasonable satisfaction of the Secretary of State or licensing authority that it did not occur, within 60 days after service of the notice is perfected under 11A V.S.A. § 5.04; and
  3. the Secretary of State or licensing authority certifies to the Attorney General a description of the violation, that it notified the corporation of the violation, and that the corporation did not correct it, or demonstrate that it did not occur, within 60 days after perfection of service of the notice.

    Added 2001, No. 77 (Adj. Sess.), § 1.

Subchapter 6. Foreign Professional Corporations

§ 860. Authority to transact business.

  1. A foreign professional corporation may not transact business in this State until it obtains a certificate of authority from the Secretary of State.
  2. A foreign professional corporation may not obtain a certificate of authority, unless:
    1. its corporate name satisfies the requirements of section 825 of this title;
    2. it is incorporated for one or more of the purposes described in section 821 of this title; and
    3. all of its shareholders, not less than one-half of its directors, and all of its officers, other than its secretary and treasurer (if any), are licensed in one or more states to render a professional service described in its articles of incorporation, except as provided in section 881 of this title.

      Added 2001, No. 77 (Adj. Sess.), § 1.

History

Effective date. See note set out under chapter 4 of this title.

§ 861. Application for certificate of authority.

The application of a foreign professional corporation for a certificate of authority to render professional services in this State must contain the information called for by 11A V.S.A. § 15.03, and, in addition, include a statement that all of its shareholders, not less than one-half of its directors, and all of its officers, other than its secretary and treasurer (if any), are licensed in one or more states to render a professional service described in its articles of incorporation, except as provided in section 881 of this title.

Added 2001, No. 77 (Adj. Sess.), § 1.

§ 862. Revocation of certificate of authority.

The Secretary of State may administratively revoke, under 11A V.S.A. §§ 15.30-15.32, the certificate of authority of a foreign professional corporation authorized to transact business in this State if a licensing authority with jurisdiction over a professional service described in the corporation's articles of incorporation certifies to the Secretary of State that the corporation has violated or is violating a provision of this chapter, and describes the violation in the certificate.

Added 2001, No. 77 (Adj. Sess.), § 1.

History

2001 (Adj. Sess.). Section 15.31 of Title 11A, referred to in this section, is reserved for future use.

Subchapter 7. Miscellaneous Regulatory Provisions

§ 870. Articles of incorporation for licensing authority.

A domestic or foreign professional corporation authorized to transact business in this State may not render professional services in this State until it delivers a certified copy of its articles of incorporation for filing to each licensing authority with jurisdiction over a professional service described in the articles.

Added 2001, No. 77 (Adj. Sess.), § 1.

History

Effective date. See note set out under chapter 4 of this title.

§ 871. Annual report for Secretary of State.

The annual report required by 11A V.S.A. § 16.22 for each domestic professional corporation, and for each foreign professional corporation authorized to transact business in this State, must include a statement that all of its shareholders, not less than one-half of its directors, and all of its officers, other than its secretary and treasurer (if any), are qualified persons with respect to the corporation, except as provided in section 881 of this title.

Added 2001, No. 77 (Adj. Sess.), § 1.

§ 872. Licensing authority's regulatory jurisdiction.

This chapter does not restrict the jurisdiction of a licensing authority over individuals rendering a professional service within the jurisdiction of the licensing authority, nor does it affect the interpretation or application of any law pertaining to standards of professional conduct.

Added 2001, No. 77 (Adj. Sess.), § 1.

§ 873. Penalty for signing false document.

  1. A person commits an offense if he or she signs a document he or she knows is false in any material respect with intent that the document be delivered to the licensing authority for filing.
  2. An offense under this section is a misdemeanor punishable by a fine not to exceed $1,000.00.
  3. The offense created by this section is in addition to any other offense created by law for the same conduct.

    Added 2001, No. 77 (Adj. Sess.), § 1.

Subchapter 8. Transition Provisions

§ 880. Application to existing corporations.

  1. This chapter does not apply to a corporation now existing unless the corporation elects professional corporation status under section 820 of this title.
  2. This chapter does not affect an existing or future right or privilege to render professional services through the use of any other form of business entity.

    Added 2001, No. 77 (Adj. Sess.), § 1.

History

Effective date. See note set out under chapter 4 of this title.

§ 881. Compliance with ownership provisions.

Notwithstanding the ownership limitations imposed by this chapter, persons who are authorized pursuant to 26 V.S.A chapter to own shares of an organization rendering licensed accounting services may own shares of a professional corporation pursuant to section 830 of this title, and such organizations with nonlicensee owners shall be deemed to comply with sections 840, 860, 861, and 871 of this title by complying with the ownership and governance requirements 26 V.S.A. chapter 1.

Added 2001, No. 77 (Adj. Sess.), § 1.

CHAPTER 5. SCRIP CORPORATIONS

Sec.

History

Severability of enactment. V.S. 1947, § 5931, derived from 1947, No. 202 , § 6004; P.L. § 5904 and 1933, No. 126 , Pt. III, § 4, contained a separability provision applicable to this chapter.

§ 921. General provisions.

Subject to the additional or varied requirements of this chapter, a corporation may be formed pursuant to the provisions of the general corporation law for the sole purpose of issuing scrip and to provide security therefor and to do all things necessary or convenient thereto.

History

Source. V.S. 1947, § 5913. 1947, No. 202 , § 5986. P.L. § 5787(VI). 1933, No. 126 , Pt. II, § 1.

Cross References

Cross references. Scrip defined, see § 923 of this title.

§ 922. Certificate of public good.

The corporators shall file with the articles of association a certificate of the Commissioner of Financial Regulation that the formation of such corporation is in his or her opinion for the public good. No such corporation shall be formed unless such corporation is in his or her opinion for the public good. No such corporation shall be formed unless such certificate has been furnished and so filed. Such corporation may be formed without capital stock, and the trustees and the clerk shall be appointed by the Governor for the term of two years and until their successors are appointed and qualify. All such trustees shall be citizens of this State.

Amended 1989, No. 225 (Adj. Sess.), § 25(b); 1995, No. 180 (Adj. Sess.), § 38(a); 2011, No. 78 (Adj. Sess.), § 2, eff. April 2, 2012.

History

Source. V.S. 1947, § 5914. P.L. § 5787(VI). 1933, No. 126 , Pt. II, § 1.

Amendments--2011 (Adj. Sess.). Substituted "Commissioner of Financial Regulation" for "commissioner of banking, insurance, securities, and health care administration".

Amendments--1995 (Adj. Sess.) Substituted "commissioner of banking, insurance, securities, and health care administration" for "commissioner of banking, insurance, securities" in the first sentence.

Amendments--1989 (Adj. Sess.). Substituted "commissioner of banking insurance, and securities" for "commissioner of banking and insurance" in the first sentence.

§ 923. Definitions.

  1. "Scrip" as used in this chapter includes certificates having no fixed maturity, transferable by delivery, and payable to bearer in lawful currency when realized out of the assets pledged to secure such scrip.  It does not include notes.
  2. "Scrip corporation" includes any person or corporation lawfully issuing scrip.

History

Source. V.S. 1947, § 5915. P.L. § 5888. 1933, No. 126 , Pt. II, § 3.

Revision note. Added subsec. designations to conform section to V.S.A. style.

§ 924. Examination; bonds.

A corporation formed under the provisions of this chapter shall be subject to examination by the Commissioner of Financial Regulation, hereinafter called the Commissioner, in the manner provided by 8 V.S.A. § 503 . The Commissioner shall issue and from time to time alter and revoke rules and regulations governing the conduct of the business of such corporation. He or she may require the officers thereof to furnish bonds and may fix the amount thereof.

Amended 1989, No. 225 (Adj. Sess.), § 25(b); 1995, No. 180 (Adj. Sess.), § 38(a); 2011, No. 78 (Adj. Sess.), § 2, eff. April 2, 2012.

History

Source. V.S. 1947, § 5916. P.L. § 5889. 1933, No. 126 , Pt. II, § 2.

Reference in text. 8 V.S.A. § 503, referred to in this section, was repealed by 1999, No. 153 (Adj. Sess.), § 27, effective January 1, 2001.

Revision note. Reference to section "1061 of Title 8" was changed to "503 of Title 8" to conform reference to repeal of former section 1061 by 1969, No. 64 , § 6, eff. Jan. 1, 1970, and enactment of section 503, a similar provision, by 1969, No. 64 , § 1, eff. Jan. 1, 1970.

Amendments--2011 (Adj. Sess.). Substituted "Commissioner of Financial Regulation" for "commissioner of banking, insurance, securities, and health care administration".

Amendments--1995 (Adj. Sess.) Substituted "commissioner of banking, insurance, securities, and health care administration" for "commissioner of banking, insurance, and securities" in the first sentence.

Amendments--1989 (Adj. Sess.). Substituted "commissioner of banking, insurance, and securities" for "commissioner of banking and insurance" in the first sentence.

Cross References

Cross references. Procedure for adoption of administrative rules, see 3 V.S.A. § 801 et seq.

§ 925. Consent of Commissioner required.

A person or corporation shall not issue scrip or notes or certificates having no fixed maturity payable to bearer in currency or other scrip without the consent of the Commissioner. But nothing herein shall prevent the issuance and use of bills of exchange, notes, or checks, or town orders for the usual and customary purposes thereof.

History

Source. V.S. 1947, § 5917. P.L. § 5890. 1933, No. 126 , Pt. II, § 4.

§ 926. Redemption.

Scrip shall not be issued unless its redemption is secured by:

  1. Short-term notes and obligations of towns, cities, or other municipalities lawfully issued to such scrip corporation as hereinafter provided.  Scrip may be issued to the amount of the face of such notes or obligations, exclusive of interest.
  2. The direct obligations of this State or of the United States; and scrip shall not be issued against the security of such obligations in excess of 75 percent of the face thereof or the market value thereof, whichever is the lesser.
  3. Deposits in banks having their principal place of business within this State and approved by the Commissioner. Scrip may not be issued against the security of such deposits to an amount in excess of one-third of the principal of such deposits assigned to the scrip corporation. The Commissioner may adopt rules limiting the percentage and maximum amount and providing for the minimum amounts exceeding the usual percentage of any single bank deposit which may be so assigned as security. Such amount and percentages may be varied with respect to the class of deposits, whether savings or commercial or on certificate of deposit, and also with respect to the amount of such deposits.

    Amended 2015, No. 23 , § 102.

History

Source. V.S. 1947, § 5918. P.L. § 5891. 1933, No. 126 , Pt. II, § 5.

Amendments--2015. Subdiv. (3): Substituted "adopt" for "promulgate" preceding "rules limiting" in the second sentence.

§ 927. Limitation of amount of scrip issued.

The Commissioner may adopt rules governing and limiting the amount of scrip which may be issued against any one or all of the classes of security mentioned in section 926 of this title.

Amended 2015, No. 23 , § 103.

History

Source. V.S. 1947, § 5919. P.L. § 5892. 1933, No. 126 , Pt. II, § 5.

Amendments--2015. Substituted "may adopt rules governing" for "may promulgate rules and regulations governing".

Cross References

Cross references. Procedure for adoption of administrative rules, see 3 V.S.A. § 801 et seq.

§ 928. Issuance; rights of holders; liquidations; actions.

A corporation authorized to issue scrip may issue the same to such persons, including corporations and municipalities, as assign to it securities enumerated in section 926 of this title, subject, however, to such limitations as are imposed by this chapter or any rules and regulations lawfully prescribed thereunder. All persons accepting such scrip shall take the same subject to the right of the State by statute or by rules, regulations, and orders of the Commissioner to regulate, control, and modify the rights and obligations under and with respect to such scrip for the equal protection of all holders and the public welfare or safety. Included within the foregoing shall be the power to provide for liquidation and distribution of the security for such scrip, to fix maturity dates, and to provide for actions and limitations thereon with respect to the same.

History

Source. V.S. 1947, § 5920. P.L. § 5893. 1933, No. 126 , Pt. II, § 6.

§ 929. Redemption right.

If scrip is issued in return for bonds of this State or of the United States, the issuing corporation shall give a receipt for such bonds. Within the time named in such receipt and under such rules as the Commissioner may prescribe, the holder of such receipt may present the same together with scrip to the amount advanced, or lawful money to the amount named therein, and receive the bonds named in such receipt, exclusive of accrued interest on such bonds from date of deposit to date of maturity. Such redemption right shall not extend for more than one year unless renewed with the consent of the Commissioner.

History

Source. V.S. 1947, § 5921. 1947, No. 202 , § 5994. P.L. § 5894. 1933, No. 126 , Pt. II, § 7.

§ 930. Borrowing scrip by municipal corporations.

All municipal corporations whether incorporated by special act or under general law may borrow scrip from the issuing corporation upon their promissory notes payable both principal and interest in scrip within one year, but not to an amount in any one year greater than one-half the taxes voted or assessed during such year. When such notes are paid, scrip to the amount of such payments shall be retired and not reissued unless against new security.

History

Source. V.S. 1947, § 5922. P.L. § 5895. 1933, No. 126 , Pt. II, § 8.

§ 931. Use of scrip in payment of taxes or wages.

Scrip issued under this chapter shall be received at the face value thereof in payment of taxes due to any municipality and may be issued by any municipality in the payment of wages and salaries hereafter accruing or, by agreement with the other contracting party, for any other purpose.

History

Source. V.S. 1947, § 5923. P.L. § 5896. 1933, No. 126 , Pt. II, § 9.

§ 932. Indebtedness pledged to secure scrip.

All evidences of indebtedness pledged to secure scrip shall be delivered and held by the corporation issuing such scrip in trust to secure the redemption thereof in legal tender. All bank deposits securing scrip shall be assigned to such issuing corporation and by it held in trust as herein provided, but the interest and income on such pledged securities and on one-third of such assigned bank deposits may be used to defray the expenses of such corporation and to create a reserve and surplus for future expenses and redemption of scrip.

History

Source. V.S. 1947, § 5924. P.L. § 5897. 1933, No. 126 , Pt. II, § 10.

§ 933. Security and redemption funds.

Portions of bank deposits assigned to the scrip corporation shall be transferred on the books of the bank or trust company to such corporation and each portion so transferred shall be divided into two parts: a one-third part and a two-thirds part. The one-third part, hereinafter called the trust redemption part, both principal and interest, shall be the absolute property of such scrip corporation. The principal, but not the interest, of the two-thirds part, hereinafter called the security part, shall be deemed to be pledged to such scrip corporation to be used proportionately with all other bank or trust company deposits so pledged to it, to make up any deficiency in the trust fund needed to redeem all outstanding scrip. From time to time, the Commissioner may issue such regulations and orders as he or she may deem necessary for the protection of the holders of such scrip, requiring such percentage of such security fund, theretofore or thereafter accruing, to be paid into the redemption trust fund of such scrip corporation, or releasing from the lien aforesaid all or any part of the security fund accordingly as he may deem that all or any part of such security fund is no longer needed. Any part of the security fund released from the lien aforesaid shall be the absolute property of the assignor.

History

Source. V.S. 1947, § 5925. P.L. § 5898. 1933, No. 126 , Pt. II, § 11.

§ 934. Bank deposits left with bank.

Bank deposits assigned under the provisions of this chapter in consideration and as security for scrip, except as otherwise directed by the Commissioner, shall remain on deposit in the same bank where originally deposited, but with the Commissioner's consent, may be transferred to deposits classified as new savings deposits. Whenever deposits which bear no interest are assigned to such scrip corporation, they may be withdrawn under rules and regulations prescribed by the Commissioner, and placed at interest, unless such corporation and such depository with the consent of the Commissioner enter into an agreement for the payment of interest thereon.

History

Source. V.S. 1947, § 5926. P.L. § 5899. 1933, No. 126 , Pt. II, § 12.

Cross References

Cross references. Procedure for adoption of administrative rules, see 3 V.S.A. § 801 et seq.

§ 935. Redemption; action against corporation limited.

At such time or times as he or she may think proper, the Commissioner may require such scrip corporation to redeem in lawful currency the scrip issued by it. Such order may require such scrip to be redeemed all at one time or part only at one time, and in such manner as the Commissioner may direct, until all of such scrip presented for payment has been redeemed. No holder of scrip shall have an action for the collection thereof against the scrip corporation except to enforce rights established by such order.

History

Source. V.S. 1947, § 5927. P.L. § 5900. 1933, No. 126 , Pt. II, § 13.

§ 936. Surplus monies belong to State.

Any monies remaining in the hands of a scrip corporation formed under this chapter, after all scrip entitled to payment has been redeemed, shall become the property of the State.

History

Source. V.S. 1947, § 5928. P.L. § 5901. 1933, No. 126 , Pt. II, § 14.

§ 937. Enjoining issuance of scrip.

On complaint brought by the Commissioner in the Superior Court within and for the county of Washington, a person issuing scrip in violation of this chapter shall be enjoined from issuing further scrip and required to redeem forthwith scrip already issued, and the terms of this chapter and rules and regulations issued hereunder may be enforced.

Amended 1973, No. 193 (Adj. Sess.), § 3, eff. April 9, 1974.

History

Source. V.S. 1947, § 5929. P.L. § 5902. 1933, No. 126 , Pt. II, § 15.

Revision note. Reference to "on bill in chancery brought by the commissioner in the court of chancery within and for the county of Washington" changed to "on complaint brought by the Commissioner in the county court within and for the county of Washington" to conform reference to merger of law and equity pursuant to 1971, No. 185 (Adj. Sess.), § 236. See note under § 219 of Title 4.

Amendments--1973 (Adj. Sess.). Substituted "superior" for "county" preceding "court".

Cross References

Cross references. Injunctions, see V.R.C.P. 65.

§ 938. Penalties.

A person violating a provision of this chapter or a regulation hereunder shall be fined not more than $1,000.00 or imprisoned not more than one year, or both.

History

Source. V.S. 1947, § 5930. P.L. § 5903. 1933, No. 126 , Pt. II, § 16.

CHAPTER 7. COOPERATIVES

Cross References

Cross references. Cooperative housing corporations, see § 1581 et seq. of this title.

Electric cooperatives, see 30 V.S.A. § 3001 et seq.

Worker cooperative corporations, see § 1081 of this title.

Subchapter 1. Provisions Relating to Cooperatives Formed Under General Corporation Law

§ 981. Use of "cooperative."

A corporation formed under chapters 1 and 17 of this title shall not have the word "cooperative" or any abbreviation thereof as part of its name, unless the corporation is a worker cooperative corporation organized under chapter 8 of this title, a cooperative housing corporation organized under chapter 14 of this title, or the articles of association contain all of the following provisions:

  1. Each shareholder shall have only one vote in all matters pertaining to the management of the corporation.
  2. The interest or dividend on the paid up capital stock of the corporation shall not exceed six percent per annum.
  3. There shall be set aside annually not less than ten percent of the net profits of the corporation for a reserve fund until there is accumulated a fund of not less than 50 percent of the paid up capital stock.
  4. The remainder of the earnings, or any part thereof, shall be distributed by a uniform dividend upon the amount of purchases or sales through the corporation by the shareholders, or the amount of raw material furnished to, or business done through, the corporation by the shareholders; and such profits or earnings shall be distributed as often as once in 12 months.
  5. Not more than ten percent of the capital stock of such corporation shall be owned by any one member.
  6. Certificates of stock in cooperative corporations shall contain a statement on the face thereof that the holder is entitled to only one vote thereon.

    Amended 1985, No. 46 , § 3; 1987, No. 254 (Adj. Sess.), § 3, eff. June 16, 1988.

History

Source. V.S. 1947, § 5760. 1947, No. 202 , § 5859. P.L. § 5791. 1929, No. 81 . G.L. § 4897. 1915, No. 141 , § 3.

Reference in text. Chapter 17 of this title, referred to in this section, was repealed by 1993, No. 85 , § 3(a), eff. Jan. 1, 1994. The subject matter is now covered by Title 11A.

Revision note. Reference to "chapter 1 of this title" changed to "chapters 1 and 17 of this title" to conform reference to repeal of certain provisions in chapter 1 and enactment of similar provisions in chapter 17.

Amendments--1987 (Adj. Sess.). In the introductory paragraph, inserted "a cooperative housing corporation organized under chapter 14 of this title" preceding "or the articles".

Amendments--1985. Inserted "the corporation is a worker cooperative corporation organized under chapter 8 of this title or" following "unless" in the introductory paragraph.

Cross References

Cross references. Corporate name of domestic corporation, see 11A V.S.A. § 4.01.

ANNOTATIONS

Analysis

1. Construction with other laws.

A cooperative creamery organized under this section was not required to file a bond or give security under provisions of Chapter 196 of the Public Laws (former section 1965 of Title 6). 1938-40 Op. Atty. Gen. 69.

2. Preferred stock.

A cooperative organized under former chapter 1 of this title, which incorporated as part of its governing articles of association the provisions of this section, could not amend its articles to establish preferred stock. 1942-44 Op. Atty. Gen. 234.

Cooperative formed under this chapter could issue preferred shares if the issuance thereof did not violate any of the conditions or requirements of this section. 1942-44 Op. Atty. Gen. 238.

3. Cooperatives.

An organization meeting in full the requirements of this section is a cooperative although word "cooperative" is not part of name. 1938-40 Op. Atty. Gen. 63.

Subchapter 2. The Cooperative Marketing Act

History

Severability of enactment. V.S. 1947, § 5972, derived from P.L. 5944, and 1931, No. 96 , § 40, contained a severability provision applicable to this subchapter.

Citation. V.S. 1947, § 5974, derived from P.L. § 1931, No. 96 , § 42, provided that this subchapter may be cited as the Cooperative Marketing Act.

§ 991. Definitions.

In this subchapter, unless the context or subject matter otherwise requires:

  1. "Agricultural products" includes horticultural, viticultural, forestry, dairy, livestock, poultry, bee, and any farm products.
  2. "Association" means any corporation organized under this chapter.
  3. "Associations" organized hereunder means nonprofit associations.
  4. "Consumers' cooperative" means a corporation organized under this chapter for the acquisition and distribution for the benefit of ultimate consumers of property, goods, commodities, or services.
  5. "Handcraft product" means any product fashioned primarily by hand with the final form and its characteristics shaped by hand and produced in the home or a small craft center by the artisan or craftsman in a skilled or artistic process rather than in an assembly line technique.
  6. "Marketing cooperative" means a corporation organized under this chapter for the marketing of agricultural or handcraft products.
  7. "Member" includes actual members of associations without capital stock and holders of common stock in associations organized with capital stock.
  8. "Person" includes individuals, firms, partnerships, corporations and associations.
  9. "Railroad cooperative" means any corporation organized under this chapter for the organization, acquisition, and operation of a general transportation business by railroad, including truck, bus, air, and water transportation subsidiaries of the railroad.

    Amended 1973, No. 90 , § 1.

History

Source. V.S. 1947, § 5932. 1947, No. 202 , § 6005. 1947, No. 104 , § 1. 1941, No. 142 , § 1. P.L. § 5905. 1931, No. 96 , § 1.

Amendments--1973. Added subdiv. designations and added subdiv. (5).

ANNOTATIONS

1. Nonprofit associations.

Associations organized under this subchapter are deemed nonprofit inasmuch as they are not organized to make profit for themselves, as such, or for their members, as such, but only for their members as producers. 1930-32 Op. Atty. Gen. 235.

§ 992. Use of "cooperative".

The use of the word "cooperative" as a part of the name of any person is hereby limited to such persons as are legally organized and chartered under the provisions of this chapter or chapter 8 or 14 of this title.

Amended 1985, No. 46 , § 4; 1987, No. 254 (Adj. Sess.), § 4, eff. June 16, 1988; 2011, No. 84 (Adj. Sess.), § 2, eff. April 20, 2012.

History

Source. V.S. 1947, § 5933. 1941, No. 142 , § 7.

Reference in text. Chapter 17 of this title, referred to in this section, was repealed by 1993, No. 85 , § 3(a), eff. Jan. 1, 1994. The subject matter is now covered by Title 11A.

Revision note. Reference to "chapter 1 of this title" changed to "chapters 1 and 17 of this title" to conform reference to repeal of certain provisions in chapter 1 and enactment of similar provisions in chapter 17.

Amendments--2011 (Adj. Sess.) Substituted "person" for "individual, partnership, corporation, or association" following "any"; "persons" for "associations" following "such"; and "chapter or chapter 8 or 14" for "subchapter or chapters 1, 8, 14 or 17" following "this".

Amendments--1987 (Adj. Sess.). Inserted "14" following "chapters 1, 8".

Amendments--1985. Substituted "8 or" for "and" following "chapters 1".

Cross References

Cross references. Name of electric cooperative, see 30 V.S.A. § 3003.

Use of the term "cooperative," see § 981 of this title.

§ 993. Subscribers.

Five or more persons, a majority of whom are residents of this State, may form a nonprofit, cooperative association, with or without capital stock, under the provisions of this subchapter.

History

Source. V.S. 1947, § 5934. 1941, No. 142 , § 2. P.L. § 5906. 1931, No. 96 , § 2.

§ 994. Powers.

Each association incorporated under this subchapter shall have the following powers:

  1. In the case of a marketing cooperative, the power to engage in any activity in connection with the purchasing, marketing, selling, preserving, harvesting, drying, processing, manufacturing, canning, packing, grading, storing, handling, or utilization of any agricultural or handcraft products or the manufacturing or marketing of the by-products thereof, any activity in connection with the purchase, hiring, or use by its members of supplies, machinery or equipment, and in financing any of the aforementioned activities.  However, a marketing association shall not handle agricultural or handcraft products of nonmembers to an extent greater in value than the products of its own members which it handles.  In the case of a consumers' cooperative, the power to engage in any one or more lawful mode or modes of acquiring, producing, building, operating, manufacturing, furnishing, exchanging, or distributing any type of property, commodities, goods, or services for the primary and mutual benefit of the patrons of the association, or their patrons, if any, as ultimate consumers.  In the case of a railroad cooperative, to engage in any activity in connection with the organization, acquisition, and operation of a subsidiary transportation business, whether by means of railroad, truck, water carrier, air, or other.  Such a corporation formed under this subchapter shall have any other rights, powers, and privileges granted by the laws of this State to corporations in a like business organized under the general laws of this State.
  2. To have perpetual succession in its corporate name unless incorporated or formed for a limited term, or dissolved as provided by law.
  3. To borrow money without limitations as to amount of corporate indebtedness or liability.
  4. To make advance payments, and advances to members.
  5. To act as the agent or representative of any member or members in any of the above mentioned activities.
  6. To acquire, to exercise all rights of ownership or control in, and to sell, transfer, or pledge, or guarantee the payment of dividends or interest on, or the retirement or redemption of, shares of the capital stock or bonds of any corporation or association engaged in any related activity or in the warehousing, handling, marketing, sale, or distribution of any of the products, property, commodities, or goods handled by the association.
  7. To establish reserves and invest the funds thereof in bonds or in such other property as may be provided in the bylaws.
  8. To buy, hold, and exercise all privileges of ownership over such real or personal property as may be necessary or convenient for the conduct and operation of any of the business of the association, or business incidental thereto.
  9. To establish, secure, own, and develop patents, trademarks, trade names, and copyrights.
  10. To do everything necessary, suitable, or proper for the accomplishment of any of the purposes or the attainment of any of the objects herein enumerated, or conducive to or expedient for the interest or benefit of the association, and to contract accordingly; to exercise and possess all powers, rights, and privileges necessary or incidental to the purposes for which the association is organized or to the activities in which it is engaged, and, in addition, any other rights, powers, and privileges granted by the laws of this State to corporations organized under the general laws of this State, except such as are inconsistent with the express provisions of this subchapter; and to do any such thing anywhere.

    Amended 1973, No. 90 , § 2.

History

Source. V.S. 1947, § 5935. 1947, No. 202 , § 6008. 1947, No. 104 , § 2. 1941, No. 142 , §§ 3, 4. P.L. § 5907. 1931, No. 96 , § 3.

Amendments--1973. Subdiv. (1): Inserted "or handcraft" following "utilization of any agricultural" in the first sentence.

ANNOTATIONS

1. Construction with other laws.

An association formed under this subchapter, having the rights, powers, and privileges granted by the laws of this State to corporations organized under general laws, is also subject to the regulatory provisions of the general law pertaining to corporations not expressly inconsistent with this subchapter. 1930-32 Op. Atty. Gen. 235.

§ 995. Articles.

Each association formed under this subchapter shall prepare and file articles of incorporation setting forth:

  1. The name of the association.
  2. The purpose for which it is formed.
  3. The place where its principal business will be transacted.
  4. The names and addresses of the directors thereof who are to serve until the election and qualification of their successors.
  5. The name and residence of the clerk.
  6. When organized without capital stock, whether the property rights and interest of the members are equal, and, if unequal, the general rules applicable to all members by which the property rights and interest, respectively, of each member shall be determined and fixed, and provision for the admission of new members who shall be entitled to share in the property of the association in accordance with such general rules. This provision or paragraph of the certificate of organization shall not be altered, amended, or replaced except by the written consent or vote representing three-fourths of the members.
  7. When organized with capital stock, the amount of such stock, the number of shares into which it is divided, and the par value thereof.
  8. The capital stock may be divided into preferred and one or more classes of common stock. When so divided, the certificate of organization shall contain a statement of the number of shares of stock to which preference is granted, the number of shares of stock to which no preference is granted, and the nature and definite extent of the preference and privileges granted to each.
  9. The articles of incorporation of any association organized under this subchapter may provide that the members or stockholders thereof shall have the right to vote in person or through another method of communication, including through a telecommunications or electronic medium, but a member or stockholder may not vote by proxy. This provision or paragraph of the articles of association shall not be altered and shall not be subject to amendment.
  10. In addition to the foregoing, the articles of incorporation of any association incorporated hereunder may contain any provision consistent with law with respect to management, regulation, government, financing, indebtedness, membership, the establishment of voting districts and the election of delegates for representative purposes, the issuance, retirement, and transfer of its stock, if formed with capital stock, or any provisions relative to the way or manner in which it shall operate or with respect to its members, officers, or directors and any other provisions relating to its affairs.
  11. The certificate shall be subscribed by the incorporators and shall be sworn to by one or more of them; and shall be filed with the Secretary of State. A certified copy shall also be filed with the Secretary of Agriculture, Food and Markets.
  12. When so filed, the certificate of organization or a certified copy thereof shall be received in the courts of this State as prima facie evidence of the facts contained therein and of the due incorporation of such association.

    Amended 2003, No. 42 , § 2, eff. May 27, 2003; 2015, No. 157 (Adj. Sess.), § B.1, eff. June 2, 2016.

History

Source. V.S. 1947, § 5936. P.L. § 5908. 1931, No. 96 , § 4.

Revision note. Substituted "Commissioner of Agriculture, Food and Markets" for "commissioner of agriculture" in subdiv. (11) for purposes of conformity with 1989, No. 256 (Adj. Sess.), § 10(a).

Amendments--2015 (Adj. Sess.). Subdiv. (9): Amended generally.

Amendments--2003 Subdiv. (11): Substituted "secretary of agriculture, food and markets" for "commissioner of agriculture, food and markets" in the last sentence.

§ 996. Amendment of certificate.

The certificate of organization may be altered or amended except as otherwise provided in this subchapter at any regular meeting or any special meeting called for that purpose. An amendment must first be approved by two-thirds of the directors and adopted by a vote of two-thirds of the members or delegates present and voting at such meeting. Amendments to the certificate of organization, when so adopted, shall be filed in accordance with the provisions of section 995 of this title.

History

Source. V.S. 1947, § 5937. 1947, No. 105 , § 1. P.L. § 5909. 1931, No. 96 , § 5.

§ 997. Fee.

For filing a certificate of organization, an association shall pay $20.00 to the Secretary of State, and for filing an amendment thereto, $10.00.

Amended 1963, No. 37 , § 4; 1967, No. 278 (Adj. Sess.), § 7.

History

Source. V.S. 1947, § 5938. P.L. § 5910. 1931, No. 96 , § 6.

Amendments--1967 (Adj. Sess.). Substituted "$20.00" for "$15.00" following "shall pay" and "$10.00" for "$5.00" following "thereto".

Amendments--1963. Substituted "$15.00" for "$10.00" following "shall pay" and "$5.00" for "$2.50" following "thereto".

§ 998. Members.

Under the terms and conditions prescribed in its bylaws, a marketing cooperative may admit as members, or issue common stock to, only cooperative marketing associations legally formed under the laws of this State, or persons engaged in the production of the agricultural or handcraft products to be handled by or through the association, including the lessees and tenants of land used therefor, and any lessors and landlords who receive any part of the agricultural or handcraft products produced on the leased premises or of the sale price of such product as rent. Under the terms and conditions prescribed in its bylaws, a consumers' cooperative may admit as members any natural persons, associations, incorporated or unincorporated groups organized on a cooperative basis, or any nonprofit groups. Under the terms and conditions prescribed in its bylaws, a railroad cooperative may admit as members, or issue stock to, any nonprofit organizations, any persons, corporations, or associations who are patrons of its services.

Amended 1973, No. 90 , § 3.

History

Source. V.S. 1947, § 5939. 1947, No. 104 , § 3. 1941, No. 142 , § 5. P.L. § 5911. 1931, No. 96 , § 7.

§ 999. Proxies.

If a member of a nonstock association be other than a natural person, such member may be represented by any individual, associate, officers, manager, or member thereof duly authorized in writing.

History

Source. V.S. 1947, § 5940. P.L. § 5912. 1931, No. 96 , § 8.

§ 1000. Adoption of bylaws.

  1. Within 30 days after its organization, each association shall adopt for its government and management a code of bylaws, not inconsistent with the powers granted hereby. Except as provided in subsection (b) of this section, a majority vote of the members shall be necessary to adopt, alter, amend, or repeal such bylaws.
  2. In the case of any association having district election of delegates and delegate system of voting as permitted by subdivision 995(10) of this title, in which, under its articles of association or bylaws, such delegates have complete voting power on behalf of the membership for every purpose except that of their own election and the election of district directors, following reasonable notice to the members or stockholders in accordance with the bylaws, a majority of the delegates attending and voting at any meeting of the delegates of the association may adopt, alter, amend, or repeal such bylaws.

    Amended 1971, No. 87 , § 1, eff. April 16, 1971.

History

Source. V.S. 1947, § 5941. P.L. § 5913. 1931, No. 96 , § 9.

2010. Substituted "subdivision 995(10)" for "section 995(10)" to conform reference to V.S.A. style.

Revision note - Added "of this section" following "subsection (b)" in subsec. (a) to conform reference to V.S.A. style.

Amendments--1971. Amended section generally.

§ 1001. Contents of bylaws.

Each association may provide in its bylaws for any or all of the following matters:

  1. The time, place, and manner of calling and conducting its meetings.
  2. The number of stockholders or members constituting a quorum.
  3. The number of directors constituting a quorum.
  4. The qualifications, compensation, duties, and term of office of directors and officers; the time of their election; and the mode and manner of giving notice thereof.
  5. Reasonable penalties for violations of the bylaws.
  6. The amount of entrance, organization, and membership fees, if any; the manner of collecting the same; and the purposes for which they may be used.
  7. The amount which each member or stockholder shall be required to pay annually or from time to time, if at all, to carry on the business of the association; the charges, if any, to be paid by each member or stockholder for services rendered by the association to him and the time of payment and manner of collection; and the marketing contract between the association and its members or stockholders, which every member or stockholder may be required to sign.
  8. The number and qualification of members or stockholders of the association and the conditions precedent to membership or ownership of common stock; the method, time, and manner of permitting members to withdraw or the holders of common stock to transfer their stock; the manner of assignment and transfer of the interest of members and of the shares of common stock; the conditions upon which and time when a membership shall cease; the automatic suspension of the rights of a member when he ceases to be eligible to membership; the manner and effect of the expulsion of a member; the manner of determining the value of a member's interest and provision for its purchase by the association upon the death or withdrawal of a member or stockholder, or upon the expulsion of a member or forfeiture of his or her membership, or, at the option of the association, the purchase at a price fixed by conclusive appraisal by a board of appraisers.  But in no case shall it be provided that the value or price of the stock shall be determined by any board on which the association shall have any greater voice than the member or his or her representative.
  9. The basis of voting by the members or stockholders, especially whether votes of all members shall be equal, or in proportion to the land area leased or used by each member for production of the products handled by the association, or in proportion to the quantity of such products delivered by or handled for each member or stockholder, or such other basis as may be determined.  Unless otherwise provided, no member or stockholder shall be entitled to more than one vote regardless of the number of shares of common stock owned by him or her.
  10. In the case of a consumer's or railroad cooperative, the method of distributing among members or stockholders and patrons, both members and nonmembers, the net savings derived from the excess of total income over operating expenses. Provision may be made for the accumulation of reserve funds out of net savings.

History

Source. V.S. 1947, § 5942. 1947, No. 104 , § 4. 1941, No. 142 , § 6. P.L. § 5914. 1931, No. 96 , § 10.

§ 1002. Meetings.

Each association shall by its bylaws provide for one or more regular meetings annually.

History

Source. V.S. 1947, § 5943. P.L. § 5915. 1931, No. 96 , § 11.

§ 1003. Special meetings.

The board of directors shall have the right to call a special meeting of the members or stockholders of the association at any time. They shall call one upon the petition of not less than ten percent of the members or stockholders, stating the specific business to be brought before the association.

History

Source. V.S. 1947, § 5944. P.L. § 5916. 1931, No. 96 , § 12.

§ 1004. Notice of meetings.

Notice of each meeting, together with a statement of the purposes thereof, shall be mailed or telegraphed to each member at least ten days prior to the meeting.

History

Source. V.S. 1947, § 5945. P.L. § 5917. 1931, No. 96 , § 13.

§ 1005. Place of meetings.

Meetings of the members or stockholders of the association, regular or special, shall be held at such place within or outside this State as may be determined from time to time by the board of directors.

Added 1971, No. 87 , § 2, eff. April 16, 1971.

§ 1006. Directors.

The business of the association shall be managed by a board of not less than five directors, elected by the members or stockholders from their own number.

History

Source. V.S. 1947, § 5946. P.L. § 5918. 1931, No. 96 , § 14.

§ 1007. Classification of directors.

The bylaws may provide that the territory in which the association has members shall be divided into districts and that the directors shall be elected according to such districts by the members in that district. In such case, the bylaws shall specify the number of directors to be elected by each district, and the manner and method of reapportioning the directors and of redistricting the territory covered by the association.

History

Source. V.S. 1947, § 5947. P.L. § 5919. 1931, No. 96 , § 15.

§ 1008. Primary elections for directors.

The bylaws may provide that primary elections shall be held in each district, to elect the directors apportioned to such districts, and that the result of all such primary elections may be ratified by the next regular meeting of the association or may be deemed the act of the association.

History

Source. V.S. 1947, § 5948. P.L. § 5920. 1931, No. 96 , § 16.

§ 1009. Appointment of directors by public officials.

The bylaws may provide that one or more directors may be appointed by any public official or commission or by the other directors selected by the members or their delegates. Such directors shall represent primarily the interest of the general public in such associations and need not be members or stockholders of the association, but shall have the same powers and rights as other directors. Such directors shall not number more than one-fifth of the entire board.

History

Source. V.S. 1947, § 5949. P.L. § 5921. 1931, No. 96 , § 17.

§ 1010. Vacancies on board of directors.

When a vacancy on the board of directors occurs other than by expiration of term, the remaining members of the board shall fill the vacancy by a majority vote, unless the bylaws provide for an election of directors by districts. In such a case, the board of directors shall immediately call a special meeting of the members, or stockholders, to fill the vacancy in the district where it exists.

History

Source. V.S. 1947, § 5950. P.L. § 5922. 1931, No. 96 , § 18.

§ 1011. Contracts with directors.

During the term of his or her office, a director shall not be a party to a contract for profit with the association differing in any way from the business relations accorded each member or holder of common stock of the association or others, or upon terms differing from those generally current in that district.

History

Source. V.S. 1947, § 5951. P.L. § 5923. 1931, No. 96 , § 19.

§ 1012. Executive committee.

The bylaws may provide for an executive committee and may allot to such committee all the functions and powers of the board of directors, subject to the general direction and control of that board.

History

Source. V.S. 1947, § 5952. P.L. § 5924. 1931, No. 96 , § 20.

§ 1013. Officers.

The directors shall elect from their number a president and one or more vice presidents. They shall also elect a secretary, who shall be the clerk of the corporation, and a treasurer, who need not be directors or members of the association. The directors may combine the two latter offices and designate the combined office as that of secretary-treasurer, or unite both functions and titles in one person. The treasurer may be a bank or any depository, and as such, shall not be considered as an officer, but as a function of the board of directors, and in such case, the secretary shall perform the usual accounting duties of the treasurer, except that the funds shall be deposited only as and where authorized by the board of directors.

History

Source. V.S. 1947, § 5953. P.L. § 5925. 1931, No. 96 , § 21.

§ 1014. Salaries.

An association may provide a fair compensation for the time actually spent by its officers and directors in its service and for the service of the members of its executive committee. The bylaws may provide that a director or officer shall not occupy any position in the association on regular salary or substantially full time pay.

History

Source. V.S. 1947, § 5954. P.L. § 5926. 1931, No. 96 , § 22.

§ 1015. Issue of stock.

An association shall not issue stock to a member until it has been fully paid for. The promissory notes of the members may be accepted by the association as full or partial payment. The association shall hold the stock as security for the payment of the note, but such retention as security shall not affect the member's right to vote. Until such notes are paid in full, the corresponding stock, to the extent of unpaid balances, shall be carried on the books of the association and upon all financial statements made by the association as "capital stock issued for notes," and the notes shall be carried on such books and statements as "notes given for capital stock."

History

Source. V.S. 1947, § 5955. P.L. § 5927. 1931, No. 96 , § 23.

§ 1016. Liability of members for debts.

A member shall not be liable for the debts of the association.

History

Source. V.S. 1947, § 5956. P.L. § 5928. 1931, No. 96 , § 24.

§ 1017. Preferred stock.

An association organized with stock may issue preferred stock but such stock shall have no voting privileges. Such stock may be issued on such terms and with such preferences as the board of directors may determine and may be sold to any person, member or nonmember, and may be redeemable or retirable by the association on such terms and conditions as may be provided in the certificate of organization and printed on the face of the stock certificate.

History

Source. V.S. 1947, § 5957. P.L. § 5929. 1931, No. 96 , § 25.

§ 1018. Marketing contracts - Terms.

An association and its members may make and execute marketing contracts, requiring the members to sell, for any period of time, all or any specified part of their agricultural products or specified commodities exclusively to or through the association or any facilities to be created by the association. If they contract a sale to the association, it shall be conclusively held that title to the products passes to the association upon delivery except for legally recorded chattel mortgages given for value and prior to July 1 in any year on such products or commodities whether such mortgages are given before or after the making of such contract of sale. The contract may provide, among other things, that the association may sell or resell the products delivered by its members, with or without taking title thereto, and pay over to its members the resale price, after deducting all necessary selling, overhead and other costs and expenses, including interest or dividends on stock, not exceeding eight percent per annum, and reserves for retiring the stock, if any, and other proper reserves, and for any other reductions.

History

Source. V.S. 1947, § 5958. P.L. § 5930. 1931, No. 96 , § 26.

Cross References

Cross references. Recording of chattel mortgage by town clerk, see 24 V.S.A. § 1156.

§ 1019. Damages.

The bylaws or the marketing contract may fix, as liquidated damages, a specific sum to be paid by a member or stockholder to the association upon the breach by him or her of any provision of the marketing contract regarding the sale or delivery or withholding of products; and may further provide that the member shall pay all costs, premiums for bonds, expenses, and fees, in case any action is brought upon the contract by the association. Any such provisions shall be valid and enforceable in the courts of this State. Such clauses providing for liquidated damages shall be enforceable as such and shall not be regarded as penalties.

History

Source. V.S. 1947, § 5959. P.L. § 5931. 1931, No. 96 , § 27.

§ 1020. Enjoining breach.

In case of any such breach or threatened breach of such marketing contract by a member, a Superior Court may restrain by injunction further breach of the contract and may decree specific performance thereof. Pending the termination of such an action and upon filing a verified complaint showing the breach or threatened breach, and upon filing a sufficient bond, such court may grant a temporary restraining order against the member.

1973, No. 193 (Adj. Sess.), § 3, eff. April 9, 1974.

History

Source. V.S. 1947, § 5960. P.L. § 5932. 1931, No. 96 , § 28.

Revision note. Reference to "court of chancery" changed to "county court" pursuant to 1971, No. 185 (Adj. Sess.), § 236. See note set out under 4 V.S.A. § 219.

Amendments--1973 (Adj. Sess.). Substituted "Superior" for "county" preceding "Court" in the first sentence.

Cross References

Cross references. Injunctions, see V.R.C.P. 65.

§ 1021. Liability of landowner, landlord or lessor.

In any action upon such marketing agreement, it shall be conclusively presumed that a landowner, landlord, or lessor is able to control the delivery of products produced on his or her land by tenants or others, whose tenancy, possession, or work on such land, or the terms of whose tenancy, possession, or labor thereon, were created or changed after execution by the landowner, landlord, or lessor of such a marketing agreement. In such action, the foregoing remedies for nondelivery or breach shall lie and be enforceable against such landowner, landlord, or lessor.

History

Source. V.S. 1947, § 5961. P.L. § 5933. 1931, No. 96 , § 29.

§ 1022. Payment in stock.

When an association with preferred capital stock shall purchase the stock or any property or interest, it may discharge the obligation so incurred, wholly or in part, by exchanging for the acquired interest shares of its preferred capital stock to an amount which at par value would equal the fair market value of the stock, property, or interest so purchased, as determined by the board of directors. In that case the transfer to the association of the stock or interest purchased shall be equivalent to payment in cash for the shares of stock issued.

History

Source. V.S. 1947, § 5962. P.L. § 5934. 1931, No. 96 , § 30.

§ 1023. Ownership or control of other corporations.

An association may organize, form, operate, own, control, have an interest in, own stock of, or be a member of, any other corporation or corporations, with or without capital stock, and engaged in preserving, drying, processing, canning, packing, storing, handling, shipping, utilizing, manufacturing, marketing, or selling the agricultural products handled by the association or byproducts thereof.

History

Source. V.S. 1947, § 5963. P.L. § 5935. 1931, No. 96 , § 31.

§ 1024. Warehouse receipts.

When such corporations are warehousing corporations, they may issue negotiable or nonnegotiable warehouse receipts of the association against the commodities delivered, and such warehouse receipts shall be considered as adequate collateral to the extent of the usual and current value of the commodity represented thereby. In case such warehouse is licensed, or licensed and bonded, under the laws of this or any other state of the United States, its warehouse receipt delivered to the association on commodities of the association or its members, or delivered by the association or by its members, shall not be challenged or discriminated against because of ownership or control, wholly or in part, by the association.

History

Source. V.S. 1947, § 5964. P.L. § 5936. 1931, No. 96 , § 32.

Cross References

Cross references. Public warehouses that store farm products, see 6 V.S.A. § 891 et seq.

Warehouse receipts, bills of lading and other documents of title, see 9A V.S.A. § 7-101 et seq.

§ 1025. Joint agreements.

Upon resolution adopted by its board of directors, an association may enter into all necessary and proper contracts or arrangements with any other cooperative corporation, association, or associations, formed in this or in any other state, for the cooperative and more economical carrying on of its business or any part thereof. Any two or more associations may, by an agreement, unite in employing and using or may separately employ and use the same personnel, methods, means, and agencies for carrying on and conducting their respective businesses.

History

Source. V.S. 1947, § 5965. P.L. § 5937. 1931, No. 96 , § 33.

§ 1026. Annual report.

An association formed under this subchapter shall prepare and submit at its annual meeting an annual report containing the name of the association, its principal place of business, a general statement of its business operations during the fiscal year, showing the amount of capital stock paid for and the number of stockholders, if a stock association, or the number of members and amount of membership fees received, if a nonstock association, the total expenses of operation, and the amount of its assets and indebtedness or liabilities.

History

Source. V.S. 1947, § 5966. 1947, No. 202 , § 6039. P.L. § 5938. 1931, No. 96 , § 34.

§ 1027. Foreign corporations.

A corporation or association organized under generally similar laws of another state shall be allowed to carry on any proper activities, operations, and functions in this State upon compliance with the general regulations applicable to foreign corporations desiring to do business in this State. All contracts which could be made by an association incorporated hereunder, made by or with such association, shall be legal and valid and enforceable in this State with all of the remedies set forth in this subchapter.

History

Source. V.S. 1947, § 5967. P.L. § 5939. 1931, No. 96 , § 35.

Cross References

Cross references. Foreign corporations, generally, see 11A V.S.A. § 15.01 et seq.

§ 1028. Application to existing corporations.

By a majority vote of its directors, and the vote in meeting assembled of the holders of two-thirds of the outstanding stock, or, if the stock is divided into classes, by the vote of the holders of two-thirds of each class of outstanding stock, a corporation or association, organized under previously existing statutes, may be brought under the provisions of this subchapter by limiting its membership and adopting the other restrictions as provided herein. It shall make out in duplicate a statement signed and sworn to by a majority of its directors to the effect that the corporation or association, by a majority vote of the directors, and the vote in meeting assembled of the holders of two-thirds of the outstanding stock, or, if the stock is divided into classes, by the vote of the holders of two-thirds of each class of outstanding stock, has decided to accept the benefits and be bound by the provisions of this subchapter and has authorized all changes accordingly. Articles of incorporation shall be filed as required in section 995 of this title, except that they shall be signed by the members of the then board of directors. The filing fee shall be the same as for filing an amendment to the certificate of organization.

History

Source. V.S. 1947, § 5968. 1937, No. 164 , § 1. P.L. § 5940. 1931, No. 96 , § 36.

Cross References

Cross references. Fee for filing an amendment to the certificate of organization, see § 997 of this title.

ANNOTATIONS

1. Filing duplicate statement.

This section requires filing of only one of the duplicate statements. 1930-32 Op. Atty. Gen. 235.

§ 1029. Soliciting breach of contract.

A person or corporation whose officers or employees knowingly induce or attempt to induce a member or stockholder of an association organized hereunder, or organized under similar statutes of other states, with similar restrictions and rights and operating in this State by legal authority, to breach his marketing contract with the association, or who maliciously and knowingly spreads false reports about the finances or management or activity thereof, shall be fined not less than $100.00 nor more than $1,000.00, and shall be liable to the association aggrieved in a civil suit in the penal sum of $500.00 for each offense.

History

Source. V.S. 1947, § 5969. 1947, No. 202 , § 6042. P.L. § 5941. 1931, No. 96 , § 37.

§ 1030. Conspiracies or combinations in restraint of trade.

An association organized under this subchapter and complying with the terms hereof shall not be deemed to be a conspiracy or a combination in restraint of trade or an illegal monopoly or an attempt to lessen competition, or to fix prices arbitrarily. The marketing contracts and agreements between the association and its members and any agreements authorized in this subchapter shall not be deemed illegal as such or in unlawful restraint of trade or as a part of a conspiracy or combination to accomplish an improper or illegal purpose.

History

Source. V.S. 1947, § 5971. P.L. § 5942. 1931, No. 96 , § 38.

§ 1031. Penalties.

An officer or director who shall subscribe or make oath to any certificate provided for in sections 995 and 996 of this title, which shall contain a false statement, known by such person to be false or who shall do any act relative to the issue of capital stock which is not permitted by section 1015 of this title, or who shall make or publish any financial statement which he or she knows does not comply with the provisions of such sections, shall be fined not more than $5,000.00, or imprisoned not more than five years, or both, and shall also be individually liable to a stockholder of the association or other person for damage caused by reason thereof.

History

Source. V.S. 1947, § 5973. 1947, No. 202 , § 6046. P.L. § 5945. 1931, No. 96 , § 41.

Cross References

Cross references. Signing or issuing false certificates of stock, see 13 V.S.A. § 2016.

Subchapter 3. Consolidation of Cooperative Associations

§ 1061. Procedure.

Two or more cooperative associations organized under, or which have adopted the provisions of subchapter 1 of this chapter, or similar laws of other states, whether having or not having capital stock, may merge or consolidate into one cooperative association which may be a new cooperative association or one of the constituent cooperatives by complying with the following requirements:

  1. Notice of the proposed merger or consolidation, to which shall be attached a copy of the articles therefor in the form prescribed in subdivision (3) of this section, shall be mailed by each consolidating cooperative to its members, its stockholders of every class, the holders of its certificates of beneficial interest, and its former members to whom an allocated reserve is credited on its books, and published in a newspaper of general circulation in the area served by such consolidating cooperative not less than 30 days before the date of the meeting at which the consolidating cooperative acts upon such proposal.
  2. Any present or past member of any consolidating cooperative having a property interest therein evidenced by its stock or its certificates of beneficial interest, or by an allocated reserve, may, not later than 10 days before the holding of such meeting, make a demand in writing upon the consolidating cooperative for payment of such property interest.  If, upon the expiration of 60 days from the time the merger or consolidation is completed, the consolidating cooperative and all demandants have not agreed upon the value of the demandants' interest, such consolidating cooperative shall, within 60 days thereafter, apply by petition to the Superior Court in the county where such consolidating cooperative is domiciled for the determination of the value in appropriate securities or cash, as the board of directors of the newly formed cooperative shall determine, of the interest of each demandant who has made a demand in writing for payment of his property interest, as hereinbefore set forth, and who has not agreed thereto.  Such petition shall state the names and addresses of each and every person who has made demand within the time specified and in the manner above provided. The consolidating cooperative shall notify each such demandant by mailing a copy of the petition and citation by registered mail, return receipt requested, to each demandant at his address as the same appears upon the books of the consolidating cooperative or to such other address as the court shall direct.  Such notice shall be in lieu of any other notice, statutory or otherwise, and shall be sufficient to bring all parties so notified and the subject matter of the petition within the jurisdiction of the court.  However, within 30 days from the mailing of such copy of the petition above referred to, the demandant, at his or her option, instead of proceeding as above set forth, may have such value ascertained by three disinterested persons, one of whom shall be named by the demandant, another by the consolidating cooperative, and the third by the two so named.  The findings of these appraisers shall be final, and if their award is not paid by the consolidating cooperative within 30 days after it is made and notice given to the consolidating cooperative, the award may be recovered by the demandant of the consolidating cooperative in a civil action on this statute. The suit shall be stayed pending the action of the appraisers and shall be terminated by the presiding judge as to the demandant upon the filing of the findings of the appraisers with the consolidating cooperative.
  3. If the articles of merger or consolidation are adopted by the affirmative vote of not less than two-thirds of the members attending and voting of each consolidating cooperative voting thereon at the meeting called to consider the same, or by not less than by a two-thirds vote of its delegates if qualified as provided in subdivision (4) of this section, articles of merger or consolidation in the form adopted shall be executed under its seal and acknowledged on behalf of each consolidating cooperative by its president or vice-president. Such articles of merger or consolidation shall recite that they are executed pursuant to this subchapter and shall state:
    1. the name of each consolidating cooperative and the address of its principal office;
    2. the name of the new cooperative and the address of its principal office;
    3. a statement that each consolidating cooperative agrees to the merger or consolidation;
    4. the names and addresses of the directors of the new cooperative; and
    5. the terms and conditions of the merger or consolidation and the mode of carrying the same into effect, including the manner in which the members of the consolidating cooperative may or shall become members of the new cooperative; and may contain provisions, not inconsistent with law or this subchapter, which are deemed necessary or advisable for the conduct of the business of the new cooperative.

      The president or vice president and the clerk or secretary of each consolidating cooperative executing such articles of merger or consolidation shall make and annex thereto an affidavit stating that the provisions of this section in respect to such articles were duly complied with by such cooperative.

  4. In the case of any consolidating cooperative having a district election of delegates and a delegate system of voting as permitted by subdivision 995(10) of this title, in which, under its articles of association or bylaws, such delegates have complete voting power on behalf of the membership for every purpose, except that of their own election and the election of district directors, the vote adopting the merger or consolidation required by subdivision (3) of this section shall be that of not less than two-thirds of the delegates attending and voting at such meeting.

    Amended 1965, No. 89 , §§ 1, 2, eff. June 10, 1965; 1973, No. 193 (Adj. Sess.), § 3, eff. April 9, 1974.

History

Source. V.S. 1947, § 5975. 1947, No. 106 , § 1.

2010. In subdiv. (4), substituted "subdivision" for "section" preceding "995(10)" to conform reference to V.S.A. style.

Revision note - In the second sentence of subdiv. (2), substituted "county court" for "court of chancery" pursuant to 1971, No. 185 (Adj. Sess.), § 236, set out under 4 V.S.A. § 219.

In the seventh sentence of subdiv. (2), substituted "a civil action" for "an action of contract" to conform to Rule 2, Vermont Rules of Civil Procedure, pursuant to 1971, No. 185 (Adj. Sess.), § 236(d). See note under 4 V.S.A. § 219.

In the eighth sentence of subdiv. (2), deleted "chancery" preceding "suit" and substituted "presiding judge" for "chancellor" pursuant to 1971, No. 185 (Adj. Sess.), § 236.

In subdiv. (4), deleted comma preceding "shall be" to correct a grammatical error.

Amendments--1973 (Adj. Sess.). Subdiv. (2): Substituted "superior" for "county" preceding "court" in the second sentence.

Amendments--1965. In the first sentence, inserted "or similar laws of other states" following "of this chapter".

Subdiv. (2): In the second sentence, inserted "in appropriate securities or cash, as the board of directors of the newly formed cooperative shall determine" following "determination of the value".

§ 1062. Filing of articles.

The articles of merger or consolidation, or a duplicate original thereof, or a copy duly certified by the clerk or secretary of the consolidating cooperative or the new cooperative, shall be filed in the Office of the Secretary of State of this State and with the Secretary of Agriculture, Food and Markets, and if the same affects title to real estate in this State, shall be recorded in the office where by law a deed of such real estate is required to be recorded. The making and perfecting of such merger or consolidation shall not be effective until the same is filed in the Office of the Secretary of State as herein provided, and in the case of the new cooperative, if the same is to have capital stock, until it has filed an affidavit of the proposed issue of its stock.

Amended 2003, No. 42 , § 2, eff. May 27, 2003.

History

Source. V.S. 1947, § 5976. 1947, No. 106 , § 2.

Revision note. Substituted "Commissioner of Agriculture, Food and Markets" for "commissioner of agriculture" in the first sentence for purposes of conformity with 1989, No. 256 (Adj. Sess.), § 10(a).

Amendments--2003 Substituted "Secretary of Agriculture, Food and Markets" for "Commissioner of Agriculture, Food and Markets" in the first sentence.

Cross References

Cross references. Office where deeds are to be recorded, see Vt. Const. Ch. II, § 62.

§ 1063. Fee.

For filing articles of merger or consolidation the new cooperative shall pay $20.00 to the Secretary of State; and for filing an amendment thereof $10.00.

Amended 1963, No. 37 , § 5; 1967, No. 278 (Adj. Sess.), § 8.

History

Source. V.S. 1947, § 5977. 1947, No. 106 , § 3.

Amendments--1967 (Adj. Sess.). Substituted "$20.00" for "$15.00" following "shall pay" and "$10.00" for "$5.00" following "thereof".

Amendments--1963. Substituted "$15.00" for "$10.00" following "shall pay", and "$5.00" for "$2.50" following "thereof".

§ 1064. Powers.

The new cooperative, in addition to the general powers of cooperative associations granted by subchapter 1 of this chapter, shall possess and enjoy all the rights, privileges, powers, franchises, immunities, exemptions, and benefits of each of the consolidating cooperatives, and may exercise the same in this State, unless contrary to law, as effectually as each of the consolidating cooperatives. The title to any real estate or personal property vested in the consolidating cooperatives, under the laws of this State shall pass to and be vested in the new cooperative upon the recording of the articles of merger or consolidation in the office where by law a deed thereof should be recorded, and shall not revert, or be in any way impaired, by reason of such merger or consolidation.

History

Source. V.S. 1947, § 5978. 1947, No. 106 , § 4.

Cross References

Cross references. Office where deeds are to be recorded, see Vt. Const. Ch. II, § 62.

§ 1065. Preservation of rights and liabilities.

All rights of creditors and liens upon the property of the consolidating cooperatives shall be preserved unimpaired; and all debts, liabilities, and duties of each consolidating cooperative shall thenceforth become the obligation of the new cooperative and may be enforced against the latter to the same extent as if the obligations and liabilities had been incurred or contracted by it.

Amended 1971, No. 185 (Adj. Sess.), § 28, eff. March 29, 1972.

History

Source. V.S. 1947, § 5979. 1947, No. 106 , § 5.

Amendments--1971 (Adj. Sess.). Deleted second sentence.

CHAPTER 8. WORKER COOPERATIVE CORPORATIONS

Sec.

§ 1081. Short title.

This chapter shall be known and may be cited as the Worker Cooperative Corporations Act.

Added 1985, No. 46 , § 1.

§ 1082. Definitions.

As used in this chapter, unless the context clearly requires otherwise, the term:

  1. "Worker cooperative" means a corporation which has elected to be governed by this chapter.
  2. "Person" means a natural person.
  3. "Member" means a person who has been accepted for membership in, and owns a membership share issued by, a worker cooperative.
  4. "Membership share" means a share of voting stock issued to each member of a worker cooperative as evidence of membership.
  5. "Membership fee" means the consideration paid for a membership share.
  6. "Patronage" means the amount of work performed as a member of a worker cooperative, measured in accordance with the articles of association or bylaws.
  7. "Written notice of allocation" means a written instrument which discloses to a member the stated dollar amount of that member's patronage allocation and the terms for payment of that amount by the worker cooperative.
  8. "Internal capital accounts" means a system of accounts on the books of a worker cooperative that reflects the book value of the corporation.
  9. "Individual capital accounts" means internal capital accounts that represent the portion of the net book value of the corporation attributable to each member.
  10. "Collective account" means an internal capital account that represents the portion of the net book value of the corporation attributable to the cooperative.
  11. "Internal capital account cooperative" means a worker cooperative governed in accordance with section 1090 of this chapter.

    Added 1985, No. 46 , § 1.

§ 1083. Corporations organized under chapter 17; election to be governed as worker cooperative.

Any corporation organized under chapter 17 of this title may elect to be governed as a worker cooperative under the provisions of this chapter, by so stating in its articles of association or articles of amendment filed in accordance with chapter 17.

Added 1985, No. 46 , § 1.

History

Reference in text. Chapter 17 of this title, referred to in this section, was repealed by 1993, No. 85 , § 3(a), eff. Jan. 1, 1994. The subject matter is now covered by Title 11A.

§ 1084. Revocation of election.

A worker cooperative may revoke its election under this chapter by a vote of majority of the members and through articles of amendment filed in accordance with subchapter 7 of chapter 17 of this title.

Added 1985, No. 46 , § 1.

History

Reference in text. Chapter 17 of this title, referred to in this section, was repealed by 1993, No. 85 , § 3(a), eff. Jan. 1, 1994. The subject matter is now covered by Title 11A.

Revision note. Added "of this title" following "chapter 17" to conform reference to V.S.A. style.

§ 1085. Corporate name.

A worker cooperative may include the word "cooperative" or any abbreviation of that word in its corporate title.

Added 1985, No. 46 , § 1.

§ 1086. Members' membership shares; fees; rights and responsibilities.

  1. The articles of association or the bylaws shall establish qualifications and the method of acceptance of members.  No person may be accepted as a member unless employed by the worker cooperative on a regular full-time or a part-time basis.  The membership of a worker cooperative shall constitute at least fifty and one-tenth percent of the regular, full and part-time work force.
  2. A worker cooperative shall issue a class of voting stock designated as "membership shares." Each member shall own only one such membership share, and only members may own such shares.
  3. Membership shares shall be issued for a fee determined from time to time by the directors.  A worker cooperative may allow for payment of such fee by payroll deduction, installments, or similar methods.  A membership share may be issued to a person upon acceptance for membership regardless of whether the membership fee is fully paid.
  4. Sections 1864, 1866(b), (d), 1869(a), 1870, and 1872 of this title shall not apply to membership shares.  Sections 2003 and 2004 of this title shall not apply to membership shares whose redemption price is determined by reference to internal capital accounts.
  5. Members of a worker cooperative shall have all the rights and responsibilities of stockholders as a corporation organized under chapter 17 of this title, except as otherwise provided in this chapter.

    Added 1985, No. 46 , § 1.

History

Reference in text. Chapter 17 of this title, which contained 11 V.S.A. §§ 1864, 1866(b), (d), 1869(a), 1870, 1872, 2003 and 2004, was repealed by 1993, No. 85 , § 3(a), eff. Jan. 1, 1994. The subject matter of former chapter 17 is now covered by Title 11A. The subject matter of former §§ 1864, 1866(b) 1869(a), 1870 and 1872 is now covered by §§ 6.20, 6.21(b), 6.25, 6.04 and 6.30, respectively, of Title 11A. The subject matter of former §§ 2003 and 2004 is now covered by § 13.01 et seq. of Title 11A.

Revision note. In subsec. (d), substituted "1866(b), (d)" for "1866(b), 1866(d)" to conform reference to V.S.A. style.

Added "of this title" following "chapter 17" in subsec. (e) to conform reference to V.S.A. style.

§ 1087. Voting shares; bylaws; amendment of articles of organization.

  1. No capital stock other than membership shares shall be given voting power in a worker cooperative except as otherwise provided in this chapter or in the articles of association.
  2. Notwithstanding the provisions of section 1873 of this title and other provisions of law relating to bylaws, the power to adopt, amend, or repeal bylaws of a worker cooperative shall be in the members only, except to the extent that directors are authorized by section 1873 of this title to adopt, amend, or repeal the bylaws.
  3. Subchapter 7 of chapter 17 relating to amendments to the articles of association shall be construed to limit voting on any amendment of the articles of association of a worker cooperative to the members, except that amendments affecting the rights of a class of stockholders as defined in section 1933 of this title may not be adopted without the vote of such stockholders in accordance with that section.

    Added 1985, No. 46 , § 1.

History

Reference in text. Chapter 17 of this title, which contained 11 V.S.A. §§ 1873 and 1933, was repealed by 1993, No. 85 , § 3(a), eff. Jan. 1, 1994. The subject matter of former §§ 1873 and 1933 is now covered by §§ 10.20 and 10.06, respectively, of Title 11A. The subject matter of former subchapter 7 is now covered by § 10.01 et seq. of Title 11A.

Revision note. Added "of this title" following "section 1873" in subsec. (b) and following "chapter 17" in subsec. (c) to conform references to V.S.A. style.

§ 1088. Net earnings or losses; apportionment, distribution, and payment.

  1. The net earnings or losses of a worker cooperative shall be apportioned and distributed at such times and in such manner as the articles of association or bylaws shall specify.  Net earnings declared as patronage allocations with respect to a period of time, and paid or credited to members, and net losses allocated to members with respect to a period of time shall be apportioned among the members in accordance with the ratio which each member's patronage during the period involved bears to total patronage by all members during that period.
  2. The apportionment, distribution, and payment of net earnings required by this section may be in cash, credits, written notices of allocation, or capital stock issued by the worker cooperative.

    Added 1985, No. 46 , § 1.

§ 1089. Directors; officers.

  1. The bylaws of a worker cooperative shall provide for the election, terms, classifications, if any, and removal of directors and officers in accordance with the provisions of this chapter or the provisions of chapter 17 of this title.
  2. Nonmembers may serve as directors or officers of a worker cooperative but at no time shall there be a majority of nonmember directors.
  3. Vacancies in director positions resulting from death, resignation, or removal shall be filled by vote of the member directors or by vote of the members.

    Added 1985, No. 46 , § 1.

History

Reference in text. Chapter 17 of this title, referred to at the end of subsec. (a), was repealed by 1993, No. 85 , § 3(a), eff. Jan. 1, 1994. The subject matter is now covered by Title 11A.

Revision note. Added "of this title" following "chapter 17" at the end of subsec. (a) to conform reference to V.S.A. style.

§ 1090. Internal capital accounts; recall or redemption of shares; interest; collective reserve account.

  1. A worker cooperative may provide in its bylaws that it shall operate as an internal capital account cooperative.  Any worker cooperative may establish through its articles of association or bylaws a system of internal capital accounts, to reflect the book value and to determine the redemption price of membership shares, capital stock, and written notices of allocation.
  2. The articles of association or bylaws of a worker cooperative may permit the periodic redemption of written notices of allocation and capital stock, and must provide for recall and redemption of the membership share upon termination of membership in the cooperative.  No redemption shall be made if such redemption would result in the liability of any director or officer of the worker cooperative under section 1891 of this title.
  3. The articles of association or bylaws may provide for the worker cooperative to pay or credit interest on the balance in each member's internal capital account.
  4. The articles of association or bylaws may authorize assignment of a portion of retained net earnings and net losses to a collective account.  Earnings assigned to the collective account may be used for any and all corporate purposes as determined by the board of directors.

    Added 1985, No. 46 , § 1.

History

Reference in text. 11 V.S.A. § 1891, referred to at the end of subsec. (b), was repealed by 1993, No. 85 , § 3(a), eff. Jan. 1, 1994. The subject matter is now covered by § 8.33 of Title 11A.

§ 1091. Internal capital account cooperatives.

  1. An internal capital account cooperative is a worker cooperative whose entire net book value is reflected in internal capital accounts, one for each member, and a collective account, and in which no persons other than members own capital stock.  In an internal capital account cooperative, each member shall have one and only one vote in any matter requiring voting by stockholders.
  2. An internal capital account cooperative shall credit the paid-in membership fee and additional paid-in capital of a member to the member's internal capital account, and shall also record the apportionment of retained net earnings or net losses to the members in accordance with patronage by appropriately crediting or debiting the internal capital accounts of members.  The collective account in an internal capital account cooperative shall reflect any paid-in capital, net losses, and retained net earnings not allocated to individual members.
  3. In an internal capital account cooperative, the balances in all the individual internal capital accounts and collective account, if any, shall be adjusted at the end of each accounting period so that the sum of the balances is equal to the net book value of the worker cooperative.

    Added 1985, No. 46 , § 1.

§ 1092. Conversion of membership shares and internal capital accounts upon revocation of election; consolidation or merger.

  1. If any worker cooperative revokes its election in accordance with section 1084 of this title, the articles of association or articles of amendment shall provide for conversion of membership shares and internal capital accounts or their conversion to securities or other property in a manner consistent with chapter 17 of this title.
  2. A worker cooperative may not consolidate or merge with another corporation unless the corporation which results from such merger or consolidation is a worker cooperative.  All such mergers and consolidations shall be in accordance with subchapter 9 of chapter 17 of this title.

    Added 1985, No. 46 , § 1.

History

Reference in text. Chapter 17 of this title, referred to in this section, was repealed by 1993, No. 85 , § 3(a), eff. Jan. 1, 1994. The subject matter of former chapter 17 is now covered by Title 11A. The subject matter of former subchapter 9 is now covered by § 11.01 et seq. of Title 11A.

Revision note. In subsec. (a), added "of this title" following "section 1084" and following "chapter 17" to conform references to V.S.A. style.

CHAPTER 9. PARTNERSHIPS

History

Former chapter 9. Former chapter 9, comprised of §§ 1121-1335 and relating to partnerships, was derived from V.S. 1941, No. 146 , § 1; V.S. 1947, § 6062, and repealed by 1997, No. 149 (Adj. Sess.), § 2, eff. January 1, 1999. The same subject matter is now covered by chapter 22.

Subchapter 1. General Provisions

§§ 1121-1125. Repealed. 1997, No. 149 (Adj. Sess.), § 2, eff. Jan. 1, 1999.

History

Former §§ 1121-1125. Former § 1121, relating to definitions, was derived from V.S. 1947, § 6063; 1941, No. 146 , § 2.

Former § 1122, relating to interpretation of "knowledge" and "notice," was derived from V.S. 1947, § 6064; 1941, No. 146 , § 3.

Former § 1123, relating to rules of construction, was derived from V.S. 1947, § 6065; 1941, No. 146 , § 4.

Former § 1124, relating to construction with other provisions, was derived from V.S. 1947, § 6105; 1941, No. 146 , § 44; and amended by 1971, No. 185 (Adj. Sess.) § 29.

Former § 1125, relating to rules for cases not provided for, was derived from V.S. 1947, § 6066; 1941, No. 146 , § 5.

Subchapter 2. Nature of Partnership

§§ 1161-1163. Repealed. 1997, No. 149 (Adj. Sess.), § 2, eff. Jan. 1, 1999.

History

Former §§ 1161-1163. Former § 1161, relating to definition of partnership, was derived from V.S. 1947, § 6067; 1941, No. 146 , § 6.

Former § 1162, relating to rules to determine the existence of a partnership, was derived from V.S. 1947, § 6068; 1941, No. 146 , § 7.

Former § 1163, relating to partnership property, was derived from V.S. 1947, § 6069; 1941, No. 146 , § 8.

Annotations From Former § 1161

1. Generally.

In a contract action for the balance due for advertising services, the record provided ample support of a finding of partnership where advertising for the real estate agencies of both defendants was placed with the plaintiff; both defendants used the same telephone number and address; both defendants placed advertising for the same properties; both defendants made payments on account as well as having made payment from corporations in which both had an interest; when one of the defendants had his real estate license revoked he operated under the other defendant's license; and where there was testimony, although conflicting, that one of the defendants received profits from the real estate office operation. Concra Corp. v. Andrus, 141 Vt. 169, 446 A.2d 363 (1982).

2. Implied partnership.

In deciding whether a partnership has been created by tacit agreement, courts must examine the facts to determine whether the parties carried on as co-owners of a business for profit. Harman v. Rogers, 147 Vt. 11, 510 A.2d 161 (1986).

As against third persons, a finding that a partnership was created by tacit agreement is determinative regardless of the parties' knowledge that their association created a partnership; where the issue hinges on the rights of the parties inter se only, there must be a manifestation of an intent to be so bound. Harman v. Rogers, 147 Vt. 11, 510 A.2d 161 (1986).

Cited. In re Russell, 80 B.R. 662 (Bankr. D. Vt. 1987).

Annotations From Former § 1162

1. Elements of partnership.

Where evidence in action for treble damages under 13 V.S.A. § 3606 established that defendant participated in logging operation, though he did not actually cut trees on plaintiffs' land, and received one-half of the net proceeds from sale of the logs, such evidence was sufficient to establish that defendant was engaged in a joint logging operation with the operator who actually cut the trees on plaintiffs' land. Lavalette v. Noyes, 124 Vt. 353, 205 A.2d 413 (1964).

An agreement to share the profits and losses of an adventure is an essential element of a partnership and, ordinarily, is sufficient to constitute the parties to such agreement partners, and such joint interest may result even though one party furnishes the capital or stock and the other contributes his labor and skill. Raymond S. Roberts, Inc. v. White, 117 Vt. 573, 97 A.2d 245 (1953).

Tenancy by the entirety and the sharing of gross returns do not of themselves establish a partnership, but a receipt by a person of a share of the profits of a business is prima facie evidence that he is a partner in the business. Raymond S. Roberts, Inc. v. White, 117 Vt. 573, 97 A.2d 245 (1953).

Agreement to share in profits and losses of an adventure is essential element of partnership, and ordinarily is sufficient to constitute parties to such agreement partners, but such agreement is not always decisive of existence of partnership as between parties. Farmers' Exchange v. Brown, 106 Vt. 65, 169 A. 906 (1934).

Agreement whereby parties have specific interest in profits as profits constitutes partnership, but agreement which gives person sought to be charged as partner a stipulated proportion of proceeds as compensation for his labor and services does not. Farmers' Exchange v. Brown, 106 Vt. 65, 169 A. 906 (1934).

To constitute partnership, it is not necessary that each party furnish share of capital or property which is to become stock or subject matter of business, or be joint owner of it, since capital of association may vest and remain in one of members, but indispensable constituent is that parties shall be jointly interested in profits and affected by losses of venture. Farmers' Exchange v. Brown, 106 Vt. 65, 169 A. 906 (1934).

2. Intention of parties .

Where the rights of the parties between themselves are concerned, and no question as to third parties is involved, the criterion to determine whether or not the contract is one of partnership must be what did the parties intend; this intention may be shown by their express agreement or inferred from their conduct and dealings with one another. Raymond S. Roberts, Inc. v. White, 117 Vt. 573, 97 A.2d 245 (1953).

It is not of the essence of a partnership that the parties to it should have known that their contract in law created a partnership. Raymond S. Roberts, Inc. v. White, 117 Vt. 573, 97 A.2d 245 (1953).

Question whether terms of contract made defendants partners, or merely provided that operator of farm was to receive as compensation for his labor and skill one-half income from farm, and to pay one-half of expenses, should have been left to jury under proper instructions. Farmers' Exchange v. Brown, 106 Vt. 65, 169 A. 906 (1934).

Annotation From Former § 1163

1. Homestead exemption.

An individual debtor may not claim a homestead exemption in real property occupied by the debtor but owned by a limited partnership in which the debtor has an interest as a limited partner, since a partnership owns real property as a distinct legal entity separate and apart from the individual partners. In re Russell, 80 B.R. 662 (Bankr. D. Vt. 1987).

Cited. In re Gorman, 68 B.R. 541 (Bankr. D. Vt. 1986), aff'd, 82 B.R. 253 (D. Vt. 1987).

Subchapter 3. Relations of Partners with Persons Dealing with the Partnership

§§ 1201-1209. Repealed. 1997, No. 149 (Adj. Sess.), § 2, eff. Jan. 1, 1999.

History

Former §§ 1201-1209. Former § 1201, relating to partners as agents of partnership, was derived from V.S. 1947, § 6070; 1941, No. 146 , § 9.

Former § 1202, relating to conveyance of partnership real property, was derived from V.S. 1947, § 6071; 1941, No. 146 , § 10.

Former § 1203, relating to effect of admission by partner, was derived from V.S. 1947, § 6072; 1941, No. 146 , § 11.

Former § 1204, relating to notice or knowledge of partner, was derived from V.S. 1947, § 6073; 1941, No. 146 , § 12.

Former § 1205, relating to wrongful acts of partner, was derived from V.S. 1947, § 6074; 1941, No. 146 , § 13.

Former § 1206, relating to breach of trust by partner, was derived from V.S. 1947, § 6075; 1941, No. 146 , § 14.

Former § 1207, relating to partners' liability, was derived from V.S. 1947, § 6076; 1941, No. 146 , § 15.

Former § 1208, relating to partner by estoppel, was derived from V.S. 1947, § 6077; 1941, No. 146 , § 16.

Former § 1209, relating to liability of incoming partner, was derived from V.S. 1947, § 6078; 1941, No. 146 , § 17.

Annotations From Former § 1201

1. Liability of partners generally.

Where husband and wife sold their partnership in 1967, and husband orally promised buyer, without wife's acknowledgment, that he would have it free and clear of the ten yearly payments should sellers die prior to full payment, and where wife, then husband, died in 1969, the husband's promise was not enforceable because wife had not also made it, or ratified it, and because of the statute of frauds provision requiring agreements which are not performed within one year to be in writing. White v. Hubbard, 131 Vt. 423, 306 A.2d 707 (1973).

Partners are jointly and severally liable for the partnership debts, and each is an agent of the partnership for the purpose of its business. Raymond S. Roberts, Inc. v. White, 117 Vt. 573, 97 A.2d 245 (1953).

2. Liability of undisclosed principals.

The rule in the law of agency relative to the liability of an undisclosed principal applies to a partnership; therefore, if one partner purchases property upon his individual credit for the partnership, and the seller is not aware of the partnership, he may when he discovers it have the benefit of the partnership liability. Raymond S. Roberts, Inc. v. White, 117 Vt. 573, 97 A.2d 245 (1953).

Cited. Clearwater Realty Co. v. Bouchard, 146 Vt. 359, 505 A.2d 1189 (1985).

Annotations From Former § 1205

Cited. Concra Corp. v. Andrus, 141 Vt. 169, 446 A.2d 363 (1982).

Annotations From Former § 1207

1. Liability of partners generally.

Under this section, partners are both jointly and severally liable for torts and breaches of trust, but they are only jointly liable for contract liability. Concra Corp. v. Andrus, 141 Vt. 169, 446 A.2d 363 (1982).

In a contract action for the balance due for advertising services, the trial court erred in holding the defendants jointly and severally liable under this section for the debt on the basis of section 1205 of this title, governing liability when a tort is committed by a partner; the defendants were only jointly liable and not both jointly and severally liable. Concra Corp. v. Andrus, 141 Vt. 169, 446 A.2d 363 (1982).

Where one of two partners fraudulently endorsed check made out to another in the name of the payee, added his own endorsement and asked the other partner to deposit the check in the bank in the partnership account, and the proceeds were subsequently withdrawn and paid to the fraudulent endorser for his own use, the partnership was the customer which deposited the check and was credited with the amount of it; thus, the partnership became liable under this section on its warranty that it had good title, and the partner who had not taken part in the fraudulent endorsement, being liable for the partnership debts, was liable to the bank, which had been found liable to the drawer. Kelton Motors, Inc. v. Phoenix of Hartford Insurance Co., 522 F.2d 728 (2d Cir. 1975).

Partners are jointly and severally liable for the partnership debts, and each is an agent of the partnership for the purpose of its business. Raymond S. Roberts, Inc. v. White, 117 Vt. 573, 97 A.2d 245 (1953).

Whether or not partnership is entity as distinct from its individual members, it is not same thing as joint ownership or joint responsibility, and members of partnership may be liable as joint contractors though not liable as partners. Dunbar v. Farnum, 109 Vt. 313, 196 A. 237 (1937).

Husband and wife doing business as partners were not chargeable in suit against them as partners on contract for sale of real estate by reason of fact that husband signed thereto his own and his wife's names, but not the firm name. Dunbar v. Farnum, 109 Vt. 313, 196 A. 237 (1937).

2. Liability of undisclosed principal.

The rule in the law of agency relative to the liability of an undisclosed principal applies to a partnership; therefore, if one partner purchases property upon his individual credit for the partnership, and the seller is not aware of the partnership, he may, when he discovers it, have the benefit of the partnership liability. Raymond S. Roberts, Inc. v. White, 117 Vt. 573, 97 A.2d 245 (1953).

Cited. Cookson v. Durivage, 153 Vt. 576, 572 A.2d 897 (1990).

Annotations From Former § 1208

Cited. In re D'Avignon, 25 B.R. 838 (Bankr. D. Vt. 1982).

Subchapter 4. Relations of Partners to One Another

§§ 1241-1246. Repealed. 1997, No. 149 (Adj. Sess.), § 2, eff. Jan. 1, 1999.

History

Former §§ 1241-1246. Former § 1241, relating to rights and duties of partners, was derived from V.S. 1947, § 6079; 1941, No. 146 , § 18.

Former § 1242, relating to partnership books, was derived from V.S. 1947, § 6080; 1941, No. 146 , § 19.

Former § 1243, relating to duty to render information, was derived from V.S. 1947, § 6081; 1941, No. 146 , § 20.

Former § 1244, relating to partner as fiduciary, was derived from V.S. 1947, § 6082; 1941, No. 146 , § 21.

Former § 1245, relating to right to an account, was derived from V.S. 1947, § 6083; 1941, No. 146 , § 22.

Former § 1246, relating to continuation of partnership, was derived from V.S. 1947, § 6084; 1941, No. 146 , § 23.

Annotations From Former § 1244

1. Nature and duration of relationship.

The fiduciary character of the partnership relationship continues until the partnership affairs are fully settled; until then, each partner stands as a trustee, with his copartners the beneficiaries of the trust, in his dealings with partnership interests. Jennison v. Bierer, 601 F. Supp. 1167 (D. Vt. 1984).

2. Breach of fiduciary duty.

Partner who, in negotiating sale of business, changed contract for sale to provide for a more favorable employment agreement for himself with the purchaser of the business without apprising his copartner, breached his fiduciary duty by excluding his copartner from the opportunity to seek a more favorable employment agreement with the purchaser than had been negotiated in his behalf. Jennison v. Bierer, 601 F. Supp. 1167 (D. Vt. 1984).

Annotations From Former § 1245

1. Construction with other laws.

This section provides the remedy for breach of the trust imposed by virtue of section 1244 of this title. Jennison v. Bierer, 601 F. Supp. 1167 (D. Vt. 1984).

2. Availability of remedy.

Partner who, in negotiating sale of business, changed contract for sale to provide for a more favorable employment agreement for himself with the purchaser of the business without apprising his copartner, breached his fiduciary duty by excluding his copartner from the opportunity to seek a more favorable employment agreement with the purchaser than had been negotiated in his behalf, and copartner was entitled to an accounting. Jennison v. Bierer, 601 F. Supp. 1167 (D. Vt. 1984).

Subchapter 5. Property Rights of a Partner

§§ 1281-1285. Repealed. 1997, No. 149 (Adj. Sess.), § 2, eff. Jan. 1, 1999.

History

Former §§ 1281-1285. Former § 1281, relating to extent of partner's property rights, was derived from V.S. 1947, § 6085; 1941, No. 146 , § 24.

Former § 1282, relating to nature of partner's rights in specific property, was derived from V.S. 1947, § 6086; 1941, No. 146 , § 25.

Former § 1283, relating to nature of partner's partnership interest, was derived from V.S. 1947, § 6087; 1941, No. 146 , § 26.

Former § 1284, relating to assignment of partner's interest, was derived from V.S. 1947, § 6088; 1941, No. 146 , § 27.

Former § 1285, relating to partner's interest subject to creditors, was derived from V.S. 1947, § 6089; 1941, No. 146 , § 28.

Annotations From Former § 1282

1. Construction with other laws.

When a partnership checking account was in the name of both partners and payable to either or the survivor, by the order creating the account and was signed by the partners, ownership of the account on the death of one partner was controlled by former section 810 of Title 8 rather than by subsection (b)(4) of this section. Pelton's Executor v. Dumas, 117 Vt. 13, 84 A.2d 408 (1951).

2. Homestead exemption.

An individual debtor may not claim a homestead exemption in real property occupied by the debtor but owned by a limited partnership in which the debtor has an interest as a limited partner, since a partnership owns real property as a distinct legal entity separate and apart from the individual partners. In re Russell, 80 B.R. 662 (Bankr. D. Vt. 1987).

Cited. In re Gorman, 68 B.R. 541 (Bankr. D. Vt. 1986), aff'd, 82 B.R. 253 (D. Vt. 1987); In re Gorman, 82 B.R. 253 (D. Vt. 1987).

Annotations From Former § 1283

Cited. In re Russell, 80 B.R. 662 (Bankr. D. Vt. 1987).

Subchapter 6. Dissolution and Winding Up

§§ 1321-1335. Repealed. 1997, No. 149 (Adj. Sess.), § 2, eff. Jan. 1, 1999.

History

Former §§ 1321-1335. Former § 1321, relating to definition of dissolution of a partnership, was derived from V.S. 1947, § 6090; 1941, No. 146 , § 29.

Former § 1322, relating to effect of dissolution on partnership, was derived from V.S. 1947, § 6091; 1941, No. 146 , § 30.

Former § 1323, relating to causes of dissolution, was derived from V.S. 1947, § 6092; 1941, No. 146 , § 31.

Former § 1324, relating to dissolution by court decree, was derived from V.S. 1947, § 6093; 1941, No. 146 , § 32.

Former § 1325, relating to effect of dissolution on authority of partner, was derived from V.S. 1947, § 6094; 1941, No. 146 , § 33.

Former § 1326, relating to right to contribution upon dissolution, was derived from V.S. 1947, § 6095; 1941, No. 146 , § 34.

Former § 1327, relating to power to bind partnership to third persons after dissolution, was derived from V.S. 1947, § 6096; 1941, No. 146 , § 35.

Former § 1328, relating to effect of dissolution on partner's liabilities, was derived from V.S. 1947, § 6097; 1941, No. 146 , § 36.

Former § 1329, relating to right to wind up partnership, was derived from V.S. 1947, § 6098; 1941, No. 146 , § 37.

Former § 1330, relating to application of partnership property, was derived from V.S. 1947, § 6099; 1941, No. 146 , § 38.

Former § 1331, relating to rights upon dissolution for fraud or misrepresentation, was derived from V.S. 1947, § 6100; 1941, No. 146 , § 39.

Former § 1332, relating to rules for distribution after dissolution, was derived from V.S. 1947, § 6101; 1941, No. 146 , § 40.

Former § 1333, relating to liability in certain cases, was derived from V.S. 1947, § 6102; 1941, No. 146 , § 41.

Former § 1334, relating to rights of deceased partners, was derived from V.S. 1947, § 6103; 1941, No. 146 , § 42.

Former § 1335, relating to accrual of actions, was derived from V.S. 1947, § 6104; 1941, No. 146 , § 43.

Annotations From Former § 1323

1. Notice.

For termination of a partnership to occur under subdivision (2) of this section, it is necessary that the dissolving partner give notice to the other partners of intention to dissolve. Halpern v. Kantor, 139 Vt. 365, 428 A.2d 1132 (1981).

2. Grounds .

Where two parties entered into a joint undertaking involving the acquisition and lease of an aircraft, with the profits and losses from the venture to be shared equally, one of the purposes of the arrangement was the obtaining of the potential lease profits and possible tax advantages to be derived from the venture; and those purposes survived an attempt by a secured creditor, which was abandoned, to repossess the aircraft, because the evidence precluded a finding of dissolution of the partnership arrangement based upon the termination of parties' undertaking under subdivision (1)(A) of this section. Cain v. Grace, 146 Vt. 599, 508 A.2d 699 (1986).

*3. Express will of partner.

In an action for contribution by a party to a joint undertaking involving the acquisition and lease of an aircraft, with the profits and losses from the venture to be shared equally by the two parties, the defendant raised the defense of dissolution of the partnership arrangement, but where the defendant did not give actual notice of his intention to dissolve the partnership, and where there was evidence that the agreement was never rescinded or modified, there was no dissolution by express will of the defendant as required by subdivision (1)(B) of this section. Cain v. Grace, 146 Vt. 599, 508 A.2d 699 (1986).

Annotations From Former § 1324

Cited. Harman v. Rogers, 147 Vt. 11, 510 A.2d 161 (1986).

Annotations From Former § 1330

1. Particular dispositions.

In suit between partners who treated proceeding as one for dissolution of the partnership, where judgment order was based on the contingency of the sale of one of the two houses the partnership was formed to build and sell rather than being based on final aligning of the interests of the partners, the contingency made the judgment impossible to enforce as it could not become operative until the sale of the house, and judgment must be reversed and a rehearing held below in the light of the governing law. Halpern v. Kantor, 136 Vt. 281, 388 A.2d 411 (1978).

CHAPTER 11. LIMITED PARTNERSHIPS

Sec.

History

Former chapter 11. Former chapter, comprised of §§ 1391-1420 and relating to limited partnerships, was repealed by 1997, No. 149 (Adj. Sess.), § 5, eff. January 1, 1999. The same subject matter is now covered by chapter 23 of this title.

Applicability of repeal. Applicability of repeal. 1997, No. 149 (Adj. Sess.), which repeals this chapter and enacts chapter 23 of this title effective January 1, 1999, provides in § 6(d): "Unless otherwise agreed by the partners, the applicable provisions of chapter 11 of Title 11 in effect immediately prior to the effective date of this act [January 1, 1999] governing allocation of profits and losses (rather than the provisions of section 3443 of Title 11), distributions to a withdrawing partner (rather than the provisions of section 3454 of Title 11), and distributions of assets upon the winding up of a limited partnership (rather than the provisions of section 3474 of Title 11) shall govern limited partnerships formed before the effective date of this act."

§§ 1391-1420. Repealed. 1997, No. 149 (Adj. Sess.), § 5, eff. Jan. 1, 1999.

History

Former §§ 1391-1420. Former § 1391, relating to definitions, was derived from V.S. 1947, § 6032; 1941, No. 145 , § 1, and amended by 1995, No. 166 (Adj. Sess.), § 8.

Former § 1392, relating to formation of limited partnerships, was derived from V.S. 1947, § 6033; 1941, No. 145 , § 2, and amended by 1995, No. 166 (Adj. Sess.), § 9.

Former § 1393, relating to business which may be carried on, was derived from V.S. 1947, § 6034; 1941, No. 145 , § 3.

Former § 1394, relating to character of limited partner's contribution, was derived from V.S. 1947, § 6035; 1941, No. 145 , § 4.

Former § 1395, relating to restrictions on partnership name, was derived from V.S. 1947, § 6036; 1941, No. 145 , § 5.

Former § 1396, relating to liability for false statements, was derived from V.S. 1947, § 6037; 1941, No. 145 , § 6, and amended by 1995, No. 166 (Adj. Sess.), § 10.

Former § 1397, relating to liability of limited partner, was derived from V.S. 1947, § 6038; 1941, No. 145 , § 7.

Former § 1398, relating to additional limited partners, was derived from V.S. 1947, § 6039; 1941, No. 145 , § 8.

Former § 1399, relating to rights, powers and liabilities of general partner, was derived from V.S. 1947, § 6040; 1941, No. 145 , § 9.

Former § 1400, relating to rights of limited partner, was derived from V.S. 1947, § 6041; 1941, No. 145 , § 10.

Former § 1401, relating to status of one erroneously believing himself a limited partner, was derived from V.S. 1947, § 6042; 1941, No. 145 , § 11.

Former § 1402, relating to one person both limited and general partner, was derived from V.S. 1947, § 6043; 1941, No. 145 , § 12.

Former § 1403, relating to transactions with limited partners, was derived from V.S. 1947, § 6044; 1941, No. 145 , § 13.

Former § 1404, relating to relations of limited partners inter se, was derived from V.S. 1947, § 6045; 1941, No. 145 , § 14.

Former § 1405, relating to compensation of limited partner, was derived from V.S. 1947, § 6046; 1941, No. 145 , § 15.

Former § 1406, relating to withdrawal or reduction of limited partner's contribution, was derived from V.S. 1947, § 6047; 1941, No. 145 , § 16.

Former § 1407, relating to liability of limited partner to partnership, was derived from V.S. 1947, § 6048; 1941, No. 145 , § 17.

Former § 1408, relating to nature of limited partner's partnership interest, was derived from V.S. 1947, § 6049; 1941, No. 145 , § 18.

Former § 1409, relating to assignment of limited partner's interest, was derived from V.S. 1947, § 6050; 1941, No. 145 , § 19.

Former § 1410, relating to death, retirement or insanity of general partner, was derived from V.S. 1947, § 6051; 1941, No. 145 , § 20.

Former § 1411, relating to death of limited partner, was derived from V.S. 1947, § 6052; 1941, No. 145 , § 21.

Former § 1412, relating to rights of creditors of limited partner, was derived from V.S. 1947, § 6053; 1941, No. 145 , § 22.

Former § 1413, relating to distribution of assets, was derived from V.S. 1947, § 6054; 1941, No. 145 , § 23.

Former § 1414, relating to amendment and cancellation of declaration or certificate, was derived from V.S. 1947, § 6055; 1941, No. 145 , § 24.

Former § 1415, relating to requirements for amendment or cancellation of declaration or certificate, was derived from V.S. 1947, § 6056; 1941, No. 145 , § 25, and amended by 1973, No. 193 (Adj. Sess.), § 3, and 1995, No. 166 (Adj. Sess.), § 12.

Former § 1416, relating to parties to actions, was derived from V.S. 1947, § 6057; 1941, No. 145 , § 26.

Former § 1417, relating to rules of construction, was derived from V.S. 1947, § 6059; 1941, No. 145 , § 28.

Former § 1418, relating to rules for cases not provided for in this chapter, was derived from V.S. 1947, § 6060; 1941, No. 145 , § 29.

Former § 1419, relating to existing partnerships, was derived from V.S. 1947, § 6061; 1941, No. 145 , § 30.

Former § 1420, relating to foreign limited partnerships, was derived from 1995, No. 166 (Adj. Sess.), § 13.

Annotations From Former § 1399

Cited. In re Russell, 80 B.R. 662 (Bankr. D. Vt. 1987).

Annotations From Former § 1400

1. Homestead exemption.

An individual debtor may not claim a homestead exemption in real property occupied by the debtor but owned by a limited partnership in which the debtor has an interest as a limited partner, since a partnership owns real property as a distinct legal entity separate and apart from the individual partners. In re Russell, 80 B.R. 662 (Bankr. D. Vt. 1987).

Annotations From Former § 1403

1. Construction.

Under subdivision (a)(1) of this section, a limited partner may not receive or hold as collateral security any partnership property; the prohibition is absolute and is not dependent upon whether or not the partnership has sufficient assets to satisfy the partnership liabilities. In re Hecht, 51 B.R. 72 (Bankr. D. Vt. 1985).

Annotations From Former § 1408

Cited. In re Russell, 80 B.R. 662 (Bankr. D. Vt. 1987).

Annotations From Former § 1412

Cited. In re Russell, 80 B.R. 662 (Bankr. D. Vt. 1987).

Annotations From Former § 1413

Cited. In re Hecht, 51 B.R. 72 (Bankr. D. Vt. 1985).

CHAPTER 13. RELIGIOUS SOCIETIES

Cross References

Cross references. Exemptions from property tax, see 32 V.S.A. § 3802.

Immunity from personal liability of directors, officers, or trustees of nonprofit organizations, see 12 V.S.A. § 5781.

License exemption for day care facilities operated by religious organizations, see 33 V.S.A. § 3502.

Nonprofit corporations, see Title 11B.

Property held for religious, fraternal, or other charitable purposes, see 27 V.S.A. § 701 et seq.

Subchapter 1. Repairs of Churches

§ 1471. Notice of meeting to provide for repairs.

When a building owned and used as a house of public worship needs repairs, and the owners are not a corporation or incorporated association, or have not the power by their charter or articles of association to repair such building, any three persons who are owners of such house may call a meeting of those who are proprietors or pew owners. At least 15 days before such meeting, such owners shall post a notice upon the door of such house, setting forth the time when it will be held and the business to be transacted, and they shall also cause such notice to be published three weeks successively in a newspaper circulating in the town where such house of worship is situated, the last of which publications shall be at least two weeks prior to such meeting.

History

Source. V.S. 1947, § 6016. P.L. § 6013. G.L. § 5695. 1917, No. 254 , § 5561. P.S. § 4877. V.S. § 4262. R.L. § 3676. 1866, No. 49 . 1864, No. 75 , § 1.

§ 1472. Organization of meeting.

At the time appointed, such meeting shall be organized by the election of a chair and a secretary.

Amended 2013, No. 161 (Adj. Sess.), § 72.

History

Source. V.S. 1947, § 6017. P.L. § 6014. G.L. § 5696. P.S. § 4878. V.S. § 4263. R.L. § 3677. 1864, No. 75 , § 2.

Amendments--2013 (Adj. Sess.). Substituted "chair" for "chairman".

§ 1473. Voting and assessment.

Owners of pews shall have one vote for each pew. At the meeting, a committee of three shall be elected by ballot, who shall appraise each interest and establish the proportion each interest shall bear to the whole. The charges for such repairs shall be assessed upon the interest of each proprietor agreeably to such proportion.

History

Source. V.S. 1947, § 6018. P.L. § 6015. G.L. § 5697. P.S. § 4879. V.S. § 4264. R.L. § 3678. 1864, No. 75 , § 3.

§ 1474. Assessment of pews.

At such meeting, the majority of such owners or proprietors may assess the pews in such house for defraying the expenses of repairing the house, and direct and make such repairs as the majority deem necessary.

History

Source. V.S. 1947, § 6019. P.L. § 6016. G.L. § 5698. P.S. § 4880. V.S. § 4265. 1888, No. 126 . R.L. § 3679. 1864, No. 75 , § 4.

§ 1475. Sale of pews for nonpayment.

When the owner or occupant of a pew so assessed does not pay the assessment to the person authorized by the meeting to collect the same, upon three weeks' notice and demand made after the completion of the repairs, which notice and demand shall be made either in person or by publishing the same for three weeks successively in some daily or weekly newspaper of general circulation in the town where such house of public worship is situated, such collector may sell the pew of such delinquent person at public auction to the highest bidder, upon giving notice thereof as is provided in section 1471 of this title. The balance of the proceeds arising from the sale, if any, after the payment of assessments, expenses of advertising, and fees equal to those allowed by law for the collection of an execution, shall be paid to the owner of the pew so sold.

History

Source. V.S. 1947, § 6020. P.L. § 6017. G.L. § 5699. P.S. § 4881. 1906, No. 134 , § 1. V.S. § 4266. R.L. § 3680. 1864, No. 75 , § 5.

Cross References

Cross references. Pews and slips in places of public worship to be treated as real estate, see 1 V.S.A. § 132.

§ 1476. Redemption.

Within six months after the sale, the owner or occupant may redeem the property by paying to the person entitled to receive the same, the purchase price with accrued interest. If such property is not redeemed, the collector shall thereupon execute and deliver to the purchaser a deed of such pew, which deed, when recorded, shall convey to the purchaser a title thereto.

History

Source. V.S. 1947, § 6021. P.L. § 6018. G.L. § 5700. P.S. § 4882. V.S. § 4267. R.L. § 3680. 1864, No. 75 , § 5.

Cross References

Cross references. Pews and slips in places of public worship to be treated as real estate, see 1 V.S.A. § 132.

Subchapter 2. Consolidation or Merger

§ 1501. Procedure.

The word "persons" as used in sections 42 and 1925 of this title shall apply to and include churches and religious or ecclesiastical corporations or societies. Churches and religious or ecclesiastical corporations or societies desiring to unite and form a corporation under the provisions of chapters 1 and 17 of this title shall hold meetings of their members to vote upon the question. Notices of such meetings and of the fact that the question of forming a corporation under the terms of such chapters is to be considered thereat shall be sent to all of the members of such churches, societies, or corporations. Voting at such meetings may be in person or by proxy, and a majority of the votes cast at such a meeting shall be necessary to determine the question of forming a corporation.

History

Source. V.S. 1947, § 6022. P.L. § 6019. G.L. § 5701. 1917, No. 140 , § 1.

Reference in text. Chapter 17 of this title, which contained § 1925, was repealed by 1993, No. 85 , § 3(a), eff. Jan. 1, 1994. The subject matter of former chapter 17 is now covered by Title 11A. The subject matter of former § 1925 is now covered by § 2.01 of Title 11A.

Revision note. References to "sections 41 and 42 of this title" and "chapter 1 of this title" changed to "sections 42 and 1925 of this title" and "chapters 1 and 17 of this title" to conform references to repeal of provisions in chapter 1 and enactment of chapter 17.

§ 1502. Signing and filing of articles.

In case it is voted to form a new corporation, a church, or religious or ecclesiastical corporation or society so voting, at the meeting when such vote is taken, shall authorize the secretary of such corporation or society to sign the name of such corporation or society to the articles of association of such new corporation. There shall be filed with the articles of association of such new corporation an attested copy of the minutes of the meeting of each corporation or society at which it was voted to form such new corporation. Upon the filing of the articles of association in the Office of the Secretary of State as required by section 1927 of this title, all rights, title, and interest of each church or religious or ecclesiastical corporation or society signing such articles of association shall vest in such new corporation.

History

Source. V.S. 1947, § 6023. P.L. § 6020. G.L. § 5702. 1917, No. 140 , § 2.

Reference in text. Section 1927 of this title, referred to in this section, was repealed by 1993, No. 85 , § 3(a), eff. Jan. 1, 1994.

Revision note. Reference to "section 45" in third sentence changed to "section 1927" to conform reference to repeal of section 45 by 1971, No. 237 (Adj. Sess.), § 100, eff. Jan. 1, 1973, and enactment of section 1927.

Subchapter 3. Dissolving or Moving Religious Associations

§ 1531. Petition for dissolution.

When five members of a corporation or society created for the support of the gospel and the maintenance of public worship, or to procure, hold, and keep in repair a house of public worship, or a parsonage, or for all or any of such purposes, desire to dissolve or move such corporation or society, they may apply by petition in writing to the Superior Court in the county in which the corporation or society is located. Such petition, with a citation, shall be served on such corporation or society like a summons.

Amended 1973, No. 193 (Adj. Sess.), § 3, eff. April 9, 1974.

History

Source. V.S. 1947, § 6024. 1945, No. 29 , § 55. P.L. § 6021. G.L. § 5703. P.S. § 4883. V.S. § 4268. R.L. § 3681. 1878, No. 109 , § 1.

Revision note. Deleted "writ of" preceding "summons" in the last sentence to conform the reference to repeal of former 12 V.S.A. § 813 by 1971, No. 185 (Adj. Sess.), § 237, eff. March 29, 1972.

Amendments--1973 (Adj. Sess.). Substituted "superior" for "county" preceding "court in the county" in the first sentence.

Cross References

Cross references. Service of process, see V.R.C.P. 4.

§ 1532. Recognizance.

Before issuing the citation the petitioners shall cause some other person to recognize to such corporation or society in not less than $500.00, to the satisfaction of the clerk of the court, conditioned that the petitioners will prosecute their petition to effect, and answer the damages and costs if judgment is rendered against them. A minute of the recognizance, with the name of the surety and the sum in which he or she is bound, shall be made upon the citation at the time of signing the same, and signed by the clerk. If such citation is otherwise issued, on motion it shall abate.

History

Source. V.S. 1947, § 6025. P.L. § 6022. G.L. § 5704. P.S. § 4884. V.S. § 4269. R.L. § 3682. 1878, No. 109 , § 2.

Cross References

Cross references. Bail and recognizances, see 12 V.S.A. § 3471 et seq.

§ 1533. Opposing petition.

When such petition is brought, members of the corporation or society may appear and defend in the name of such corporation or society, by filing a bond with the clerk in the penal sum of not less than $500.00, conditioned for the payment of the costs which the petitioners may recover against such corporation or society.

History

Source. V.S. 1947, § 6026. P.L. § 6023. G.L. § 5705. P.S. § 4885. V.S. § 4270. R.L. § 3683. 1878, No. 109 , § 3.

§ 1534. Appointment of commissioners, hearing.

If sufficient cause is shown, the court shall appoint three disinterested persons as commissioners, who shall fix a time and place for hearing, and give reasonable notice thereof to those who defend. If, at the time of giving such notice, a person has not entered to defend, the commissioners shall give notice of such hearing by posting a notice thereof, at least 14 days before such hearing, in three or more public places in the town in which such corporation or society is located.

Amended 2017, No. 11 , § 13.

History

Source. V.S. 1947, § 6027. 1945, No. 29 , § 56. P.L. § 6024. G.L. § 5706. P.S. § 4886. V.S. § 4271. R.L. § 3684. 1878, No. 109 , § 4.

Amendments--2017. Substituted "14" for "ten" preceding "days" in the second sentence.

Cross References

Cross references. Appointment of commissioners, see V.R.C.P. 53.

§ 1535. Report and judgment.

When, upon such hearing, it appears to be for the best interests of a majority of the members of such corporation or society or the persons interested therein, that the same should be dissolved or moved, and that the property should be divided among the owners thereof, or that such property should be sold and the proceeds divided, the commissioners shall so report to the court within 30 days of their determination of the matter. The court shall thereupon render judgment in accordance with the facts found, and that such corporation or society is dissolved, and that the property belonging to it, whether real or personal, shall be divided or sold, and its proceeds divided among the owners thereof, or the persons interested therein, as to the court seems just, and for the petitioners to recover their costs, if defense is made to such petition. If defense is not made, the petitioners shall pay the costs, and the court shall so order.

History

Source. V.S. 1947, § 6028. 1945, No. 29 , § 57. P.L. § 6025. G.L. § 5707. P.S. § 4887. V.S. § 4272. R.L. § 3685. 1878, No. 109 , § 5.

§ 1536. Further proceedings.

If no appeal is taken, the court shall issue its order directing the commissioners forthwith to carry out the provisions of such judgment and make return of their doings thereon to the clerk of the court and to the town clerk of the town where such corporation is located, and cause the same to be there recorded.

History

Source. V.S. 1947, § 6029. 1947, No. 202 , § 6097. P.L. § 6026. 1933, No. 157 , § 5700. G.L. §§ 5707, 5708, 5709. P.S. §§ 4887, 4888, 4889. V.S. §§ 4272, 4273, 4274. R.L. §§ 3685, 3686, 3687. 1878, No. 109 , §§ 5-7.

§ 1537. Commissioner's fees; costs.

Each commissioner shall receive $2.00 a day for his or her services and necessary expenses, to be paid by the State as in case of other commissioners appointed by the Superior Court. All other costs incurred shall be taxed as costs are taxed in hearings before a referee in civil causes, and the court shall tax costs as seem just.

Amended 1973, No. 193 (Adj. Sess.), § 3, eff. April 9, 1974.

History

Source. V.S. 1947, § 6030. P.L. § 6027. 1933, No. 157 , § 5701. G.L. §§ 5709, 5710. P.S. §§ 4889, 4890. V.S. §§ 4274, 4275. R.L. §§ 3687, 3688. 1878, No. 109 , §§ 7-9.

Amendments--1973 (Adj. Sess.) Substituted "Superior Court" for "county court" following "commissioners appointed by the" in the first sentence.

Cross References

Cross references. Appointment of commissioners, see V.R.C.P. 53.

Subchapter 4. Religious Convention as Trustee

§ 1571. Authority to act as trustee.

A religious state convention organized under the laws of this State is hereby authorized to act as trustee under deeds, wills, or otherwise when such convention is a beneficiary under the trust.

History

Source. V.S. 1947, § 6031. P.L. § 6028. G.L. § 5711. 1917, No. 170 .

CHAPTER 14. COOPERATIVE HOUSING OWNERSHIP ACT

Sec.

History

Revision note. The provisions of this chapter as enacted by 1987, No. 254 Adj. Sess., § 1, were originally designated as sections 1250-1278. However, for purposes of conformity with the classification system of V.S.A., sections 1250-1278, as enacted, were redesignated as sections 1581-1609.

Cross References

Cross references. Condominiums, see 27 V.S.A. § 1301 et seq.

§ 1581. Short title.

This chapter shall be known as the "Cooperative Housing Ownership Act."

Added 1987, No. 254 (Adj. Sess.), § 1, eff. June 16, 1988.

§ 1582. Purpose.

The purpose of this chapter is to foster creation and preservation of affordable housing in Vermont by enabling individuals to form cooperative housing corporations, including limited equity cooperatives, for the purpose of developing, acquiring, owning, and operating housing on a cooperative basis, and by encouraging lending institutions to engage in financing of cooperative housing ownership interests.

Added 1987, No. 254 (Adj. Sess.), § 1, eff. June 16, 1988.

§ 1583. Definitions.

The definitions contained in chapter 17 of this title shall apply to this chapter. As used in this chapter, the following terms shall have the meanings indicated, unless the context otherwise requires:

  1. "Conversion" means a change in character of residential real property from a rental to an ownership basis.  Creation of a cooperative housing corporation to own property formerly rented for dwelling purposes is deemed to be such a change in character.
  2. "Cooperative housing corporation" means a domestic corporation which has elected to be governed by the provisions of this chapter.
  3. "Cooperative interest" means the ownership interest in a cooperative housing corporation which is evidenced by a membership share.
  4. "Cooperative property" means all the real and personal property, including mobile and manufactured homes, in this state owned or leased by a cooperative housing corporation for the primary purpose of residential use.
  5. "Low income" means having income that is less than or equal to 80 percent of median income for the area, adjusted for family size, in accordance with federal standards generally accepted at the time of incorporation and comparable to standards of the U.S. Department of Housing and Urban Development existing on June 16, 1988.
  6. "Moderate income" means less than or equal to 100 percent of median income for the area, adjusted for family size, in accordance with standards generally accepted at the time of incorporation and comparable to standards of the U.S. Department of Housing and Urban Development existing on June 16, 1988.
  7. "Lender" includes banks, the Vermont Housing Finance Agency, and other financial institutions.
  8. "Limited equity cooperative" means a cooperative housing corporation, organized in accordance with section 1598 of this title.
  9. "Limited equity formula" means a rule or method for determining the transfer value of a share in a limited equity cooperative.
  10. "Member" means a person who owns a cooperative interest, and who is entitled to voting rights as prescribed in section 1594 of this title.
  11. "Proprietary lease" means an agreement with a cooperative housing corporation governing a member's right to occupancy, under which a member has an exclusive possessory interest in a unit.
  12. "Resident" means any occupant of space owned by the cooperative housing corporation.
  13. "Share loan" means an agreement entered into by a member and a lender to finance the member's acquisition of his or her cooperative interest.
  14. "Subscription agreement" means a written agreement between a prospective member and a cooperative housing corporation for the purchase and sale of a cooperative interest.
  15. "Unit" means a portion of the cooperative property leased for exclusive occupancy by a member under a proprietary lease, or leased to a tenant by lease agreement.

    Added 1987, No. 254 (Adj. Sess.), § 1, eff. June 16, 1988.

History

Reference in text. Chapter 17 of this title, referred to in this section, was repealed by 1993, No. 85 , § 3(a), eff. Jan 1, 1994. The subject matter is now covered by Title 11A.

Revision note. At the end of subdivs. (5) and (6), substituted "on June 16, 1988" for "at the time that this chapter was enacted" for purposes of clarity.

In subdiv. (8), substituted "section 1598" for "section 1267" in view of the redesignation of section 1267 as section 1598.

In subdiv. (10), substituted "section 1594" for "section 1263" in view of the redesignation of section 1263 as section 1594.

For explanation of redesignation of sections comprising this chapter, see note following the section analysis for this chapter.

§ 1584. Application.

Any corporation organized under chapter 17 of this title may elect to be governed as a cooperative housing corporation under the provisions of this chapter.

Added 1987, No. 254 (Adj. Sess.), § 1, eff. June 16, 1988.

History

Reference in text. Chapter 17 of this title, referred to in this section, was repealed by 1993, No. 85 , § 3(a), eff. Jan. 1, 1994. The subject matter is now covered by Title 11A.

Cross References

Cross references. Revocation of election, see § 1084 of this title.

§ 1585. Name; use of "cooperative".

The use of the terms "cooperative housing," "housing cooperative," or "cooperative apartments," or any variants thereof in identification of dwelling units is reserved to cooperative housing corporations organized under this chapter. Except as allowed by section 981 of this title, use of those terms, or any variants thereof, by any other person is prohibited.

Added 1987, No. 254 (Adj. Sess.), § 1, eff. June 16, 1988.

§ 1586. Property classification of cooperative interest.

  1. A cooperative interest is personal property.
  2. The possessory interest evidenced by a proprietary lease is a part of and may not be severed from a cooperative interest.

    Added 1987, No. 254 (Adj. Sess.), § 1, eff. June 16, 1988.

§ 1587. Perfection of security interests in cooperative interests.

  1. A security interest in a cooperative interest shall attach, be perfected, and be enforceable as provided in 9A V.S.A. Article 9.
  2. On request of a secured party, a cooperative housing corporation shall note on its books and records the interest of the secured party in a cooperative interest.  No such request or notation is required in order to perfect a security interest in a cooperative interest.

    Added 1987, No. 254 (Adj. Sess.), § 1, eff. June 16, 1988.

§ 1588. Articles of association; minimum requirements.

Articles of association of cooperative housing corporations shall contain the following provisions in addition to those required by chapter 17 of this title:

  1. a statement that the cooperative housing corporation shall have only one class of stock;
  2. a statement of restrictions, if any, upon transfer of shares;
  3. the rate of dividend, if any, allocable to membership shares which shall not exceed six percent per annum on invested capital;
  4. reservation of the right of the cooperative housing corporation to acquire membership shares;
  5. basis of distribution of assets in event of dissolution;
  6. the method of allocation of ownership and voting interests in the cooperative housing corporation; and
  7. the conditions, if any, under which the cooperative housing corporation shall have a right of first refusal upon proposed transfer of cooperative interests.

    Added 1987, No. 254 (Adj. Sess.), § 1, eff. June 16, 1988.

History

Reference in text. Chapter 17 of this title, referred to in this section, was repealed by 1993, No. 85 , § 3(a), eff. Jan. 1, 1994. The subject matter is now covered by Title 11A.

§ 1589. Subscriptions for membership prior to organization; organization meeting.

  1. Within two years after issuance of the certificate of incorporation of a cooperative housing corporation, the cooperative housing corporation shall secure memberships or subscription agreements representing no less than 80 percent of the units in the cooperative housing corporation. In the case of a conversion, other than a conversion of a mobile home park, subscription agreements representing no less than 50 percent of the units in the proposed cooperative housing corporation shall be secured prior to issuance of the certificate of incorporation, provided that at the expiration of the two-year period after issuance of the certificate of incorporation or at the expiration of the notice periods provided to tenants at 27 V.S.A. § 1333 , whichever comes later, no fewer than 80 percent of the units in the cooperative housing corporation shall be occupied by members, occupied by sublessees permitted under subdivision 1599(1) of this title, or subject to subscription agreements. In the case of a conversion of a mobile home park, subscription agreements representing no fewer than 25 percent of the units in a proposed cooperative housing corporation shall be secured prior to issuance of the certificate of incorporation, provided that at the expiration of the two-year period after issuance of the certificate of incorporation or at the expiration of the notice periods provided to tenants pursuant to 27 V.S.A. § 1333 , whichever comes later, no fewer than 80 percent of the units in the cooperative housing corporation shall be occupied by members, occupied by sublessees permitted under subdivision 1599(1) of this title, or subject to subscription agreements. Extensions of the time limits imposed by this section may be granted by the Commissioner of Housing and Community Affairs for cooperative housing corporations containing more than 50 units or for cooperative housing corporations formed in connection with the conversion of a mobile home park.
  2. Within six months after the first conveyance of a share to a member, an organization meeting of the cooperative housing corporation shall be held for the purpose of adopting bylaws, electing officers and transacting such other business as may come before the meeting.

    Added 1987, No. 254 (Adj. Sess.), § 1, eff. June 16, 1988; amended 2005, No. 116 (Adj. Sess.), § 2, eff. April 26, 2006.

History

Revision note. In the second sentence of subsec. (a), substituted "section 1599(1) of this title" for " § 1268(1)" to conform reference to V.S.A. style and in view of the redesignation of section 1268 as section 1599. For explanation of redesignations of sections comprising this chapter generally, see note following the section analysis for this chapter.

Amendments--2005 (Adj. Sess.). Subsec. (a): Inserted "other than a conversion of a mobile home park" following "conversion" in the second sentence, added the third sentence and added "or for cooperative housing corporations formed in connection with the conversion of a mobile home park" following "50 units" in the fourth sentence.

Cross References

Cross references. Contents and cancellation of subscription agreements, see § 1601 of this title.

Organization meetings, see § 1595 of this title.

§ 1590. Minimum occupancy requirement.

Subject to the provisions of section 1589 of this title, at least 80 percent of a cooperative housing corporation's occupied units shall be occupied by members.

Added 1987, No. 254 (Adj. Sess.), § 1, eff. June 16, 1988.

History

Revision note. Substituted "section 1589" for "section 1258" in view of the redesignation of former section 1258 as present section 1589. For explanation of redesignation of sections comprising this chapter generally, see note following the section analysis for this chapter.

§ 1591. Membership.

  1. A cooperative housing corporation shall be organized on a membership basis with capital stock.
  2. A cooperative housing corporation shall have one class of stock and, therefore, one class of members, all of whom must be residents except as provided in subdivision 1599(1) of this title.  The designation, qualifications, requirements, method of acceptance, and incidents of membership shall be set forth in the articles of association or the bylaws.
  3. No member may transfer his or her membership except as permitted in the articles of association or the bylaws.
  4. The bylaws may provide for termination of membership and the conditions and terms thereof.

    Added 1987, No. 254 (Adj. Sess.), § 1, eff. June 16, 1988.

History

2010. In subsec. (b), substituted "subdivision 1599(1)" for "section 1599(1)" to conform reference to V.S.A. style.

Revision note - In the first sentence of subsec. (b), substituted "section 1599(1)" for "section 1268(1)" in view of the redesignation of former section 1268 as present section 1599. For explanation of redesignation of sections comprising this chapter generally, see note following the section analysis for this chapter.

Cross References

Cross references. Issuance and form of shares generally, see § 1593 of this title.

§ 1592. Bylaws; minimum requirements.

The bylaws of a cooperative housing corporation shall contain procedures under which the cooperative housing corporation's possessory remedy shall be pursued in the event of a member's default and the rights of the defaulting member, in accordance with subdivision 1599(3) of this title.

Added 1987, No. 254 (Adj. Sess.), § 1, eff. June 16, 1988.

History

2010. Substituted "subdivision 1599(3)" for "section 1599(3)" to conform reference to V.S.A. style.

Near the end of the section, substituted "section 1599(3)" for "section 1268(3)" in view of the redesignation of former section 1268 as present section 1599. For explanation of redesignation of sections comprising this chapter generally, see note following the section analysis of this chapter.

§ 1593. Membership shares; requirements.

A cooperative housing corporation shall issue shares to its members as evidence of their ownership of a cooperative interest. Such shares shall be in a form prescribed in the articles of association or bylaws of the cooperative housing corporation. Restrictions upon transfer of shares shall be noted on the face of the certificates representing shares. No membership shares shall be issued under this section and no proprietary leases shall be issued under section 1599 of this title prior to issuance of a certificate of incorporation as a cooperative housing corporation.

Added 1987, No. 254 (Adj. Sess.), § 1, eff. June 16, 1988.

History

Revision note. In the fourth sentence, substituted "section 1599 of this title" for "section 1268" in view of the redesignation of former section 1268 as present section 1599. For explanation of redesignation of sections comprising this chapter generally, see note following the section analysis of this chapter.

§ 1594. Voting.

  1. The votes in a cooperative housing corporation shall be assigned so that each member has one vote.
  2. Voting authority may not be assigned to nonresidents.
  3. Nonmembers may be elected by the membership of the cooperative housing corporation to serve on the board of directors of the cooperative housing corporation, provided that no more than one-third of the directors may be nonmembers.
  4. Voting by proxy may be permitted in cooperative housing corporations, provided that proxies are assigned to members and that no more than one proxy may be voted by any member on any question.
  5. Voting by early voter absentee ballots may be permitted in cooperative housing corporations.
  6. Notwithstanding subsection (a) of this section, a cooperative housing corporation not organized as a limited equity cooperative pursuant to section 1598 of this title may adopt in its articles of association or bylaws, a voting scheme other than one vote per member, except that decisions to merge a cooperative housing corporation with another entity, dissolve it, or amend its articles of association or bylaws shall be made on the basis of one vote per member.

    Added 1987, No. 254 (Adj. Sess.), § 1, eff. June 16, 1988; amended 2001, No. 6 , § 12(a), eff. April 10, 2001.

History

Revision note. In subsec. (f), substituted "section 1598" for "section 1267" in view of the redesignation of former section 1267 as present section 1598. For explanation of redesignation of sections comprising this chapter generally, see note following the section analysis for this chapter.

Amendments --Subsec. (e): Substituted "early voter absentee ballots" for "absentee ballots".

§ 1595. Meetings; notice; quorum.

  1. Each cooperative housing corporation shall provide in its bylaws for one or more regular membership meetings annually.
  2. Special membership meetings may be called by the president or the board of directors, and shall be called upon receipt by the board of a petition signed by at least ten percent of the cooperative housing corporation's members.
  3. Written notice of a meeting, stating the time, date, location, and purpose of the meeting, shall be mailed to each member not less than seven days prior to the meeting, by those authorized to call the meeting.  A signed waiver is equivalent to notice to the member signing.
  4. No less than a majority of a cooperative housing corporation's members shall constitute a quorum, except that the bylaws may provide for a lesser quorum requirement for cooperative housing corporations with more than 50 units, but in no event shall the quorum be less than 20 percent.

    Added 1987, No. 254 (Adj. Sess.), § 1, eff. June 16, 1988.

§ 1596. Directors; election; removal.

  1. The business of the cooperative housing corporation shall be managed by a board of directors of not less than three individuals, elected by the members from their own number, except as provided in subsection 1594(c) of this title.
  2. In cooperative housing corporations with less than 20 members, the bylaws may provide that the members shall constitute the board of directors.
  3. Directors may be removed from office for cause shown, by a two-thirds vote of the board of directors at a meeting duly convened for this purpose.  Directors may be removed from office without cause, by no less than a majority vote of the cooperative housing corporation's members at a meeting duly convened for this purpose.

    Added 1987, No. 254 (Adj. Sess.), § 1, eff. June 16, 1988.

History

2010. In subsec. (a), substituted "subsection 1594(c)" for "section 1594(c)" to conform reference to V.S.A. style.

Revision note - In subsec. (a), substituted "section 1594(c)" for "section 1263(c)" in view of the redesignation of former section 1263 as present section 1594. For explanation of redesignation of sections comprising this chapter generally, see note following the section analysis for this chapter.

§ 1597. Merger; consolidation.

Cooperative housing corporations shall not engage in mergers or consolidation if such action is undertaken for the purpose of circumventing section 1598, 1602, 1603, 1606, or 1607 of this title.

Added 1987, No. 254 (Adj. Sess.), § 1, eff. June 16, 1988.

History

Revision note. Substituted "sections 1598, 1602, 1603, 1606 or 1607" for "sections 1267, 1271, 1272, 1275 or 1276" in view of the redesignation of former sections 1267, 1271, 1272, 1275 and 1276 as present sections 1598, 1602, 1603, 1606 and 1607, respectively. For explanation of redesignation of sections comprising this chapter generally, see note following the section analysis for this chapter.

§ 1598. Limited equity cooperatives.

A cooperative housing corporation may organize as a limited equity cooperative in order to fulfill the public purpose of providing and preserving housing for persons and households of low and moderate income at the time that they purchase their memberships. In addition to safeguarding the foregoing public purpose, a limited equity cooperative shall meet the following requirements:

  1. The articles of association shall require that cooperative interests be sold at no more than a transfer value determined by a limited equity formula contained in the articles.  That value shall be consistent with the object of maintaining long-term affordability of cooperative interests for persons or households of low and moderate income.
  2. A limited equity formula, once established by a cooperative housing corporation in its articles of association, may be amended only if that amendment does not make the cooperative membership unaffordable for the class of low or moderate income households for which the cooperative housing corporation was originally incorporated, as determined and certified by the Commissioner of Housing and Community Affairs.  A cooperative housing corporation once organized under this section may not reorganize as other than a limited equity cooperative without first dissolving.
  3. A limited equity cooperative shall not sell all or substantially all of its assets if such sale is intended to circumvent the public purposes of this section.
  4. The articles of association shall require that the cooperative housing corporation shall have the first right to repurchase a member's cooperative interest.
  5. The articles of association shall require that the total distribution out of capital to a member shall not exceed that transfer value.
  6. The articles of association shall require that upon dissolution of the cooperative housing corporation, any assets remaining after retirement of corporate debts and distribution to members shall be distributed to a charitable organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended, a public agency, or another limited equity cooperative whose formula for determining transfer value shall be no less restrictive than that of the cooperative housing corporation being dissolved.
  7. The articles of association shall require that no sublease of a unit shall provide for monthly payments by the sublessee in excess of 110 percent of monthly payments for the unit provided for in the proprietary lease.

    Added 1987, No. 254 (Adj. Sess.), § 1, eff. June 16, 1988.

History

Reference in text. Section 501 of the Internal Revenue Code of 1986, referred to in subdiv. (6), is codified as 26 U.S.C. § 501.

§ 1599. Proprietary lease.

Every member of a cooperative housing corporation shall be entitled to receive from the cooperative housing corporation a written proprietary lease which shall include the following:

  1. A provision that no sublease in excess of one year, no amendment, and no modification to such proprietary lease shall be permitted or created without the prior written consent of the board of directors of the cooperative housing corporation.  A member who sublets does not relinquish the rights and benefits of membership.
  2. A provision that the security for a loan against the member's cooperative interest shall be in the nature of a personal property security interest, and any default of such loan shall entitle the lender to treat such default in the same manner as a default of a loan secured by personal property.
  3. A provision that the cooperative housing corporation's possessory remedy in event of default of a member affecting that person's right to occupancy shall be in an action under 12 V.S.A. chapter 169, subchapter 3.  However, good cause shall be required for termination of the right of occupancy. Good cause shall include nonpayment of loans, fees, costs, or assessments pertaining to the cooperative interest, or material violation of bylaws, rules, or proprietary lease which continues following reasonable notice and reasonable opportunity to cure the alleged material violations.
  4. Provisions for determining maintenance and carrying charges for the unit.
  5. A right on the part of the cooperative housing corporation to cure any default in the member's obligations pertaining to the member's cooperative interest, including share loans, and cooperative fees, costs, and assessments.
  6. A provision requiring that terms and form of the proprietary lease shall be amended by the board of directors only.
  7. A provision requiring that any lease term which is not uniformly applied to all members or prospective members of the same or similar category shall be unenforceable.

    Added 1987, No. 254 (Adj. Sess.), § 1, eff. June 16, 1988.

History

2016. In subdiv. (5), deleted "but not limited to" following "including" in accordance with 2013 Acts and Resolves No. 5, Sec. 4.

Cross References

Cross references. Termination of proprietary leases, see § 1603 of this title.

§ 1600. Deposits; sale of cooperative interests; escrow.

Deposits taken in connection with the sale of cooperative interests by a cooperative housing corporation, with respect to units intended for residential use shall be deposited and held in an interest-bearing escrow account for the benefit of the purchaser, until such time as the transaction closes unless the escrow requirement is expressly waived by the purchaser.

Added 1987, No. 254 (Adj. Sess.), § 1, eff. June 16, 1988.

§ 1601. Offering of cooperative interests; subscription agreement; disclosures required.

  1. In conjunction with the offering of cooperative interests to prospective members, a cooperative housing corporation, or other persons or entities seeking to establish a cooperative housing corporation, or the owner of a cooperative interest seeking to sell that interest, shall provide to all prospective purchasers a copy of the proposed or adopted articles of association and bylaws of the cooperative housing corporation, a subscription agreement or sales agreement, a proposed proprietary lease, and the most current corporate financial statements, if any exist.
  2. The subscription agreement or sales agreement shall contain provisions detailing the cost of acquisition of a cooperative interest, the rights and privileges of membership in the cooperative housing corporation, and terms and conditions of occupancy of a unit in the cooperative housing corporation; provisions, if any, under which the subscription agreement or sales agreement is subordinated to other agreements or otherwise encumbered; provisions for cancellation of the agreement by either party; and a legally sufficient description of the property.
  3. The subscription agreement or sales agreement shall contain provisions detailing the risks of acquisition of a cooperative interest including risks resulting from failure of all units to be occupied.
  4. The subscriber or purchaser shall have a right to cancel the subscription agreement or sales agreement without penalty, upon provision of written notice to the offeror within 10 days of the date of signing the agreement.  In the event of such cancellation, all monies paid by the subscriber or purchaser to the offeror shall be returned to the subscriber or purchaser within 14 days of receipt of the notice of cancellation by the offeror.  The offeror shall inform the subscriber or purchaser in writing of their right of cancellation.

    Added 1987, No. 254 (Adj. Sess.), § 1, eff. June 16, 1988.

Cross References

Cross references. Penalties for failure to provide documents and disclosures, see § 1602 of this title.

Requirements for securing memberships or subscriptions agreements prior to organization of cooperative, see § 1589 of this title.

§ 1602. Consumer protection; enforcement.

  1. For purposes of this section, "consumer" means an actual or prospective subscriber, purchaser, member, assignee, or transferee of a cooperative interest with respect to a residential unit.  A "consumer" includes a co-obligor or surety for a consumer.
  2. To the extent that a violation of a provision of this chapter affects a consumer, that violation is deemed to be a violation of 9 V.S.A. § 2453 and is subject to all rights, obligations, and penalties provided under 9 V.S.A. chapter 63.
  3. Failure or neglect to provide to subscribers or purchasers the documents and disclosures required by section 1601 of this title is deemed to be a violation of this section.

    Added 1987, No. 254 (Adj. Sess.), § 1, eff. June 16, 1988.

History

Revision note. In subsec. (c), substituted "section 1601" for "section 1270" in view of the redesignation of former section 1270 as present section 1601. For explanation of redesignation of sections comprising this chapter generally, see note following the section analysis for this chapter.

§ 1603. Dissolution.

  1. By vote of at least 80 percent of its members or any larger percentage specified in the articles or bylaws, a cooperative housing corporation may vote to dissolve and terminate all of its proprietary leases.
  2. A cooperative housing corporation shall have its election pursuant to section 1584 of this chapter revoked if it fails to certify to the Secretary of State within 30 days of the deadlines specified in section 1589 of this title that at least 80 percent of its available housing units are occupied by members.

    Added 1987, No. 254 (Adj. Sess.), § 1, eff. June 16, 1988.

History

Revision note. In subsec. (b), substituted "section 1584" for "section 1253" and "section 1589" for "section 1258" in view of the redesignation of former sections 1253 and 1258 as present sections 1584 and 1589, respectively. For explanation of redesignations of sections comprising this chapter generally, see note following the section analysis for this chapter.

§ 1604. Loans.

Any lender is authorized to make loans secured by cooperative interests of a cooperative housing corporation, including limited equity cooperatives, upon the same terms and with the same limitations as other consumer and residential loans.

Added 1987, No. 254 (Adj. Sess.), § 1, eff. June 16, 1988.

§ 1605. Net income; apportionment.

  1. Annually, the board of directors of a cooperative housing corporation may apportion the remainder of the net income in one or more of the following ways:
    1. as a reserve fund for the general operation of the business;
    2. as a dividend not to exceed six percent per annum on invested capital; and
    3. as an equitable distribution or refund to all members in proportion to their proprietary lease payment, except that the distribution or refund to members shall first be credited to the member's account to pay off the purchase price of his or her cooperative interest and any amounts owed to the cooperative housing corporation as a result of cure by the cooperative housing corporation of any default in the member's obligations as described in subdivision 1599(5) of this title.
  2. This section shall not prevent a cooperative housing corporation from disposing of the net income by reducing the cost of facilities or services or by applying such net income otherwise for the common benefit of members.
  3. This section shall not prevent a cooperative housing corporation from adopting a system by which the payment of net income is deferred, nor from adopting a system in which the net savings distributed are partly in cash and partly in equity interests or certificates of indebtedness.

    Added 1987, No. 254 (Adj. Sess.), § 1, eff. June 16, 1988.

History

2016. In subdiv. (a)(3), substituted "1599(5)" for "1589(5)" to correct an error in the reference.

2010. In subdiv. (a)(3), substituted "subdivision" for "section" preceding "1589(5)" to conform reference to V.S.A. style.

§ 1606. Conversion; cooperative apartments.

The provisions of 27 V.S.A. chapter 15, subchapter 2 shall apply to all proposed conversions of residential rental properties to cooperative ownership. "Conversion" shall be deemed to occur when a cooperative interest is first offered to a prospective member of a cooperative housing corporation involving the subject property.

Added 1987, No. 254 (Adj. Sess.), § 1, eff. June 16, 1988.

§ 1607. Nondiscrimination.

The provisions of 9 V.S.A. chapter 139 shall apply to all cooperative housing corporations in the State.

Added 1987, No. 254 (Adj. Sess.), § 1, eff. June 16, 1988.

§ 1608. Eligibility for property tax relief.

Members of cooperative housing corporations shall be eligible to apply for and receive a homestead property tax adjustment under 32 V.S.A. § 6066 , subject to the conditions of eligibility set forth therein.

Added 1987, No. 254 (Adj. Sess.), § 1, eff. June 16, 1988; amended 1997, No. 71 (Adj. Sess.), § 16a, eff. Jan. 1, 1999.

History

Amendments--1997 (Adj. Sess.). Substituted "a homestead property tax adjustment under 32 V.S.A. § 6066" for "tax credits as homeowners under 32 V.S.A. chapter 153".

§ 1609. Homestead exemption from attachment and execution.

The provisions of 27 V.S.A. chapter 3 shall apply to cooperative interests in cooperative housing corporations, notwithstanding characterization of cooperative interests as personal property.

Added 1987, No. 254 (Adj. Sess.), § 1, eff. June 16, 1988.

§ 1610. Separate taxation; mobile home cooperatives.

Each unit in a mobile home limited equity cooperative under proprietary lease, together with any improvements thereon and together with the proprietary lessee's cooperative interest in the common areas and facilities owned by the cooperative, shall be considered to be a parcel, and shall be subject to separate assessment and taxation as real property by each assessing unit and special district for all types of taxes authorized by law, including special ad valorem levies and special assessments. Each unit held by the cooperative not under proprietary lease, together with any improvements thereon, and together with the remaining and unissued cooperative interest in the common areas and facilities owned by the cooperative, may be combined and treated as one parcel for purposes of assessment and taxation at the discretion of the listers, and shall be subject to assessment and taxation as real property by each assessing unit and special district for all types of taxes authorized by law. Except for the units described in this section, no cooperative property, including common areas and facilities owned by the cooperative, shall be deemed to be a parcel subject to separate assessment and taxation.

Added 1999, No. 159 (Adj. Sess.), § 21, eff. May 29, 2000.

History

Application. 1999, No. 159 (Adj. Sess.), § 25, provided in part that section 21 of this act, which enacted this section, shall apply to tax assessments for 2001 and after, and shall apply to sales, transfers, trades, and removal on or after July 1, 2000.

CHAPTER 15. REGISTRATION OF BUSINESS ENTITIES

Sec.

Cross References

Cross references. Limited partnerships, see § 1391 et seq. of this title.

Partnerships, see § 1121 et seq. of this title.

ANNOTATIONS

1. Purpose.

The purpose of this chapter is to prevent people from being misled as to with whom they are dealing. 1960-62 Op. Atty. Gen. 96.

§ 1621. Registration of business name by persons, partnerships, and associations.

  1. A person doing business in this State under any name other than his or her own, and every copartnership or association of individuals, except corporations and limited liability companies, doing business in this State, resident or nonresident, shall cause to be recorded with the Secretary of State a return setting forth the name under which such business is carried on, the name of the town wherein such place of business is located, a brief description of the kind of business to be transacted under such name, and the individual names and residences of all persons, general partners, or members so doing business thereunder.
  2. Such returns shall be subscribed and sworn to by one or more of the persons so doing business, and shall be filed with the Secretary of State within 10 days after commencement of business.
  3. The Secretary of State shall decline to register any business name unless the name is distinguishable in the records of the Secretary of State from any other business name of any name registered or reserved under this chapter, or the name of any other entity, whether domestic or foreign, that is reserved, registered, or granted by or with the Secretary of State, or any name that would lead a reasonable person to conclude that the business is a type of entity that it is not.
  4. The Secretary of State shall establish rules and regulations for the administration of this section.
  5. Prior to registering its business name under this section, a person intending to operate a postsecondary school, as defined in 16 V.S.A. §§ 176 and 176a, shall apply to the State Board of Education for a certificate of approval pursuant to those sections.

    Amended 1961, No. 217 , § 1, eff. July 13, 1961; 1981, No. 125 (Adj. Sess.), § 1; 1993, No. 221 (Adj. Sess.), § 24; 1995, No. 166 (Adj. Sess.), § 14; 1995, No. 179 (Adj. Sess.), § 1c, eff. Jan. 1, 1997; 1995, No. 179 (Adj. Sess.), §§ 6, 7; 2001, No. 19 , § 3; 2011, No. 84 (Adj. Sess.), § 3, eff. April 20, 2012; 2015, No. 17 , § 3.

History

Source. 1955, No. 236 , § 1. V.S. 1947, § 6106. 1947, No. 202 , § 6174. P.L. §§ 6040, 6042. G.L. §§ 5739, 5741. 1917, No. 254 , § 5602. 1908, No. 117 , §§ 1, 3.

Amendments--2015. Subsec. (c): Substituted "unless the name is distinguishable in the records of the Secretary of State from" for "that is the same as, deceptively similar to, or likely to be confused with or mistaken for".

Amendments--2011 (Adj. Sess.) Subsec. (c): Substituted "any business name that is the same as, deceptively similar to" for "any business name the same, deceptively similar" and added "or any name that would lead a reasonable person to conclude that the business is a type of entity that it is not" at the end.

Amendments--2001. Subsec. (e): Added.

Amendments--1995 (Adj. Sess.) Subsec. (a): Act No. 166 inserted "or her" following "other than his" and substituted "general partners" for "copartners" following "residences of all persons".

Act No. 179, § 6, inserted "and limited liability companies" following "except corporations".

Subsec. (c): Act No. 179, § 7 substituted "name registered or reserved under this chapter, or the name of any corporation or other entity, whether domestic or foreign, that is granted, reserved or registered by or with the Secretary of State" for "existing validly registered corporations, copartnership or association of individuals" following "business name of any".

Act No. 179, § 1c deleted "corporation or" preceding "other entity", "granted" following "foreign, that is" and "or" preceding "registered" and inserted "or granted" thereafter.

Amendments--1993 (Adj. Sess.). Subsec. (a): Substituted "with the Secretary of State" for "in the clerk's office in the town wherein the principal place of business of such person, copartnership or association is located" following "recorded" and deleted "and shall file with the Secretary of State a like return" following "thereunder".

Subsec. (b): Deleted "town clerk and" preceding "secretary".

Amendments--1981 (Adj. Sess.). Designated existing first and second sentences as subsecs. (a) and (b), respectively, and added subsecs. (c) and (d).

Amendments--1961. Substituted "Secretary of State" for "commissioner of taxes" preceding "a like return" in the first sentence and for "commissioner" preceding "within ten days" in the second sentence.

Applicability-- 1995, No. 166 (Adj. Sess.) amendment 1995, No. 166 (Adj. Sess.), § 16, provided that the amendment to this section by section 14 of the act relating to the filing of an initial or amended declaration with the Secretary of State, and an initial or amended certificate at the principal place of business of the limited partnership, shall apply to domestic limited partnerships organized on or after July 1, 1996, and shall apply to existing domestic limited partnerships as their declarations and certificates are amended and filed.

Cross References

Cross references. Procedure for adoption of administrative rules, see 3 V.S.A. § 801 et seq.

Registration by corporations, see § 1623 of this title.

ANNOTATIONS

Analysis

1. Construction.

Although it did not appear from the certified copy of the registration that the defendant signed the statement of his partnership with his son, his signature was not necessary to accomplish a valid certificate of registration, for this section requires only the statement of one of the partners. Giroux v. Lussier, 126 Vt. 555, 238 A.2d 63 (1967).

Provision, requiring the return of a person doing business under a name other than his own to be filed in the office of the town clerk within ten days after the commencement of business, is merely directory; section 1626 of this title declares that any person conducting business contrary to the act may, upon complaint of the commissioner of taxes, be enjoined, and section 1634 of this title prohibits the institution of proceedings for the enforcement of any right or obligation unless the return has been filed and the registration fee paid prior to the issuance of the original writ, and so clearly recognizes the validity of claims accruing to one doing business in disregard of the ten-day requirement. Nemie v. Todd, 89 Vt. 502, 96 A. 14 (1915).

2. Doing business.

Where spiritual leader and officer of religious association had only isolated contacts with the state involving matters unrelated to claim in suit, they were not "doing business" for purposes of this section, and motion to dismiss complaint would be granted for insufficiency of service of process and for lack of in personam jurisdiction. Schuppin v. Unification Church, 435 F. Supp. 603 (D. Vt. 1977), aff'd, 573 F.2d 1295 (2d Cir. 1977).

The term "business" in this section implies an employment or occupation that is continuing, and a single or isolated act of advertising under a name other than that of the plaintiff is not "doing business" under the name thus used. Johnson v. Cass & Emerson, 91 Vt. 103, 99 A. 633 (1917).

3. Business names.

When a person named John A. Smith does business under the name "John A. Smith, Carpenter and Builder," thus setting forth his name in full and simply adding thereto his trade or profession, nobody is misled, and such person need not be registered under this chapter. 1960-62 Op. Atty. Gen. 96.

Whether certain transactions by a corporation in the name of an individual, such as advertising, carrying a small checking account in his name, and receiving cars from an automobile manufacturer under a previous contract entered into by the manufacturer with such individual, constituted doing business under an assumed name was a question of fact for the trial court. Corner Garage, Inc. v. Pullen, 96 Vt. 458, 120 A. 863 (1923).

Chapter applied to a real estate agency consisting of the plaintiff and two other members doing business under the name of Lowell Real Estate Agency. Lowell v. Wood, 96 Vt. 218, 118 A. 887 (1922).

Where plaintiff used upon his stationery the words, "Johnson's Employment Office, W. L. Johnson, Prop'r" and "Johnson's Employment Agency, W. L. Johnson, Prop'r" and advertised his business under the name of "W. L. Johnson, Proprietor," except in three issues of a newspaper, when the advertisements read "Johnson's Employment Agency," there was no tendency to show that plaintiff was doing business under a name other than his own. Johnson v. Cass & Emerson, 91 Vt. 103, 99 A. 633 (1917).

Where plaintiffs, A. H. Wilson and C. J. Wilson, were doing business under the firm name of "Wilson Brothers Garage," they were required to file the prescribed return and to pay the required registration fee. Wilson Brothers Garage v. Tudor, 89 Vt. 522, 95 A. 794 (1915).

Where the name of the business conducted by plaintiff was the Vermont Produce Company, a return giving the name as the Vermont Products Company was sufficient, for such a slight error was not likely to mislead. Nemie v. Todd, 89 Vt. 502, 96 A. 14 (1915).

4. Burden of proof of registration.

Burden of proof on issue of proper registration of plaintiff suing for balance due on purchase price was on defendant who moved for dismissal on the ground that there was no local registration on file and the court thus was deprived of jurisdiction to dispose of the action. Senesac v. Duclos, 128 Vt. 601, 270 A.2d 156 (1970).

5. Preservation of registration.

The law cannot put upon registrants the burden of insuring that clerk's records are properly kept and permanently available. Senesac v. Duclos, 128 Vt. 601, 270 A.2d 156 (1970).

Cited. Coty v. Ramsey Associates, Inc., 149 Vt. 451, 546 A.2d 196 (1988).

§ 1621a. Reserved name.

  1. The exclusive right to the use of a business name may be reserved by any person, copartnership, or association intending to register its name under this section.
  2. The reservation shall be made by filing with the Secretary of State an application to reserve a specified business name, executed by the applicant, its agent, or attorney.  If the Secretary of State finds that the name is available for use, he or she shall reserve the same for the exclusive use of the applicant for a period of 120 days.
  3. The right to the exclusive use of a specified business name so reserved may be transferred to any other person, copartnership, or association by filing in the office of the Secretary of State a notice of such transfer, executed by the applicant for whom the name was reserved, and specifying the name and address of the transferee.

    Added 1981, No. 125 (Adj. Sess.), § 2.

§ 1622. Registration by legal representative of decedent.

If a person who was required by the provisions of section 1621 of this title to register with the Secretary of State failed so to do and dies, the legal representative of such deceased person may register under such section in the name of the estate of such decedent. Such registration shall be sufficient for all purposes under the provisions of this chapter.

Amended 1961, No. 217 , § 1, eff. July 13, 1961.

History

Source. V.S. 1947, § 6107. 1943, No. 118 , § 1.

Amendments--1961. Substituted "Secretary of State" for "commissioner of taxes" preceding "failed so to do" in the first sentence.

§ 1623. Registration by business organizations.

  1. A business organization doing business in this State under any name other than that of the business organization shall be subject to all the provisions of this chapter; and shall file returns sworn to by some officer or director of the corporation or mutual benefit enterprise, or by some director or manager of the limited liability company, or by some partner of the partnership or limited partnership, setting forth:
    1. the name and location of the principal office of the business organization;
    2. the name under which the organization will conduct business;
    3. the town or towns where the organization conducts business under the name; and
    4. a brief description of the kind of business the organization conducts under the name.
  2. The Secretary of State shall decline to register any business name unless the name is distinguishable in the records of the Secretary of State from any other business name of any name registered or reserved under this chapter or the name of any other entity, whether domestic or foreign, that is reserved, registered, or granted by or with the Secretary of State, or any name that would lead a reasonable person to conclude that the business is a type of entity that it is not.

    Amended 1995, No. 179 (Adj. Sess.), § 8; 2011, No. 84 (Adj. Sess.), § 4, eff. April 20, 2012; 2015, No. 17 , § 4; 2015, No. 97 (Adj. Sess.), § 41; 2015, No. 157 (Adj. Sess.), § E.4, eff. June 2, 2016.

History

Source. V.S. 1947, § 6108. 1947, No. 202 , § 6176. P.L. § 6041. G.L. § 5740. 1917, No. 254 , § 5603. 1908, No. 117 , § 2.

Amendments--2015 (Adj. Sess.). Act No. 97 substituted "director" for "member" twice in subsec. (a).

Act No. 157 substituted "business organizations" for "corporations and limited liability companies" in the section heading, and rewrote subsec. (a).

Amendments--2015. Subsec. (b): Substituted "unless the name is distinguishable in the records of the Secretary of State from" for "that is the same as, deceptively similar to, or likely to be confused with or mistaken for".

Amendments--2011 (Adj. Sess.). Added the subsec. (a) designation and added subsec. (b).

Amendments--1995 (Adj. Sess.) Added "and limited liability companies" in the catchline, "or by some member or manager of such limited liability company" following "member of such corporation" and inserted "or limited liability company" preceding "doing business", preceding "shall be subject", following "corporate" in two places and at the end of the section.

ANNOTATIONS

1. Question of fact.

Whether certain transactions by a corporation in the name of an individual, such as advertising, carrying a small checking account in his name, and receiving cars from an automobile manufacturer under a previous contract entered into by the manufacturer with such individual, constituted doing business under an assumed name was a question of fact for the trial court. Corner Garage, Inc. v. Pullen, 96 Vt. 458, 120 A. 863 (1923).

§ 1624. Forms.

The Secretary of State shall formulate forms for the returns and shall, on request, furnish such forms by mail or otherwise to persons, copartnerships, associations, or corporations subject to the provisions of this chapter.

Amended 1961, No. 217 , § 1, eff. July 13, 1961.

History

Source. V.S. 1947, § 6109. 1947, No. 202 , § 6177. P.L. § 6043. G.L. § 5742. 1908, No. 117 , § 4.

Amendments--1961. Substituted "Secretary of State" for "commissioner of taxes" preceding "shall formulate".

§ 1625. Fees.

  1. A person, copartnership, association, limited liability company, or corporation required by the provisions of this chapter to file a return, shall, at the time of filing as provided, pay a registration fee of $50.00 to the Secretary of State.
  2. A person, copartnership, association, limited liability company, or corporation required by the provisions of this chapter to file a certificate of cessation or change of business status or an application to reserve a business name shall, at the time of filing, pay a fee of $20.00 to the Secretary of State.
  3. Statement of change of designated agent or designated office, or both: $25.00, not to exceed $1,000.00 per filer per calendar year.
  4. The Secretary shall collect $25.00 each time process is served on the Secretary under this chapter. The party to a proceeding causing service of process is entitled to recover this fee as costs if he or she prevails in the proceeding.

    Amended 1959, No. 177 , eff. May 14, 1959; 1961, No. 217 , § 1, eff. July 13, 1961; 1967, No. 278 (Adj. Sess.), § 9; 1977, No. 237 (Adj. Sess.), § 3; 1981, No. 125 (Adj. Sess.), § 3; 1995, No. 179 (Adj. Sess.), § 9; 2003, No. 70 (Adj. Sess.), § 10, eff. March 1, 2004; 2007, No. 153 (Adj. Sess.), § 33; 2013, No. 1 , § 81, eff. March 7, 2013; 2013, No. 72 , § 4.

History

Source. V.S. 1947, § 6110. 1947, No. 107 . P.L. § 6044. G.L. § 5743. 1908, No. 117 , § 5.

2013. 2013, No. 1 , § 81, eff. March 7, 2013, and 2013, No. 72 , § 4 both amended this section. The two amendments are not in conflict, and the changes by each act are set out in the amendment notes.

Amendments--2013 Act No. 1 deleted "for the benefit of the state" following "Secretary of State" in subsecs. (a) and (b).

Act No. 72 deleted "for the benefit of the state" following "Secretary of State" in subsecs. (a) and (b), and added subsecs. (c) and (d).

Amendments--2007 (Adj. Sess.) Subsec. (a): Substituted "$50.00" for "$40.00" near the end.

Amendments--2003 (Adj. Sess.). Subsec. (a): Substituted "$40.00" for "$20.00".

Subsec. (b): Substituted "$20.00" for "$10.00".

Amendments--1995 (Adj. Sess.) Subsecs. (a), (b): Inserted "limited liability company" following "association".

Amendments--1981 (Adj. Sess.). Designated existing provisions of section as subsec. (a) and added subsec. (b).

Amendments--1977 (Adj. Sess.). Substituted "$20.00" for "$15.00" following "pay a registration fee of".

Amendments--1967 (Adj. Sess.). Substituted "$15.00" for "$10.00" following "pay a registration fee of".

Amendments--1961. Substituted "Secretary of State" for "commissioner of taxes" preceding "for the benefit of the state".

Amendments--1959. Substituted "$10.00" for "$5.00" following "pay a registration fee of".

§ 1626. Failure to register; enforcing compliance.

  1. A person who is not registered with the Secretary of State as required under this chapter and any successor to the person or assignee of a cause of action arising out of the business of the person may not maintain an action or proceeding or raise a counterclaim, crossclaim, or affirmative defense in this State until the person, successor, or assignee registers with the Secretary.
  2. The failure of a person to register as required under this chapter does not impair the validity of a contract or act of the person or preclude it from defending an action or proceeding in this State.
  3. An individual does not waive a limitation on his or her personal liability afforded by other law solely by transacting business in this State without registering with the Secretary of State as required under this chapter.
  4. If a person transacts business in this State without registering with the Secretary of State as required under this chapter, the Secretary is its agent for service of process with respect to a right of action arising out of the transaction of business in this State.
  5. A person that transacts business in this State without registering with the Secretary of State as required under this chapter shall be liable to the State for:
    1. a civil penalty of $50.00 for each day, not to exceed a total of $10,000.00 for each year, it transacts business in this State without a registration;
    2. an amount equal to the fees due under this chapter during the period it transacted business in this State without a registration; and
    3. other penalties imposed by law.
  6. The Attorney General may maintain an action in the Civil Division of the Superior Court to collect the penalties imposed in subsection (e) of this section and to restrain a person from transacting business in this State in violation of this chapter.

    Amended 1961, No. 217 , § 1, eff. July 13, 1961; 1981, No. 125 (Adj. Sess.), § 4; 1995, No. 179 (Adj. Sess.), § 10; 2015, No. 128 (Adj. Sess.), § C.3.

History

Source. V.S. 1947, § 6111. P.L. § 6045. G.L. § 5744. 1908, No. 117 , § 6.

Revision note. Reference to "court of chancery" changed to "county court" pursuant to 1971, No. 185 (Adj. Sess.), § 236. See note under 4 V.S.A. § 219.

Amendments--2015 (Adj. Sess.). Rewrote the section.

Amendments--1996 (Adj. Sess.) Inserted "limited liability company" preceding "or corporation".

Amendments--1981 (Adj. Sess.). Substituted "enforcing compliance" for "enjoining noncompliance" in the catchline, "Superior Court" for "county court" following "may be enjoined therefrom by a", and added "and fined not more than $100.00" thereafter.

Amendments--1961. Substituted "Secretary of State" for "commissioner of taxes" following "upon the complaint of the".

Cross References

Cross references. Injunctions, see V.R.C.P. 65.

§ 1627. Service of process.

Service of such complaint and process thereunder may be made by delivering within this State a true and attested copy thereof to any person so doing business or any servant or agent of such person, copartnership, association, limited liability company, or corporation, or in any manner otherwise provided by law. A name so registered shall not thereafter be used by a person, copartnership, association, limited liability company, or corporation, unless it is lawfully entitled thereto at the date of such registration.

Amended 1995, No. 179 (Adj. Sess.), § 11.

History

Source. V.S. 1947, § 6112. P.L. § 6046. G.L. § 5745. 1908, No. 117 , § 7.

Amendments--1995 (Adj. Sess.) Inserted "limited liability company" preceding "or corporation" in the first and second sentence.

Cross References

Cross references. Service of process generally, see V.R.C.P. 4.

Service of process in suits by and against partnerships and unincorporated associations in firm name, see 12 V.S.A. § 814.

§ 1628. Certificate of cessation of business or change of business status.

  1. When a person, copartnership, association, limited liability company, or corporation subject to the provisions of this chapter shall cease to do business in this State, a certificate setting forth such fact and the date whereon it so ceased shall be filed with the Secretary of State within 10 days after the date such business ceases. Such certificate may be sworn to and filed by a surviving partner, member of such association, officer of such corporation, member or manager of such limited liability company, or person so doing business, or his or her executor or administrator.
  2. Whenever any general partner of such partnership, or member of such association withdraws from the business, a remaining general partner or member shall within 30 days file a certificate with the Secretary of State signed and sworn by a remaining general partner or member, setting forth the fact of such withdrawal, together with the date of that withdrawal. Filing of this certificate shall avoid any interruption in the period of registration remaining before the need for renewal, as if no partner or member of the association had withdrawn.

    Amended 1961, No. 217 , § 1, eff. July 13, 1961; 1981, No. 125 (Adj. Sess.), § 5; 1993, No. 221 (Adj. Sess.), § 25; 1995, No. 166 (Adj. Sess.), § 15; 1995, No. 179 (Adj. Sess.), § 12.

History

Source. V.S. 1947, § 6113. 1947, No. 202 , § 6181. P.L. § 6047. 1919, No. 157 . G.L. § 5746. 1908, No. 117 , § 8.

Amendments--1995 (Adj. Sess.) Subsec. (a): Act No. 179 inserted "limited liability company" following "association" in the first sentence and "member or manager of such limited liability company" following "corporation" in the second sentence.

Subsec. (b): Act No. 166 rewrote the first sentence.

Amendments--1993 (Adj. Sess.). Subsec. (a): Deleted "and the clerk designated in section 1621 of this title" following "Secretary of State" in the first sentence.

Subsec. (b): Deleted "and the town clerk" preceding "signed" in the first sentence.

Amendments--1981 (Adj. Sess.). Designated existing provisions of section as subsec. (a) and added subsec. (b).

Amendments--1961. Substituted "Secretary of State" for "commissioner" preceding "and the clerk designated" in the first sentence.

Applicability-- 1995, No. 166 (Adj. Sess.) amendment 1995, No. 166 (Adj. Sess.), § 16, provided that the amendment to this section by section 15 of the act relating to the filing of an initial or amended declaration with the Secretary of State, and an initial or amended certificate at the principal place of business of the limited partnership, shall apply to domestic limited partnerships organized on or after July 1, 1996, and shall apply to existing domestic limited partnerships as their declarations and certificates are amended and filed.

§ 1629. Penalties.

Failure to file such certificate at the time so required by section 1628 of this title shall work a forfeiture of $10.00 to be recovered by the Secretary of State in a civil action on this statute, in his or her name, against any surviving partner, any member of such association, any officer of such corporation, or any person so doing business, or his executor or administrator, and the same shall be paid into the Treasury of the State.

Amended 1961, No. 217 , § 1, eff. July 13, 1961.

History

Source. V.S. 1947, § 1629. 1947, No. 202 , § 6182. P.L. § 6048. 1919, No. 157 . G.L. § 5746. 1908, No. 117 , § 8.

Revision note. Substituted "a civil action" for "an action of tort" to conform to V.R.C.P. 2, pursuant to 1971, No. 185 (Adj. Sess.), § 236(d). See note under 4 V.S.A. § 219.

Amendments--1961. Substituted "Secretary of State" for "commissioner" preceding "in an action of tort on this statute".

§ 1630. Process agent.

Each nonresident doing business in this State in his or her individual capacity, or as copartner or member of a copartnership or association required by sections 1621 and 1623 of this title to file the returns therein specified, or under any name other than his or her own, except as otherwise provided, shall appoint in writing a person having an office or place of business and residing in the town wherein the principal office of such nonresident, copartnership, or association is located, upon whom process against such nonresident may be served in an action founded upon a liability incurred in this State. Such appointment shall continue in force until revoked by a like instrument appointing another person therein residing, and having therein an office or place of business. Such instrument shall be recorded with the Secretary of State. In the event a nonresident has not appointed a process agent, and has not filed such appointment, as set forth in this section, the Secretary of State shall be such process agent.

Amended 1961, No. 217 , § 1; eff. July 13, 1961; 1993, No. 221 (Adj. Sess.), § 26.

History

Source. 1955, No. 236 , § 2. V.S. 1947, § 6115. P.L. § 6049. G.L. § 5747. 1917, No. 254 , § 5610. 1908, No. 117 , § 9.

Amendments--1993 (Adj. Sess.). Substituted "with" for "in the town clerk's office in the town where such appointee resides, and by such town clerk forthwith forwarded to" following "recorded" in the third sentence.

Amendments--1961. Substituted "Secretary of State" for "commissioner of taxes" following "by such town clerk forthwith forwarded to the" in the third sentence and preceding "shall be such process agent" in the fourth sentence.

Cross References

Cross references. Section not applicable to foreign building and loan associations, foreign creamery companies and foreign investment companies, see § 1632 of this title.

ANNOTATIONS

Analysis

1. Generally.

This section must be complied with by a nonresident broker transacting business in this State in an individual capacity since the legislature intended to provide a forum in this state by providing a means of service of process upon such an individual. 1938-40 Op. Atty. Gen. 171.

2. Doing business.

Mere presence of members, meetings or places of worship of religious association without doing business in this State did not render Secretary of State the continuing process agent for church official who resided in another state, long after his having made a single trip to Vermont unrelated to the matter being litigated. Schuppin v. Unification Church, 435 F. Supp. 603 (D. Vt. 1977), aff'd, 573 F.2d 1295 (2d Cir. 1977).

3. Foreign administrator.

This section, which requires nonresidents doing business in their individual capacity within this State to appoint a process agent, does not confer the capacity to be sued upon the foreign administrator of a nonresident's estate. Palmer v. L. E. Leach Co., 60 F.R.D. 602 (D. Vt. 1973).

§ 1631. Vacancy.

When an appointee dies or removes from the State, another person residing in such town and having therein an office or place of business, within 10 days from the date of such death or removal, shall be appointed in the manner hereinbefore specified, upon whom service of process may be made as provided in section 1630 of this title. In case of such death or removal, or if a person is not appointed as aforesaid, process against such nonresident person may be served by delivering to the Secretary of State duplicate copies thereof, one of which shall be filed with the Secretary of State and the other shall be forwarded by mail prepaid by the clerk to the last known residence of such person.

Amended 1971, No. 84 , § 6; 1993, No. 221 (Adj. Sess.), § 27; 2013, No. 72 , § 5.

History

Source. V.S. 1947, § 6116. P.L. § 6050. G.L. § 5748. 1908, No. 117 , § 10.

Amendments--2013 Substituted "an" for "such" preceding "appointee" in the first sentence and deleted the third sentence.

Amendments--1993 (Adj. Sess.). Substituted "secretary of state" for "town clerk of the town" preceding "duplicate" and "with the Secretary of State" for "in the office of the clerk" following "filed" in the second sentence and "Secretary of State" for "town clerk" following "paid to the" in the third sentence.

Amendments--1971. Substituted "$2.00" for "$1.00" following "the sum of" in the third sentence.

Cross References

Cross references. Section not applicable to foreign building and loan associations, foreign creamery companies and foreign investment companies, see § 1632 of this title.

§ 1632. Exceptions.

The provisions of sections 1630 and 1631 of this title shall not apply to foreign investment companies, foreign building and loan associations, or foreign creamery companies.

History

Source. V.S. 1947, § 6117. P.L. § 6051. G.L. § 5749. 1917, No. 254 , § 5612.

§ 1633. Secretary of State as process agent.

A foreign insurance, express, shipping car, telegraph, or telephone company, or a foreign company under any other name engaged in like business, shall not do business in this State as an unincorporated association or partnership, until it has filed with the Secretary of State a written stipulation containing the association or firm name, and the names and residences of the associates or partners, and appointing the Secretary of State as its process agent. Such stipulation shall be in form and substance like that specified in subdivision 692(3) of this title, and shall have the same legal effect. The provisions of 12 V.S.A. §§ 851-853 , shall apply to service of process on such company and to acts done by persons or agents in its behalf.

History

Source. 1949, No. 134 , § 2. V.S. 1947, § 6118. P.L. § 6052. G.L. § 5750. 1917, No. 254 , § 5613. P.S. §§ 4743, 4744, 4747. R. 1906, § 4643. V.S. §§ 4165, 4168. 1894, No. 43 , § 1. 1884, No. 46 , §§ 1, 3. 1882, No. 71 , § 6. R.L. §§ 3608, 3610. 1874, No. 1 , §§ 8, 9. G.S. 87, §§ 6, 9, 10. 1854, No. 31 , § 2. 1852, No. 46 , §§ 2, 5. 1852, No. 47 , § 6.

Reference in text. Section 692(3) of this title, referred to in the second sentence, was repealed by 1971, No. 237 (Adj. Sess.), § 100, eff. Jan. 1, 1973.

2010. Substituted "subdivision" for "section" preceding "692(3)" to conform reference to V.S.A. style.

Revision note - Reference in the third sentence to sections "851-854" of Title 12 changed to "851-853" to conform reference to repeal of former § 854 by 1971, No. 185 (Adj. Sess.), § 237, eff. March 29, 1972. The subject matter of former 12 V.S.A. § 854 is now covered by V.R.C.P. 4(d)(7).

ANNOTATIONS

1. Action by nonresidents.

In action by residents of New Hampshire against company that was incorporated and organized under the laws of Massachusetts, and that had complied with the requirements of this chapter, where the writ was served on one of the insurance commissioners, the court thereby acquired jurisdiction of defendant, and it made no difference that plaintiffs resided out of the state. Osborne & Woodbury v. Shawmut Insurance Co., 51 Vt. 278 (1878).

§ 1634. Effect of failure and neglect.

A person, copartnership, limited liability company, or corporation subject to this chapter shall not institute any proceedings in this State for the enforcement of any right or obligation unless it shall, prior to the issuance of the original return or complaint therein, have filed the returns and paid the registration fee required by this chapter; nor shall a license or certificate be granted to a nonresident individual, copartnership, or unincorporated association to transact a business specified in Titles 5 and 23 or in 6 V.S.A. chapter 29 until such individual, copartnership, or association has complied with the provisions of section 1630 of this title.

Amended 1995, No. 179 (Adj. Sess.), § 13.

History

Source. V.S. 1947, § 6119. P.L. § 6053. G.L. § 5751. 1917, No. 254 , § 5614. 1910, No. 54 , §§ 2, 3. 1908, No. 117 , § 11.

Reference in text. 6 V.S.A. chapter 29, referred to in this section, was repealed by 1985, No. 126 (Adj. Sess.), § 3. The subject matter is now covered by 6 V.S.A. § 361 et seq.

Revision note. Reference to "chapter 338 of V.S. 1947" was changed to "chapter 29 of Title 6" in view of repeal of chapter 338 of V.S. 1947 by 1955, No. 99 , § 14.

Amendments--1995 (Adj. Sess.) Inserted "limited liability company" following "a person, copartnership".

ANNOTATIONS

Analysis

1. Purpose.

Since this section is regulative in nature, it affects the remedy only and does not render the transaction with persons required to register under this chapter void. Enosburg Grain Co. v. Wilder, 112 Vt. 11, 20 A.2d 473 (1941).

2. Jurisdiction of court.

A failure to comply with the provisions of this chapter prior to the issuance of process in which such an entity required to register is plaintiff makes the process void and deprives the court of jurisdiction. Wilson Bros. Garage v. Tudor, 89 Vt. 522, 95 A. 794 (1915); Amey v. Vermont Products Co., 107 Vt. 178, 177 A. 197 (1935); Enosburg Grain Co. v. Wilder, 112 Vt. 11, 20 A.2d 473 (1941).

3. Prior obligations and rights.

Although a corporation, which had done business in its own name, subsequently did business under an assumed name, failure to conform with this chapter did not preclude a recovery on rights or obligations that arose while the corporation was doing business in its own name. Corner Garage, Inc. v. Pullen, 96 Vt. 458, 120 A. 863 (1923).

4. Filing before suit.

The filing by defendants of a partnership certificate required by section 1621 of this title, after a contract upon which they were sued was made but before suit was brought against one of them, was not notice, actual or constructive, to the other parties to the contract of the existence of the partnership. Jaquith v. Smith, 112 Vt. 353, 24 A.2d 341 (1942).

5. Effect of cessation certificate.

Where partnership, at time writ was issued, was registered as required by this section, fact that firm subsequently filed a cessation certificate did not affect court's jurisdiction. E.L. Stoddard & Son v. Village of North Troy, 102 Vt. 462, 150 A. 148 (1930).

6. Defective process.

The direction of this section that a partnership required to register should not, upon failure to register, institute any proceedings, makes any process issued in violation thereof defective and not curable by waiver, consent or agreement. Enosburg Grain Co. v. Wilder, 112 Vt. 11, 20 A.2d 473 (1941).

7. Burden of proof.

A motion to dismiss on the ground that the plaintiff had not registered as a partner as required by this chapter relates only to what appears of record, and where the record contains nothing the court must ascertain which party has the burden of proof. Enosburg Grain Co. v. Wilder, 112 Vt. 11, 20 A.2d 473 (1941).

The presumption of jurisdiction of a court of general jurisdiction places upon the defendants the burden of producing evidence to show that the plaintiff cannot institute suit because it was not registered as a partnership as required by this chapter. Enosburg Grain Co. v. Wilder, 112 Vt. 11, 20 A.2d 473 (1941).

8. Directed verdict.

In a suit by copartnership to recover commission on the sale of certain property effected through the efforts of some of the partners, where the evidence showed a failure to comply with the provisions of this section prior to the issuance of the original writ or complaint therein, a verdict was properly directed for the defendant. Lowell v. Wood, 96 Vt. 218, 118 A. 887 (1922).

§ 1635. Reregistration.

  1. One or more persons doing business under a registered business name shall reregister the name every five years by filing a reregistration return with the Secretary of State with a fee of $40.00 within 60 days following the date five years after the date of the original registration or of the last reregistration. The Secretary of State shall prepare and supply the necessary forms.
  2. When reregistration is not accomplished as provided in subsection (a) of this section, a business name may be registered by the first applicant making application to the Secretary of State for an original registration as provided by this chapter.

    Added 1971, No. 48 , § 2; amended 1977, No. 237 (Adj. Sess.), § 4; 1993, No. 221 (Adj. Sess.), § 28; 2003, No. 70 (Adj. Sess.), § 11, eff. March 1, 2004.

History

Amendments--2003 (Adj. Sess.). Subsec. (a): Substituted "five years" for "ten years" in two places, "$40.00" for "$10.00", and "60 days" for "sixty days".

Amendments--1993 (Adj. Sess.). Subsec. (a): Deleted "and with the town clerk where the business has its main office, if the business has an office in the State of Vermont, with a fee of $5.00" following "$10.00" in the first sentence.

Amendments--1977 (Adj. Sess.). Subsec. (a): In the first sentence, substituted "every ten years" for "biennially" following "shall re-register the name", "$10.00" for "$2.00" preceding "and with the town clerk", "$5.00" for "$1.00" preceding "within sixty days following the date", and "ten" for "two" thereafter.

§ 1636. Termination of business name; hearing.

  1. If the Secretary of State declines to register a business name in accordance with the provisions of subsection 1621(c) of this title, the applicant may request that the Secretary determine whether the person to whom the business name is registered is doing business or taking steps to do business in this State.
  2. If, after notice and an opportunity for hearing, the Secretary or designee finds that the person is not doing business or intending to do business in this State as demonstrated by a substantive act or acts consistent with that intent, the Secretary may terminate the registration and register the business name to the applicant.  If the business name is not taken by the person who requested a hearing under this section, the business name shall be available for selection by another registrant.
  3. A person aggrieved by a final decision of the Secretary under this section may appeal to the Superior Court of Washington County, which shall consider the matter de novo.

    Added 1989, No. 226 (Adj. Sess.).

History

2010. In subsec. (a), substituted "subsection 1621(c) of this title" for "subsection (c) of section 1621 of this title" to conform reference to V.S.A. style.

§ 1637. Authority to terminate and amend registration.

  1. The Secretary of State shall have the authority to:
    1. terminate the registration of a person who, pursuant to a final court order or an assurance of discontinuance, is not authorized to conduct business in this State; and
    2. amend his or her records to reflect the termination of a registration pursuant to subdivision (1) of this subsection.
    1. If the Secretary of State terminates the registration of a person pursuant to this section, the person appoints the Secretary as his or her agent for service of process in any proceeding based on a cause of action that arose during the time the person was authorized to transact, or was transacting without authorization, business in this State. (b) (1)  If the Secretary of State terminates the registration of a person pursuant to this section, the person appoints the Secretary as his or her agent for service of process in any proceeding based on a cause of action that arose during the time the person was authorized to transact, or was transacting without authorization, business in this State.
    2. Upon receipt of process, the Secretary of State shall deliver by registered mail a copy of the process to the secretary of the terminated person at its principal office shown in its most recent annual report or in any subsequent communication received from the person stating the current mailing address of its principal office, or, if none is on file, in its application for registration.
    1. If a court or other person with sufficient legal authority reinstates the ability of a terminated person to conduct business in this State, the terminated person may file with the Secretary of State evidence of the reinstated authority and pay to the Secretary a fee of $25.00 for each year the person is delinquent. (c) (1)  If a court or other person with sufficient legal authority reinstates the ability of a terminated person to conduct business in this State, the terminated person may file with the Secretary of State evidence of the reinstated authority and pay to the Secretary a fee of $25.00 for each year the person is delinquent.
    2. Upon receipt of a filing and payment pursuant to subdivision (1) of this subsection, the Secretary shall cancel the termination and prepare a certificate of reinstatement, file the original of the certificate, and serve a copy on the person.

      Added 2015, No. 128 (Adj. Sess.), § C.2.

CHAPTER 16. BUSINESS RAPID RESPONSE TO DECLARED STATE DISASTERS

Sec.

§ 1701. Definitions.

In this chapter:

  1. "Critical infrastructure" means property and equipment owned or used by communications networks and electric generation, transmission, and distribution systems.
    1. "Declared State disaster or emergency" means: (2) (A) "Declared State disaster or emergency" means:
      1. a disaster or emergency event for which a Governor's state of emergency proclamation has been issued;
      2. a disaster or emergency event for which a Presidential declaration of a federal major disaster or emergency has been issued; or
      3. a disaster or emergency event within the State for which a good faith response effort is required, and for which the Commissioner of Public Service is given notification from the registered business and the Commissioner, in consultation with the Director of Emergency Management, Department of Public Safety, designates the event as a disaster or emergency, thereby invoking the provisions of this chapter.
    2. "Declared State disaster or emergency" does not include an emergency or situation arising solely from a labor dispute.
  2. "Disaster response period" means a period that begins 10 days prior to the first day of the Governor's proclamation, the President's declaration, or designation by another authorized official of the State as set forth in this chapter, whichever occurs first, and that extends 60 calendar days after the declared State disaster or emergency.
  3. "Disaster- or emergency-related work" means repairing, renovating, installing, building, rendering services, or other nonretail business activities in areas of the State affected by the declared State disaster or emergency that relate to critical infrastructure that has been damaged, impaired, or destroyed by the declared State disaster or emergency.
  4. "Mutual Assistance Agreement" means an agreement to which one or more registered businesses and one or more out-of-state businesses are party and pursuant to which an electric or telephone utility may request and receive assistance from an out-of-state business for performance of disaster- or emergency-related work by the out-of-state business during the disaster response period.
    1. "Out-of-state business" means a business entity that, except for disaster- or emergency-related work, has no presence in the State and conducts no business in the State whose services are requested pursuant to a Mutual Assistance Agreement by a registered business or by a State or local government for purposes of performing disaster- or emergency-related work on critical infrastructure in the State. (6) (A) "Out-of-state business" means a business entity that, except for disaster- or emergency-related work, has no presence in the State and conducts no business in the State whose services are requested pursuant to a Mutual Assistance Agreement by a registered business or by a State or local government for purposes of performing disaster- or emergency-related work on critical infrastructure in the State.
    2. "Out-of-state business" also includes a business entity that is affiliated with a registered business in the State solely through common ownership.
    3. An out-of-state business has no registrations or tax filings or nexus in the State other than disaster- or emergency-related work during the tax year immediately preceding the declared State disaster or emergency.
  5. "Out-of-state employee" means an employee who does not work in the State, except for disaster- or emergency-related work during the disaster response period.
  6. "Registered business in the State" or "registered business" means a business entity that is currently registered with the Secretary of State to do business in the State prior to the declared State disaster or emergency.

    Added 2015, No. 51 , § A.1., eff. June 3, 2015.

§ 1702. Obligations after disaster response period.

  1. Business and employee status during the disaster response period.
      1. An out-of-state business that conducts operations within the State for purposes of performing work or services related to a declared State disaster or emergency during the disaster response period shall not be considered to have established a level of presence that would require that business to register, file, or remit State or local taxes or that would require that business or its out-of-state employees to be subject to any State licensing or registration requirements. (1) (A) An out-of-state business that conducts operations within the State for purposes of performing work or services related to a declared State disaster or emergency during the disaster response period shall not be considered to have established a level of presence that would require that business to register, file, or remit State or local taxes or that would require that business or its out-of-state employees to be subject to any State licensing or registration requirements.
      2. This includes any State or local business licensing or registration requirements or State and local taxes or fees, including unemployment insurance, State or local occupational licensing fees, ad valorem tax on equipment brought into the State temporarily for use during the disaster response period and subsequently removed from the State, and Public Utility Commission or Secretary of State licensing and regulatory requirements.
      3. For purposes of any State or local tax on or measured by, in whole or in part, net or gross income or receipts, all activity of the out-of-state business that is conducted in this State pursuant to this chapter shall be disregarded with respect to any filing requirements for such tax, including the filing required for a unitary or combined group of which the out-of-state business may be a part.
      4. For the purpose of apportioning income, revenue, or receipts, the performance by an out-of-state business of any work in accordance with this section shall not be sourced to or shall not otherwise impact or increase the amount of income, revenue, or receipts apportioned to this State.
      1. An out-of-state employee shall not be considered to have established residency or a presence in the State that would require that person or that person's employer to file and pay income taxes or to be subjected to tax withholdings or to file and pay any other State or local tax or fee during the disaster response period. (2) (A) An out-of-state employee shall not be considered to have established residency or a presence in the State that would require that person or that person's employer to file and pay income taxes or to be subjected to tax withholdings or to file and pay any other State or local tax or fee during the disaster response period.
      2. This includes any related State or local employer withholding and remittance obligations, but does not include any transaction taxes or fees as described in subsection (b) of this section.
  2. Transaction taxes and fees. An out-of-state business and an out-of-state employee shall be required to pay transaction taxes and fees, including fuel tax and sales and use tax on materials or services consumed or used in the State subject to sales and use tax, rooms and meals tax, car rental taxes or fees that the out-of-state affiliated business or out-of-state employee purchases for use or consumption in the State during the disaster response period, unless such taxes are otherwise exempted during a disaster response period. An out-of-state business making retail sales of tangible personal property during the disaster response period shall be subject to all sales tax registration, collection, reporting, and other requirements set forth in 32 V.S.A. chapter 233.
  3. Business or employee activity after disaster response period. An out-of-state business or out-of-state employee that remains in the State after the disaster response period will become subject to the State's normal standards for establishing presence, residency, or doing business in the State and will therefore become responsible for any business or employee tax requirements that ensue.

    Added 2015, No. 51 , § A.1., eff. June 3, 2015; amended 2017, No. 53 , § 12.

History

2017. In subdiv. (a)(1)(B), substituted "Public Utility Commission" for "Public Service Board" in accordance with 2017, No. 53 , § 12.

§ 1703. Administration.

  1. Notification of out-of-state business during the disaster response period.
    1. The out-of-state business that enters the State shall, upon request, provide to the Secretary of State a statement that it is in the State for purposes of responding to the disaster or emergency, which statement shall include the business's name, state of domicile, principal business address, federal tax identification number, date of entry, and contact information.
    2. A registered business in the State shall, upon request, provide the information required in subdivision (1) of this subsection for any affiliate that enters the State that is an out-of-state business.
    3. The notification shall also include contact information for the registered business in the State.
  2. Notification of intent to remain in State.  An out-of-state business or an out-of-state employee that remains in the State after the disaster response period shall complete State and local registration, licensing, and filing requirements that ensue as a result of establishing the requisite business presence or residency in the State applicable under the existing law.
  3. Procedures.  The Secretary of State may adopt necessary rules, develop and issue forms or online processes, and maintain and make available an annual record of any designations pursuant to this chapter to carry out these administrative procedures.

    Added 2015, No. 51 , § A.1., eff. June 3, 2015.

CHAPTER 17. CORPORATIONS

Sec.

§§ 1801-2216. Repealed. 1993, No. 85, § 3(a), eff. Jan. 1, 1994.

History

Former §§ 1801-2216. Former §§ 1801-2216, relating to business corporations, were derived from 1969, No. 286 (Adj. Sess.), § 2, and amended by 1971, No. 51 , §§ 2-14, 16, 17; 1971, No. 184 (Adj. Sess.), § 28; 1971, No. 237 (Adj. Sess.), § 101; 1973, No. 8 ; 1973, No. 90 , § 5; 1973, No. 193 (Adj. Sess.), § 3; 1975, No. 167 (Adj. Sess.); 1979, No. 49 , § 2; 1979, No. 128 (Adj. Sess.); 1981, No. 125 (Adj. Sess.), § 6; 1981, No. 184 (Adj. Sess.), § 2, 1981, No. 217 (Adj. Sess.), §§ 1-5; 1983, No. 127 (Adj. Sess.), § 2; 1975, No. 46 , § 5; 1989, No. 129 (Adj. Sess.), §§ 1, 3, 4, 5, 7; 1989, No. 193 (Adj. Sess.), §§ 1-3, and 1989, No. 222 (Adj. Sess.), § 39. The subject matter is now covered by Title 11A.

Applicability of repeal. 1993, No. 85 , § 4, eff. Jan. 1, 1994, provided:

"(a) This act [which repealed this chapter and enacted Title 11A] applies to all domestic corporations in existence on its effective date [Jan. 1, 1994] that were incorporated under any general statute of this state relating to incorporation of corporations for profit, where the power to amend or repeal the statute under which the corporation was incorporated was reserved by the general assembly.

"(b) A foreign corporation authorized to transact business in this state on the effective date of this act is subject to this act but is not required to obtain a new certificate of authority to transact business under this act."

Effect of repeal - Equitable rights and remedies. 1993, No. 85 , § 4a, eff. Jan. 1, 1994, provided: "The enactment of this act [which repealed this chapter and enacted Title 11A] shall have no effect on any applicable equitable rights and remedies, as determined by the courts of this state. To the extent that this act permits variation from the terms of the act in articles of incorporation, bylaws, or otherwise, a corporation may not adopt any such variation that is unconscionable."

- Savings clause. 1993, No. 85 , § 5, eff. Jan. 1, 1994, provided:

"(a) Except as provided in subsection (b) of this section, the repeal of a statute by this act does not affect:

"(1) the operation of the statute or any action taken under it before its repeal;

"(2) any ratification, right, remedy, privilege, obligation, or liability acquired, accrued, or incurred under the statute before its repeal;

"(3) any violation of the statute, or any penalty, forfeiture, or punishment incurred because of the violation, before its repeal;

"(4) any proceeding, reorganization, or dissolution commenced under the statute before its repeal, and the proceeding, reorganizations, or dissolution may be completed in accordance with the statute as if it had not been repealed.

"(b) If a penalty or punishment imposed for violation of a statute repealed by this act is reduced by this act, the penalty or punishment if not already imposed shall be imposed in accordance with this act."

CHAPTER 19. NONPROFIT CORPORATIONS

Cross References

Cross references. Business corporations, see Title 11A.

Charitable solicitations, see 9 V.S.A. § 2471 et seq.

Cooperatives, see § 981 et seq. of this title.

Private foundations, see §§ 561-568 of this title.

Registration of business entities, see § 1621 et seq. of this title.

Religious societies, see § 1471 et seq. of this title.

Taxation of paid fundraisers, see 32 V.S.A. § 9710.

Subchapter 1. General

§§ 2301-2309. Repealed. 1995, No. 179 (Adj. Sess.), § 3, eff. Jan. 1, 1997.

History

Former §§ 2301-2309. Former §§ 2301 through 2309, relating to the Vermont Nonprofit Corporation Act, were derived from 1971, No. 237 (Adj. Sess.), § 1-3, 93-95, and 97-99, eff. Jan 1, 1973. The subject matter is now covered in Title 11B.

Subchapter 2. General Provisions

§§ 2351-2374. Repealed. 1995, No. 179 (Adj. Sess.), § 3, eff. Jan. 1, 1997.

History

Former §§ 2351-2374. Former §§ 2351 through 2374, relating to nonprofit corporations generally, were derived from 1971, No. 237 (Adj. Sess.), §§ 4-27, eff. Jan. 1, 1973; 1981, No. 51 , §§ 1; and 1989, No. 193 (Adj. Sess.), §§ 4-6, eff. May 21, 1990. The subject matter is now covered in Title 11B.

Subchapter 3. Formation of Nonprofit Corporations

§§ 2401-2405. Repealed. 1995, No. 179 (Adj. Sess.), § 3, eff. Jan. 1, 1997.

History

Former §§ 2401-2405. Former §§ 2401 through 2405, relating to the formation of nonprofit corporations, were derived from 1971, No. 237 (Adj. Sess.), §§ 28-32, eff. Jan. 1, 1973. The subject matter is now covered in Title 11B.

Subchapter 4. Amendment of Articles of Association

Cross References

Cross references. Power of historical corporations to amend articles, see § 196 of this title.

§§ 2451-2455. Repealed. 1995, No. 179 (Adj. Sess.), § 3, eff. Jan. 1, 1997.

History

Former §§ 2451-2455. Former §§ 2451 through 2455, relating to amending the articles of association for nonprofit corporations, were derived from 1971, No. 237 (Adj. Sess.), §§ 33-36, eff. Jan. 1, 1973, No. 237 (Adj. Sess.), § 37, eff. Jan. 31, 1973; and 1989, No. 129 (Adj. Sess.), § 6, eff. March 27, 1990. The subject matter is now covered in Title 11B.

Subchapter 5. Merger and Consolidation

§§ 2501-2506. Repealed. 1995, No. 179 (Adj. Sess.), § 3, eff. Jan. 1, 1997.

History

Former §§ 2501-2506. Former §§ 2501 through 2506, relating to mergers and consolidations of nonprofit corporations, were derived from 1971, No. 237 (Adj. Sess.), §§ 38-43, eff. April 5, 1972. The subject matter is now covered in Title 11B.

Subchapter 6. Sale of Assets

§ 2551. Repealed. 1995, No. 179 (Adj. Sess.), § 3, eff. Jan. 1, 1997.

History

Former § 2551. Former § 2551, relating to the sale, lease, exchange or mortgage of nonprofit corporate assets, was derived from 1971, No. 237 (Adj. Sess.), § 44, eff. Jan. 1, 1973. The subject matter is now covered in Title 11B.

Subchapter 7. Dissolution

§§ 2601-2619. Repealed. 1995, No. 179 (Adj. Sess.), § 3, eff. Jan. 1, 1997.

History

Former §§ 2601-2619. Former §§ 2601-2619, relating to the dissolution of nonprofit corporations, were derived from 1971, No. 237 (Adj. Sess.), §§ 45-62, eff. Jan. 1, 1973; 1973, No. 193 (Adj. Sess.), § 3, eff. April 9, 1974; 1981, No. 51 , § 2; and 1989, No. 129 (Adj. Sess.), §§ 2, 2a, eff. March 27, 1990. The subject matter is now covered in Title 11B.

Reference in text. Corporations terminated under former section 2607, Involuntary Dissolution, prior to March 27, 1990 for failure to file report may be reinstated. See 1993, No. 235 (Adj. Sess.), § 10d, eff. June 21, 1994, set out in the note below.

Reinstatement of corporations terminated prior to March 27, 1990 for failure to file report. 1993, No. 235 (Adj. Sess.), § 10d, eff. June 21, 1994, provided:

"(a) A business or nonprofit corporation that was terminated prior to March 27, 1990 for failure to file its annual or status report may, if the corporation has not voluntarily dissolved by filing articles of dissolution with the secretary of state or has not been involuntarily dissolved by a court decree, apply to the secretary of state and be reinstated administratively, upon payment of the statutory fee and the filing of the delinquent annual or status report. When the reinstatement is effective, reinstatement shall relate back to and take effect as of the date of the corporation's termination as if the termination had never occurred.

"(b) The provisions of this section shall not be construed to entitle a corporation to retain the name it used prior to termination if that name has been taken by another corporation."

Subchapter 8. Foreign Nonprofit Corporations

§§ 2651-2668. Repealed. 1995, No. 179 (Adj. Sess.), § 3, eff. Jan. 1, 1997.

History

Former §§ 2651-2668. Former §§ 2651-2668, relating to foreign nonprofit corporations, were derived from 1971, No. 237 (Adj. Sess.), § 63, eff. Jan. 1, 1973; 1989, No. 225 (Adj. Sess.), § 25(b); and 1995, No. 180 (Adj. Sess.), § 38(a). The subject matter is now covered in Title 11B.

Subchapter 9. Status Reports

History

Revision note. Changed "annual reports" to "status reports" to conform subchapter heading to text of sections in subchapter as amended by 1973, No. 212 (Adj. Sess.), §§ 1, 2.

§§ 2701, 2702. Repealed. 1995, No. 179 (Adj. Sess.), § 3, eff. Jan. 1, 1997.

History

Former §§ 2701-2702. Former §§ 2701-2702, relating to status reports, were derived from 1971, No. 237 (Adj. Sess.), § 81, eff. Jan. 1,1973; and 1973, No. 212 (Adj. Sess.), §§ 1, 2 eff. April 3, 1974. The subject matter is now covered in Title 11B.

Subchapter 10. Fees, Charges and Penalties

§§ 2751-2755. Repealed. 1995, No. 179 (Adj. Sess.), § 3, eff. Jan. 1, 1997.

History

Former §§ 2751-2755. Former §§ 2751-2755, relating to fees, charges, and penalties, were derived from 1971, No. 237 (Adj. Sess.), § 83-86, 96, eff. Jan. 1, 1973; 1973, No. 212 (Adj. Sess.), §§ 3, 4, eff. April 3, 1974; and 1981, No. 217 (Adj. Sess.), §§ 6, 7. The subject matter is now covered in Title 11B.

Subchapter 11. Enforcement

§§ 2801-2806. Repealed. 1995, No. 179 (Adj. Sess.), § 3, eff. Jan. 1, 1997.

History

Former §§ 2801-2806. Former §§ 2801-2806, relating to enforcement, were derived from 1971, No. 237 (Adj. Sess.), §§ 87-92, eff. Jan. 1, 1973; and 1973, No. 193 (Adj. Sess.), § 3, eff. April 9, 1974. The subject matter is now covered in Title 11B.

CHAPTER 21. LIMITED LIABILITY COMPANIES

Subchapter 1. General Provisions

§§ 3001-3013. Repealed. 2014, No. 17 (Adj. Sess.), § 1.

History

Former §§ 3001-3013. Former § 3001, relating to definitions, was derived from 1995, No. 179 (Adj. Sess.), § 4 and amended by 2007, No. 106 (Adj. Sess.), § 1 and 2007, No. 190 (Adj. Sess.), § 74.

Former § 3002, relating to knowledge and notice, was derived from 1995, No. 179 (Adj. Sess.), § 4.

Former § 3003, relating to effect of operating agreement; nonwaivable provisions, was derived from 1995, No. 179 (Adj. Sess.), § 4.

Former § 3004, relating to supplemental principles of law, was derived from 1995, No. 179 (Adj. Sess.), § 4.

Former § 3005, relating to name, was derived from 1995, No. 179 (Adj. Sess.), § 4 and amended by 2003, No. 107 (Adj. Sess.), § 16 and 2007, No. 106 (Adj. Sess.), § 2.

Former § 3006, relating to reserved name, was derived from 1995, No. 179 (Adj. Sess.), § 4.

Former § 3007, relating to registered name, was derived from 1995, No. 179 (Adj. Sess.), § 4.

Former § 3008, relating to designated office and agent, was derived from 1995, No. 179 (Adj. Sess.), § 4.

Former § 3009, relating to change of designated office or agent for service of process, was derived from 1995, No. 179 (Adj. Sess.), § 4.

Former § 3010, relating to resignation of agent for service of process, was derived from 1995, No. 179 (Adj. Sess.), § 4.

Former § 3011, relating to service of process, was derived from 1995, No. 179 (Adj. Sess.), § 4.

Former § 3012, relating to nature of business and powers, was derived from 1995, No. 179 (Adj. Sess.), § 4 and amended by 1997, No. 149 (Adj. Sess.), § 3; 1999, No. 153 (Adj. Sess.), § 23; 2001, No. 77 (Adj. Sess.), § 3 and 2003, No. 105 (Adj. Sess.), § 20.

Former § 3013, relating to fees, was derived from 1995, No. 179 (Adj. Sess.), § 4 and amended by 2003, No. 70 (Adj. Sess.), § 12; 2007, No. 76 , § 1; 2007, No. 153 (Adj. Sess.), § 34, and 2013, No. 72 , § 6.

Subchapter 2. Organization

§§ 3021-3032. Repealed. 2014, No. 17 (Adj. Sess.), § 1.

History

Former §§ 3021-3032. Former § 3021, relating to limited liability company as legal entity, was derived from 1995, No. 179 (Adj. Sess.), § 4.

Former § 3022, relating to organization, was derived from 1995, No. 179 (Adj. Sess.), § 4 and amended by 2009, No. 78 (Adj. Sess.), § 44b.

Former § 3023, relating to articles of organization, was derived from 1995, No. 179 (Adj. Sess.), § 4 and amended by 2007, No. 106 (Adj. Sess.), § 3.

Former § 3024, relating to amendment or restatement of articles of organization, was derived from 1995, No. 179 (Adj. Sess.), § 4.

Former § 3025, relating to signing of documents, was derived from 1995, No. 179 (Adj. Sess.), § 4.

Former § 3026, relating to filing in office of Secretary of State, was derived from 1995, No. 179 (Adj. Sess.), § 4 and amended by 2007, No. 190 (Adj. Sess.), § 75.

Former § 3027, relating to correcting filed document, was derived from 1995, No. 179 (Adj. Sess.), § 4.

Former § 3028, relating to certificate of existence or authorization, was derived from 1995, No. 179 (Adj. Sess.), § 4.

Former § 3029, relating to liability for false statement in filed document, was derived from 1995, No. 179 (Adj. Sess.), § 4.

Former § 3030, relating to filing by judicial act, was derived from 1995, No. 179 (Adj. Sess.), § 4.

Former § 3031, relating to limited liability company property, was derived from 1995, No. 179 (Adj. Sess.), § 4.

Former § 3032, relating to when property is limited liability company property, was derived from 1995, No. 179 (Adj. Sess.), § 4.

Subchapter 3. Relations of Members and Managers to Persons Dealing with Limited Liability Company

§§ 3041-3043. Repealed. 2014, No. 17 (Adj. Sess.), § 1.

History

Former §§ 3041-3043. Former § 3041, relating to agency of members and managers, was derived from 1995, No. 179 (Adj. Sess.), § 4.

Former § 3042, relating to limited liability company liable for member's or manager's actionable conduct, was derived from 1995, No. 179 (Adj. Sess.), § 4.

Former § 3043, relating to liability of members and managers, was derived from 1995, No. 179 (Adj. Sess.), § 4.

Subchapter 4. Relations of Members to Each Other and to Limited Liability Company

§§ 3051-3062. Repealed. 2014, No. 17 (Adj. Sess.), § 1.

History

Former §§ 3051-3062. Former § 3051, relating to form of contribution, was derived from 1995, No. 179 (Adj. Sess.), § 4.

Former § 3052, relating to member's liability for contributions, was derived from 1995, No. 179 (Adj. Sess.), § 4.

Former § 3053, relating to member's and manager's rights to payments and reimbursement, was derived from 1995, No. 179 (Adj. Sess.), § 4.

Former § 3054, relating to management of limited liability company, was derived from 1995, No. 179 (Adj. Sess.), § 4.

Former § 3055, relating to sharing of profits and losses and right to distributions, was derived from 1995, No. 179 (Adj. Sess.), § 4.

Former § 3056, relating to limitations on distributions, was derived from 1995, No. 179 (Adj. Sess.), § 4.

Former § 3057, relating to liability for unlawful distributions, was derived from 1995, No. 179 (Adj. Sess.), § 4.

Former § 3058, relating to member's right to information, was derived from 1995, No. 179 (Adj. Sess.), § 4 and amended by 2007, No. 190 (Adj. Sess.), § 76..

Former § 3059, relating to general standards of member's and manager's conduct, was derived from 1995, No. 179 (Adj. Sess.), § 4 and amended by 2007, No. 190 (Adj. Sess.), § 76.

Former § 3060, relating to actions by members, was derived from 1995, No. 179 (Adj. Sess.), § 4.

Former § 3061, relating to continuation of term limited liability company beyond expiration of stated duration, was derived from 1995, No. 179 (Adj. Sess.), § 4.

Former § 3062, relating to authority to indemnify, was derived from 1995, No. 179 (Adj. Sess.), § 4.

Subchapter 5. Transferees and Creditors of Member

§§ 3071-3075. Repealed. 2014, No. 17 (Adj. Sess.), § 1.

History

Former §§ 3071-3075. Former § 3071, relating to member's distributional interest, was derived from 1995, No. 179 (Adj. Sess.), § 4.

Former § 3072, relating to transfer of distributional interest, was derived from 1995, No. 179 (Adj. Sess.), § 4.

Former § 3073, relating to transferee, was derived from 1995, No. 179 (Adj. Sess.), § 4.

Former § 3074, relating to rights of creditor, was derived from 1995, No. 179 (Adj. Sess.), § 4.

Former § 3075, relating to power of estate of deceased or member who is incompetent, was derived from 1995, No. 179 (Adj. Sess.), § 4 and amended by 2013, No. 96 (Adj. Sess.), § 40.

Subchapter 6. Member's Dissociation

§§ 3081-3083. Repealed. 2014, No. 17 (Adj. Sess.), § 1.

History

Former §§ 3081-3083. Former § 3081, relating to events causing member's dissociation, was derived from 1995, No. 179 (Adj. Sess.), § 4.

Former § 3082, relating to member's power to dissociate; wrongful dissociation, was derived from 1995, No. 179 (Adj. Sess.), § 4.

Former § 3083, relating to effect of member's dissociation, was derived from 1995, No. 179 (Adj. Sess.), § 4.

Subchapter 7. Member's Dissociation When Business Not Wound Up

§§ 3091-3094. Repealed. 2014, No. 17 (Adj. Sess.), § 1.

History

Former §§ 3091-3094. Former § 3091, relating to exercise of purchase right, was derived from 1995, No. 179 (Adj. Sess.), § 4.

Former § 3092, relating to court action to determine fair value of distributional interest, was derived from 1995, No. 179 (Adj. Sess.), § 4.

Former § 3093, relating to dissociated member's power to bind limited liability company, was derived from 1995, No. 179 (Adj. Sess.), § 4.

Former § 3094, relating to statement of dissociation, was derived from 1995, No. 179 (Adj. Sess.), § 4.

Subchapter 8. Winding Up Company Business

§§ 3101-3109. Repealed. 2014, No. 17 (Adj. Sess.), § 1.

History

Former §§ 3101-3109. Former § 3101, relating to events causing dissolution and winding up of company business, was derived from 1995, No. 179 (Adj. Sess.), § 4.

Former § 3102, relating to limited liability company continues after dissolution, was derived from 1995, No. 179 (Adj. Sess.), § 4.

Former § 3103, relating to right to wind up limited liability company's business, was derived from 1995, No. 179 (Adj. Sess.), § 4.

Former § 3104, relating to member's or manager's power and liability as agent after dissolution, was derived from 1995, No. 179 (Adj. Sess.), § 4.

Former § 3105, relating to articles of termination, was derived from 1995, No. 179 (Adj. Sess.), § 4.

Former § 3106, relating to distribution of assets in winding up limited liability company's business, was derived from 1995, No. 179 (Adj. Sess.), § 4.

Former § 3107, relating to known claims against dissolved limited liability company, was derived from 1995, No. 179 (Adj. Sess.), § 4.

Former § 3108, relating to other claims against dissolved limited liability company, was derived from 1995, No. 179 (Adj. Sess.), § 4.

Former § 3109, relating to enforcement of claims against dissolved limited liability company, was derived from 1995, No. 179 (Adj. Sess.), § 4.

Subchapter 9. Conversions and Mergers

§§ 3121-3127. Repealed. 2014, No. 17 (Adj. Sess.), § 1.

History

Former §§ 3121-3127. Former § 3121, relating to definitions, was derived from 1995, No. 179 (Adj. Sess.), § 4.

Former § 3122, relating to conversion of partnership or limited partnership to limited liability company, was derived from 1995, No. 179 (Adj. Sess.), § 4.

Former § 3123, relating to effect of conversion; entity unchanged, was derived from 1995, No. 179 (Adj. Sess.), § 4.

Former § 3124, relating to merger of entities, was derived from 1995, No. 179 (Adj. Sess.), § 4.

Former § 3125, relating to articles of merger, was derived from 1995, No. 179 (Adj. Sess.), § 4.

Former § 3126, relating to effect of merger, was derived from 1995, No. 179 (Adj. Sess.), § 4.

Former § 3127, relating to article not exclusive, was derived from 1995, No. 179 (Adj. Sess.), § 4.

Subchapter 10. Foreign Limited Liability Companies

§§ 3131-3140. Repealed. 2014, No. 17 (Adj. Sess.), § 1.

History

Former §§ 3131-3140. Former § 3131, relating to law governing foreign limited liability companies, was derived from 1995, No. 179 (Adj. Sess.), § 4.

Former § 3132, relating to application for certificate of authority, was derived from 1995, No. 179 (Adj. Sess.), § 4.

Former § 3133, relating to activities not constituting transacting business, was derived from 1995, No. 179 (Adj. Sess.), § 4.

Former § 3134, relating to issuance of certificate of authority, was derived from 1995, No. 179 (Adj. Sess.), § 4.

Former § 3135, relating to amended certificate of authority, was derived from 1995, No. 179 (Adj. Sess.), § 4.

Former § 3136, relating to name of foreign limited liability company, was derived from 1995, No. 179 (Adj. Sess.), § 4.

Former § 3137, relating to revocation of certificate of authority, was derived from 1995, No. 179 (Adj. Sess.), § 4.

Former § 3138, relating to cancellation of authority, was derived from 1995, No. 179 (Adj. Sess.), § 4.

Former § 3139, relating to effect of failure to obtain certificate of authority, was derived from 1995, No. 179 (Adj. Sess.), § 4.

Former § 3140, relating to action by Attorney General, was derived from 1995, No. 179 (Adj. Sess.), § 4.

§ 3141. Repealed. 1997, No. 50, § 42, eff. June 26, 1997.

History

Former § 3141, relating to foreign registered limited liability partnerships, was derived from 1995, No. 179 (Adj. Sess.), § 4.

This section was also repealed by 1997, No. 149 (Adj. Sess.), § 2, eff. Jan. 1, 1999.

Subchapter 11. Derivative Actions

§§ 3151-3154. Repealed. 2014, No. 17 (Adj. Sess.), § 1.

History

Former §§ 3151-3154. Former § 3151, relating to right of action, was derived from 1995, No. 179 (Adj. Sess.), § 4.

Former § 3152, relating to proper plaintiff, was derived from 1995, No. 179 (Adj. Sess.), § 4.

Former § 3153, relating to pleading, was derived from 1995, No. 179 (Adj. Sess.), § 4.

Former § 3154, relating to expenses, was derived from 1995, No. 179 (Adj. Sess.), § 4.

Subchapter 12. Annual Report

§§ 3161, 3162. Repealed. 2014, No. 17 (Adj. Sess.), § 1.

History

Former §§ 3161, 3162. Former § 3161, relating to annual report for Secretary of State, was derived from 1995, No. 179 (Adj. Sess.), § 4.

Former § 3162, relating to involuntary termination, was derived from 1995, No. 179 (Adj. Sess.), § 4.

Subchapter 13. Foreign Law Limited Liability Companies

History

Promotion to foreign businesses. 2003, No. 164 (Adj. Sess.), § 12, eff. June 12, 2004, provided: "The agency of commerce and community development shall promote the utilization of foreign law limited liability companies as authorized under subchapter 13 of chapter 21 of Title 11 to attract foreign companies and businesses to locate in Vermont in furtherance of the purposes of this act."

§§ 3181-3184. Repealed. 2014, No. 17 (Adj. Sess.), § 1.

History

Former §§ 3181-3184. Former § 3181, relating to election, was derived from 2003, No. 164 (Adj. Sess.), § 11.

Former § 3182, relating to designation of controlling foreign law, was derived from 2003, No. 164 (Adj. Sess.), § 11.

Former § 3183, relating to scope of designated foreign law, was derived from 2003, No. 164 (Adj. Sess.), § 11.

Former § 3184, relating to jurisdiction, was derived from 2003, No. 164 (Adj. Sess.), § 11.

CHAPTER 22. PARTNERSHIPS

Subchapter 1. General Provisions

§ 3201. Definitions.

As used in this chapter:

  1. "Business" includes every trade, occupation, and profession.
  2. "Debtor in bankruptcy" means a person who is the subject of:
    1. an order for relief under Title 11 of the U.S. Code or a comparable order under a successor statute of general application; or
    2. a comparable order under federal, state, or foreign law governing insolvency.
  3. "Distribution" means a transfer of money or other property from a partnership to a partner in the partner's capacity as a partner or to the partner's transferee.
  4. "Foreign limited liability partnership" means a partnership that:
    1. is formed under laws other than the laws of this State; and
    2. has the status of a limited liability partnership under those laws.
  5. "Limited liability partnership" means a partnership that has filed a statement of qualification under section 3291 of this title and does not have a similar statement in effect in any other jurisdiction.
  6. "Partnership" means an association of two or more persons to carry on as co-owners a business for profit formed under section 3212 of this title, predecessor law, or comparable law of another jurisdiction and includes for all purposes of the laws of this State a limited liability partnership.
  7. "Partnership agreement" means the agreement, whether written, oral, or implied, among the partners concerning the partnership, including amendments to the partnership agreement.
  8. "Partnership at will" means a partnership in which the partners have not agreed to remain partners until the expiration of a definite term or the completion of a particular undertaking.
  9. "Partnership interest" or "partner's interest in the partnership" means all of a partner's interests in the partnership, including the partner's transferable interest and all management and other rights.
  10. "Person" means an individual, corporation, limited liability company, business trust, estate, trust, partnership, association, joint venture, government, governmental subdivision, agency, or instrumentality, or any other legal or commercial entity.
  11. "Property" means all property, real, personal, or mixed, tangible or intangible, or any interest therein.
  12. "State" means a state of the United States, the District of Columbia, the Commonwealth of Puerto Rico, or any territory or insular possession subject to the jurisdiction of the United States.
  13. "Statement" means a statement of partnership authority under section 3223 of this title, a statement of denial under section 3224 of this title, a statement of dissociation under section 3264 of this title, a statement of dissolution under section 3275 of this title, a statement of merger under section 3287 of this title, a statement of qualification under section 3291 of this title, a statement of foreign qualification under section 3302 of this title; or an amendment or cancellation of any of the foregoing.
  14. "Transfer" includes an assignment, conveyance, lease, mortgage, deed, and encumbrance.

    Added 1997, No. 149 (Adj. Sess.), § 1, eff. Jan. 1, 1999.

§ 3202. Knowledge and notice.

  1. A person knows a fact if the person has actual knowledge of it.
  2. A person has notice of a fact if the person:
    1. knows of it;
    2. has received a notification of it; or
    3. has reason to know it exists from all of the facts known to the person at the time in question.
  3. A person notifies or gives a notification to another by taking steps reasonably required to inform the other person in ordinary course, whether or not the other person learns of it.
  4. A person receives a notification when the notification:
    1. comes to the person's attention; or
    2. is duly delivered at the person's place of business or at any other place held out by the person as a place for receiving communications.
  5. Except as otherwise provided in subsection (f) of this section, a person other than an individual knows, has notice, or receives a notification of a fact for purposes of a particular transaction when the individual conducting the transaction knows, has notice, or receives a notification of the fact, or in any event when the fact would have been brought to the individual's attention if the person had exercised reasonable diligence. The person exercises reasonable diligence if it maintains reasonable routines for communicating significant information to the individual conducting the transaction and there is reasonable compliance with the routines. Reasonable diligence does not require an individual acting for the person to communicate information unless the communication is part of the individual's regular duties or the individual has reason to know of the transaction and that the transaction would be materially affected by the information.
  6. A partner's knowledge, notice, or receipt of a notification of a fact relating to the partnership is effective immediately as knowledge by, notice to, or receipt of a notification by the partnership, except in the case of a fraud on the partnership committed by or with the consent of that partner.

    Added 1997, No. 149 (Adj. Sess.), § 1, eff. Jan. 1, 1999.

§ 3203. Effect of partnership agreement; nonwaivable provisions.

  1. Except as otherwise provided in subsection (b) of this section, relations among the partners and between the partners and the partnership are governed by the partnership agreement. Subsection (b) of this section shall be the exclusive list of rights, duties, and provisions of this chapter which may not be varied by the partnership agreement. To the extent the partnership agreement does not otherwise provide, this chapter governs relations among the partners and between the partners and the partnership.
  2. The partnership agreement may not:
    1. vary the rights and duties under section 3205 of this title except to eliminate the duty under subsection 3205(e) of this title to provide copies of statements to all of the partners;
    2. unreasonably restrict the right of access to books and records under subsection 3233(b) of this title;
    3. eliminate the duty of loyalty under subsection 3234(b) or subdivision 3253(b)(3) of this title, but:
      1. the partnership agreement may identify specific types or categories of activities that do not violate the duty of loyalty, if not manifestly unreasonable; or
      2. all of the partners or a number or percentage specified in the partnership agreement may authorize or ratify, after full disclosure of all material facts, a specific act or transaction that otherwise would violate the duty of loyalty;
    4. unreasonably reduce the duty of care under subsection 3234(c) or subdivision 3253(b)(3) of this title;
    5. eliminate the obligation of good faith and fair dealing under subsection 3234(d) of this title, but the partnership agreement may prescribe the standards by which the performance of the obligation is to be measured, if the standards are not manifestly unreasonable;
    6. vary the power to dissociate as a partner under subsection 3252(a) of this title, except to require the notice under subdivision 3251(1) of this title to be in writing;
    7. vary the right of a court to expel a partner in the events specified in subdivision 3251(5) of this title;
    8. vary the requirement to wind up the partnership business in cases specified in subdivision 3271(4), (5), or (6) of this title;
    9. vary the law applicable to a limited liability partnership under subsection 3206(b) of this title; or
    10. restrict rights of third parties under this chapter unless such third parties have agreed to be bound by such restrictions.

      Added 1997, No. 149 (Adj. Sess.), § 1, eff. Jan. 1, 1999.

§ 3204. Supplemental principles of law.

  1. Unless displaced by particular provisions of this chapter, the principles of law and equity supplement this chapter.
  2. If an obligation to pay interest arises under this chapter and the rate is not specified, the rate shall be determined pursuant to 9 V.S.A. § 41a(a) .

    Added 1997, No. 149 (Adj. Sess.), § 1, eff. Jan. 1, 1999.

§ 3205. Execution, filing, and recording of statements.

  1. A statement may be filed in the Office of the Secretary of State. A certified copy of a statement that is filed in an office in another state may be filed in the Office of the Secretary of State. Either filing has the effect provided in this chapter with respect to partnership property located in or transactions that occur in this State.
  2. A certified copy of a statement that has been filed in the Office of the Secretary of State has the effect provided for recorded statements in this chapter. A recorded statement that is not a certified copy of a statement filed in the Office of the Secretary of State does not have the effect provided for recorded statements in this chapter.
  3. A statement filed by a partnership must be executed by at least two partners. Other statements must be executed by a partner or other person authorized by this chapter. An individual who executes a statement as, or on behalf of, a partner or other person named as a partner in a statement shall personally declare under penalty of perjury that the contents of the statement are accurate.
  4. A person authorized by this chapter to file a statement may amend or cancel the statement by filing an amendment or cancellation that names the partnership, identifies the statement, and states the substance of the amendment or cancellation.
  5. A person who files a statement pursuant to this section shall promptly send a copy of the statement to every nonfiling partner and to any other person named as a partner in the statement. Failure to send a copy of a statement to a partner or other person does not limit the effectiveness of the statement as to a person not a partner.
  6. The Secretary of State shall collect a fee for filing or providing a certified copy of a statement as set forth in section 3310 of this title.

    Added 1997, No. 149 (Adj. Sess.), § 1, eff. Jan. 1, 1999.

§ 3206. Governing law.

  1. Except as otherwise provided in subsection (b) of this section, the law of the jurisdiction in which a partnership has its chief executive office governs relations among the partners and between the partners and the partnership.
  2. The law of this State governs relations among the partners and between the partners and the partnership and the liability of partners for an obligation of a limited liability partnership.

    Added 1997, No. 149 (Adj. Sess.), § 1, eff. Jan. 1, 1999.

§ 3207. Partnership subject to amendment or repeal of chapter.

A partnership governed by this chapter is subject to any amendment to or repeal of this chapter.

Added 1997, No. 149 (Adj. Sess.), § 1, eff. Jan. 1, 1999.

Subchapter 2. Nature of Partnership

§ 3211. Partnership as entity.

  1. A partnership is an entity distinct from its partners.
  2. A limited liability partnership continues to be the same entity that existed before the filing of a statement of qualification under section 3291 of this title.

    Added 1997, No. 149 (Adj. Sess.), § 1, eff. Jan. 1, 1999.

§ 3212. Formation of partnership.

  1. Except as otherwise provided in subsection (b) of this section, the association of two or more persons to carry on as co-owners a business for profit forms a partnership, whether or not the persons intend to form a partnership.
  2. An association formed under a statute other than this chapter, a predecessor statute, or a comparable statute of another jurisdiction is not a partnership under this chapter except that a statute of another jurisdiction relating to the formation of partnerships or limited liability partnerships shall be deemed to be a comparable statute.
  3. In determining whether a partnership is formed, the following rules apply:
    1. Joint tenancy, tenancy in common, tenancy by the entireties, joint property, common property, or part ownership does not by itself establish a partnership, even if the co-owners share profits made by the use of the property.
    2. The sharing of gross returns does not by itself establish a partnership, even if the persons sharing them have a joint or common right or interest in property from which the returns are derived.
    3. A person who receives a share of the profits of a business is presumed to be a partner in the business, unless the profits were received in payment:
      1. of a debt by installments or otherwise;
      2. for services as an independent contractor or of wages or other compensation to an employee;
      3. of rent;
      4. of an annuity or other retirement or health benefit to a beneficiary, representative, or designee of a deceased or retired partner;
      5. of interest or other charge on a loan, even if the amount of payment varies with the profits of the business, including a direct or indirect present or future ownership of the collateral, or rights to income, proceeds, or increase in value derived from the collateral; or
      6. for the sale of the goodwill of a business or other property by installments or otherwise.

        Added 1997, No. 149 (Adj. Sess.), § 1, eff. Jan. 1, 1999.

§ 3213. Partnership property.

Property acquired by a partnership is property of the partnership and not of the partners individually.

Added 1997, No. 149 (Adj. Sess.), § 1, eff. Jan. 1, 1999.

§ 3214. When property is partnership property.

  1. Property is partnership property if acquired in the name of:
    1. the partnership; or
    2. one or more partners with an indication in the instrument transferring title to the property of the person's capacity as a partner or of the existence of a partnership but without an indication of the name of the partnership.
  2. Property is acquired in the name of the partnership by a transfer to:
    1. the partnership in its name; or
    2. one or more partners in their capacity as partners in the partnership, if the name of the partnership is indicated in the instrument transferring title to the property.
  3. Property is presumed to be partnership property if purchased with partnership assets, even if not acquired in the name of the partnership or of one or more partners with an indication in the instrument transferring title to the property of the person's capacity as a partner or of the existence of a partnership.
  4. Property acquired in the name of one or more of the partners, without an indication in the instrument transferring title to the property of the person's capacity as a partner or of the existence of a partnership and without use of partnership assets, is presumed to be separate property, even if used for partnership purposes.

    Added 1997, No. 149 (Adj. Sess.), § 1, eff. Jan. 1, 1999.

Subchapter 3. Relations of Partners to Persons Dealing with Partnership

§ 3221. Partner agent of partnership.

Subject to the effect of a statement of partnership authority under section 3223 of this title:

  1. Each partner is an agent of the partnership for the purpose of its business. An act of a partner, including the execution of an instrument in the partnership name, for apparently carrying on in the ordinary course the partnership business or business of the kind carried on by the partnership binds the partnership, unless the partner had no authority to act for the partnership in the particular matter and the person with whom the partner was dealing knew or had received a notification that the partner lacked authority.
  2. An act of a partner which is not apparently for carrying on in the ordinary course the partnership business or business of the kind carried on by the partnership binds the partnership only if the act was authorized by the other partners.

    Added 1997, No. 149 (Adj. Sess.), § 1, eff. Jan. 1, 1999.

§ 3222. Transfer of partnership property.

  1. Partnership property may be transferred as follows:
    1. Subject to the effect of a statement of partnership authority under section 3223 of this title, partnership property held in the name of the partnership may be transferred by an instrument of transfer executed by a partner in the partnership name.
    2. Partnership property held in the name of one or more partners with an indication in the instrument transferring the property to them of their capacity as partners or of the existence of a partnership, but without an indication of the name of the partnership, may be transferred by an instrument of transfer executed by the persons in whose name the property is held.
    3. Partnership property held in the name of one or more persons other than the partnership, without an indication in the instrument transferring the property to them of their capacity as partners or of the existence of a partnership, may be transferred by an instrument of transfer executed by the persons in whose name the property is held.
  2. A partnership may recover partnership property from a transferee only if it proves that execution of the instrument of initial transfer did not bind the partnership under section 3221 of this title; and
    1. as to a subsequent transferee who gave value for property transferred under subdivisions (a)(1) and (2) of this section, proves that the subsequent transferee knew or had received a notification that the person who executed the instrument of initial transfer lacked authority to bind the partnership; or
    2. as to a transferee who gave value for property transferred under subdivision (a)(3) of this section, proves that the transferee knew or had received a notification that the property was partnership property and that the person who executed the instrument of initial transfer lacked authority to bind the partnership.
  3. A partnership may not recover partnership property from a subsequent transferee if the partnership would not have been entitled to recover the property, under subsection (b) of this section, from any earlier transferee of the property.
  4. If a person holds all of the partners' interests in the partnership, all of the partnership property vests in that person. The person may execute a document in the name of the partnership to evidence vesting of the property in that person and may file or record the document.

    Added 1997, No. 149 (Adj. Sess.), § 1, eff. Jan. 1, 1999.

§ 3223. Statement of partnership authority.

  1. A partnership may file a statement of partnership authority, which:
    1. must include:
      1. the name of the partnership;
      2. the street address of its chief executive office and of one office in this State, if there is one;
      3. the names and mailing addresses of all of the partners or of an agent appointed and maintained by the partnership for the purpose of subsection (b) of this section; and
      4. the names of the partners authorized to execute an instrument transferring real property held in the name of the partnership; and
    2. may state the authority, or limitations on the authority, of some or all of the partners to enter into other transactions on behalf of the partnership and any other matter.
  2. If a statement of partnership authority names an agent, the agent shall maintain a list of the names and mailing addresses of all of the partners and make it available to any person on request for good cause shown.
  3. If a filed statement of partnership authority is executed pursuant to subsection 3205(c) of this title and states the name of the partnership but does not contain all of the other information required by subsection (a) of this section, the statement nevertheless operates with respect to a person not a partner as provided in subsections (d) and (e) of this section.
  4. Except as otherwise provided in subsection (g) of this section, a filed statement of partnership authority supplements the authority of a partner to enter into transactions on behalf of the partnership as follows:
    1. Except for transfers of real property, a grant of authority contained in a filed statement of partnership authority is conclusive in favor of a person who gives value without knowledge to the contrary, so long as and to the extent that a limitation on that authority is not then contained in another filed statement. A filed cancellation of a limitation on authority revives the previous grant of authority.
    2. A grant of authority to transfer real property held in the name of the partnership contained in a certified copy of a filed statement of partnership authority recorded in the office for recording transfers of that real property is conclusive in favor of a person who gives value without knowledge to the contrary, so long as and to the extent that a certified copy of a filed statement containing a limitation on that authority is not then of record in the office for recording transfers of that real property. The recording in the office for recording transfers of that real property of a certified copy of a filed cancellation of a limitation on authority revives the previous grant of authority.
  5. A person not a partner is deemed to know of a limitation on the authority of a partner to transfer real property held in the name of the partnership if a certified copy of the filed statement containing the limitation on authority is of record in the office for recording transfers of that real property.
  6. Except as otherwise provided in subsections (d) and (e) of this section and sections 3264 and 3275 of this title, a person not a partner is not deemed to know of a limitation on the authority of a partner merely because the limitation is contained in a filed statement.
  7. Unless earlier canceled, a filed statement of partnership authority is canceled by operation of law five years after the date on which the statement, or the most recent amendment, was filed with the Secretary of State.

    Added 1997, No. 149 (Adj. Sess.), § 1, eff. Jan. 1, 1999.

§ 3224. Statement of denial.

A partner or other person named as a partner in a filed statement of partnership authority or in a list maintained by an agent pursuant to subsection 3223(b) of this title may file a statement of denial stating the name of the partnership and the fact that is being denied, which may include denial of a person's authority or status as a partner. A statement of denial is a limitation on authority as provided in subsections 3223(d) and (e) of this title.

Added 1997, No. 149 (Adj. Sess.), § 1, eff. Jan. 1, 1999.

History

Revision note. Substituted "of this title" for "of this section" at the end of the section as apparently the intended reference.

§ 3225. Partnership liable for partner's actionable conduct.

  1. A partnership is liable for loss or injury caused to a person, or for a penalty incurred, as a result of a wrongful act or omission, or other actionable conduct, of a partner acting in the ordinary course of business of the partnership or with authority of the partnership.
  2. If, in the course of the partnership's business or while acting with authority of the partnership, a partner receives or causes the partnership to receive money or property of a person not a partner, and the money or property is misapplied by a partner, the partnership is liable for the loss.

    Added 1997, No. 149 (Adj. Sess.), § 1, eff. Jan. 1, 1999.

§ 3226. Partner's liability.

  1. Except as otherwise provided in subsections (b) and (c) of this section, all partners are liable jointly and severally for all obligations of the partnership unless otherwise agreed by the claimant or provided by law.
  2. A person admitted as a partner into an existing partnership is not personally liable for any partnership obligation incurred before the person's admission as a partner.
  3. An obligation of a partnership incurred while the partnership is a limited liability partnership, whether arising in contract, tort, or otherwise, is solely the obligation of the partnership. A partner is not personally liable, directly or indirectly, by way of contribution or otherwise, for such an obligation solely by reason of being or so acting as a partner. This subsection applies notwithstanding anything inconsistent in the partnership agreement that existed immediately before the vote required to become a limited liability partnership under subsection 3291(b) of this title.

    Added 1997, No. 149 (Adj. Sess.), § 1, eff. Jan. 1, 1999.

ANNOTATIONS

Analysis

1. Liability of limited partners.

The trial court erred under prior Vermont law [11 V.S.A. § 1416] in concluding that limited partners were agents of the landlord not subject to suit because there was evidence that the limited partners, along with the general partner, had contact with state water authorities supporting the inference that the limited partners participated in decisions, made on behalf of the partnership, to withhold information about the water from the tenants while not supplying an alternative source of safe water, thereby contributing to the ongoing breach of the partnership's habitability obligation. Willard v. Parsons Hill Partnership, 178 Vt. 300, 882 A.2d 1213 (August 5, 2005). (Decided under prior law.)

2. Damages.

When an injured employee recovers damages under an employer-purchased insurance policy, or any other first-party insurance policy, the settling parties, or the trial court, must apportion the award between economic and noneconomic damages; workers' compensation benefits reflect an employee's economic losses. Willard v. Parsons Hill Partnership, 178 Vt. 300, 882 A.2d 1213 (August 5, 2005). (Decided under prior law.)

§ 3227. Actions by and against partnership and partners.

  1. A partnership may sue and be sued in the name of the partnership.
  2. An action may be brought against the partnership and, to the extent not inconsistent with section 3226 of this title, any or all of the partners in the same action or in separate actions.
  3. A judgment against a partnership is not by itself a judgment against a partner. A judgment against a partnership may not be satisfied from a partner's assets unless there is also a judgment against the partner.
  4. A judgment creditor of a partner may not levy execution against the assets of the partner to satisfy a judgment based on a claim against the partnership unless the partner is personally liable for the claim under section 3226 of this title and either:
    1. a judgment based on the same claim has been obtained against the partnership and a writ of execution on the judgment has been returned unsatisfied in whole or in part;
    2. the partnership is a debtor in bankruptcy;
    3. the partner has agreed that the creditor need not exhaust partnership assets;
    4. a court grants permission to the judgment creditor to levy execution against the assets of a partner based on a finding that partnership assets subject to execution are clearly insufficient to satisfy the judgment, that exhaustion of partnership assets is excessively burdensome, or that the grant of permission is an appropriate exercise of the court's equitable powers; or
    5. liability is imposed on the partner by law or contract independent of the existence of the partnership.
  5. This section applies to any partnership liability or obligation resulting from a representation by a partner or purported partner under section 3228 of this title.

    Added 1997, No. 149 (Adj. Sess.), § 1, eff. Jan. 1, 1999.

§ 3228. Liability of purported partner.

  1. If a person, by words or conduct, purports to be a partner, or consents to being represented by another as a partner, in a partnership or with one or more persons not partners, the purported partner is liable to a person to whom the representation is made, if that person, relying on the representation, enters into a transaction with the actual or purported partnership. If the representation, either by the purported partner or by a person with the purported partner's consent, is made in a public manner, the purported partner is liable to a person who relies upon the purported partnership even if the purported partner is not aware of being held out as a partner to the claimant. If partnership liability results, the purported partner is liable with respect to that liability as if the purported partner were a partner. If no partnership liability results, the purported partner is liable with respect to that liability jointly and severally with any other person consenting to the representation.
  2. If a person is thus represented to be a partner in an existing partnership, or with one or more persons not partners, the purported partner is an agent of persons consenting to the representation to bind them to the same extent and in the same manner as if the purported partner were a partner, with respect to persons who enter into transactions in reliance upon the representation. If all of the partners of the existing partnership consent to the representation, a partnership act or obligation results. If fewer than all of the partners of the existing partnership consent to the representation, the person acting and the partners consenting to the representation are jointly and severally liable.
  3. A person is not liable as a partner merely because the person is named by another in a statement of partnership authority.
  4. A person does not continue to be liable as a partner merely because of a failure to file a statement of dissociation or to amend a statement of partnership authority to indicate the partner's dissociation from the partnership.
  5. Except as otherwise provided in subsections (a) and (b) of this section, persons who are not partners as to each other are not liable as partners to other persons.

    Added 1997, No. 149 (Adj. Sess.), § 1, eff. Jan. 1, 1999.

Subchapter 4. Relations of Partners to Each Other and to Partnership

§ 3231. Partner's rights and duties.

  1. Each partner is deemed to have an account that is:
    1. credited with an amount equal to the money plus the value of any other property, net of the amount of any liabilities, the partner contributes to the partnership and the partner's share of the partnership profits; and
    2. charged with an amount equal to the money plus the value of any other property, net of the amount of any liabilities, distributed by the partnership to the partner and the partner's share of the partnership losses.
  2. Each partner is entitled to an equal share of the partnership profits. Except as provided in subsections 3226(b) and (c) of this title, each partner is chargeable with a share of the partnership losses, whether capital or operating, in proportion to the partner's share of the profits.
  3. A partnership shall reimburse a partner for payments made and indemnify a partner for liabilities incurred by the partner in the ordinary course of the business of the partnership or for the preservation of its business or property.
  4. A partnership shall reimburse a partner for an advance to the partnership beyond the amount of capital the partner agreed to contribute.
  5. A payment or advance made by a partner which gives rise to a partnership obligation under subsection (c) or (d) of this section constitutes a loan to the partnership which accrues interest from the date of the payment or advance.
  6. Each partner has equal rights in the management and conduct of the partnership business.
  7. A partner may use or possess partnership property only on behalf of the partnership.
  8. A partner is not entitled to remuneration for services performed for the partnership, except for reasonable compensation for services rendered in winding up the business of the partnership.
  9. A person may become a partner only with the consent of all of the partners.
  10. A difference arising as to a matter in the ordinary course of business of a partnership may be decided by a majority of the partners. An act outside the ordinary course of business of a partnership and an amendment to the partnership agreement may be undertaken only with the consent of all of the partners.
  11. This section does not affect the obligations of a partnership to other persons under section 3221 of this title.

    Added 1997, No. 149 (Adj. Sess.), § 1, eff. Jan. 1, 1999.

§ 3232. Distributions in kind.

A partner has no right to receive, and may not be required to accept, a distribution in kind.

Added 1997, No. 149 (Adj. Sess.), § 1, eff. Jan. 1, 1999.

§ 3233. Partner's rights and duties with respect to information.

  1. A partnership shall keep its books and records, if any, at its chief executive office.
  2. A partnership shall provide partners and their agents and attorneys access to its books and records. It shall provide former partners and their agents and attorneys access to books and records pertaining to the period during which they were partners. The right of access provides the opportunity to inspect and copy books and records during ordinary business hours. A partnership may impose a reasonable charge, covering the costs of labor and material, for copies of documents furnished.
  3. Each partner and the partnership shall furnish to a partner, and to the legal representative of a deceased partner or partner under legal disability, with or without demand, any information concerning the partnership's business and affairs as is just and reasonable.

    Added 1997, No. 149 (Adj. Sess.), § 1, eff. Jan. 1, 1999.

§ 3234. General standards of partner's conduct.

  1. The only fiduciary duties a partner owes to the partnership and the other partners are the duty of loyalty and the duty of care set forth in subsections (b) and (c) of this section.
  2. A partner's duty of loyalty to the partnership and the other partners is limited to the following:
    1. to account to the partnership and hold as trustee for it any property, profit, or benefit derived by the partner in the conduct and winding up of the partnership business or derived from a use by the partner of partnership property, including the appropriation of a partnership opportunity;
    2. to refrain from dealing with the partnership in the conduct or winding up of the partnership business as or on behalf of a party having an interest adverse to the partnership; and
    3. to refrain from competing with the partnership in the conduct of the partnership business before the dissolution of the partnership.
  3. A partner's duty of care to the partnership and the other partners in the conduct and winding up of the partnership business is limited to refraining from engaging in grossly negligent or reckless conduct, intentional misconduct, or a knowing violation of law.
  4. A partner shall discharge the duties to the partnership and the other partners under this chapter or under the partnership agreement and exercise any rights consistently with the obligation of good faith and fair dealing.
  5. A partner does not violate a duty or obligation under this chapter or under the partnership agreement merely because the partner's conduct furthers the partner's own interest.
  6. A partner may lend money to and transact other business with the partnership, and as to each loan or transaction, the rights and obligations of the partner are the same as those of a person who is not a partner, subject to other applicable law.
  7. This section applies to a person winding up the partnership business as the personal or legal representative of the last surviving partner as if the person were a partner.

    Added 1997, No. 149 (Adj. Sess.), § 1, eff. Jan. 1, 1999.

§ 3235. Actions by partnership and partners.

  1. A partnership may maintain an action against a partner for a breach of the partnership agreement, or for the violation of a duty to the partnership, causing harm to the partnership.
  2. A partner may maintain an action against the partnership or another partner for legal or equitable relief, with or without an accounting as to partnership business, to:
    1. enforce the partner's rights under the partnership agreement;
    2. enforce the partner's rights under this chapter, including:
      1. the partner's rights under section 3231, 3233, or 3234 of this title;
      2. the partner's right on dissociation to have the partner's interest in the partnership purchased pursuant to section 3261 of this title or enforce any other right under subchapter 6 or 7 of this chapter; or
      3. the partner's right to compel a dissolution and winding up of the partnership business under section 3271 of this title or enforce any other right under subchapter 8 of this chapter; or
    3. enforce the rights and otherwise protect the interests of the partner, including rights and interests arising independently of the partnership relationship.
  3. The accrual of, and any time limitation on, a right of action for a remedy under this section is governed by other law. A right to an accounting upon a dissolution and winding up does not revive a claim barred by law.

    Added 1997, No. 149 (Adj. Sess.), § 1, eff. Jan. 1, 1999.

§ 3236. Continuation of partnership beyond definite term or particular undertaking.

  1. If a partnership for a definite term or particular undertaking is continued, without an express agreement, after the expiration of the term or completion of the undertaking, the rights and duties of the partners remain the same as they were at the expiration or completion, so far as is consistent with a partnership at will.
  2. If the partners, or those of them who habitually acted in the business during the term or undertaking, continue the business without any settlement or liquidation of the partnership, they are presumed to have agreed that the partnership will continue.

    Added 1997, No. 149 (Adj. Sess.), § 1, eff. Jan. 1, 1999.

Subchapter 5. Transferees and Creditors of Partner

§ 3241. Partner not co-owner of partnership property.

A partner is not a co-owner of partnership property and has no interest in partnership property which can be transferred, either voluntarily or involuntarily.

Added 1997, No. 149 (Adj. Sess.), § 1, eff. Jan. 1, 1999.

§ 3242. Partner's transferable interest in partnership.

The only transferable interest of a partner in the partnership is the partner's share of the profits and losses of the partnership and the partner's right to receive distributions. The interest is personal property.

Added 1997, No. 149 (Adj. Sess.), § 1, eff. Jan. 1, 1999.

§ 3243. Transfer of partner's transferable interest.

  1. A transfer, in whole or in part, of a partner's transferable interest in the partnership:
    1. is permissible;
    2. does not by itself cause the partner's dissociation or a dissolution and winding up of the partnership business; and
    3. does not, as against the other partners or the partnership, entitle the transferee, during the continuance of the partnership, to participate in the management or conduct of the partnership business, to require access to information concerning partnership transactions, or to inspect or copy the partnership books or records.
  2. A transferee of a partner's transferable interest in the partnership has a right:
    1. to receive, in accordance with the transfer, distributions to which the transferor would otherwise be entitled;
    2. to receive upon the dissolution and winding up of the partnership business, in accordance with the transfer, the net amount otherwise distributable to the transferor; and
    3. to seek under subdivision 3271(6) of this title a judicial determination that it is equitable to wind up the partnership business.
  3. In a dissolution and winding up, a transferee is entitled to an account of partnership transactions only from the date of the latest account agreed to by all of the partners.
  4. Upon transfer, the transferor retains the rights and duties of a partner other than the interest in distributions transferred.
  5. A partnership need not give effect to a transferee's rights under this section until it has notice of the transfer.
  6. A transfer of a partner's transferable interest in the partnership in violation of a restriction on transfer contained in the partnership agreement is ineffective as to a person having notice of the restriction at the time of transfer.

    Added 1997, No. 149 (Adj. Sess.), § 1, eff. Jan. 1, 1999.

§ 3244. Partner's transferable interest subject to charging order.

  1. On application by a judgment creditor of a partner or of a partner's transferee, a court having jurisdiction may charge the transferable interest of the judgment debtor to satisfy the judgment. The court may appoint a receiver of the share of the distributions due or to become due to the judgment debtor in respect of the partnership and make all other orders, directions, accounts, and inquiries the judgment debtor might have made or which the circumstances of the case may require.
  2. A charging order constitutes a lien on the judgment debtor's transferable interest in the partnership. The court may order a foreclosure of the interest subject to the charging order at any time. The purchaser at the foreclosure sale has the rights of a transferee.
  3. At any time before foreclosure, an interest charged may be redeemed:
    1. by the judgment debtor;
    2. with property other than partnership property, by one or more of the other partners; or
    3. with partnership property, by one or more of the other partners with the consent of all of the partners whose interests are not so charged.
  4. This chapter does not deprive a partner of a right under exemption laws with respect to the partner's interest in the partnership.
  5. This section provides the exclusive remedy, except as provided in 9 V.S.A chapter 57, by which a judgment creditor of a partner or partner's transferee may satisfy a judgment out of the judgment debtor's transferable interest in the partnership.

    Added 1997, No. 149 (Adj. Sess.), § 1, eff. Jan. 1, 1999.

Subchapter 6. Partner's Dissociation

§ 3251. Events causing partner's dissociation.

A partner is dissociated from a partnership upon the occurrence of any of the following events:

  1. the partnership's having notice of the partner's express will to withdraw as a partner or on a later date specified by the partner;
  2. an event agreed to in the partnership agreement as causing the partner's dissociation;
  3. the partner's expulsion pursuant to the partnership agreement;
  4. the partner's expulsion by the unanimous vote of the other partners if:
    1. it is unlawful to carry on the partnership business with that partner;
    2. there has been a transfer of all or substantially all of that partner's transferable interest in the partnership, other than a transfer for security purposes, or a court order charging the partner's interest, which has not been foreclosed;
    3. within 90 days after the partnership notifies a corporate partner that it will be expelled because it has filed a certificate of dissolution or the equivalent, its charter has been revoked, or its right to conduct business has been suspended by the jurisdiction of its incorporation, there is no revocation of the certificate of dissolution or no reinstatement of its charter or its right to conduct business; or
    4. a partnership that is a partner has been dissolved and its business is being wound up;
  5. on application by the partnership or another partner, the partner's expulsion by judicial determination because:
    1. the partner engaged in wrongful conduct that adversely and materially affected the partnership business;
    2. the partner willfully or persistently committed a material breach of the partnership agreement or of a duty owed to the partnership or the other partners under section 3234 of this title; or
    3. the partner engaged in conduct relating to the partnership business which makes it not reasonably practicable to carry on the business in partnership with the partner;
  6. the partner's:
    1. becoming a debtor in bankruptcy;
    2. executing an assignment for the benefit of creditors;
    3. seeking, consenting to, or acquiescing in the appointment of a trustee, receiver, or liquidator of that partner or of all or substantially all of that partner's property; or
    4. failing, within 90 days after the appointment, to have vacated or stayed the appointment of a trustee, receiver, or liquidator of the partner or of all or substantially all of the partner's property obtained without the partner's consent or acquiescence, or failing within 90 days after the expiration of a stay to have the appointment vacated;
  7. in the case of a partner who is an individual:
    1. the partner's death;
    2. the appointment of a guardian or general conservator for the partner; or
    3. a judicial determination that the partner has otherwise become incapable of performing the partner's duties under the partnership agreement;
  8. in the case of a partner that is a trust or is acting as a partner by virtue of being a trustee of a trust, distribution of the trust's entire transferable interest in the partnership, but not merely by reason of the substitution of a successor trustee;
  9. in the case of a partner that is an estate or is acting as a partner by virtue of being a personal representative of an estate, distribution of the estate's entire transferable interest in the partnership, but not merely by reason of the substitution of a successor personal representative; or
  10. termination of a partner who is not an individual, partnership, corporation, trust, or estate.

    Added 1997, No. 149 (Adj. Sess.), § 1, eff. Jan. 1, 1999.

§ 3252. Partner's power to dissociate; wrongful dissociation.

  1. A partner has the power to dissociate at any time, rightfully or wrongfully, by express will pursuant to subdivision 3251(1) of this title.
  2. A partner's dissociation is wrongful only if:
    1. it is in breach of an express provision of the partnership agreement; or
    2. in the case of a partnership for a definite term or particular undertaking, before the expiration of the term or the completion of the undertaking:
      1. the partner withdraws by express will, unless the withdrawal follows within 90 days after another partner's dissociation by death or otherwise under subdivisions 3251(6) through (10) of this title or wrongful dissociation under this subsection;
      2. the partner is expelled by judicial determination under subdivision 3251(5) of this title;
      3. the partner is dissociated by becoming a debtor in bankruptcy; or
      4. in the case of a partner who is not an individual, trust other than a business trust, or estate, the partner is expelled or otherwise dissociated because it willfully dissolved or terminated.
  3. A partner who wrongfully dissociates is liable to the partnership and to the other partners for damages caused by the dissociation. The liability is in addition to any other obligation of the partner to the partnership or to the other partners.

    Added 1997, No. 149 (Adj. Sess.), § 1, eff. Jan. 1, 1999.

§ 3253. Effect of partner's dissociation.

  1. If a partner's dissociation results in a dissolution and winding up of the partnership business, subchapter 8 of this chapter applies; otherwise, subchapter 7 of this chapter applies.
  2. Upon a partner's dissociation:
    1. the partner's right to participate in the management and conduct of the partnership business terminates, except as otherwise provided in section 3273 of this title;
    2. the partner's duty of loyalty under subdivision 3234(b)(3) of this title terminates; and
    3. the partner's duty of loyalty under subdivisions 3234(b)(1) and (2) of this title and duty of care under subsection 3234(c) of this title continue only with regard to matters arising and events occurring before the partner's dissociation, unless the partner participates in winding up the partnership's business pursuant to section 3273 of this title.

      Added 1997, No. 149 (Adj. Sess.), § 1, eff. Jan. 1, 1999.

Subchapter 7. Partner's Dissociation When Business Not Wound Up

§ 3261. Purchase of dissociated partner's interest.

  1. If a partner is dissociated from a partnership without resulting in a dissolution and winding up of the partnership business under section 3271 of this title, the partnership shall cause the dissociated partner's interest in the partnership to be purchased for a buyout price determined pursuant to subsection (b) of this section.
  2. The buyout price of a dissociated partner's interest is the amount that would have been distributable to the dissociating partner under subsection 3277(b) of this title, if, on the date of dissociation, the assets of the partnership were sold at a price equal to the greater of the liquidation value or the value based on a sale of the entire business as a going concern without the dissociated partner and the partnership were wound up as of that date. Interest must be paid from the date of dissociation to the date of payment.
  3. Damages for wrongful dissociation under subsection 3252(b) of this title, and all other amounts owing, whether or not presently due, from the dissociated partner to the partnership, must be offset against the buyout price. Interest must be paid from the date the amount owed becomes due to the date of payment.
  4. A partnership shall indemnify a dissociated partner whose interest is being purchased against all partnership liabilities, whether incurred before or after the dissociation, except liabilities incurred by an act of the dissociated partner under section 3262 of this title.
  5. If no agreement for the purchase of a dissociated partner's interest is reached within 120 days after a written demand for payment, the partnership shall pay, or cause to be paid, in cash to the dissociated partner the amount the partnership estimates to be the buyout price and accrued interest, reduced by any offsets and accrued interest under subsection (c) of this section.
  6. If a deferred payment is authorized under subsection (h) of this section, the partnership may tender a written offer to pay the amount it estimates to be the buyout price and accrued interest, reduced by any offsets under subsection (c) of this section, stating the time of payment, the amount and type of security for payment, and the other terms and conditions of the obligation.
  7. The payment or tender required by subsection (e) or (f) of this section must be accompanied by the following:
    1. a statement of partnership assets and liabilities as of the date of dissociation;
    2. the latest available partnership balance sheet and income statement, if any;
    3. an explanation of how the estimated amount of the payment was calculated; and
    4. written notice that the payment is in full satisfaction of the obligation to purchase unless, within 120 days after the written notice, the dissociated partner commences an action to determine the buyout price, any offsets under subsection (c) of this section, or other terms of the obligation to purchase.
  8. A partner who wrongfully dissociates before the expiration of a definite term or the completion of a particular undertaking is not entitled to payment of any portion of the buyout price until the expiration of the term or completion of the undertaking, unless the partner establishes to the satisfaction of the court that earlier payment will not cause undue hardship to the business of the partnership. A deferred payment must be adequately secured and bear interest.
  9. A dissociated partner may maintain an action against the partnership, pursuant to subdivision 3235(b)(2)(B) of this title, to determine the buyout price of that partner's interest, any offsets under subsection (c) of this section, or other terms of the obligation to purchase. The action must be commenced within 120 days after the partnership has tendered payment or an offer to pay or within one year after written demand for payment if no payment or offer to pay is tendered. The court shall determine the buyout price of the dissociated partner's interest, any offset due under subsection (c) of this section, and accrued interest, and enter judgment for any additional payment or refund. If deferred payment is authorized under subsection (h) of this section, the court shall also determine the security for payment and other terms of the obligation to purchase. The court may assess reasonable attorney's fees and the fees and expenses of appraisers or other experts for a party to the action, in amounts the court finds equitable, against a party that the court finds acted arbitrarily, vexatiously, or not in good faith. The finding may be based on the partnership's failure to tender payment or an offer to pay or to comply with subsection (g) of this section.

    Added 1997, No. 149 (Adj. Sess.), § 1, eff. Jan. 1, 1999.

§ 3262. Dissociated partner's power to bind and liability to partnership.

  1. For two years after a partner dissociates without resulting in a dissolution and winding up of the partnership business, the partnership, including a surviving partnership under subchapter 9 of this title, is bound by an act of the dissociated partner which would have bound the partnership under section 3221 of this title before dissociation only if at the time of entering into the transaction the other party:
    1. reasonably believed that the dissociated partner was then a partner;
    2. did not have notice of the partner's dissociation; and
    3. is not deemed to have had knowledge under subsection 3223(e) of this title, or notice under subsection 3264(c) of this title.
  2. A dissociated partner is liable to the partnership for any damage caused to the partnership arising from an obligation incurred by the dissociated partner after dissociation for which the partnership is liable under subsection (a) of this section.

    Added 1997, No. 149 (Adj. Sess.), § 1, eff. Jan. 1, 1999.

§ 3263. Dissociated partner's liability to other persons.

  1. A partner's dissociation does not discharge the partner's liability for a partnership obligation incurred before dissociation. A dissociated partner is not liable for a partnership obligation incurred after dissociation, except as otherwise provided in subsection (b) of this section.
  2. A partner who dissociates without resulting in a dissolution and winding up of the partnership business is liable as a partner to the other party in a transaction entered into by the partnership, or a surviving partnership under subchapter 9 of this chapter, within two years after the partner's dissociation, only if the partner is liable for the obligation under section 3226 of this title, and at the time of entering into the transaction the other party:
    1. reasonably believed that the dissociated partner was then a partner;
    2. did not have notice of the partner's dissociation; and
    3. is not deemed to have had knowledge under subsection 3223(e) of this title or notice under subsection 3264(c) of this title.
  3. By agreement with the partnership creditor and the partners continuing the business, a dissociated partner may be released from liability for a partnership obligation.
  4. A dissociated partner is released from liability for a partnership obligation if a partnership creditor, with notice of the partner's dissociation but without the partner's consent, agrees to a material alteration in the nature or time of payment of a partnership obligation.

    Added 1997, No. 149 (Adj. Sess.), § 1, eff. Jan. 1, 1999.

§ 3264. Statement of dissociation.

  1. A dissociated partner or the partnership may file a statement of dissociation stating the name of the partnership and that the partner is dissociated from the partnership.
  2. A statement of dissociation is a limitation on the authority of a dissociated partner for the purposes of subsections 3223(d) and (e) of this title.
  3. For the purposes of subdivisions 3262(a)(3) and 3263(b)(3) of this title, a person not a partner is deemed to have notice of the dissociation 90 days after the statement of dissociation is filed.

    Added 1997, No. 149 (Adj. Sess.), § 1, eff. Jan. 1, 1999.

§ 3265. Continued use of partnership name.

Continued use of a partnership name, or a dissociated partner's name as part thereof, by partners continuing the business does not of itself make the dissociated partner liable for an obligation of the partners or the partnership continuing the business.

Added 1997, No. 149 (Adj. Sess.), § 1, eff. Jan. 1, 1999.

Subchapter 8. Winding Up Partnership Business

§ 3271. Events causing dissolution and winding up of partnership business.

A partnership is dissolved, and its business must be wound up, only upon the occurrence of any of the following events:

  1. in a partnership at will, the partnership's having notice from a partner, other than a partner who is dissociated under subdivisions 3251(2) through (10) of this title, of that partner's express will to withdraw as a partner, or on a later date specified by the partner;
  2. in a partnership for a definite term or particular undertaking:
    1. the expiration of 90 days after a partner's dissociation by death or otherwise under subdivisions 3251(6) through (10) of this title or wrongful dissociation under subsection 3252(b) of this title, unless before that time a majority in interest of the remaining partners, including partners who have rightfully dissociated pursuant to subdivision 3252(b)(2)(A) of this title, agree to continue the partnership;
    2. the express will of all of the partners to wind up the partnership business; or
    3. the expiration of the term or the completion of the undertaking;
  3. an event agreed to in the partnership agreement resulting in the winding up of the partnership business;
  4. an event that makes it unlawful for all or substantially all of the business of the partnership to be continued, but a cure of illegality within 90 days after notice to the partnership of the event is effective retroactively to the date of the event for purposes of this section;
  5. on application by a partner, a judicial determination that:
    1. the economic purpose of the partnership is likely to be unreasonably frustrated;
    2. another partner has engaged in conduct relating to the partnership business which makes it not reasonably practicable to carry on the business in partnership with that partner; or
    3. it is not otherwise reasonably practicable to carry on the partnership business in conformity with the partnership agreement; or
  6. on application by a transferee of a partner's transferable interest, a judicial determination that it is equitable to wind up the partnership business:
    1. after the expiration of the term or completion of the undertaking, if the partnership was for a definite term or particular undertaking at the time of the transfer or entry of the charging order that gave rise to the transfer; or
    2. at any time, if the partnership was a partnership at will at the time of the transfer or entry of the charging order that gave rise to the transfer.

      Added 1997, No. 149 (Adj. Sess.), § 1, eff. Jan. 1, 1999.

§ 3272. Partnership continues after dissolution.

  1. Subject to subsection (b) of this section, a partnership continues after dissolution only for the purpose of winding up its business. The partnership is terminated when the winding up of its business is completed.
  2. At any time after the dissolution of a partnership and before the winding up of its business is completed, all of the partners, including any dissociating partner other than a wrongfully dissociating partner, may waive the right to have the partnership's business wound up and the partnership terminated. In that event:
    1. the partnership resumes carrying on its business as if dissolution had never occurred, and any liability incurred by the partnership or a partner after the dissolution and before the waiver is determined as if dissolution had never occurred; and
    2. the rights of a third party accruing under subdivision 3274(1) of this title or arising out of conduct in reliance on the dissolution before the third party knew or received a notification of the waiver may not be adversely affected.

      Added 1997, No. 149 (Adj. Sess.), § 1, eff. Jan. 1, 1999.

§ 3273. Right to wind up partnership business.

  1. After dissolution, a partner who has not wrongfully dissociated may participate in winding up the partnership's business, but on application of any partner, partner's legal representative, or transferee, the Superior Court, for good cause shown, may order judicial supervision of the winding up. Venue for such a proceeding lies in the county where the partnership's principal office is or was located.
  2. The legal representative of the last surviving partner may wind up a partnership's business.
  3. A person winding up a partnership's business may preserve the partnership business or property as a going concern for a reasonable time, prosecute and defend actions and proceedings, whether civil, criminal, or administrative, settle and close the partnership's business, dispose of and transfer the partnership's property, discharge the partnership's liabilities, distribute the assets of the partnership pursuant to section 3277 of this title, settle disputes by mediation or arbitration, and perform other necessary acts.

    Added 1997, No. 149 (Adj. Sess.), § 1, eff. Jan. 1, 1999.

§ 3274. Partner's power to bind partnership after dissolution.

Subject to section 3275 of this title, a partnership is bound by a partner's act after dissolution that:

  1. is appropriate for winding up the partnership business; or
  2. would have bound the partnership under section 3221 of this title before dissolution, if the other party to the transaction did not have notice of the dissolution.

    Added 1997, No. 149 (Adj. Sess.), § 1, eff. Jan. 1, 1999.

§ 3275. Statement of dissolution.

  1. After dissolution, a partner who has not wrongfully dissociated may file a statement of dissolution stating the name of the partnership and that the partnership has dissolved and is winding up its business.
  2. A statement of dissolution cancels a filed statement of partnership authority for the purposes of subsection 3223(d) of this title, and is a limitation on authority for the purposes of subsection 3223(e) of this title.
  3. For the purposes of sections 3221 and 3274 of this title, a person not a partner is deemed to have notice of the dissolution and the limitation on the partners' authority as a result of the statement of dissolution 90 days after it is filed.
  4. After filing and, if appropriate, recording a statement of dissolution, a dissolved partnership may file and, if appropriate, record a statement of partnership authority which will operate with respect to a person not a partner as provided in subsections 3223(d) and (e) of this title in any transaction, whether or not the transaction is appropriate for winding up the partnership business.

    Added 1997, No. 149 (Adj. Sess.), § 1, eff. Jan. 1, 1999.

§ 3276. Partner's liability to other partners after dissolution.

  1. Except as otherwise provided in subsection (b) of this section and section 3226 of this title, after dissolution a partner is liable to the other partners for the partner's share of any partnership liability incurred under section 3274 of this title.
  2. A partner who, with knowledge of the dissolution, incurs a partnership liability under subdivision 3274(2) of this title by an act that is not appropriate for winding up the partnership business is liable to the partnership for any damage caused to the partnership arising from the liability.

    Added 1997, No. 149 (Adj. Sess.), § 1, eff. Jan. 1, 1999.

§ 3277. Settlement of accounts and contributions among partners.

  1. In winding up a partnership's business, the assets of the partnership, including the contributions of the partners required by this section, must be applied to discharge its obligations to creditors, including, to the extent permitted by law, partners who are creditors. Any surplus must be applied to pay in cash the net amount distributable to partners in accordance with their right to distributions under subsection (b) of this section.
  2. Each partner is entitled to a settlement of all partnership accounts upon winding up the partnership business. In settling accounts among the partners, profits and losses that result from the liquidation of the partnership assets must be credited and charged to the partners' accounts. The partnership shall make a distribution to a partner in an amount equal to any excess of the credits over the charges in the partner's account. A partner shall contribute to the partnership an amount equal to any excess of the charges over the credits in the partner's account but excluding from the calculation charges attributable to an obligation for which the partner is not personally liable under section 3226 of this title.
  3. If a partner fails to contribute the full amount required under subsection (b) of this section, all of the other partners shall contribute, in the proportions in which those partners share partnership losses, the additional amount necessary to satisfy the partnership obligations for which they are personally liable under section 3226 of this title. A partner or partner's legal representative may recover from the other partners any contributions the partner makes to the extent the amount contributed exceeds that partner's share of the partnership obligations for which the partner is personally liable under section 3226 of this title.
  4. After the settlement of accounts, each partner shall contribute, in the proportion in which the partner shares partnership losses, the amount necessary to satisfy partnership obligations that were not known at the time of the settlement and for which the partner is personally liable under section 3226 of this title.
  5. The estate of a deceased partner is liable for the partner's obligation to contribute to the partnership.
  6. An assignee for the benefit of creditors of a partnership or a partner, or a person appointed by a court to represent creditors of a partnership or a partner, may enforce a partner's obligation to contribute to the partnership.

    Added 1997, No. 149 (Adj. Sess.), § 1, eff. Jan. 1, 1999.

ANNOTATIONS

1. Partnership agreement.

Where a partnership agreement provides for distribution of the partnership property, the agreement controls over the statute. Quimby v. Myers, 179 Vt. 611, 895 A.2d 128 (mem.) (November 9, 2005).

Subchapter 9. Conversions and Mergers

§ 3281. Definitions.

In this subchapter:

  1. "General partner" means a partner in a partnership and a general partner in a limited partnership.
  2. "Limited partner" means a limited partner in a limited partnership.
  3. "Limited partnership" means a limited partnership created under the Uniform Limited Partnership Act, predecessor law, or comparable law of another jurisdiction.
  4. "Partner" includes both a general partner and a limited partner.

    Added 1997, No. 149 (Adj. Sess.), § 1, eff. Jan. 1, 1999.

History

Reference in text. The Uniform Limited Partnership Act, referred to in subdiv. (3), was codified as 11 V.S.A. chapter 11, which was repealed and replaced by chapter 23 of this title as of January 1, 1999.

§ 3282. Conversion of partnership to limited partnership.

  1. A partnership may be converted to a limited partnership pursuant to this section.
  2. The terms and conditions of a conversion of a partnership to a limited partnership must be approved by all of the partners or by a number or percentage specified for conversion in the partnership agreement.
  3. After the conversion is approved by the partners, the partnership shall file a certificate of limited partnership in the jurisdiction in which the limited partnership is to be formed. The certificate must include:
    1. a statement that the partnership was converted to a limited partnership from a partnership;
    2. its former name; and
    3. a statement of the number of votes cast by the partners for and against the conversion and, if the vote is less than unanimous, the number or percentage required to approve the conversion under the partnership agreement.
  4. The conversion takes effect when the certificate of limited partnership is filed or at any later date specified in the certificate.
  5. A general partner who becomes a limited partner as a result of the conversion remains liable as a general partner for an obligation incurred by the partnership before the conversion takes effect. If the other party to a transaction with the limited partnership reasonably believes when entering the transaction that the limited partner is a general partner, the limited partner is liable for an obligation incurred by the limited partnership within 90 days after the conversion takes effect. The limited partner's liability for all other obligations of the limited partnership incurred after the conversion takes effect is that of a limited partner as provided in the Uniform Limited Partnership Act.

    Added 1997, No. 149 (Adj. Sess.), § 1, eff. Jan. 1, 1999.

History

Reference in text. The Uniform Limited Partnership Act, referred to in subsec. (e), was codified as 11 V.S.A. chapter 11, which was repealed and replaced by chapter 23 of this title as of January 1, 1999.

§ 3283. Conversion of limited partnership to partnership.

  1. A limited partnership may be converted to a partnership pursuant to this section.
  2. Notwithstanding a provision to the contrary in a limited partnership agreement, the terms and conditions of a conversion of a limited partnership to a partnership must be approved by all of the partners.
  3. After the conversion is approved by the partners, the limited partnership shall cancel its certificate of limited partnership.
  4. The conversion takes effect when the certificate of limited partnership is canceled.
  5. A limited partner who becomes a general partner as a result of the conversion remains liable only as a limited partner for an obligation incurred by the limited partnership before the conversion takes effect. Except as otherwise provided in section 3226 of this title, the partner is liable as a general partner for an obligation of the partnership incurred after the conversion takes effect.

    Added 1997, No. 149 (Adj. Sess.), § 1, eff. Jan. 1, 1999.

§ 3284. Effect of conversion; entity unchanged.

  1. A partnership or limited partnership that has been converted pursuant to this subchapter is for all purposes the same entity that existed before the conversion.
  2. When a conversion takes effect:
    1. all property owned by the converting partnership or limited partnership remains vested in the converted entity;
    2. all obligations of the converting partnership or limited partnership continue as obligations of the converted entity; and
    3. an action or proceeding pending against the converting partnership or limited partnership may be continued as if the conversion had not occurred.

      Added 1997, No. 149 (Adj. Sess.), § 1, eff. Jan. 1, 1999.

§ 3285. Merger of partnerships.

  1. Pursuant to a plan of merger approved as provided in subsection (c) of this section, a partnership may be merged with one or more partnerships or limited partnerships.
  2. The plan of merger must set forth:
    1. the name of each partnership or limited partnership that is a party to the merger;
    2. the name of the surviving entity into which the other partnerships or limited partnerships will merge;
    3. whether the surviving entity is a partnership or a limited partnership and the status of each partner;
    4. the terms and conditions of the merger;
    5. the manner and basis of converting the interests of each party to the merger into interests or obligations of the surviving entity, or into money or other property in whole or in part; and
    6. the street address of the surviving entity's chief executive office.
  3. The plan of merger must be approved:
    1. in the case of a partnership that is a party to the merger, by all of the partners, or a number or percentage specified for merger in the partnership agreement; and
    2. in the case of a limited partnership that is a party to the merger, by the vote required for approval of a merger by the law of the state or foreign jurisdiction in which the limited partnership is organized and, in the absence of such a specifically applicable law, by all of the partners, notwithstanding a provision to the contrary in the partnership agreement.
  4. After a plan of merger is approved and before the merger takes effect, the plan may be amended or abandoned as provided in the plan.
  5. The merger takes effect on the later of:
    1. the approval of the plan of merger by all parties to the merger, as provided in subsection (c) of this section;
    2. the filing of all documents required by law to be filed as a condition to the effectiveness of the merger; or
    3. any effective date specified in the plan of merger.

      Added 1997, No. 149 (Adj. Sess.), § 1, eff. Jan. 1, 1999.

§ 3286. Effect of merger.

  1. When a merger takes effect:
    1. the separate existence of every partnership or limited partnership that is a party to the merger, other than the surviving entity, ceases;
    2. all property owned by each of the merged partnerships or limited partnerships vests in the surviving entity;
    3. all obligations of every partnership or limited partnership that is a party to the merger become the obligations of the surviving entity; and
    4. an action or proceeding pending against a partnership or limited partnership that is a party to the merger may be continued as if the merger had not occurred, or the surviving entity may be substituted as a party to the action or proceeding.
  2. The Secretary of State of this State is the agent for service of process in an action or proceeding against a surviving foreign partnership or limited partnership to enforce an obligation of a domestic partnership or limited partnership that is a party to a merger. The surviving entity shall promptly notify the Secretary of State of the mailing address of its chief executive office and of any change of address. Upon receipt of process, the Secretary of State shall mail a copy of the process to the surviving foreign partnership or limited partnership.
  3. A partner of the surviving partnership or limited partnership is liable for:
    1. all obligations of a party to the merger for which the partner was personally liable before the merger;
    2. all other obligations of the surviving entity incurred before the merger by a party to the merger, but those obligations may be satisfied only out of property of the entity; and
    3. except as otherwise provided in section 3226 of this title, all obligations of the surviving entity incurred after the merger takes effect, but those obligations may be satisfied only out of property of the entity if the partner is a limited partner.
  4. If the obligations incurred before the merger by a party to the merger are not satisfied out of the property of the surviving partnership or limited partnership, the general partners of that party immediately before the effective date of the merger shall contribute the amount necessary to satisfy that party's obligations to the surviving entity, in the manner provided in section 3277 of this title, or in the Uniform Limited Partnership Act of the jurisdiction in which the party was formed, as the case may be, as if the merged party were dissolved.
  5. A partner of a party to a merger who does not become a partner of the surviving partnership or limited partnership is dissociated from the entity, of which that partner was a partner, as of the date the merger takes effect. The surviving entity shall cause the partner's interest in the entity to be purchased under section 3261 of this title, or another statute specifically applicable to that partner's interest with respect to a merger. The surviving entity is bound under section 3262 of this title by an act of a general partner dissociated under this subsection, and the partner is liable under section 3263 of this title for transactions entered into by the surviving entity after the merger takes effect.

    Added 1997, No. 149 (Adj. Sess.), § 1, eff. Jan. 1, 1999.

History

Reference in text. The Uniform Limited Partnership Act, referred to in subsec. (d), was codified as 11 V.S.A. chapter 11, which was repealed and replaced by chapter 23 of this title as of January 1, 1999.

§ 3287. Statement of merger.

  1. After a merger, the surviving partnership or limited partnership may file a statement that one or more partnerships or limited partnerships have merged into the surviving entity.
  2. A statement of merger must contain:
    1. the name of each partnership or limited partnership that is a party to the merger;
    2. the name of the surviving entity into which the other partnerships or limited partnerships were merged;
    3. the street address of the surviving entity's chief executive office and of an office in this state, if any; and
    4. whether the surviving entity is a partnership or a limited partnership.
  3. Except as otherwise provided in subsection (d) of this section, for the purposes of section 3222 of this title, property of the surviving partnership or limited partnership which before the merger was held in the name of another party to the merger is property held in the name of the surviving entity upon filing a statement of merger.
  4. For the purposes of section 3222 of this title, real property of the surviving partnership or limited partnership which before the merger was held in the name of another party to the merger is property held in the name of the surviving entity upon recording a certified copy of the statement of merger in the office for recording transfers of that real property.
  5. A filed and, if appropriate, recorded statement of merger, executed and declared to be accurate pursuant to subsection 3205(c) of this title, stating the name of a partnership or limited partnership that is a party to the merger in whose name property was held before the merger and the name of the surviving entity, but not containing all of the other information required by subsection (b) of this section, operates with respect to the partnerships or limited partnerships named to the extent provided in subsections (c) and (d) of this section.

    Added 1997, No. 149 (Adj. Sess.), § 1, eff. Jan. 1, 1999.

§ 3288. Nonexclusive.

This subchapter is not exclusive. Partnerships or limited partnerships may be converted or merged in any other manner provided by law.

Added 1997, No. 149 (Adj. Sess.), § 1, eff. Jan. 1, 1999.

Subchapter 10. Limited Liability Partnership

§ 3291. Statement of qualification.

    1. Any lawful partnership may become a limited liability partnership pursuant to this section. (a) (1)  Any lawful partnership may become a limited liability partnership pursuant to this section.
    2. A limited liability partnership or a foreign limited liability partnership engaging in a business subject to any other provisions of law of this State governing or regulating business may be formed or authorized to transact business under this chapter only if permitted by, and subject to all limitations of, the other statute. The following shall not be formed or authorized to transact business under this chapter:
      1. credit unions regulated under Title 8;
      2. insurance companies regulated under Title 8;
      3. railroad companies regulated under Title 19.
  1. The terms and conditions on which a partnership becomes a limited liability partnership must be approved by the vote necessary to amend the partnership agreement except, in the case of a partnership agreement that expressly considers obligations to contribute to the partnership, the vote necessary to amend those provisions.
  2. After the approval required by subsection (b) of this section, a partnership may only become a limited liability partnership by filing a statement of qualification. The statement must contain:
    1. the name of the partnership;
    2. the location of the principal place of business in this State;
    3. if the partnership does not have a principal place of business in this State, the name and street address of the partnership's agent for service of process;
    4. a statement that the partnership elects to be a limited liability partnership; and
    5. a deferred effective date, if any.
  3. The agent of a limited liability partnership for service of process must be an individual who is a resident of this State or other person authorized to do business in this State.
  4. The status of a partnership as a limited liability partnership is effective on the later of the filing of the statement or a date specified in the statement. The status remains effective, regardless of changes in the partnership, until it is canceled pursuant to subsection 3205(d) of this title or revoked pursuant to section 3293 of this title.
  5. The status of a partnership as a limited liability partnership and the liability of its partners is not affected by errors or later changes in the information required to be contained in the statement of qualification under subsection (c) of this section.
  6. The filing of a statement of qualification establishes that a partnership has satisfied all conditions precedent to the qualification of the partnership as a limited liability partnership.
  7. An amendment or cancellation of a statement of qualification is effective when it is filed or on a deferred effective date specified in the amendment or cancellation.

    Added 1997, No. 149 (Adj. Sess.), § 1, eff. Jan. 1, 1999; amended 1999, No. 153 (Adj. Sess.), § 24, eff. Jan. 1, 2001.

History

Reference in text. In subdiv. (a)(2)(A), the reference regarding credit unions regulated under Title 8 was repealed by 2005, No. 16 , § 4.

Amendments--1999 (Adj. Sess.) Subdiv. (a)(2)(A): Deleted "banks, savings and loan associations and" preceding "credit".

§ 3292. Name.

  1. The name of a limited liability partnership must end with "Registered Limited Liability Partnership," "Limited Liability Partnership," "R.L.L.P.," "L.L.P.," "RLLP," or "LLP."
  2. Except as authorized by subsections (c) and (d) of this section, a limited liability partnership's name shall be distinguishable in the records of the Secretary of State from any name granted, registered, or reserved under this chapter, or the name of any other entity, whether domestic or foreign, that is granted, reserved, or registered by or with the Secretary of State.
  3. A limited liability partnership may apply to the Secretary of State for authorization to use a name that is not distinguishable in the records of the Secretary of State from one or more of the names described in subsection (b) of this section. The Secretary of State shall authorize use of the name applied for if:
    1. the other entity consents to the use in writing and submits an undertaking in a form satisfactory to the Secretary of State to change its name to a name that is distinguishable in the records from the name of the applying company; or
    2. the applicant delivers to the Secretary of State a certified copy of the final judgment of a court of competent jurisdiction establishing the applicant's right to use the name applied for in this State.
  4. A limited liability partnership may use the name, including the trade name, of another domestic or foreign limited liability partnership that is used in this State if the other partnership is organized or authorized to transact business in this State and the proposed user partnership:
    1. has merged with the other partnership;
    2. has been formed by reorganization of the other partnership; or
    3. has acquired all or substantially all of the assets, including the name, of the other partnership.
  5. Notwithstanding any other provision of law, a limited liability partnership or foreign limited liability partnership that renders professional service may use as its name all or some of the names of individual present or former partners of the partnership or a predecessor partnership, as permitted by the applicable rules of ethics and by the applicable statutory or regulatory provisions governing the rendering of such professional service.

    Added 1997, No. 149 (Adj. Sess.), § 1, eff. Jan. 1, 1999; amended 2015, No. 17 , § 5.

History

Amendments--2015. Subsec. (b): Deleted "based upon the records of the secretary of state" following "partnership's name"; inserted "in the records of the Secretary of State" following "distinguishable"; and deleted "and not the same as, deceptively similar to, or likely to be confused with or mistaken for" preceding "any name granted".

Subsec. (c): Amended generally.

§ 3293. Annual report.

  1. A limited liability partnership, and a foreign limited liability partnership authorized to transact business in this State, shall file an annual report in the Office of the Secretary of State which contains:
    1. the name of the limited liability partnership and the state or other jurisdiction under whose laws the foreign limited liability partnership is formed;
    2. the street address of the partnership's principal office and, if different, the street address of an office in this State, if any; and
    3. if the partnership does not have an office in this State, the name and street address of the partnership's designated agent for service of process.
  2. An annual report must be filed between January 1 and April 1 of each year following the calendar year in which a partnership files a statement of qualification or a foreign partnership becomes authorized to transact business in this State.
  3. The Secretary of State may revoke the statement of qualification of a partnership that fails to file an annual report when due or pay the required filing fee. To do so, the Secretary of State shall provide the partnership at least 60 days' written notice of intent to revoke the statement. The notice must be mailed to the partnership at its designated office set forth in the last filed statement of qualification or annual report. The notice must specify the annual report that has not been filed, the fee that has not been paid, and the effective date of the revocation. The revocation is not effective if the annual report is filed and the fee is paid before the effective date of the revocation.
  4. A revocation under subsection (c) of this section only affects a partnership's status as a limited liability partnership and is not an event of dissolution of the partnership.
  5. A partnership whose statement of qualification has been revoked may apply to the Secretary of State for reinstatement within two years after the effective date of the revocation. The application must state:
    1. the name of the partnership and the effective date of the revocation; and
    2. that the ground for revocation either did not exist or has been corrected.
  6. A reinstatement under subsection (e) of this section relates back to and takes effect as of the effective date of the revocation, and the partnership's status as a limited liability partnership continues as if the revocation had never occurred.

    Added 1997, No. 149 (Adj. Sess.), § 1, eff. Jan. 1, 1999.

Subchapter 11. Foreign Limited Liability Partnership

§ 3301. Law governing foreign limited liability partnership.

  1. The law under which a foreign limited liability partnership is formed governs relations among the partners and between the partners and the partnership and the liability of partners for obligations of the partnership.
  2. A foreign limited liability partnership may not be denied a statement of foreign qualification by reason of any difference between the law under which the partnership was formed and the law of this State.
  3. A statement of foreign qualification does not authorize a foreign limited liability partnership to engage in any business or exercise any power that a partnership may not engage in or exercise in this State as a limited liability partnership.

    Added 1997, No. 149 (Adj. Sess.), § 1, eff. Jan. 1, 1999.

§ 3302. Statement of foreign qualification.

  1. Before transacting business in this State, a foreign limited liability partnership must file a statement of foreign qualification. The statement must contain:
    1. The name of the foreign limited liability partnership which satisfies the requirements of section 3292 of this title and the state or other jurisdiction under whose law it is formed and ends with "Registered Limited Liability Partnership," "Limited Liability Partnership," "R.L.L.P.," "L.L.P.," "RLLP," or "LLP." In the event that the name of the foreign limited liability partnership does not satisfy the requirements of section 3292 of this title, the foreign limited liability partnership shall use an available trade name to transact business in this State if it delivers to the Secretary of State for filing a copy of the statement executed by at least two partners adopting the trade name.
    2. The street address of the partnership's principal office and, if different, the street address of an office of the partnership in this State, if any.
    3. If there is no office of the partnership in this State, the name and street address of the partnership's agent for service of process.
    4. A deferred effective date, if any.
  2. The agent of a foreign limited liability partnership for service of process must be an individual who is a resident of this State or other person authorized to do business in this State.
  3. The status of a partnership as a foreign limited liability partnership is effective on the later of the filing of the statement of foreign qualification or a date specified in the statement. The status remains effective, regardless of changes in the partnership, until it is canceled pursuant to subsection 3205(d) or revoked pursuant to section 3293 of this title.
  4. An amendment or cancellation of a statement of foreign qualification is effective when it is filed or on a deferred effective date specified in the amendment or cancellation.

    Added 1997, No. 149 (Adj. Sess.), § 1, eff. Jan. 1, 1999.

§ 3303. Effect of failure to qualify.

    1. A foreign limited liability partnership transacting business in this State may not maintain an action or proceeding or raise a counterclaim, crossclaim, or affirmative defense in this State unless it has in effect a statement of foreign qualification. (a) (1)  A foreign limited liability partnership transacting business in this State may not maintain an action or proceeding or raise a counterclaim, crossclaim, or affirmative defense in this State unless it has in effect a statement of foreign qualification.
    2. The successor to a foreign limited liability partnership that transacted business in this State without a certificate of authority and the assignee of a cause of action arising out of that business may not maintain a proceeding or raise a counterclaim, crossclaim, or affirmative defense based on that cause of action in any court in this State until the foreign limited liability partnership or its successor or assignee obtains a certificate of authority.
  1. The failure of a foreign limited liability partnership to have in effect a statement of foreign qualification does not impair the validity of a contract or act of the foreign limited liability partnership or preclude it from defending an action or proceeding in this State.
  2. A limitation on personal liability of a partner is not waived solely by transacting business in this State without a statement of foreign qualification.
  3. If a foreign limited liability partnership transacts business in this State without a statement of foreign qualification, the Secretary of State is its agent for service of process with respect to a right of action arising out of the transaction of business in this State.
  4. A foreign limited liability partnership that transacts business in this State without a statement of foreign qualification shall be liable to the State for:
    1. a civil penalty of $50.00 for each day, not to exceed a total of $10,000.00 for each year, it transacts business in this State without a statement of foreign qualification;
    2. an amount equal to the fees due under this chapter during the period it transacted business in this State without a statement of foreign qualification; and
    3. other penalties imposed by law.

      Added 1997, No. 149 (Adj. Sess.), § 1, eff. Jan. 1, 1999; amended 2015, No. 128 (Adj. Sess.), § C.4.

History

Amendments--2015 (Adj. Sess.). Section amended generally.

§ 3304. Activities not constituting transacting business.

  1. Activities of a foreign limited liability partnership which do not constitute transacting business for the purpose of this subchapter include:
    1. maintaining, defending, or settling an action or proceeding;
    2. holding meetings of its partners or carrying on any other activity concerning its internal affairs;
    3. maintaining bank accounts;
    4. maintaining offices or agencies for the transfer, exchange, and registration of the partnership's own securities or maintaining trustees or depositories with respect to those securities;
    5. selling through independent contractors;
    6. soliciting or obtaining orders, whether by mail or through employees or agents or otherwise, if the orders require acceptance outside this State before they become contracts;
    7. creating or acquiring indebtedness, with or without a mortgage, or other security interest in personal property;
    8. collecting debts or foreclosing mortgages or other security interests in property securing the debts, and holding, protecting, and maintaining property so acquired;
    9. conducting an isolated transaction that is completed within 30 days and is not one in the course of similar transactions; and
    10. transacting business in interstate commerce.
  2. For purposes of this subchapter, the ownership in this State of income producing real property or tangible personal property, other than property excluded under subsection (a) of this section, constitutes transacting business in this State.
  3. This section does not apply in determining the contacts or activities that may subject a foreign limited liability partnership to service of process, taxation, or regulation under any other law of this State.

    Added 1997, No. 149 (Adj. Sess.), § 1, eff. Jan. 1, 1999.

§ 3305. Action by Attorney General.

The Attorney General may maintain an action in the Civil Division of the Superior Court to collect the penalties imposed in section 3303 of this title and to restrain a foreign limited liability partnership from transacting business in this State in violation of this subchapter.

Added 1997, No. 149 (Adj. Sess.), § 1, eff. Jan. 1, 1999; amended 2015, No. 128 (Adj. Sess.), § C.5.

History

Amendments--2015 (Adj. Sess.). Inserted "in the Civil Division of the Superior Court to collect the penalties imposed in section 3303 of this title and" following "maintain an action".

Subchapter 12. Miscellaneous Provisions

§ 3310. Fees.

  1. The Secretary of State shall collect the following fees when a document described in this section is delivered to the Office of the Secretary of State for filing:
    1. Statement of authority                                        $ 125.00      (2) Statement of denial                                             No fee      (3) Statement of dissociation                                       No fee      (4) Statement of dissolution                                        No fee      (5) Statement of merger                                           $  50.00      (6) Statement of qualification                                    $  75.00      (7) Statement of foreign qualification                            $ 100.00      (8) Amendment                                                     $  25.00      (9) Cancellation                                                  $   5.00      (10) Annual report of domestic limited      liability partnership                                           $  15.00      (11) Annual report of foreign limited      liability partnership                                           $ 100.00      (12) Reinstatement                                                $  25.00      (13) Statement of change of designated      agent or designated office, or both                             $ 25.00,                                                                        not to                                                                        exceed                                                                     $1,000.00                                                                           per                                                                         filer                                                                           per                                                                        calen-                                                                           dar                                                                          year      (14) Application for certificate      of good standing                                                $  25.00      (15) Any other document permitted or required to      be filed by this chapter                                        $  20.00
  2. The Secretary of State shall collect the following fees:
    1. $ 25.00 each time process is served on the Secretary under this chapter. The party to a proceeding causing service of process is entitled to recover this fee as costs if he or she prevails in the proceeding.
    2. $ 25.00 for the certificate certifying the copy of any filed document related to a partnership, limited liability partnership, or a foreign limited liability partnership.

      Added 1997, No. 149 (Adj. Sess.), § 1, eff. Jan. 1, 1999; amended 2003, No. 70 (Adj. Sess.), § 13, eff. March 1, 2004; 2013, No. 72 , § 7.

History

Amendments--2013 Substituted "$125.00" for "50.00" in subdiv. (a)(1); added subdivs. (a)(13) and (a)(14); added subdiv. (a)(15) designation and substituted "$20.00" for "5.00" in subdiv. (a)(15); substituted "$25.00" for "$10.00" in subdiv. (b)(1); and substituted "$25.00" for "$1.00 per page for copying and $5.00" in subdiv. (b)(2).

Amendments--2003 (Adj. Sess.). Subdivs. (a)(2)-(4): Substituted "No fee" for "5.00".

§ 3311. Uniformity of application and construction.

This chapter shall be applied and construed to effectuate its general purpose to make uniform the law with respect to the subject of this chapter among states enacting it.

Added 1997, No. 149 (Adj. Sess.), § 1, eff. Jan. 1, 1999.

§ 3312. Applicability.

  1. Before January 1, 1999, this chapter governs only a partnership formed:
    1. after the effective date of this chapter, except a partnership that is continuing the business of a dissolved partnership under section 1333 of this title; and
    2. before the effective date of this chapter, that elects, as provided by subsection (c) of this section, to be governed by this chapter.
  2. On and after January 1, 1999, this chapter governs all partnerships.
  3. Before January 1, 1999, a partnership voluntarily may elect, in the manner provided in its partnership agreement or by law for amending the partnership agreement, to be governed by this chapter. The provisions of this chapter relating to the liability of the partnership's partners to third parties apply to limit those partners' liability to a third party who had done business with the partnership within one year before the partnership's election to be governed by this chapter, only if the third party knows or has received a notification of the partnership's election to be governed by this chapter.

    Added 1997, No. 149 (Adj. Sess.), § 1, eff. Jan. 1, 1999.

History

Reference in text. The Uniform Partnership Act, referred to in subdiv. (a)(1), was repealed by 1997, No. 149 (Adj. Sess.), § 2, effective January 1, 1999. For present provisions, see chapter 22 of this title.

§ 3313. Savings clause.

The enactment of this chapter does not affect an action or proceeding commenced or right accrued before this chapter takes effect.

Added 1997, No. 149 (Adj. Sess.), § 1, eff. Jan. 1, 1999.

CHAPTER 23. LIMITED PARTNERSHIPS

Subchapter 1. General Provisions

§ 3401. Definitions.

As used in this chapter:

  1. A "certificate of limited partnership" means the certificate referred to in section 3411 of this title, and the certificate as amended or restated.
  2. A "contribution" means any cash, property, services rendered, or a promissory note or other binding obligation to contribute cash or property or to perform services, which a partner contributes to a limited partnership in his or her capacity as a partner.
  3. An "event of withdrawal of a general partner" means an event that causes a person to cease to be a general partner as provided in section 3432 of this title.
  4. A "foreign limited partnership" means a partnership formed under laws other than the laws of this State and having as partners one or more general partners and one or more limited partners.
  5. "General partner" means a person who has been admitted to a limited partnership as a general partner in accordance with the partnership agreement and named in the certificate of limited partnership as a general partner.
  6. "Limited partner" means a person who has been admitted to a limited partnership as a limited partner in accordance with the partnership agreement.
  7. "Limited partnership" and "domestic limited partnership" mean a partnership formed by two or more persons under the laws of this State and having one or more general partners and one or more limited partners.
  8. "Partner" means a limited or general partner.
  9. "Partnership agreement" means any valid agreement, written or oral, of the partners as to the affairs of a limited partnership and the conduct of its business.
  10. "Partnership interest" means a partner's share of the profits and losses of a limited partnership and the right to receive distributions of partnership assets.
  11. "Person" means a natural person, partnership, limited partnership (domestic or foreign), trust, estate, association, corporation, or limited liability company.
  12. "State" means a state, territory, or possession of the United States, the District of Columbia, or the Commonwealth of Puerto Rico.

    Added 1997, No. 149 (Adj. Sess.), § 4, eff. Jan. 1, 1999.

§ 3402. Name.

  1. The name of each limited partnership as set forth in its certificate of limited partnership:
    1. shall contain the words "Limited Partnership," or the letters "L.P.";
    2. may not contain the name of a limited partner unless it is also the name of a general partner or the corporate name of a corporate general partner, or the business of the limited partnership had been carried on under that name before the admission of that limited partner;
    3. shall be distinguishable in the records of the Secretary of State from the name of any corporation, limited liability company, limited liability partnership, or limited partnership organized under the laws of this State or licensed or registered as a foreign corporation, limited liability company, limited liability partnership, or limited partnership in this State; and
    4. may not contain the following words: "corporation," "incorporated," "limited" by itself, "limited liability company," "limited company," or the abbreviations "corp.," "Inc.," or "Ltd."
  2. A person intending to operate a postsecondary school, as defined in 16 V.S.A. §§ 176 and 176a, shall apply for a certificate of approval from the State Board of Education prior to registering a name under this chapter.

    Added 1997, No. 149 (Adj. Sess.), § 4, eff. Jan. 1, 1999; amended 2003, No. 107 (Adj. Sess.), § 17; 2015, No. 17 , § 6.

History

Amendments--2015. Subdiv. (a)(3): Substituted "shall be distinguishable in the records of the Secretary of State from" for "may not be the same as, or deceptively similar to".

Amendments--2003 (Adj. Sess.) Designated the existing provisions of the section as subsec. (a), and added subsec. (b).

§ 3403. Reservation of name.

  1. The exclusive right to the use of a name may be reserved by:
    1. any person intending to organize a limited partnership under this chapter and to adopt that name;
    2. any domestic limited partnership or any foreign limited partnership registered in this State which, in either case, intends to adopt that name;
    3. any foreign limited partnership intending to register in this State and adopt that name; and
    4. any person intending to organize a foreign limited partnership and intending to have it registered in this State and to adopt that name.
  2. The reservation shall be made by filing with the Secretary of State an application, executed by the applicant, to reserve a specified name. If the Secretary of State finds that the name is available for use by a domestic or foreign limited partnership, he or she shall reserve the name for the exclusive use of the applicant for a period of 120 days. The owner of a name reserved under this section may renew the reservation for two successive periods of 120 days each. The right to the exclusive use of a reserved name may be transferred to any other person by filing in the Office of the Secretary of State a notice of the transfer, executed by the applicant for whom the name was reserved and specifying the name and address of the transferee.

    Added 1997, No. 149 (Adj. Sess.), § 4, eff. Jan. 1, 1999.

§ 3404. Specified office and agent.

Each limited partnership shall continuously maintain in this State:

  1. an office, which may but need not be a place of its business in this State, at which shall be kept the records required by section 3405 of this title to be maintained; and
  2. an agent for service of process on the limited partnership, which agent must be an individual resident of this State, a domestic corporation, partnership, limited liability company, or a foreign corporation, partnership, or limited liability company authorized to do business in this State.

    Added 1997, No. 149 (Adj. Sess.), § 4, eff. Jan. 1, 1999.

§ 3405. Records to be kept.

  1. Each limited partnership shall keep at the office referred to in subdivision 3404(1) of this title the following:
    1. a current list of the full name and last known business address of each partner, separately identifying the general partners (in alphabetical order) and the limited partners (in alphabetical order);
    2. a copy of the certificate of limited partnership and all certificates of amendment thereto, together with executed copies of any powers of attorney pursuant to which any certificate has been executed;
    3. copies of the limited partnership's federal, state, and local income tax returns and reports, if any, for the three most recent years;
    4. copies of any then effective written partnership agreements and of any financial statements of the limited partnership for the three most recent years; and
    5. unless contained in a written partnership agreement, a writing setting out:
      1. the amount of cash and a description and statement of the agreed value of the other property or services contributed by each partner and which each partner has agreed to contribute;
      2. the times at which or events on the happening of which any additional contributions agreed to be made by each partner are to be made;
      3. any right of a partner to receive, or of a general partner to make, distributions to a partner which include a return of all or any part of the partner's contribution; and
      4. any events upon the happening of which the limited partnership is to be dissolved and its affairs wound up.
  2. Records kept under this section are subject to inspection and copying at the reasonable request and at the expense of any partner during ordinary business hours.

    Added 1997, No. 149 (Adj. Sess.), § 4, eff. Jan. 1, 1999.

§ 3406. Nature of business.

A limited partnership may carry on any business that a partnership without limited partners may carry on except a business in which a corporation formed under the general corporation law may not engage.

Added 1997, No. 149 (Adj. Sess.), § 4, eff. Jan. 1, 1999.

§ 3407. Business transactions of partner with partnership.

Except as provided in the partnership agreement, a partner may lend money to and transact other business with the limited partnership and, subject to other applicable law, has the same rights and obligations with respect thereto as a person who is not a partner.

Added 1997, No. 149 (Adj. Sess.), § 4, eff. Jan. 1, 1999.

Subchapter 2. Certificate of Limited Partnership

§ 3411. Certificate of limited partnership.

  1. In order to form a limited partnership, a certificate of limited partnership must be executed and filed in the Office of the Secretary of State. The certificate shall set forth:
    1. the name of the limited partnership;
    2. the address of the office and the name and address of the agent for service of process required to be maintained by section 3404 of this title;
    3. the name and the business address of each general partner;
    4. the name and place of residence of each limited partner and the amount of cash and a description of and the agreed value of other property contributed by each limited partner;
    5. the latest date upon which the limited partnership is to dissolve; and
    6. any other matters the general partners determine to include therein.
  2. A limited partnership is formed at the time of the filing of the certificate of limited partnership in the Office of the Secretary of State or at any later time specified in the certificate of limited partnership if, in either case, there has been substantial compliance with the requirements of this section.

    Added 1997, No. 149 (Adj. Sess.), § 4, eff. Jan. 1, 1999.

§ 3412. Amendment to certificate.

  1. A certificate of limited partnership is amended by filing a certificate of amendment thereto in the Office of the Secretary of State. The certificate shall set forth:
    1. the name of the limited partnership;
    2. the date of filing the original certificate; and
    3. the amendment to the certificate.
  2. Within 30 days after the happening of any of the following events, an amendment to a certificate of limited partnership reflecting the occurrence of the event or events shall be filed:
    1. the admission of a new general partner;
    2. the withdrawal of a general partner; or
    3. the continuation of the business under section 3471 of this title after an event of withdrawal of a general partner.
  3. A general partner who becomes aware that any statement in a certificate of limited partnership was false when made or that any arrangements or other facts described have changed, making the certificate inaccurate in any respect, shall promptly amend the certificate.
  4. A certificate of limited partnership may be amended at any time for any other proper purpose the general partners determine.
  5. No person has any liability because an amendment to a certificate of limited partnership has not been filed to reflect the occurrence of any event referred to in subsection (b) of this section if the amendment is filed within the 30-day period specified in subsection (b).
  6. A restated certificate of limited partnership may be executed and filed in the same manner as a certificate of amendment.

    Added 1997, No. 149 (Adj. Sess.), § 4, eff. Jan. 1, 1999.

§ 3413. Cancellation of certificate.

A certificate of limited partnership shall be canceled upon the dissolution and the commencement of winding up of the partnership or at any other time there are no limited partners. A certificate of cancellation shall be filed in the Office of the Secretary of State and set forth:

  1. the name of the limited partnership;
  2. the date of filing of its original certificate of limited partnership;
  3. the reason for filing the certificate of cancellation;
  4. the effective date (which shall be a date certain) of cancellation if it is not to be effective upon the filing of the certificate; and
  5. any other information the general partners filing the certificate determine.

    Added 1997, No. 149 (Adj. Sess.), § 4, eff. Jan. 1, 1999.

§ 3414. Execution of certificates.

  1. Each certificate required by this subchapter to be filed in the Office of the Secretary of State shall be executed in the following manner:
    1. an original certificate of limited partnership must be signed by all general partners;
    2. a certificate of amendment must be signed by at least one general partner and by each other general partner designated in the certificate as a new general partner; and
    3. a certificate of cancellation must be signed by all general partners.
  2. Any person may sign a certificate by an attorney-in-fact, but a power of attorney to sign a certificate relating to the admission of a general partner must specifically describe the admission.
  3. The execution of a certificate by a general partner constitutes an affirmation under the penalties of perjury that the facts stated therein are true.

    Added 1997, No. 149 (Adj. Sess.), § 4, eff. Jan. 1, 1999.

§ 3415. Execution by judicial act.

If a person required by section 3414 of this title to execute any certificate fails or refuses to do so, any other person who is adversely affected by the failure or refusal, may petition the Superior Court for the county where the limited partnership has its principal place of business or, if it has no principal place of business in this State, then the county where the office required to be maintained by section 3404 of this title is located to direct the execution of the certificate. If the court finds that it is proper for the certificate to be executed and that any person so designated has failed or refused to execute the certificate, it shall order the Secretary of State to record an appropriate certificate.

Added 1997, No. 149 (Adj. Sess.), § 4, eff. Jan. 1, 1999.

§ 3416. Filing in Office of Secretary of State.

  1. Two signed copies of the certificate of limited partnership and of any certificates of amendment or cancellation (or of any judicial decree of amendment or cancellation) shall be delivered to the Secretary of State. A person who executes a certificate as an agent or fiduciary need not exhibit evidence of his or her authority as a prerequisite to filing. Unless the Secretary of State finds that any certificate does not conform to law, upon receipt of all filing fees required by law he or she shall:
    1. endorse on each duplicate original the word "Filed" and the day, month, and year of the filing thereof;
    2. file one duplicate original in his or her office; and
    3. return the other duplicate original to the person who filed it or his or her representative.
  2. Upon the filing of a certificate of amendment (or judicial decree of amendment) in the Office of the Secretary of State, the certificate of limited partnership shall be amended as set forth therein, and upon the effective date of a certificate of cancellation (or a judicial decree thereof), the certificate of limited partnership is canceled.

    Added 1997, No. 149 (Adj. Sess.), § 4, eff. Jan. 1, 1999.

§ 3417. Liability for false statement in certificate.

If any certificate of limited partnership or certificate of amendment or cancellation contains a false statement, one who suffers loss by reliance on the statement may recover damages for the loss from:

  1. any person who executes the certificate, or causes another to execute it on his or her behalf, and knew, and any general partner who knew or should have known, the statement to be false at the time the certificate was executed; and
  2. any general partner who thereafter knows or should have known that any arrangement or other fact described in the certificate has changed, making the statement inaccurate in any respect within a sufficient time before the statement was relied upon reasonably to have enabled that general partner to cancel or amend the certificate, or to file a petition for its cancellation or amendment under section 3415 of this title.

    Added 1997, No. 149 (Adj. Sess.), § 4, eff. Jan. 1, 1999.

§ 3418. Scope of notice.

The fact that a certificate of limited partnership is on file in the Office of the Secretary of State is notice that the partnership is a limited partnership and the persons designated therein as general partners are general partners and the persons designated therein as limited partners, if any are so designated, are limited partners, but it is not notice of any other fact.

Added 1997, No. 149 (Adj. Sess.), § 4, eff. Jan. 1, 1999.

§ 3419. Delivery of certificates to limited partners.

Upon the return by the Secretary of State pursuant to section 3416 of this title of a certificate marked "Filed", the general partners shall promptly deliver or mail a copy of the certificate of limited partnership and each certificate of amendment or cancellation to each limited partner unless the partnership agreement provides otherwise.

Added 1997, No. 149 (Adj. Sess.), § 4, eff. Jan. 1, 1999.

§ 3420. Fees.

  1. The Secretary of State shall collect the following fees when a document described in this section is delivered to the Office of the Secretary of State for filing:
    1. Certificate of Limited Partnership                             $125.00      (2) Registration of Foreign Limited Partnership                    $125.00      (3) Amendment                                                       $25.00      (4) Cancellation                                                    No fee      (5) Merger                                                          $50.00      (6) Statement of change      (6)      of designated agent      (6)      or designated office, or both                                    $25.00,                                                                        not to                                                                        exceed                                                                     $1,000.00                                                                           per                                                                         filer                                                                           per                                                                        calen-                                                                           dar                                                                          year      (7) Application for certificate of good standing                    $25.00      (8) Any other document permitted or required to      be filed by this chapter                                          $20.00
  2. The Secretary of State shall collect the following fees:
    1. $25.00 each time process is served on the Secretary under this chapter. The party to a proceeding causing service of process is entitled to recover this fee as costs if he or she prevails in the proceeding.
    2. $25.00 for the certificate certifying the copy of any filed document related to a partnership, limited liability partnership, or a foreign limited liability partnership.

      Added 1997, No. 149 (Adj. Sess.), § 4, eff. Jan. 1, 1999; amended 2003, No. 70 (Adj. Sess.), § 14, eff. March 1, 2004; 2013, No. 72 , § 8.

History

Amendments--2013 Substituted "$125.00" for "$50.00" in subdiv. (a)(1) and "125.00" for "50.00" in subdiv. (a)(2); added subdivs. (a)(6) and (a)(7); added subdiv. (a)(8) designation and substituted "20.00" for "5.00" in subdiv. (a)(8); substituted "$25.00" for "$10.00" in subdiv. (b)(1); and substituted "$25.00" for "$1.00 per page for copying and $5.00" in subdiv. (b)(2).

Amendments--2003 (Adj. Sess.). Subdiv. (a)(4): Substituted "No fee" for "5.00".

Subchapter 3. Limited Partners

§ 3421. Admission of limited partners.

  1. A person becomes a limited partner:
    1. at the time the limited partnership is formed; or
    2. at any later time specified in the records of the limited partnership for becoming a limited partner.
  2. After the filing of a limited partnership's original certificate of limited partnership, a person may be admitted as an additional limited partner:
    1. in the case of a person acquiring a partnership interest directly from the limited partnership, upon compliance with the partnership agreement or, if the partnership agreement does not so provide, upon the written consent of all partners; and
    2. in the case of an assignee of a partnership interest of a partner who has the power, as provided in section 3464 of this title, to grant the assignee the right to become a limited partner, upon the exercise of that power and compliance with any conditions limiting the grant or exercise of the power.

      Added 1997, No. 149 (Adj. Sess.), § 4, eff. Jan. 1, 1999.

§ 3422. Voting.

Subject to section 3423 of this title, the partnership agreement may grant to all or a specified group of the limited partners the right to vote (on a per capita or other basis) upon any matter.

Added 1997, No. 149 (Adj. Sess.), § 4, eff. Jan. 1, 1999.

§ 3423. Liability to third parties.

  1. Except as provided in subsection (d) of this section, a limited partner is not liable for the obligations of a limited partnership unless he or she is also a general partner or, in addition to the exercise of his or her rights and powers as a limited partner, he or she participates in the control of the business. However, if the limited partner participates in the control of the business, he or she is liable only to persons who transact business with the limited partnership reasonably believing, based upon the limited partner's conduct, that the limited partner is a general partner.
  2. A limited partner does not participate in the control of the business within the meaning of subsection (a) of this section solely by doing one or more of the following:
    1. being a contractor for or an agent or employee of the limited partnership or of a general partner or being an officer, director, or shareholder of a general partner that is a corporation;
    2. consulting with and advising a general partner with respect to the business of the limited partnership;
    3. acting as surety for the limited partnership or guaranteeing or assuming one or more specific obligations of the limited partnership;
    4. taking any action required or permitted by law to bring or pursue a derivative action in the right of the limited partnership;
    5. requesting or attending a meeting of partners;
    6. proposing, approving, or disapproving, by voting or otherwise, one or more of the following matters:
      1. the dissolution and winding up of the limited partnership;
      2. the sale, exchange, lease, mortgage, pledge, or other transfer of all or substantially all of the assets of the limited partnership;
      3. the incurrence of indebtedness by the limited partnership other than in the ordinary course of its business;
      4. a change in the nature of the business;
      5. the admission or removal of a general partner;
      6. the admission or removal of a limited partner;
      7. a transaction involving an actual or potential conflict of interest between a general partner and the limited partnership or the limited partners;
      8. an amendment to the partnership agreement or certificate of limited partnership; or
      9. matters related to the business of the limited partnership not otherwise enumerated in this subsection, which the partnership agreement states in writing may be subject to the approval or disapproval of limited partners;
    7. winding up the limited partnership pursuant to section 3473 of this title; or
    8. exercising any right or power permitted to limited partners under this chapter and not specifically enumerated in this subsection.
  3. The enumeration in subsection (b) of this section does not mean that the possession or exercise of any other powers by a limited partner constitutes participation by him or her in the business of the limited partnership.
  4. A limited partner who knowingly permits his or her name to be used in the name of the limited partnership, except under circumstances permitted by subdivision 3402(a)(2) of this title, is liable to creditors who extend credit to the limited partnership without actual knowledge that the limited partner is not a general partner.

    Added 1997, No. 149 (Adj. Sess.), § 4, eff. Jan. 1, 1999.

History

2010. In subsec. (d), substituted "subdivision 3402(a)(2)" for "subdivision 3402(2)" for purposes of clarity and to conform reference to V.S.A. style.

ANNOTATIONS

1. Liability of limited partners .

The trial court erred under prior Vermont law [11 V.S.A. § 1397] in concluding that limited partners were agents of the landlord not subject to suit because there was evidence that the limited partners, along with the general partner, had contact with state water authorities supporting the inference that the limited partners participated in decisions, made on behalf of the partnership, to withhold information about the water from the tenants while not supplying an alternative source of safe water, thereby contributing to the ongoing breach of the partnership's habitability obligation. (Decided under prior law.) Willard v. Parsons Hill Partnership, 178 Vt. 300, 882 A.2d 1213 (August 5, 2005).

§ 3424. Person erroneously believing himself or herself limited partner.

  1. Except as provided in subsection (b) of this section, a person who makes a contribution to a business enterprise and erroneously but in good faith believes that he or she has become a limited partner in the enterprise is not a general partner in the enterprise and is not bound by its obligations by reason of making the contribution, receiving distributions from the enterprise, or exercising any rights of a limited partner, if, on ascertaining the mistake, he or she:
    1. causes an appropriate certificate of limited partnership or a certificate of amendment to be executed and filed; or
    2. withdraws from future equity participation in the enterprise by executing and filing in the Office of the Secretary of State a certificate declaring withdrawal under this section.
  2. A person who makes a contribution of the kind described in subsection (a) of this section is liable as a general partner to any third party who transacts business with the enterprise before the person withdraws and an appropriate certificate is filed to show withdrawal, or before an appropriate certificate is filed to show that he or she is not a general partner, but in either case only if the third party actually believed in good faith that the person was a general partner at the time of the transaction.

    Added 1997, No. 149 (Adj. Sess.), § 4, eff. Jan. 1, 1999.

§ 3425. Information.

Each limited partner has the right to:

  1. inspect and copy any of the partnership records required to be maintained by section 3405 of this title; and
  2. obtain from the general partners from time to time upon reasonable demand true and full information regarding the state of the business and financial condition of the limited partnership; promptly after becoming available, a copy of the limited partnership's federal, state, and local income tax returns for each year; and other information regarding the affairs of the limited partnership as is just and reasonable.

    Added 1997, No. 149 (Adj. Sess.), § 4, eff. Jan. 1, 1999.

Subchapter 4. General Partners

§ 3431. Admission of additional general partners.

After the filing of a limited partnership's original certificate of limited partnership, additional general partners may be admitted as provided in writing in the partnership agreement or, if the partnership agreement does not provide in writing for the admission of additional general partners, with the written consent of all partners.

Added 1997, No. 149 (Adj. Sess.), § 4, eff. Jan. 1, 1999.

§ 3432. Events of withdrawal.

Except as approved by the specific written consent of all partners at the time, a person ceases to be a general partner of a limited partnership upon the happening of any of the following events:

  1. the general partner withdraws from the limited partnership as provided in section 3452 of this title;
  2. the general partner ceases to be a member of the limited partnership as provided in section 3462 of this title;
  3. the general partner is removed as a general partner in accordance with the partnership agreement;
  4. unless otherwise provided in writing in the partnership agreement, the general partner: makes an assignment for the benefit of creditors; files a voluntary petition in bankruptcy; is adjudicated a bankrupt or insolvent; files a petition or answer seeking for himself or herself any reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under any statute, law, or regulation; files an answer or other pleading admitting or failing to contest the material allegations of a petition filed against him or her in any proceeding of this nature; or seeks, consents to, or acquiesces in the appointment of a trustee, receiver, or liquidator of the general partner or of all or any substantial part of his or her properties;
  5. unless otherwise provided in writing in the partnership agreement, 120 days after the commencement of any proceeding against the general partner seeking reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under any statute, law, or regulation, the proceeding has not been dismissed, or if within 90 days after the appointment without his or her consent or acquiescence of a trustee, receiver, or liquidator of the general partner or of all or any substantial part of his or her properties, the appointment is not vacated or stayed or within 90 days after the expiration of any such stay, the appointment is not vacated;
  6. in the case of a general partner who is a natural person:
    1. his or her death; or
    2. the entry of an order by a court of competent jurisdiction adjudicating him or her incompetent to manage his or her person or his or her estate;
  7. in the case of a general partner who is acting as a general partner by virtue of being a trustee of a trust, the termination of the trust (but not merely the substitution of a new trustee);
  8. in the case of a general partner that is a separate partnership, the dissolution and commencement of winding up of the separate partnership;
  9. in the case of a general partner that is a corporation, the filing of a certificate of dissolution, or its equivalent, for the corporation or the revocation of its charter; or
  10. in the case of an estate, the distribution by the fiduciary of the estate's entire interest in the partnership.

    Added 1997, No. 149 (Adj. Sess.), § 4, eff. Jan. 1, 1999.

§ 3433. General powers and liabilities.

  1. Except as provided in this chapter or in the partnership agreement, a general partner of a limited partnership has the rights and powers and is subject to the restrictions of a partner in a partnership without limited partners.
  2. Except as provided in this chapter, a general partner of a limited partnership has the liabilities of a partner in a partnership without limited partners to persons other than the partnership and the other partners. Except as provided in this chapter or in the partnership agreement, a general partner of a limited partnership has the liabilities of a partner in a partnership without limited partners to the partnership and to the other partners.

    Added 1997, No. 149 (Adj. Sess.), § 4, eff. Jan. 1, 1999.

§ 3434. Contributions by general partner.

A general partner of a limited partnership may make contributions to the partnership and share in the profits and losses of, and in distributions from, the limited partnership as a general partner. A general partner also may make contributions to and share in profits, losses, and distributions as a limited partner. A person who is both a general partner and a limited partner has the rights and powers, and is subject to the restrictions and liabilities, of a general partner and, except as provided in the partnership agreement, also has the powers, and is subject to the restrictions, of a limited partner to the extent of his or her participation in the partnership as a limited partner.

Added 1997, No. 149 (Adj. Sess.), § 4, eff. Jan. 1, 1999.

§ 3435. Voting.

The partnership agreement may grant to all or certain identified general partners the right to vote (on a per capita or any other basis), separately or with all or any class of the limited partners, on any matter.

Added 1997, No. 149 (Adj. Sess.), § 4, eff. Jan. 1, 1999.

Subchapter 5. Finance

§ 3441. Form of contribution.

The contribution of a partner may be in cash, property, or services rendered, or a promissory note or other obligation to contribute cash or property or to perform services.

Added 1997, No. 149 (Adj. Sess.), § 4, eff. Jan. 1, 1999.

History

Effective date. 1997, No. 149 , § 6 makes this section effective on January 1, 1999, and further provides that this section applies only to contributions and distributions made after January 1, 1999.

§ 3442. Liability for contribution.

  1. A promise by a limited partner to contribute to the limited partnership is not enforceable unless set out in a writing signed by the limited partner.
  2. Except as provided in the partnership agreement, a partner is obligated to the limited partnership to perform any enforceable promise to contribute cash or property or to perform services, even if he or she is unable to perform because of death, disability, or any other reason. If a partner does not make the required contribution of property or services, he or she is obligated at the option of the limited partnership to contribute cash equal to that portion of the value, as stated in the partnership records required to be kept pursuant to section 3405 of this title, of the stated contribution which has not been made.
  3. Unless otherwise provided in the partnership agreement, the obligation of a partner to make a contribution or return money or other property paid or distributed in violation of this chapter may be compromised only by consent of all partners. Notwithstanding the compromise, a creditor of a limited partnership who extends credit or otherwise acts in reliance on that obligation after the partner signs a writing which reflects the obligation and before the amendment or cancellation thereof to reflect the compromise may enforce the original obligation.

    Added 1997, No. 149 (Adj. Sess.), § 4, eff. Jan. 1, 1999.

History

Effective date. 1997, No. 149 , § 6 makes this section effective on January 1, 1999, and further provides that this section applies only to contributions and distributions made after January 1, 1999.

§ 3443. Sharing of profits and losses.

The profits and losses of a limited partnership shall be allocated among the partners, and among classes of partners, in the manner provided in writing in the partnership agreement. If the partnership agreement does not so provide in writing, profits and losses shall be allocated on the basis of the value, as stated in the partnership records required to be kept pursuant to section 3405 of this title, of the contributions made by each partner to the extent they have been received by the partnership and have not been returned.

Added 1997, No. 149 (Adj. Sess.), § 4, eff. Jan. 1, 1999.

History

Application. 1997, No. 149 (Adj. Sess.), which enacted this chapter, provides in § 6(d), in part: "Unless otherwise agreed by the partners, the applicable provisions of chapter 11 of Title 11 in effect immediately prior to the effective date of this act governing allocation of profits and losses (rather than the provisions of section 3443 of Title 11) ... shall govern limited partnerships formed before the effective date of this act [January 1, 1999]."

§ 3444. Sharing of distributions.

Distributions of cash or other assets of a limited partnership shall be allocated among the partners and among classes of partners in the manner provided in writing in the partnership agreement. If the partnership agreement does not so provide in writing, distributions shall be made on the basis of the value, as stated in the partnership records required to be kept pursuant to section 3405 of this title, of the contributions made by each partner to the extent they have been received by the partnership and have not been returned.

Added 1997, No. 149 (Adj. Sess.), § 4, eff. Jan. 1, 1999.

Subchapter 6. Distributions and Withdrawal

§ 3451. Interim distributions.

Except as provided in this subchapter, a partner is entitled to receive distributions from a limited partnership before his or her withdrawal from the limited partnership and before the dissolution and winding up thereof to the extent and at the times or upon the happening of the events specified in the partnership agreement.

Added 1997, No. 149 (Adj. Sess.), § 4, eff. Jan. 1, 1999.

§ 3452. Withdrawal of general partner.

A general partner may withdraw from a limited partnership at any time by giving written notice to the other partners, but if the withdrawal violates the partnership agreement, the limited partnership may recover from the withdrawing general partner damages for breach of the partnership agreement and offset the damages against the amount otherwise distributable to him or her.

Added 1997, No. 149 (Adj. Sess.), § 4, eff. Jan. 1, 1999.

§ 3453. Withdrawal of limited partner.

A limited partner may only withdraw from a limited partnership at the time or upon the happening of events specified in writing in the partnership agreement. If the agreement does not specify in writing the time or the events upon the happening of which a limited partner may withdraw or a definite time for the dissolution and winding up of the limited partnership, a limited partner may withdraw upon not less than six months' prior written notice to each general partner at his or her address on the books of the limited partnership at its office in this State.

Added 1997, No. 149 (Adj. Sess.), § 4, eff. Jan. 1, 1999.

§ 3454. Distribution upon withdrawal.

Except as provided in this subchapter, upon withdrawal any withdrawing partner is entitled to receive any distribution to which he or she is entitled under the partnership agreement and, if not otherwise provided in the agreement, he or she is entitled to receive, within a reasonable time after withdrawal, the fair value of his or her interest in the limited partnership as of the date of withdrawal based upon what a willing buyer would pay a willing seller for the interest, with neither party being under any compulsion to buy or sell his or her right to share in distributions from the limited partnership.

Added 1997, No. 149 (Adj. Sess.), § 4, eff. Jan. 1, 1999.

History

Application. 1997, No. 149 (Adj. Sess.), which enacted this chapter, provides in § 6(d), in part: "Unless otherwise agreed by the partners, the applicable provisions of chapter 11 of Title 11 in effect immediately prior to the effective date of this act governing ... distributions to a withdrawing partner (rather than the provisions of section 3454 of Title 11) ... shall govern limited partnerships formed before the effective date of this act [January 1, 1999]."

§ 3455. Distribution in kind.

Except as provided in writing in the partnership agreement, a partner, regardless of the nature of his or her contribution, has no right to demand and receive any distribution from a limited partnership in any form other than cash. Except as provided in writing in the partnership agreement, a partner may not be compelled to accept a distribution of any asset in kind from a limited partnership to the extent that the percentage of the asset distributed to him or her exceeds a percentage of that asset which is equal to the percentage in which he or she shares in distributions from the limited partnership.

Added 1997, No. 149 (Adj. Sess.), § 4, eff. Jan. 1, 1999.

§ 3456. Right to distribution.

At the time a partner becomes entitled to receive a distribution, he or she has the status of, and is entitled to all remedies available to, a creditor of the limited partnership with respect to the distribution.

Added 1997, No. 149 (Adj. Sess.), § 4, eff. Jan. 1, 1999.

§ 3457. Limitations on distribution.

A partner may not receive a distribution from a limited partnership to the extent that, after giving effect to the distribution, all liabilities of the limited partnership, other than liabilities to partners on account of their partnership interests, exceed the fair value of the partnership assets.

Added 1997, No. 149 (Adj. Sess.), § 4, eff. Jan. 1, 1999.

§ 3458. Liability upon return of contribution.

  1. If a partner has received the return of any part of his or her contribution without violation of the partnership agreement or this chapter, he or she is liable to the limited partnership for a period of one year thereafter for the amount of the returned contribution, but only to the extent necessary to discharge the limited partnership's liabilities to creditors who extended credit to the limited partnership during the period the contribution was held by the partnership.
  2. If a partner has received the return of any part of his or her contribution in violation of the partnership agreement or this chapter, he or she is liable to the limited partnership for a period of six years thereafter for the amount of the contribution wrongfully returned.
  3. A partner receives a return of his or her contribution to the extent that a distribution to him or her reduces his or her share of the fair value of the net assets of the limited partnership below the value, as set forth in the partnership records required to be kept pursuant to section 3405 of this title, of his or her contribution which has not been distributed to him or her.

    Added 1997, No. 149 (Adj. Sess.), § 4, eff. Jan. 1, 1999.

History

Effective date. 1997, No. 149 , § 6 makes this section effective on January 1, 1999, and further provides that this section applies only to contributions and distributions made after January 1, 1999.

Subchapter 7. Assignment of Partnership Interests

§ 3461. Nature of partnership interest.

A partnership interest is personal property.

Added 1997, No. 149 (Adj. Sess.), § 4, eff. Jan. 1, 1999.

§ 3462. Assignment of partnership interest.

Except as provided in the partnership agreement, a partnership interest is assignable in whole or in part. An assignment of a partnership interest does not dissolve a limited partnership or entitle the assignee to become or to exercise any rights of a partner. An assignment entitles the assignee to receive, to the extent assigned, only the distribution to which the assignor would be entitled. Except as provided in the partnership agreement, a partner ceases to be a partner upon assignment of all his or her partnership interest.

Added 1997, No. 149 (Adj. Sess.), § 4, eff. Jan. 1, 1999.

§ 3463. Rights of creditor.

On application to a court of competent jurisdiction by any judgment creditor of a partner, the court may charge the partnership interest of the partner with payment of the unsatisfied amount of the judgment with interest. To the extent so charged, the judgment creditor has only the rights of an assignee of the partnership interest. This chapter does not deprive any partner of the benefit of any exemption laws applicable to his or her partnership interest.

Added 1997, No. 149 (Adj. Sess.), § 4, eff. Jan. 1, 1999.

§ 3464. Right of assignee to become limited partner.

  1. An assignee of a partnership interest, including an assignee of a general partner, may become a limited partner if and to the extent that the assignor gives the assignee that right in accordance with authority described in the partnership agreement, or all other partners consent.
  2. An assignee who has become a limited partner has, to the extent assigned, the rights and powers, and is subject to the restrictions and liabilities, of a limited partner under the partnership agreement and this chapter. An assignee who becomes a limited partner also is liable for the obligations of his or her assignor to make and return contributions as provided in subchapters 5 and 6 of this title. However, the assignee is not obligated for liabilities unknown to the assignee at the time he or she became a limited partner.
  3. If an assignee of a partnership interest becomes a limited partner, the assignor is not released from his or her liability to the limited partnership under sections 3417 and 3442 of this title.

    Added 1997, No. 149 (Adj. Sess.), § 4, eff. Jan. 1, 1999.

History

Effective date. 1997, No. 149 , § 6 makes this section effective on January 1, 1999, and further provides that this section applies only to assignments made after January 1, 1999.

§ 3465. Power of estate of deceased or partner who is incompetent.

If a partner who is an individual dies or a court of competent jurisdiction adjudges him or her to be incompetent to manage his or her person or his or her property, the partner's executor, administrator, guardian, conservator, or other legal representative may exercise all of the partner's rights for the purpose of settling his or her estate or administering his or her property, including any power the partner had to give an assignee the right to become a limited partner. If a partner is a corporation, trust, or other entity and is dissolved or terminated, the powers of that partner may be exercised by its legal representative or successor.

Added 1997, No. 149 (Adj. Sess.), § 4, eff. Jan. 1, 1999; amended 2013, No. 96 (Adj. Sess.), § 41.

History

Amendments--2013 (Adj. Sess.). Catchline: Substituted "partner who is incompetent" for "incompetent partner".

Subchapter 8. Dissolution

§ 3471. Nonjudicial dissolution.

A limited partnership is dissolved and its affairs shall be wound up upon the happening of the first to occur of the following:

  1. at the time specified in the certificate of limited partnership;
  2. upon the happening of events specified in writing in the partnership agreement;
  3. written consent of all partners;
  4. an event of withdrawal of a general partner unless at the time there is at least one other general partner and the written provisions of the partnership agreement permit the business of the limited partnership to be carried on by the remaining general partner and that partner does so, but the limited partnership is not dissolved and is not required to be wound up by reason of any event of withdrawal if, within 90 days after the withdrawal, all partners agree in writing to continue the business of the limited partnership and to the appointment of one or more additional general partners if necessary or desired; or
  5. entry of a decree of judicial dissolution under section 3472 of this title.

    Added 1997, No. 149 (Adj. Sess.), § 4, eff. Jan. 1, 1999.

§ 3472. Judicial dissolution.

On application by or for a partner the Superior Court may decree dissolution of a limited partnership whenever it is not reasonably practicable to carry on the business in conformity with the partnership agreement. Venue for such a proceeding lies in the county where the partnership's principal office is or was located.

Added 1997, No. 149 (Adj. Sess.), § 4, eff. Jan. 1, 1999.

§ 3473. Winding up.

Except as provided in the partnership agreement, the general partners who have not wrongfully dissolved a limited partnership or, if none, the limited partners, may wind up the limited partnership's affairs; but the Superior Court may wind up the limited partnership's affairs upon application of any partner, his or her legal representative, or assignee. Venue for such a proceeding lies in the county where the partnership's principal office is or was located.

Added 1997, No. 149 (Adj. Sess.), § 4, eff. Jan. 1, 1999.

§ 3474. Distribution of assets.

Upon the winding up of a limited partnership, the assets shall be distributed as follows:

  1. to creditors, including partners who are creditors, to the extent permitted by law, in satisfaction of liabilities of the limited partnership other than liabilities for distributions to partners under section 3451 or 3454 of this title;
  2. except as provided in the partnership agreement, to partners and former partners in satisfaction of liabilities for distributions under section 3451 or 3454 of this title; and
  3. except as provided in the partnership agreement, to partners first for the return of their contributions and secondly respecting their partnership interests, in the proportions in which the partners share in distributions.

    Added 1997, No. 149 (Adj. Sess.), § 4, eff. Jan. 1, 1999.

History

Application. 1997, No. 149 (Adj. Sess.), which enacted this chapter, provides in § 6(d), in part: "Unless otherwise agreed by the partners, the applicable provisions of chapter 11 of Title 11 in effect immediately prior to the effective date of this act governing ... distributions of assets upon the winding up of a limited partnership (rather than the provisions of section 3474 of Title 11) shall govern limited partnerships formed before the effective date of this act [January 1, 1999]."

Subchapter 9. Foreign Limited Partnerships

§ 3481. Law governing.

Subject to the constitution of this State, the laws of the state under which a foreign limited partnership is organized govern its organization and internal affairs and the liability of its limited partners, and a foreign limited partnership may not be denied registration by reason of any difference between those laws and the laws of this State.

Added 1997, No. 149 (Adj. Sess.), § 4, eff. Jan. 1, 1999.

§ 3482. Registration.

Before transacting business in this State, a foreign limited partnership shall register with the Secretary of State. In order to register, a foreign limited partnership shall submit to the Secretary of State, in duplicate, an application for registration as a foreign limited partnership, signed and sworn to by a general partner and setting forth:

  1. the name of the foreign limited partnership and, if different, the name under which it proposes to register and transact business in this State;
  2. the state and date of its formation;
  3. the name and address of any agent for service of process on the foreign limited partnership whom the foreign limited partnership elects to appoint; the agent must be an individual resident of this State, a domestic corporation, or a foreign corporation having a place of business in, and authorized to do business in, this State;
  4. a statement that the Secretary of State is appointed the agent of the foreign limited partnership for service of process if no agent has been appointed under subdivision (3) of this section or, if appointed, the agent's authority has been revoked or if the agent cannot be found or served with the exercise of reasonable diligence;
  5. the address of the office required to be maintained in the state of its organization by the laws of that state or, if not so required, of the principal office of the foreign limited partnership;
  6. the name and business address of each general partner; and
  7. the address of the office at which is kept a list of the names and addresses of the limited partners and their capital contributions, together with an undertaking by the foreign limited partnership to keep those records until the foreign limited partnership's registration in this State is canceled or withdrawn.

    Added 1997, No. 149 (Adj. Sess.), § 4, eff. Jan. 1, 1999.

§ 3483. Issuance of registration.

  1. If the Secretary of State finds that an application for registration conforms to law and all requisite fees have been paid, he or she shall:
    1. endorse on the application the word "Filed," and the month, day, and year of the filing thereof;
    2. file in his or her office a duplicate original of the application; and
    3. issue a certificate of registration to transact business in this State.
  2. The certificate of registration, together with a duplicate original of the application, shall be returned to the person who filed the application or his or her representative.

    Added 1997, No. 149 (Adj. Sess.), § 4, eff. Jan. 1, 1999.

§ 3484. Name.

A foreign limited partnership may register with the Secretary of State under any name, whether or not it is the name under which it is registered in its state of organization, and it:

  1. shall contain the words "Limited Partnership," or the letters "L.P.";
  2. may not contain the name of a limited partner unless it is also the name of a general partner or the corporate name of a corporate general partner, or the business of the limited partnership had been carried on under the name before the admission of that limited partner;
  3. shall be distinguishable in the records of the Secretary of State from the name of any corporation, limited liability company, limited liability partnership, or limited partnership organized under the laws of the State or licensed or registered as a foreign corporation, limited liability company, limited liability partnership, or limited partnership in this State; and
  4. may not contain the following words: "corporation," "incorporated," "limited by itself," "limited liability company," "limited company," or the abbreviations "corp.," "inc.," or "ltd."

    Added 1997, No. 149 (Adj. Sess.), § 4, eff. Jan. 1, 1999; amended 2015, No. 17 , § 7.

History

Amendments--2015. Subdiv. (3): Substituted "shall be distinguishable in the records of the Secretary of State from" for "may not be the same as, or deceptively similar to".

§ 3485. Changes and amendments.

If any statement in the application for registration of a foreign limited partnership was false when made or any arrangements or other facts described have changed, making the application inaccurate in any respect, the foreign limited partnership shall promptly file in the Office of the Secretary of State a certificate, signed and sworn to by a general partner, correcting such statement.

Added 1997, No. 149 (Adj. Sess.), § 4, eff. Jan. 1, 1999.

§ 3486. Cancellation of registration.

A foreign limited partnership may cancel its registration by filing with the Secretary of State a certificate of cancellation signed and sworn to by a general partner. A cancellation does not terminate the authority of the Secretary of State to accept service of process on the foreign limited partnership with respect to claims for relief or causes of action arising out of the transaction of business in this State.

Added 1997, No. 149 (Adj. Sess.), § 4, eff. Jan. 1, 1999.

§ 3487. Transaction of business without registration.

    1. A foreign limited partnership transacting business in this State may not maintain an action or proceeding or raise a counterclaim, crossclaim, or affirmative defense in this State until it has registered in this State. (a) (1)  A foreign limited partnership transacting business in this State may not maintain an action or proceeding or raise a counterclaim, crossclaim, or affirmative defense in this State until it has registered in this State.
    2. The successor to a foreign limited partnership that transacted business in this State without a certificate of authority and the assignee of a cause of action arising out of that business may not maintain a proceeding or raise a counterclaim, crossclaim, or affirmative defense based on that cause of action in any court in this State until the foreign limited partnership or its successor or assignee obtains a certificate of authority.
  1. The failure of a foreign limited partnership to register in this State does not impair the validity of any contract or act of the foreign limited partnership or prevent the foreign limited partnership from defending any action, suit, or proceeding in any court of this State.
  2. A limited partner of a foreign limited partnership is not liable as a general partner of the foreign limited partnership solely by reason of having transacted business in this State without registration.
  3. A foreign limited partnership, by transacting business in this State without registration, appoints the Secretary of State as its agent for service of process with respect to claims for relief and causes of action arising out of the transaction of business in this State.
  4. A foreign limited partnership that transacts business in this State without a registration shall be liable to the State for:
    1. a civil penalty of $50.00 for each day, not to exceed a total of $10,000.00 for each year, it transacts business in this State without a registration;
    2. an amount equal to the fees due under this chapter during the period it transacted business in this State without a registration; and
    3. other penalties imposed by law.

      Added 1997, No. 149 (Adj. Sess.), § 4, eff. Jan. 1, 1999; amended 2015, No. 128 (Adj. Sess.), § C.6.

History

Amendments--2015 (Adj. Sess.). Subsec. (a): Redesignated existing text as subdiv. (a)(1), and inserted "or raise a counterclaim, cross claim, or affirmative defense" following "action or proceeding".

Subdiv. (a)(2): Added.

Subsec. (e): Added.

§ 3488. Action by Attorney General.

The Attorney General may bring an action in the Civil Division of the Superior Court to collect the penalties imposed under section 3487 of this title and to restrain a foreign limited partnership from transacting business in this State in violation of this subchapter.

Added 1997, No. 149 (Adj. Sess.), § 4, eff. Jan. 1, 1999; amended 2015, No. 128 (Adj. Sess.), § C.7.

History

Amendments--2015 (Adj. Sess.). Inserted "in the Civil Division of the Superior Court to collect the penalties imposed under section 3487 of this title and" following "bring an action".

Subchapter 10. Derivative Actions

§ 3491. Right of action.

A limited partner may bring an action in the right of a limited partnership to recover a judgment in its favor if general partners with authority to do so have refused to bring the action or if an effort to cause those general partners to bring the action is not likely to succeed.

Added 1997, No. 149 (Adj. Sess.), § 4, eff. Jan. 1, 1999.

§ 3492. Proper plaintiff.

In a derivative action, the plaintiff must be a partner at the time of bringing the action and must have been a partner at the time of the transaction of which he or she complains or his or her status as a partner must have devolved upon him or her by operation of law or pursuant to the terms of the partnership agreement from a person who was a partner at the time of the transaction.

Added 1997, No. 149 (Adj. Sess.), § 4, eff. Jan. 1, 1999.

§ 3493. Pleading.

In a derivative action, the complaint shall set forth with particularity the effort of the plaintiff to secure initiation of the action by a general partner or the reasons for not making the effort.

Added 1997, No. 149 (Adj. Sess.), § 4, eff. Jan. 1, 1999.

§ 3494. Expenses.

If a derivative action is successful, in whole or in part, or if anything is received by the plaintiff as a result of a judgment, compromise, or settlement of an action or claim, the court may award the plaintiff reasonable expenses, including reasonable attorney's fees, and shall direct him or her to remit to the limited partnership the remainder of those proceeds received by him or her.

Added 1997, No. 149 (Adj. Sess.), § 4, eff. Jan. 1, 1999.

Subchapter 11. Miscellaneous

§ 3501. Construction and application.

This chapter shall be so applied and construed to effectuate its general purpose to make uniform the law with respect to the subject of this chapter among states enacting it.

Added 1997, No. 149 (Adj. Sess.), § 4, eff. Jan. 1, 1999.

§ 3502. Rules for cases not provided for in this chapter.

In any case not provided for in this chapter the provisions of the Uniform Partnership Act govern.

Added 1997, No. 149 (Adj. Sess.), § 4, eff. Jan. 1, 1999.

§ 3503. Savings clause.

The repeal of any statutory provision by this act does not impair, or otherwise affect, the organization or the continued existence of a limited partnership existing at the effective date of this act, nor does the repeal of any existing statutory provision by this act impair any contract or affect any right accrued before the effective date of this act.

Added 1997, No. 149 (Adj. Sess.), § 4, eff. Jan. 1, 1999.

CHAPTER 25. LIMITED LIABILITY COMPANIES

History

Effective date and applicability. 2015, No. 17 , § 12(c)-(f) provides: "(c) Sec. 2 [which enacted this chapter] shall take effect on July 1, 2015, and apply only to:

"(1) a limited liability company formed on or after July 1, 2015; and

"(2) except as otherwise provided in subsection (f) of this section, a limited liability company formed before July 1, 2015 that elects, in the manner provided in its operating agreement or by law for amending the operating agreement, to be subject to this act.

"(d) This act does not affect an action commenced, a proceeding brought, or a right accrued before July 1, 2015.

"(e) Except as otherwise provided in subsection (f) of this section, Sec. 2 shall apply to all limited liability companies on and after July 1, 2016.

"(f) For the purposes of applying Sec. 2 to a limited liability company formed before July 1, 2015, for the purposes of applying 11 V.S.A. § 4023 and subject to 11 V.S.A. § 4003, language in the company's articles of organization designating the company's management structure operates as if that language were in the operating agreement."

Subchapter 1. General Provisions

§ 4001. Definitions.

As used in this chapter:

  1. "Articles of organization" means initial, amended, and restated articles of organization and articles of merger. In the case of a foreign limited liability company, the term includes all documents serving a similar function required to be filed in the Office of the Secretary of State, or comparable office, of the company's jurisdiction of organization.
  2. "Business" includes every trade, occupation, profession, and other lawful purpose, whether or not carried on for profit.
  3. "Debtor in bankruptcy" means a person who is the subject of an order for relief under Title 11 of the U.S. Code or a comparable order under a successor statute of general application or a comparable order under federal, state, or foreign law governing insolvency.
  4. "Delivery" means transmission by surface mail or by a method of electronic transmission the Secretary of State may prescribe.
  5. "Designated office" means the office of a limited liability company designated pursuant to section 4007 of this title or the principal office of a foreign limited liability company.
  6. "Dissolution" means an event under section 4101 of this title which requires a limited liability company to wind up its affairs and to terminate its existence as a legal entity.
  7. "Dissociation" means a complete termination of a member's continued membership in a limited liability company for any reason.
  8. "Distribution" means a transfer of money or property from a limited liability company to a member in the member's capacity as a member or to a transferee of the member's distributional interest.
  9. "Distributional interest" means the right of a member or transferee to receive a distribution from a limited liability company.
  10. "Document" means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form.
  11. "Entity" means a person other than an individual.
  12. "Foreign limited liability company" means an unincorporated entity organized under laws, other than the laws of this State, which afford limited liability to its owners comparable to the liability under section 4042 of this title.
  13. "Limited liability company" or "company," except in the phrase "foreign limited liability company," means an organization formed under this chapter or subject to this chapter following a merger, conversion, or domestication pursuant to subchapter 10 of this chapter.
  14. "L3C" or "low-profit limited liability company" means a limited liability company that elects to be a low-profit limited liability company pursuant to section 4161 of this title and meets the requirements of section 4162 of this title.
  15. "Manager" means a person that under the operating agreement of a manager-managed limited liability company is responsible, alone or in concert with others, for performing the management functions stated in subsection 4054(c) of this title.
  16. "Manager-managed limited liability company" means a limited liability company that qualifies under subsection 4054(a) of this title.
  17. "Meeting" means any structured communication conducted by participants in person or through an electronic or telecommunications medium that permits simultaneous or sequentially structured communications.
  18. "Member" means a person that has become a member of a limited liability company under section 4051 of this title and has not dissociated under section 4081 of this title.
  19. "Member-managed limited liability company" means a limited liability company that is not a manager-managed limited liability company.
  20. "Operating agreement" means any form of description of membership rights and obligations under section 4003 of this title, stored or depicted in any tangible or electronic medium, which is agreed to by the members, including amendments to the agreement.
  21. "Record," used as a noun, means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form.
  22. "Sign" means, with the present intent to authenticate or adopt a record:
    1. to execute or adopt a tangible symbol; or
    2. to attach or to logically associate with the record an electronic symbol, sound, or process.
  23. "State" means a state of the United States, the District of Columbia, the Commonwealth of Puerto Rico, or any territory or insular possession subject to the jurisdiction of the United States.
  24. "Transfer" includes an assignment, a conveyance, a sale, a lease, an encumbrance, including a mortgage or security interest, a gift, and a transfer by operation of law.
  25. "Writing" means a written communication, including a letter, fax, e-mail, or other electronic format that may be prescribed by the Secretary of State.

    Added 2015, No. 17 , § 2.

§ 4002. Knowledge and notice.

  1. A person knows a fact if the person has actual knowledge of it.
  2. A person has notice of a fact if the person:
    1. has received a notification of the fact;
    2. has reason to know of the fact from all of the facts known to the person at the time in question; or
    3. is deemed to have notice of the fact under subsection (d) of this section.
  3. A person notifies or gives a notification of a fact to another by taking steps reasonably required to inform the other person in the ordinary course, whether or not they cause the other person to know the fact.
  4. In the case of a limited liability company's dissolution, termination, or merger or conversion, a person who is not a member of the company is deemed to have notice as follows:
    1. for a dissolution, 90 days after a statement of dissolution under section 4103 of this title becomes effective;
    2. for a termination, 90 days after the articles of termination under section 4105 of this title become effective; and
    3. for a merger or conversion, upon the effective date of articles of merger or a statement of conversion filed with the Secretary of State.
  5. A person receives a notification when the notification:
    1. comes to the person's attention; or
    2. is delivered at the person's place of business or at any other place held out by the person as a place for receiving communications.
  6. A member's knowledge, notice, or receipt of a notification of a fact in the member's capacity as a member does not impute knowledge, notice, or receipt of notification of the fact to the limited liability company.

    Added 2015, No. 17 , § 2.

§ 4003. Effect of operating agreement; nonwaivable provisions.

  1. Except as otherwise provided in subsection (b) of this section, an operating agreement regulates the affairs of the company and the conduct of its business and governs relations among the members, among the managers, and among the members, managers, and the limited liability company. To the extent the operating agreement does not otherwise provide, this chapter regulates the affairs of the company, the conduct of its business, and governs relations among the members, among the managers, and among members, managers, and the limited liability company.
  2. An operating agreement may not:
    1. vary a limited liability company's capacity under subsection 4011(e) of this title to sue and be sued in its own name;
    2. except as provided in subchapter 8 of this chapter, vary the law applicable under subsection 4011(g) of this title;
    3. vary the power of the court under section 4030 of this title;
    4. subject to subsections (c) through (f) of this section, eliminate or restrict the duty of loyalty, the duty of care, or any other fiduciary duty;
    5. subject to subsections (c) through (f) of this section, eliminate or restrict the contractual obligation of good faith and fair dealing under subsection 4059(d) of this title;
    6. unreasonably restrict the duties and rights with respect to books, records, and other information stated in section 4058 of this title, but the operating agreement may impose reasonable restrictions on the availability and use of information obtained under that section and may define appropriate remedies, including liquidated damages, for a breach of any reasonable restriction on use;
    7. vary the power of a court to decree dissolution in the circumstances specified in subdivision 4101(a)(4) of this title;
    8. vary the requirement to wind up a limited liability company's business as specified in section 4101 of this title;
    9. unreasonably restrict the right of a member to maintain an action under subchapter 9 of this chapter;
    10. restrict the right to approve a merger, conversion, or domestication under section 4152 of this title to a member that will have personal liability with respect to a surviving, converted, or domesticated organization; or
    11. restrict the rights under this title of a person other than a member, manager, or transferee of any interest in a limited liability company.
  3. Unless unreasonable, the operating agreement may:
    1. restrict the duty:
      1. as required in subdivision 4059(b)(1) and subsection 4059(h) of this title, to account to the limited liability company and to hold as trustee for it any property, profit, or benefit derived by the member in the conduct or winding up of the company's business, from a use by the member of the company's property, or from the appropriation of a limited liability company opportunity;
      2. as required in subdivision 4059(b)(2) and subsection 4059(h) of this title, to refrain from dealing with the company in the conduct or winding up of the company's business as or on behalf of a party having an interest adverse to the company; and
      3. as required in subdivision 4059(b)(3) and subsection 4059(h) of this title, to refrain from competing with the company in the conduct of the company's business before the dissolution of the company;
    2. identify the specific types or categories of activities that do not violate the duty of loyalty;
    3. alter the duty of care, except to authorize intentional misconduct or knowing violation of law;
    4. alter any other fiduciary duty, including eliminating particular aspects of that duty; and
    5. prescribe the standards by which to measure the performance of the contractual obligation of good faith and fair dealing under subsection 4059(d) of this title.
  4. The operating agreement may specify the method by which a specific act or transaction that would otherwise violate the duty of loyalty may be authorized or ratified by one or more disinterested and independent persons after full disclosure of all material facts.
  5. To the extent the operating agreement of a member-managed limited liability company expressly relieves a member of a responsibility that the member would otherwise have under this chapter and imposes the responsibility on one or more other members, the operating agreement may, to the benefit of the member that the operating agreement relieves of the responsibility, also eliminate or limit any fiduciary duty that would have pertained to the responsibility.
  6. The operating agreement may alter or eliminate the indemnification for a member or manager provided by section 4060 of this title and may eliminate or limit a member or manager's liability to the limited liability company and members for money damages, except for:
    1. breach of the duty of loyalty;
    2. a financial benefit received by the member or manager to which the member or manager is not entitled;
    3. a breach of a duty under subsection 4059(d) of this title;
    4. intentional infliction of harm on the company or a member; or
    5. an intentional violation of criminal law.
    1. The court shall decide any claim under subsection (c) of this section that a term of an operating agreement is manifestly unreasonable. (g) (1)  The court shall decide any claim under subsection (c) of this section that a term of an operating agreement is manifestly unreasonable.
    2. The court:
      1. shall make its determination as of the time the challenged term became part of the operating agreement and by considering only circumstances existing at that time; and
      2. may invalidate the term only if, in light of the purposes and activities of the limited liability company, it is readily apparent that:
        1. the objective of the term is unreasonable; or
        2. the term is an unreasonable means to achieve the provision's objective.
  7. A limited liability company is bound by and may enforce the operating agreement, whether or not the company has itself manifested assent to the operating agreement.
  8. A person that becomes a member of a limited liability company is deemed to assent to the operating agreement.
    1. Two or more persons intending to become the initial members of a limited liability company may make an agreement providing that upon the formation of the company the agreement will become the operating agreement. (j) (1)  Two or more persons intending to become the initial members of a limited liability company may make an agreement providing that upon the formation of the company the agreement will become the operating agreement.
    2. One person intending to become the initial member of a limited liability company may assent to terms providing that upon the formation of the company the terms will become the operating agreement.
    1. An operating agreement may specify that its amendment requires the approval of a person that is not a party to the operating agreement or the satisfaction of a condition. (k) (1)  An operating agreement may specify that its amendment requires the approval of a person that is not a party to the operating agreement or the satisfaction of a condition.
    2. An amendment is ineffective if its adoption does not include the required approval or satisfy the specified condition.
    1. The obligations of a limited liability company and its members to a person in the person's capacity as a transferee or dissociated member are governed by the operating agreement. (l) (1)  The obligations of a limited liability company and its members to a person in the person's capacity as a transferee or dissociated member are governed by the operating agreement.
    2. Subject only to any court order issued under subdivision 4074(b)(2) of this title to effectuate a charging order, an amendment to the operating agreement made after a person becomes a transferee or dissociated member is effective with regard to any debt, obligation, or other liability of the limited liability company or its members to the person in the person's capacity as a transferee or dissociated member.
  9. If a record that has been delivered by a limited liability company to the Secretary of State for filing and has become effective under this chapter contains a provision that would be ineffective under subsection (b) of this section if contained in the operating agreement, the provision is likewise ineffective in the record.
  10. Subject to subsection (c) of this section, if a record that has been delivered by a limited liability company to the Secretary of State for filing and has become effective under this title conflicts with a provision of the operating agreement:
    1. the operating agreement prevails as to members, dissociated members, transferees, and managers; and
    2. the record prevails as to other persons to the extent they reasonably rely on the record.

      Added 2015, No. 17 , § 2; amended 2015, No. 97 (Adj. Sess.), § 42; 2015, No. 157 (Adj. Sess.), § E.3.

History

Amendments--2015 (Adj. Sess.). Subdiv. (b)(8): Act Nos. 97 and 157 substituted "section 4101" for "section 4102".

Effective date and applicability of 2015 (Adj. Sess.) amendment. 2015, No. 157 (Adj. Sess.), § U.1(d) provides: "(1) Notwithstanding 1 V.S.A. § 214, Sec. E.3 (technical corrections to LLC Act) [which amended this section and 11 V.S.A. §§ 4141, 4142, and 4149] shall take effect retroactively as of July 1, 2015, and apply only to:

"(A) a limited liability company formed on or after July 1, 2015; and

"(B) except as otherwise provided in subdiv. (4) of this subsec., a limited liability company formed before July 1, 2015 that elects, in the manner provided in its operating agreement or by law for amending the operating agreement, to be subject to this act.

"(2) Sec. E.3 does not affect an action commenced, a proceeding brought, or a right accrued before July 1, 2015.

"(3) Except as otherwise provided in subdiv.(4) of this subsec., Sec. E.3 shall apply to all limited liability companies on and after July 1, 2016.

"(4) For the purposes of applying Sec. E.3 to a limited liability company formed before July 1, 2015, for the purposes of applying 11 V.S.A. § 4023 and subject to 11 V.S.A. § 4003, language in the company's articles of organization designating the company's management structure operates as if that language were in the operating agreement."

§ 4004. Supplemental principles of law.

  1. Unless displaced by particular provisions of this chapter, the principles of law and equity supplement this chapter.
  2. If an obligation to pay interest arises under this chapter and the rate is not specified, the rate shall be 12 percent per annum computed by the actuarial method.

    Added 2015, No. 17 , § 2.

§ 4005. Name.

    1. Except for a low-profit limited liability company, the name of a limited liability company as set forth in its articles of organization shall contain the words "limited liability company" or "limited company" or the abbreviation "L.L.C.," "LLC," "L.C.," or "LC." The word "limited" may be abbreviated as "Ltd." and "company" may be abbreviated as "Co." in a limited liability company name. (a) (1)  Except for a low-profit limited liability company, the name of a limited liability company as set forth in its articles of organization shall contain the words "limited liability company" or "limited company" or the abbreviation "L.L.C.," "LLC," "L.C.," or "LC." The word "limited" may be abbreviated as "Ltd." and "company" may be abbreviated as "Co." in a limited liability company name.
    2. The name of a low-profit limited liability company shall contain the abbreviation L3C.
  1. Unless authorized under subsection (c) of this section, the name of a limited liability company shall be distinguishable in the records of the Secretary of State from:
    1. the name of each person that is not an individual and that is incorporated, organized, or authorized to transact business in this State; and
    2. each name reserved under:
      1. sections 1621a, 4006, and 3403 of this title;
      2. 11A V.S.A. § 4.02;
      3. 11B V.S.A. § 4.02; and
      4. 11C V.S.A. § 112.
  2. A person may apply to the Secretary of State for authorization to use a name that does not comply with subsection (b) of this section. The Secretary of State shall authorize use of the name applied for if, as to each noncomplying name:
    1. the present user, registrant, or owner of the name consents to the applicant's use of the name in a signed record and submits an undertaking in a form satisfactory to the Secretary of State to change its name to a new name that complies with subsection (b) of this section; or
    2. the applicant delivers to the Secretary of State a certified copy of the final judgment of a court of competent jurisdiction establishing the applicant's right to use in this State the name applied for.
  3. Subject to section 4116 of this title, this section applies to a foreign limited liability company transacting business in this State that has a certificate of authority to transact business in this State or which has applied for a certificate of authority.
  4. A person intending to operate a postsecondary school, as defined in 16 V.S.A. §§ 176 and 176a, shall apply for a certificate of approval from the State Board of Education prior to registering a name under this section.

    Added 2015, No. 17 , § 2.

§ 4006. Reserved name.

    1. A person may reserve the exclusive use of the name of a limited liability company, including a fictitious or assumed name for a foreign limited liability company whose name is not available, by delivering an application to the Secretary of State for filing. (a) (1)  A person may reserve the exclusive use of the name of a limited liability company, including a fictitious or assumed name for a foreign limited liability company whose name is not available, by delivering an application to the Secretary of State for filing.
    2. The application shall state the name and address of the applicant and the name proposed to be reserved.
    3. If the Secretary of State finds that the name applied for is available, the Secretary shall reserve that name for the applicant's exclusive use for a 120-day period.
  1. The owner of a reserved limited liability company name may renew the reservation for successive periods of 120 days each by delivering a renewal application to the Secretary of State during the 45-day period preceding the date of expiration of the reservation.
  2. The owner of a name reserved for a limited liability company may assign the reservation to another person by delivering to the Secretary of State for filing a signed notice of the assignment that states the name and address of the assignee.
  3. The owner of a reserved limited liability company name may terminate the name reservation by delivering to the Secretary of State for filing a signed notice of withdrawal of name reservation.

    Added 2015, No. 17 , § 2.

§ 4007. Designated office and agent.

  1. A limited liability company and a foreign limited liability company authorized to do business in this State shall designate and continuously maintain:
    1. a designated office for notification purposes, which may but need not be a place of its business, and may but need not be located in this State; and
    2. an agent and street address of the agent for service of process on the limited liability company in this State.
  2. An agent for service of process shall be an individual resident of this State, a domestic corporation, another limited liability company, or a foreign corporation or foreign limited liability company authorized to do business in this State.

    Added 2015, No. 17 , § 2.

§ 4008. Change of designated office or agent for service of process.

  1. A limited liability company or foreign limited liability company may change its designated office or agent for service of process by delivering to the Secretary of State for filing a statement of change that sets forth:
    1. the name of the company;
    2. the street address, and the mailing address if different from the street address, of its current designated office;
    3. if the current designated office is to be changed, the street address, and the mailing address if different from the street address, of the new designated office;
    4. the name and address of its current agent for service of process; and
    5. if the current agent for service of process is to be changed, the name of the new agent for service of process and the new agent's written consent, either on the statement or attached to it, to the appointment.
  2. If an agent for service of process changes the street address of the agent's business office, the agent may change the street address of the designated office of any limited liability company or foreign limited liability company for which the agent is the agent for service of process by notifying the company in writing of the change and signing, either manually or in facsimile, and filing with the Secretary of State a statement that complies with the requirements of subsection (a) of this section and recites that the company has been notified of the change.

    Added 2015, No. 17 , § 2.

§ 4009. Resignation of agent for service of process.

  1. To resign as an agent for service of process of a limited liability company or foreign limited liability company, the agent shall deliver to the Secretary of State for filing a statement of resignation containing the company name and stating that the agent is resigning.
  2. The Secretary of State shall file a statement of resignation delivered under subsection (a) of this section and mail or otherwise deliver a copy to the designated office of the limited liability company.
  3. An agency for service of process terminates on the earlier of:
    1. the 41st day after the Secretary of State files the statement of resignation; or
    2. when a record designating a new agent for service of process is delivered to the Secretary of State for filing on behalf of the limited liability company and becomes effective.

      Added 2015, No. 17 , § 2.

§ 4010. Service of process.

  1. An agent for service of process appointed by a limited liability company or a foreign limited liability company is an agent of the company for service of any process, notice, or demand required or permitted by law to be served upon the company.
  2. If a limited liability company or foreign limited liability company fails to appoint or maintain an agent for service of process in this State or the agent for service of process cannot with reasonable diligence be found at the agent's address, the Secretary of State is an agent of the company upon whom process, notice, or demand may be served.
  3. Service of any process, notice, or demand on the Secretary of State may be made by delivering to and leaving with the Secretary of State duplicate copies of the process, notice, or demand. If the process, notice, or demand is served on the Secretary of State, the Secretary of State shall forward one of the copies by registered or certified mail, return receipt requested, to the company at its registered office. Service on the Secretary of State shall be returnable in not less than 30 days.
  4. The Secretary of State shall keep a record of all processes, notices, and demands served pursuant to this section and record the time of and the action taken regarding the service.
  5. This section shall not affect the right to serve process, notice, or demand upon a limited liability company or foreign limited liability company in any manner otherwise provided by law.

    Added 2015, No. 17 , § 2.

§ 4011. Nature of business and powers; governing law.

  1. A limited liability company is an entity distinct from its members.
  2. A limited liability company may have any lawful purpose, regardless of whether for profit.
  3. A limited liability company has perpetual duration.
    1. A limited liability company or a foreign limited liability company engaging in a business subject to any other provisions of law of this State governing or regulating business may be formed or authorized to transact business under this chapter only if permitted by, and subject to all limitations of, the other statute. (d) (1)  A limited liability company or a foreign limited liability company engaging in a business subject to any other provisions of law of this State governing or regulating business may be formed or authorized to transact business under this chapter only if permitted by, and subject to all limitations of, the other statute.
    2. The following shall not be formed or authorized to transact business under this chapter:
      1. a credit union regulated under Title 8;
      2. an insurance company regulated under Title 8, except that a captive insurance company regulated under 8 V.S.A. chapter 141 may be formed as a limited liability company;
      3. a railroad company regulated under Title 19.
  4. A limited liability company shall possess and may exercise all the powers and privileges granted by this chapter, any other law, its articles of organization, or its operating agreement, together with any powers incidental thereto, so far as the powers and privileges are necessary or convenient to the conduct, promotion, or attainment of the business purposes or activities of the limited liability company, including power to sue and to be sued, complain and defend in its company name, and the power to do all things necessary or convenient to carry on its activities.
  5. The law of this State governs:
    1. the internal affairs of a limited liability company; and
    2. the liability of a member as member and a manager as manager for the debts, obligations, or other liabilities of a limited liability company.
    1. Notwithstanding the provisions of subsections (a) and (b) of this section, a limited liability company or foreign limited liability company shall engage in rendering professional services only to the extent that, and subject to the conditions and limitations under which, a professional corporation may engage in rendering professional services under chapter 4 of this title. (g) (1)  Notwithstanding the provisions of subsections (a) and (b) of this section, a limited liability company or foreign limited liability company shall engage in rendering professional services only to the extent that, and subject to the conditions and limitations under which, a professional corporation may engage in rendering professional services under chapter 4 of this title.
    2. For purposes of applying the provisions, conditions, and limitations of chapter 4 of this title, unless the licensing laws of this State expressly prohibit the provision of professional services by domestic and foreign limited liability companies:
      1. unless the context clearly requires otherwise, references to 11A V.S.A. chapters 1-20, relating to business corporations shall be treated as references to this chapter, and references to a "corporation" shall be treated as references to a limited liability company or foreign limited liability company;
      2. the members shall be treated in the same manner as shareholders of a professional corporation;
      3. managers shall be treated in the same manner as directors of a professional corporation;
      4. the persons signing the articles of organization of the company shall be treated in the same manner as the incorporators of a professional corporation; and
      5. the name shall comply with sections 4005 and 4116 of this title and, in addition, shall contain the word "Professional" or the abbreviation "P.L.C.," "PLC," "P.L.L.C.," or "PLLC."

        Added 2015, No. 17 , § 2.

§ 4012. Fees.

  1. The Secretary of State shall collect the following fees when a document described in this section is delivered to the Office of the Secretary of State for filing:
    1. Articles of organization                                       $125.00      (2) Application for certificate of authority                       $125.00      (3) Amendment of articles or certificate of authority               $25.00      (4) Cancellation of certificate of authority                        $20.00      (5) Application for reserved name                                   $20.00      (6) Notice of transfer of reserved name                             No fee      (7) Application for registered name                                 $25.00      (8) Application for renewal of registered name                      $25.00      (9) Statement of change of designated agent or designated            office, or both                                                   $25.00                                                                                 and                                                                              not to                                                                              exceed                                                                           $1,000.00                                                                                 per                                                                         filer                                                                                 per                                                                              calen-                                                                                 dar                                                                                year      (10) Agent's statement of resignation                               no fee      (11) Restatement of articles of organization                        $25.00      (12) Articles of correction                                         $25.00      (13) Application for certificate of existence or authorization      $25.00      (14) Articles of merger                                             $50.00      (15) Annual report of a domestic limited liability company          $35.00      (16) Annual report of a foreign limited liability company          $140.00      (17) Reinstatement                                                  $25.00      (18) Any other document required or permitted to be            filed by this chapter                                             $20.00
  2. The Secretary of State shall collect the following fees:
    1. $25.00 each time process is served on the Secretary under this chapter. The party to a proceeding causing service of process is entitled to recover this fee as costs if he or she prevails in the proceeding.
    2. $25.00 for the certificate certifying the copy of any filed document relating to a limited liability company or a foreign limited liability company.

      Added 2015, No. 17 , § 2.

Subchapter 2. Organization

§ 4021. Limited liability company as legal entity.

A limited liability company is a legal entity distinct from its members.

Added 2015, No. 17 , § 2.

§ 4022. Organization.

  1. One or more persons may organize a limited liability company, consisting of one or more members, by delivering articles of organization to the Office of the Secretary of State for filing. The organizers need not be members of the limited liability company at the time of formation or after formation has occurred.
  2. Unless a delayed effective date is specified, the existence of a limited liability company begins when the articles of organization are filed.
  3. The filing of the articles of organization by the Secretary of State is conclusive proof that the organizers satisfied all conditions precedent to the creation of the organization.
  4. The Secretary of State shall maintain a separate record of the number of limited liability companies that deliver articles of organization to the Secretary for filing by electronic transmission.

    Added 2015, No. 17 , § 2.

§ 4023. Articles of organization.

  1. Articles of organization of a limited liability company shall set forth:
    1. the name of the company;
    2. the address of the initial designated office;
    3. the name and street address of the initial agent for service of process;
    4. the name and address of each organizer;
    5. if the company has no members at the time of filing, a statement to that effect; and
    6. whether the company is an L3C.
  2. Articles of organization of a limited liability company may set forth:
    1. provisions permitted to be set forth in an operating agreement; and
    2. other matters not inconsistent with law.
  3. Articles of organization of a limited liability company may not vary the nonwaivable provisions of subsection 4003(b) of this title. As to all other matters, if any provision of an operating agreement is inconsistent with the articles of organization:
    1. the operating agreement controls as to managers, members, and members' transferees; and
    2. the articles of organization control as to persons other than managers, members, and their transferees who relied on the articles to their detriment.

      Added 2015, No. 17 , § 2.

§ 4024. Amendment or restatement of articles of organization.

  1. Articles of organization of a limited liability company may be amended at any time by delivering articles of amendment to the Secretary of State for filing. The articles of amendment shall set forth the:
    1. name of the limited liability company;
    2. date of filing of the articles of organization; and
    3. amendment to the articles.
  2. The articles of organization of a limited liability company may be amended at any time but shall be amended if:
    1. there is a change in the name of the company;
    2. there is a change in any other matter set forth in the articles of organization under subsection 4023(b) of this title; or
    3. the articles of organization contain a false or erroneous statement.
  3. A limited liability company may restate its articles of organization at any time. Restated articles of organization shall be signed and filed in the same manner as articles of amendment. Restated articles of organization shall be designated as such in the heading and state in the heading or in an introductory paragraph the limited liability company's present name and, if it has been changed, all of its former names and the date of the filing of its initial articles of organization.

    Added 2015, No. 17 , § 2.

§ 4025. Signing of documents.

  1. Except as otherwise provided in this chapter, a document to be filed by or on behalf of a limited liability company in the Office of the Secretary of State must be signed in the name of the company by:
    1. a person authorized by the company;
    2. a person organizing the company, if it is the company's initial articles of organization; or
    3. a fiduciary, if the company is in the hands of a receiver, trustee, or other court-appointed fiduciary.
  2. A document signed under subsection (a) of this section shall state adjacent to the signature the name and capacity of the signer.
  3. Any record filed under this chapter may be signed by an agent.
  4. An individual who signs a record authorized or required to be filed under this chapter affirms under penalty of perjury that the information stated in the record is accurate.

    Added 2015, No. 17 , § 2.

§ 4026. Filing in Office of Secretary of State.

  1. The original signed copy, together with a duplicate copy that may be either a signed, photocopied, or conformed copy, of the articles of organization or any other document required to be filed pursuant to this chapter shall be delivered to the Secretary of State. If the Secretary of State determines that a document conforms to the filing provisions of this chapter, the Secretary of State shall, when all required filing fees have been paid:
    1. endorse each signed original and duplicate copy with the word "filed" and the date and time of the acceptance for filing;
    2. retain the signed original in the Office of the Secretary of State; and
    3. return the duplicate copy to the limited liability company or to its representative.
  2. If the Secretary of State is unable to make the determination required under subsection (a) of this section for filing the articles of organization at the time a document is delivered for filing, the document is deemed to have been filed at the time of delivery if the Secretary of State subsequently determines that:
    1. the document as delivered conforms to the filing provisions of this chapter; or
    2. within 20 days after notification of nonconformance is given by the Secretary to the limited liability company or its representative, the document is brought into conformance.
  3. If the filing and determination requirements of this chapter are not satisfied within the time prescribed in subdivision (b)(2) of this section, the document shall not be filed.
  4. A document accepted for filing by the Secretary of State is effective:
    1. on the date it is filed, as evidenced by the Secretary of State maintaining a record of the date and time of the filing;
    2. at the time specified in the document as its effective time; or
    3. on the date and at the time specified in the document if the document specifies a delayed effective date and time.
  5. If a delayed effective date for a document is specified but no time is specified, the document is effective at 12:01 a.m. on that date. A delayed effective date that is later than the 90th day after the document is filed makes the document effective as of the 90th day.
  6. An original copy may consist of an electronic communication received by the Secretary of State's office, endorsement may consist of an attached electronic record, and the delivery of a duplicate may be done electronically.

    Added 2015, No. 17 , § 2.

§ 4027. Correcting filed document.

  1. A limited liability company or foreign limited liability company may correct a document filed by the Secretary of State if the document contains a false or erroneous statement or was defectively signed.
  2. A document is corrected:
    1. by preparing articles of correction that:
      1. describe the document, including its filing date, or attach a copy of it to the articles of correction;
      2. specify the incorrect statement and the reason it is incorrect or the manner in which the signing was defective;
      3. correct the incorrect statement or defective signing; and
    2. by delivering the corrected document to the Secretary of State for filing.
  3. When filed by the Secretary of State, articles of correction filed under subsection (a) of this section are effective retroactively as of the effective date of the record the articles correct, but the articles are effective when filed as to persons that previously relied on the uncorrected record and would be adversely affected by the retroactive effect.

    Added 2015, No. 17 , § 2.

§ 4028. Certificate of existence or authorization.

  1. A person may request the Secretary of State to furnish a certificate of existence for a limited liability company or a certificate of authorization for a foreign limited liability company.
  2. A certificate of existence for a limited liability company shall set forth:
    1. the company's name;
    2. that it is duly organized under the laws of this State and the date of organization; and
    3. that articles of termination have not been filed.
  3. A certificate of authorization for a foreign limited liability company shall set forth:
    1. the company's name used in this State;
    2. that it is authorized to transact business in this State; and
    3. that a certificate of cancellation has not been filed.
  4. Subject to any qualification stated in the certificate, a certificate of existence or authorization issued by the Secretary of State may be relied upon as conclusive evidence that the domestic or foreign limited liability company is in existence or is authorized to transact business in this State.

    Added 2015, No. 17 , § 2.

§ 4029. Liability for false statement in filed document.

If a document filed with the Secretary of State contains a false statement, one who suffers loss by reliance on the statement may recover damages for the loss from a person who signed the document or caused another to sign it on the person's behalf and knew the statement to be false at the time the document was signed.

Added 2015, No. 17 , § 2.

§ 4030. Filing by judicial act.

If a person required by section 4025 of this title to sign any document fails or refuses to do so, any other person who is adversely affected by the failure or refusal may petition the Superior Court to direct the signing of the document. If the Court finds that it is proper for the document to be signed and that a person so designated has failed or refused to sign the document, it shall order the Secretary of State to sign and file an appropriate document.

Added 2015, No. 17 , § 2.

§ 4031. Limited liability company property.

Property transferred to or otherwise acquired by a limited liability company is property of the limited liability company and not of the members individually.

Added 2015, No. 17 , § 2.

ANNOTATIONS

1. Equitable interest.

Avoidance of creditor's lien on debtor's property pursuant to 11 U.S.C.S. § 522(f) was not warranted because debtor's persistent use of the property during the period when his LLC held legal title to the property did not meet the demanding criteria established for equitable title under Vermont law; when debtor acquired the property, he acquired it subject to the creditor's lien, by operation of 27 V.S.A. § 107. In re Hewitt, 576 B.R. 790 (Bankr. D. Vt. 2017).

§ 4032. When property is limited liability company property.

  1. Property is limited liability company property if acquired in the name of:
    1. the limited liability company; or
    2. one or more members with an indication in the instrument transferring title to the property of the person's capacity as a member or of the existence of a limited liability company, but without an indication of the name of the limited liability company.
  2. Property is presumed to be limited liability company property if purchased with limited liability company assets, even if not acquired in the name of the limited liability company or of one or more members with an indication in the instrument transferring title to the property of the person's capacity as a member or of the existence of a limited liability company.
  3. Property acquired in the name of one or more of the members, without an indication in the instrument transferring title to the property of the person's capacity as a member or of the existence of a limited liability company and without use of limited liability company assets, is presumed to be separate property, even if used for limited liability company purposes.

    Added 2015, No. 17 , § 2.

§ 4033. Annual report for Secretary of State.

  1. Each domestic limited liability company and each foreign limited liability company authorized to transact business in this State shall file an annual report with the Secretary of State. The annual report shall set forth the following information:
    1. the name of the company and the state or country under whose law it is organized; and
    2. the address of its designated office and the name of its designated agent at that office in this State.
  2. Information in the annual report shall be current as of the date the annual report is signed on behalf of the company.
  3. The annual report shall be delivered to the Secretary of State within three months after the expiration of the company's fiscal year.

    Added 2015, No. 17 , § 2.

§ 4034. Involuntary termination.

    1. The articles of organization of a limited liability company that fails to file an annual report required by section 4033 of this title shall terminate and the provisions of this section shall apply to the limited liability company. (a) (1)  The articles of organization of a limited liability company that fails to file an annual report required by section 4033 of this title shall terminate and the provisions of this section shall apply to the limited liability company.
    2. The certificate of authority of a foreign limited liability company that fails to file an annual report required by section 4033 of this title shall terminate and the Secretary of State shall notify the company of the termination.
    3. If a company that has had its articles of organization terminated or had its certificate of authority terminated files its annual report together with the annual report filing fee and the reinstatement fee for each year the company failed to file its annual report, its articles of organization or certificate of authority, as the case may be, shall be reinstated by the Secretary of State.
  1. When the reinstatement becomes effective, it relates back to and takes effect as of the effective date of termination of the company's articles of organization or the date the company's certificate of authority was terminated under subsection (a) of this section as if the termination never occurred.
  2. A limited liability company or a foreign limited liability company shall lose the right to retain its name if the annual report required under subsection (a) of this section is not filed on or before five years after the date when the report is due.
  3. Involuntary termination under this section does not:
    1. prevent commencement of a proceeding against the limited liability company or the foreign limited liability company in its company name; provided that a proceeding is subject to dismissal unless the company is reinstated in accordance with subsections (a) and (b) of this section;
    2. abate or suspend a proceeding pending by or against the limited liability company or foreign limited liability company on the effective date of involuntary termination; or
    3. terminate the authority of the designated agent of the limited liability company or foreign limited liability company;
    4. alter the limited liability status of members or managers of the limited liability company or foreign limited liability company; or
    5. impair the validity of acts of the limited liability company during the period between involuntary termination and reinstatement.

      Added 2015, No. 17 , § 2.

Subchapter 3. Relations of Members and Managers to Persons Dealing with Limited Liability Company

§ 4041. No agency power of member as member.

  1. A member is not an agent of a limited liability company solely by reason of being a member.
  2. A person's status as a member does not prevent or restrict law other than this title from imposing liability on a limited liability company because of the person's conduct.

    Added 2015, No. 17 , § 2.

§ 4042. Liability of members and managers.

  1. The debts, obligations, or other liabilities of a limited liability company, whether arising in contract, tort, or otherwise:
    1. are solely the debts, obligations, or other liabilities of the company; and
    2. do not become the debts, obligations, or other liabilities of a member or manager solely by reason of the member acting as a member or the manager acting as a manager.
  2. The failure of a limited liability company to observe any particular formalities relating to the exercise of its power or management of its activities is not a ground for imposing liability on a member or manager for the debts, obligations, or other liabilities of the company.

    Added 2015, No. 17 , § 2.

Subchapter 4. Relations of Members to Each Other and to Limited Liability Company

§ 4051. Becoming a member.

  1. If a limited liability company is to have only one member upon formation, the person becomes a member as agreed by that person and the organizer of the company. That person and the organizer may be, but need not be, different persons. If different, the organizer acts on behalf of the initial member.
  2. If a limited liability company is to have more than one member upon formation, those persons become members as agreed by the persons before the formation of the company. The organizer acts on behalf of the persons in forming the company and may be, but need not be, one of the persons.
  3. If articles of organization filed with the Secretary of State contain the statement required by subdivision 4023(a)(5) of this title, a person becomes an initial member of the limited liability company with the consent of a majority of the organizers. The organizers may consent to more than one person simultaneously becoming the company's initial members.
  4. After formation of a limited liability company, a person becomes a member:
    1. as provided in the operating agreement;
    2. as the result of a transaction effective under subchapter 10 of this chapter;
    3. with the affirmative vote or consent of all the members; or
    4. if, within 90 consecutive days after the company ceases to have any members:
      1. the last person to have been a member or the legal representative of that person designates a person to become a member; and
      2. the designated person consents to become a member.
  5. A person may become a member without acquiring a distributional interest and without making or being obligated to make a contribution to the limited liability company.

    Added 2015, No. 17 , § 2.

§ 4052. Form of contribution.

A contribution may consist of tangible or intangible property or other benefit to the company, including money, promissory notes, services performed, agreements to contribute money or property, or contracts for services to be performed.

Added 2015, No. 17 , § 2.

§ 4053. Member's liability for contributions.

  1. A person's obligation to make a contribution to a limited liability company is not excused by the member's death, disability, or other inability to perform personally. If a person does not make the required contribution, the person's estate is obligated at the option of the company to contribute money equal to that portion of the value of the part of the contribution which has not been made.
  2. A creditor of a limited liability company who extends credit or otherwise acts in reliance on an obligation described in subsection (a) of this section, and without notice of any compromise under subdivision 4054(d)(4) of this title, may enforce the original obligation.

    Added 2015, No. 17 , § 2.

§ 4054. Management of limited liability company.

  1. A limited liability company is a member-managed limited liability company unless the operating agreement:
    1. expressly provides that:
      1. the company is or will be "manager-managed";
      2. the company is or will be "managed by managers"; or
      3. management of the company is or will be "vested in managers"; or
    2. includes words of similar import.
  2. In a member-managed limited liability company:
    1. the management and conduct of the company are vested in the members;
    2. each member has equal rights in the management and conduct of the company's activities; and
    3. except as otherwise provided in subsection (d) of this section, any matter relating to the activities of the company may be decided by a majority of the members.
  3. In a manager-managed limited liability company:
    1. Except as otherwise provided in subsection (d) of this section, the managers have the exclusive authority to manage and conduct the company's activities.
    2. Each manager has equal rights in the management and conduct of the company's activities.
    3. Except as specified in subsection (d) of this section, any matter relating to the activities of the company may be exclusively decided by the manager or, if there is more than one manager, by a majority of the managers.
      1. A manager may be chosen at any time by the affirmative vote or consent of a majority of the members and remains a manager until a successor has been chosen, unless the manager at an earlier time resigns, is removed, or dies, or, in the case of a manager that is not an individual, terminates. (4) (A) A manager may be chosen at any time by the affirmative vote or consent of a majority of the members and remains a manager until a successor has been chosen, unless the manager at an earlier time resigns, is removed, or dies, or, in the case of a manager that is not an individual, terminates.
      2. A manager may be removed at any time by the affirmative vote or consent of a majority of the members without notice or cause.
      1. A person need not be a member to be a manager, but the dissociation of a member that is also a manager removes the person as a manager. (5) (A) A person need not be a member to be a manager, but the dissociation of a member that is also a manager removes the person as a manager.
      2. If a person that is both a manager and a member ceases to be a manager, that cessation does not by itself dissociate the person as a member.
    4. A person's ceasing to be a manager does not discharge any debt, obligation, or other liability to the limited liability company or members which the person incurred while a manager.
  4. Except as provided in the operating agreement, the affirmative vote or consent of all the members is required to:
    1. amend the operating agreement of a limited liability company;
    2. amend the articles of organization under section 4024 of this title;
    3. compromise an obligation to make a contribution under section 4053 of this title;
    4. compromise, as among members, an obligation of a member to make a contribution or return money or other property paid or distributed in violation of this chapter;
    5. make interim distributions under subsection 4055(a) of this title;
    6. admit a new member;
    7. use the company's property to redeem an interest subject to a charging order;
    8. waive the right to have the company's business wound up and the company terminated under subsection 4102(b) of this title; and
    9. sell, lease, exchange or otherwise dispose of all, or substantially all, of the company's property with or without goodwill.
    1. A member or manager may appoint a proxy to vote or otherwise act for the member or manager by signing an appointment instrument, either personally or by the member's or manager's attorney-in-fact. (e) (1)  A member or manager may appoint a proxy to vote or otherwise act for the member or manager by signing an appointment instrument, either personally or by the member's or manager's attorney-in-fact.
    2. An appointment of a proxy is valid for 11 months unless a different time is specified in the appointment instrument.
    3. An appointment is revocable by the member or manager unless the appointment form conspicuously states that it is irrevocable and the appointment is coupled with an interest, in which case the appointment is revoked when the coupled interest is extinguished.
    1. An action requiring the affirmative vote or consent of members under this title may be taken without a meeting if the action is approved in a consent by members having not less than the minimum number of votes that would be necessary to authorize or take the action at a meeting at which all members entitled to vote thereon were present and voted. (f) (1)  An action requiring the affirmative vote or consent of members under this title may be taken without a meeting if the action is approved in a consent by members having not less than the minimum number of votes that would be necessary to authorize or take the action at a meeting at which all members entitled to vote thereon were present and voted.
    2. A member may appoint a proxy or other agent to consent or otherwise act for the member by signing an appointing record, personally or by the member's agent.
    1. An action that may be taken at a meeting of the managers may be taken without a meeting if the action is approved by consent of all managers entitled to vote on the action. (g) (1)  An action that may be taken at a meeting of the managers may be taken without a meeting if the action is approved by consent of all managers entitled to vote on the action.
    2. The action must be evidenced by one or more consents reflected in a record describing the action taken and signed by all managers entitled to vote on the action.
  5. The dissolution of a limited liability company does not affect the applicability of this section. However, a person that wrongfully causes dissolution of the company loses the right to participate in management as a member and a manager.
  6. This chapter does not entitle a member to remuneration for services performed for a member-managed limited liability company, except for reasonable compensation for services rendered in winding up the activities of the company.

    Added 2015, No. 17 , § 2.

§ 4055. Sharing of profits and losses and right to distributions.

  1. The profits and losses of a limited liability company shall be allocated among the members or the holders of distributional interests, as the case may be, in proportion to the agreed value, as stated in the limited liability company records required to be kept under this chapter, of the contributions made by each member, taking into account variations in the capital contributions of each member during the period for which such allocations are made.
  2. Any distributions made by a limited liability company before its dissolution and winding up shall be made among the members or the holders of distributional interests, as the case may be, in proportion to the agreed value of the contributions made by each member as of the date of such distribution.
    1. A member has a right to a distribution before the dissolution and winding up of a limited liability company only if the company decides to make an interim distribution. (c) (1)  A member has a right to a distribution before the dissolution and winding up of a limited liability company only if the company decides to make an interim distribution.
    2. A person's dissociation does not entitle the person to a distribution.
  3. A member has no right to receive, and may not be required to accept, a distribution in kind.
  4. If a member or transferee becomes entitled to receive a distribution, the member or transferee has the status of, and is entitled to all remedies available to, a creditor of the limited liability company with respect to the distribution.

    Added 2015, No. 17 , § 2.

§ 4056. Limitations on distributions.

  1. A distribution shall not be made if:
    1. the limited liability company would not be able to pay its debts as they become due in the ordinary course of business; or
    2. the company's total assets would be less than the sum of its total liabilities plus the amount that would be needed, if the company were to be dissolved, wound up, and terminated at the time of the distribution, to satisfy the preferential rights upon dissolution, winding up, and termination of members whose preferential rights are superior to those receiving the distribution.
  2. A limited liability company may base a determination that a distribution is not prohibited under subsection (a) of this section on financial statements prepared on the basis of:
    1. generally accepted accounting practices and principles;
    2. a fair valuation; or
    3. another method that is reasonable under the circumstances.
  3. Except as otherwise provided in subsection (e) of this section, the effect of a distribution under subsection (a) of this section is measured:
    1. in the case of distribution by purchase, redemption, or other acquisition of a distributional interest in a limited liability company, as of the date money or other property is transferred or debt incurred by the company; and
    2. in all other cases, as of the date the:
      1. distribution is authorized if the payment occurs within 120 days after the date of authorization; or
      2. payment is made if it occurs more than 120 days after the date of authorization.
  4. A limited liability company's indebtedness to a member incurred by reason of a distribution made in accordance with this section is at parity with the company's indebtedness to its general, unsecured creditors.
  5. Indebtedness of a limited liability company, including indebtedness issued in connection with or as part of a distribution, is not considered a liability for purposes of determinations under subsection (a) of this section if its terms provide that payment of principal and interest are made only if and to the extent that payment of a distribution to members could then be made under this section. If the indebtedness is issued as a distribution, each payment of principal or interest on the indebtedness and not the issuance of the indebtedness is treated as a distribution, the effect of which is measured on the date the payment is made.

    Added 2015, No. 17 , § 2.

§ 4057. Liability for unlawful distributions.

  1. A member of a member-managed limited liability company or a member or manager of a manager-managed company who votes for or assents to a distribution made in violation of section 4056 of this title, the articles of organization, or a written operating agreement is personally liable to the company for the amount of the distribution which exceeds the amount that could have been distributed without violating section 4056 of this title, the articles of organization, or a written operating agreement if it is established that the member or manager did not perform the member's or manager's duties in compliance with section 4059 of this title.
  2. A member of a manager-managed limited liability company who knew a distribution was made to such member in violation of section 4056 of this title is personally liable to the limited liability company, but only to the extent that the distribution received by such member exceeded the amount that could properly have been paid under section 4056 of this title.
  3. A member or manager against whom an action is brought under this section may implead in the action all:
    1. other members or managers who voted for or assented to the distribution in violation of subsection (a) of this section and may compel contribution from them; and
    2. members who received a distribution in violation of subsection (b) of this section and may compel contribution from the member in the amount received in violation of subsection (b) of this section.
  4. A proceeding under this section is barred unless it is commenced within two years after the distribution.

    Added 2015, No. 17 , § 2.

§ 4058. Information rights.

  1. In a member-managed limited liability company, each member has the right, subject to such reasonable standards, including standards governing what information and documents are to be furnished and at what time and location, as may be set forth in the articles of organization, an operating agreement, or otherwise established by the members to obtain from the company from time to time and upon reasonable demand for any purpose reasonably related to the member's interest as a member of the limited liability company during the period in which he or she was a member:
    1. information concerning the company's business or affairs reasonably required for the proper exercise of the member's rights and duties under the operating agreement or this chapter; and
    2. other information concerning the company's business or affairs, except to the extent the demand or the information demanded is unreasonable or otherwise improper under the circumstances.
  2. In a manager-managed limited liability company:
    1. the right to receive information as stated in subdivision (a)(1) of this section shall apply to the managers and not the members;
    2. during regular business hours and at a reasonable location specified by the company, a member may inspect and copy information regarding the activities, affairs, financial condition, and other circumstances of the company as is just and reasonable if:
      1. the member seeks the information for a purpose reasonably related to the member's interest as a member;
      2. the member makes a demand in a record received by the company, describing with reasonable particularity the information sought and the purpose for seeking the information; and
      3. the information sought is directly connected to the member's purpose; and
    3. the managers shall have the right to keep confidential from members who are not managers, for such period of time as the managers deem reasonable, any information which the managers reasonably believe to be in the nature of trade secrets or other information the disclosure of which the managers in good faith believe is not in the best interest of the company.
  3. A company may impose a reasonable charge, limited to the costs of labor and material, for copies of records or other information furnished under this section.
  4. A company may maintain its records in other than written form if such form is capable of conversion into written form within a reasonable time or into an electronic form that may be prescribed by the Secretary of State.
  5. Any demand under this section shall:
    1. be in writing;
    2. be made in good faith and for a proper purpose; and
    3. describe with reasonable particularity the purpose and the records or information desired.
    1. A member or person dissociated as a member may exercise the rights under this section through an agent or, in the case of an individual under legal disability, a legal representative. (f) (1)  A member or person dissociated as a member may exercise the rights under this section through an agent or, in the case of an individual under legal disability, a legal representative.
    2. Any restriction or condition imposed by the operating agreement or under subsection (h) of this section applies both to the agent or legal representative of such a member and to a person dissociated as a member.
  6. Subject to section 4075 of this title, the rights under this section do not extend to a person who is a transferee of an interest in a limited liability company, except that a transferee is entitled to an account of the company's transactions only from the date of dissolution.
    1. In addition to any restriction or condition stated in this section or the company's operating agreement, a limited liability company may impose reasonable restrictions and conditions on access to and use of information to be furnished under this section, including designating information confidential and imposing nondisclosure and safeguarding obligations on the recipient. (h) (1)  In addition to any restriction or condition stated in this section or the company's operating agreement, a limited liability company may impose reasonable restrictions and conditions on access to and use of information to be furnished under this section, including designating information confidential and imposing nondisclosure and safeguarding obligations on the recipient.
    2. In a dispute concerning the reasonableness of a restriction under this subsection, the company has the burden of proving reasonableness.
  7. Failure of the company to keep or maintain any of the records or information required pursuant to this section shall not be grounds for imposing liability on any person for the debts and obligations of the company.

    Added 2015, No. 17 , § 2.

§ 4059. General standards of member's and manager's conduct.

  1. The only fiduciary duties a member owes to a member-managed limited liability company and its other members are the duty of loyalty and the duty of care imposed by subsections (b) and (c) of this section.
  2. A member's duty of loyalty to a member-managed limited liability company and its other members is limited to the following:
    1. to account to the company and to hold as trustee for it any property, profit, or benefit derived by the member in the conduct or winding up of the company's business or derived from a use by the member of the company's property, including the appropriation of the company's opportunity;
    2. to refrain from dealing with the company in the conduct or winding up of the company's business as or on behalf of a party having an interest adverse to the company; and
    3. to refrain from competing with the company in the conduct of the company's business before the dissolution of the company.
  3. A member's duty of care to a member-managed limited liability company and its other members in the conduct of and winding up of the company's business is limited to refrain from engaging in grossly negligent or reckless conduct, or a knowing violation of the law.
  4. A member shall discharge the duties to a member-managed limited liability company and its other members under this chapter or under the operating agreement and exercise any rights consistently with the obligation of good faith and fair dealing.
  5. A member of a member-managed limited liability company does not violate a duty or obligation under this chapter or under the operating agreement merely because the member's conduct furthers the member's own interest.
  6. All the members of a member-managed limited liability company or a manager-managed limited liability company may authorize or ratify, after full disclosure of all material facts, a specific act or transaction that otherwise would violate the duty of loyalty.
  7. It is a defense to a claim under subdivision (b)(2) of this section and any comparable claim in equity or at common law that the transaction was fair to the limited liability company.
  8. This section applies to a person winding up the limited liability company's business as the personal or legal representative of the last surviving member of the company as if the person were a member.
  9. In a manager-managed limited liability company:
    1. subsections (a), (b), (c), and (g) of this section apply to the manager or managers and not the members, and the duty stated in subdivision (b)(3) of this section continues until winding up is completed;
    2. subsection (d) of this section applies to managers and members;
    3. subsection (e) of this section applies only to members;
    4. the power to ratify under subsection (f) of this section applies only to members;
    5. subject to subsection (d) of this section, a member does not have any duty to the company or to the other members solely by reason of being a member;
    6. a member who pursuant to the operating agreement exercises some or all of the rights of a manager in the management and conduct of the company's business is held to the standards of conduct in subsections (a), (b), (c), and (g) of this section to the extent that the member exercises the managerial authority vested in a manager by this chapter; and
    7. a manager is relieved of liability imposed by law for violation of the standards prescribed by subsections (a), (b), (c), and (g) of this section to the extent of the managerial authority delegated to the members by the operating agreement.
  10. In discharging his or her duties, a member or a manager is entitled to rely on information, opinions, reports, or statements, including financial statements and other financial data, if prepared or presented by:
    1. one or more members, managers, officers, or employees of the company whom the member or manager reasonably believes to be reliable and competent in the matter presented;
    2. legal counsel, public accountants, or other persons as to matters the member or manager reasonably believes are within the person's professional or expert competence; or
    3. a committee of the members or managers of which the member or manager is not a member if the member or manager reasonably believes the committee merits confidence.
  11. A member or manager is not acting in good faith if he or she has knowledge concerning the matter in question that makes reliance permitted by subsection (j) of this section unwarranted.
    1. A member of a member-managed limited liability company or a manager of a manager-managed limited liability company may lend money to and transact other business with the company. (l) (1)  A member of a member-managed limited liability company or a manager of a manager-managed limited liability company may lend money to and transact other business with the company.
    2. As to each loan or transaction, the rights and obligations of the member or manager, as applicable, are the same as those of a person who is not a member or manager, subject to other applicable law.
  12. A member or manager is not liable for any action taken as a member or manager or any failure to take any action, if the member or manager performed the duties of his or her office in compliance with this section.

    Added 2015, No. 17 , § 2.

§ 4060. Reimbursement, indemnification, and insurance.

  1. A member-managed limited liability company shall reimburse a member, and a manager-managed limited liability company shall reimburse a manager, for payments made and indemnify the member or manager for liabilities reasonably incurred by the member or manager in the ordinary and proper conduct of the activities of the limited liability company or for the preservation of its activities or property.
  2. A limited liability company may purchase and maintain insurance on behalf of a member or manager against liability asserted against or incurred by the member or manager in that capacity or arising from that status whether or not the operating agreement is permitted to provide for the member or manager to be indemnified against the liability.
  3. A limited liability company shall reimburse a member for an advance to the company beyond the amount of contribution the member agreed to make.
  4. A payment or advance that gives rise to an obligation of a limited liability company under subsections (a) through (c) of this section constitutes a loan to the company, which accrues interest from the date of the payment or advance.
  5. A member is not entitled to remuneration for services performed for a limited liability company even in the capacity as a manager of a manager-managed company, except for reasonable compensation for services rendered in winding up the activities of the company.

    Added 2015, No. 17 , § 2.

Subchapter 5. Transferees and Creditors of Member

§ 4071. Member's distributional interest.

  1. A distributional interest in a limited liability company is personal property and, subject to sections 4072 and 4073 of this title, may be transferred in whole or in part.
  2. An operating agreement may provide that a distributional interest may be evidenced by a certificate of the interest issued by the limited liability company and, subject to section 4073 of this title, may also provide for the transfer of any interest represented by the certificate by a transfer of the certificate.

    Added 2015, No. 17 , § 2.

§ 4072. Transfer of distributional interest.

  1. A transfer, in whole or in part, of a distributional interest:
    1. is permissible;
    2. does not by itself cause a member's dissociation or a dissolution and winding up of the company's activities; and
    3. subject to section 4075 of this title, does not entitle the transferee to:
      1. become or to exercise any rights of a member:
      2. participate in the management or conduct of the company's activities; or
      3. except as otherwise provided in subsection 4073(d) of this title, have access to records or other information concerning the company's activities.
  2. A transfer of a distributional interest entitles the transferee to receive, in accordance with the transfer, the distributions to which the transferor would otherwise be entitled with respect to the interest.
  3. Except as otherwise provided in subdivision 4081(4)(B) of this title, if a member transfers a distributional interest, the transferor retains the rights of a member other than the distributional interest transferred and retains all duties and obligations of a member.
  4. A transfer of a distributional interest in violation of a restriction on transfer contained in the operating agreement is ineffective if the intended transferee has knowledge or notice of the restriction at the time of transfer.

    Added 2015, No. 17 , § 2.

§ 4073. Rights of transferee.

  1. A transferee of a distributional interest may become a member of a limited liability company if and to the extent that all other members consent.
    1. A transferee who has become a member has the rights and powers, and is subject to the restrictions and liabilities, of a member under the operating agreement and this chapter to the extent of the membership interest transferred. (b) (1)  A transferee who has become a member has the rights and powers, and is subject to the restrictions and liabilities, of a member under the operating agreement and this chapter to the extent of the membership interest transferred.
    2. A transferee who becomes a member also is liable for the transferor member's obligations to make contributions under section 4053 of this title and for obligations under section 4057 of this title to return unlawful distributions, but the transferee is not obligated for the transferor member's liabilities unknown to the transferee at the time the transferee becomes a member and which could not be ascertained from the articles of organization or the operating agreement made available to the transferee, and is not personally liable for any obligation of the limited liability company incurred before the transferee's admission as a member.
  2. Whether or not a transferee of a distributional interest becomes a member under subsection (a) of this section, the transferor retains all duties and obligations of a member and is not released from liability to the limited liability company and the other members under the operating agreement or this chapter unless all other members consent.
  3. A transferee who does not become a member is not entitled to participate in the management or conduct of the limited liability company's business or affairs, require access to information concerning the company's transactions, or inspect or copy any of the company's books and other records, except that in a dissolution and winding up of a limited liability company, a transferee is entitled to an account of the company's transactions only from the date of dissolution.
  4. A transferee who does not become a member is entitled to:
    1. receive, in accordance with the transfer, distributions to which the transferor would otherwise be entitled;
    2. receive, upon dissolution and winding up of the limited liability company's business:
      1. in accordance with the transfer, the net amount otherwise distributable to the transferor; and
      2. a statement of account only from the date of the latest statement of account agreed to by all the members.
  5. A limited liability company need not give effect to a transfer or a transferee's rights under this section until it has notice of the transfer.

    Added 2015, No. 17 , § 2.

§ 4074. Charging order.

    1. On application by a judgment creditor of a member or transferee, a court may enter a charging order against the distributional interest of the judgment debtor for the unsatisfied amount of the judgment. (a) (1)  On application by a judgment creditor of a member or transferee, a court may enter a charging order against the distributional interest of the judgment debtor for the unsatisfied amount of the judgment.
    2. Except as provided in subsection (f) of this section, a charging order constitutes a lien on a judgment debtor's distributional interest and requires the limited liability company to pay over to the person to which the charging order was issued any distribution that would otherwise be paid to the judgment debtor.
  1. To the extent necessary to effectuate the collection of distributions pursuant to a charging order in effect under subsection (a) of this section, the court may:
    1. appoint a receiver of the distributions subject to the charging order, with the power to make all inquiries the judgment debtor might have made; and
    2. make all other orders necessary to give effect to the charging order.
    1. Upon a showing that distributions under a charging order will not pay the judgment debt within a reasonable time, the court may foreclose the lien and order the sale of the distributional interest. (c) (1)  Upon a showing that distributions under a charging order will not pay the judgment debt within a reasonable time, the court may foreclose the lien and order the sale of the distributional interest.
    2. Except as provided in subsection (f) of this section, the purchaser at the foreclosure sale obtains only the distributional interest, does not thereby become a member, and is subject to section 4073 of this title.
  2. At any time before foreclosure under subsection (c) of this section, the member or transferee whose distributional interest is subject to a charging order under subsection (a) of this section may extinguish the charging order by satisfying the judgment and filing a certified copy of the satisfaction with the court that issued the charging order.
  3. At any time before foreclosure under subsection (c) of this section, a limited liability company or one or more members whose distributional interests are not subject to the charging order may pay to the judgment creditor the full amount due under the judgment and thereby succeed to the rights of the judgment creditor, including the charging order.
  4. This section does not deprive any member or transferee of the benefit of any exemption laws applicable to the member's or transferee's distributional interest.
  5. If a court orders foreclosure of a charging order lien against the sole member of a limited liability company:
    1. the court shall confirm the sale;
    2. the purchaser at the sale obtains the member's entire interest, not only the member's transferable interest;
    3. the purchaser thereby becomes a member; and
    4. the person whose interest was subject to the foreclosed charging order is dissociated as a member.
  6. This section provides the exclusive remedy by which a person, who in the capacity of a judgment creditor seeks to enforce a judgment against a member or transferee, may satisfy the judgment from the judgment debtor's distributional interest.

    Added 2015, No. 17 , § 2.

§ 4075. Power of estate of deceased member.

If a member who is an individual dies, the member's legal representative may exercise the rights of a transferee under section 4073 of this title, and, for purposes of settling the estate, the member's legal representative may exercise the rights the deceased member had under section 4058 of this title.

Added 2015, No. 17 , § 2.

Subchapter 6. Member's Dissociation

§ 4081. Events causing member's dissociation.

A person is dissociated from a limited liability company upon the occurrence of any of the following events:

  1. the company's having notice of the member's express will to withdraw upon the date of notice or, if a later withdrawal date is specified by the member, on the later date;
  2. an event agreed to in the operating agreement as causing the member's dissociation;
  3. the member's expulsion pursuant to the operating agreement;
  4. the member's expulsion by unanimous vote of the other members if:
    1. it is unlawful to carry on the company's business with the person as a member;
    2. there has been a transfer of substantially all of the member's distributional interest, other than a transfer for security purposes, or a court order charging the member's distributional interest, which has not been foreclosed;
    3. a corporation that is a member fails to obtain a revocation of its certificate of dissolution or a reinstatement of its charter or its right to conduct business within 90 days after the company notifies such member that it will be expelled because it has filed a certificate of dissolution or the equivalent, its charter has been revoked, or its right to conduct business has been suspended by the jurisdiction of its incorporation; or
    4. a partnership or a limited liability company that is a member has been dissolved and its business is being wound up;
  5. on application by the company or another member, the member's expulsion by judicial determination because the member:
    1. engaged in wrongful conduct that has adversely and materially affected, or will adversely and materially affect, the company's business;
    2. willfully or persistently committed a material breach of the operating agreement or of a duty owed to the company or the other members under section 4059 of this title; or
    3. engaged in conduct relating to the company's business which makes it not reasonably practicable to carry on the business with the person as a member;
  6. in a member-managed limited liability company, the member:
    1. becomes a debtor in bankruptcy;
    2. executes an assignment for the benefit of creditors;
    3. seeks, consents to, or acquiesces in, the appointment of a trustee, receiver, or liquidator of the member or of all or substantially all of the member's property; or
    4. fails, within 90 days after the appointment, to have vacated or stayed the appointment of a trustee, receiver, or liquidator of the member or of all or substantially all of the member's property obtained without the member's consent or acquiescence, or fails within 90 days after the expiration of a stay to have the appointment vacated;
  7. in the case of a member who is an individual:
    1. the member's death; or
    2. in a member-managed limited liability company:
      1. the appointment of a guardian or general conservator for the member; or
      2. a judicial determination that the member has otherwise become incapable of performing the member's duties under the operating agreement;
  8. in the case of a member that is a trust or is acting as a member by virtue of being a trustee of a trust, distribution of the trust's entire rights to receive distributions from the company, but not merely by reason of the substitution of a successor trustee;
  9. in the case of a member that is an estate or is acting as a member by virtue of being a personal representative of an estate, distribution of the estate's entire distributional interest in the company, but not merely the substitution of a successor personal representative;
  10. termination of the existence of a member if the member is not an individual, partnership, limited liability company, corporation, estate, or trust;
  11. the company participates in a merger under subchapter 10 of this chapter and:
    1. the company is not the surviving entity; or
    2. the person otherwise ceases to be a member as a result of the merger;
  12. the company participates in a conversion under subchapter 10 of this chapter;
  13. the company participates in a domestication under subchapter 10 of this chapter, and, the person ceases to be a member as a result of the domestication; or
  14. termination of a member's continued membership in a limited liability company for any other reason.

    Added 2015, No. 17 , § 2.

§ 4082. Member's power to dissociate; wrongful dissociation.

  1. A person has the power to dissociate as a member from a limited liability company at any time, rightfully or wrongfully, by express will pursuant to subdivision 4081(1) of this title.
  2. A member's dissociation from a limited liability company is wrongful only if the dissociation:
    1. is in breach of an express provision of the operating agreement or articles of organization; or
    2. occurs before the termination of the company and:
      1. the member withdraws as a member by express will;
      2. the member is expelled as a member by judicial determination under subdivision 4081(5) of this title;
      3. the member is dissociated under subdivision 4081(6)(A) of this title by becoming a debtor in bankruptcy; or
      4. in the case of a member who is not an individual, trust other than a business trust, or estate, the member is expelled or otherwise dissociated because it willfully dissolved or terminated its existence.
    1. A person that wrongfully dissociates as a member from a limited liability company is liable to the company and, subject to section 4131 of this title, to the other members for damages caused by the dissociation. (c) (1)  A person that wrongfully dissociates as a member from a limited liability company is liable to the company and, subject to section 4131 of this title, to the other members for damages caused by the dissociation.
    2. The liability is in addition to any other debt, obligation, or other liability of the member to the company or to the other members.

      Added 2015, No. 17 , § 2.

§ 4083. Effect of member's dissociation.

  1. When a person is dissociated as a member of a limited liability company:
    1. the person's right to participate as a member in the management and conduct of the company's business terminates;
    2. if the company is member-managed, the person's fiduciary duties as a member end with regard to matters arising and events occurring after the person's dissociation; and
    3. subject to section 4075 of this title and subchapter 10 of this chapter, any distributional interest owned by the person immediately before dissociation in the person's capacity as a member is owned by the person solely as a transferee.
  2. A person's dissociation as a member of a limited liability company does not of itself discharge the person from any debt, obligation, or other liability to the company or the other members that the person incurred while a member.

    Added 2015, No. 17 , § 2.

Subchapter 7. Winding Up of Company Business

§ 4101. Events causing dissolution and winding up of company business.

  1. A limited liability company is dissolved, and its business shall be wound up, upon the occurrence of any of the following events:
    1. an event or circumstance that the operating agreement states causes dissolution;
    2. consent of the number or percentage of members specified in the operating agreement, or in the absence of a provision governing approval of a dissolution or winding up of the company contained in an operating agreement, the consent of all the members;
    3. the passage of 90 consecutive days during which the company has no members;
    4. on application by a member, the entry by the Superior Court of an order dissolving the company on the grounds that:
      1. the conduct of all or substantially all of the company's activities is unlawful; or
      2. it is not reasonably practicable to carry on the company's activities in conformance with the certificate of organization and the operating agreement; or
    5. on application by a member, the entry by the Superior Court of an order dissolving the company on the grounds that the managers or those members in control of the company:
      1. have acted, are acting, or will act in a manner that is illegal or fraudulent; or
      2. have acted or are acting in a manner that is oppressive and was, is, or will be directly harmful to the applicant.
  2. In an action brought under subdivision (a)(5) of this section, the Court may order a remedy other than dissolution.

    Added 2015, No. 17 , § 2.

§ 4102. Limited liability company continues after dissolution.

  1. Subject to subsection (b) of this section, a limited liability company continues after dissolution only for the purpose of winding up its business.
  2. At any time after the dissolution of a limited liability company and before the winding up of its business is completed, all of the members, or, if different, the number or percentage of members specified in the operating agreement to dissolve or liquidate the company may waive the right to have the company's business wound up and the company terminated, in which case:
    1. the limited liability company resumes carrying on its business as if dissolution had never occurred and any liability incurred by the company or a member after the dissolution and before the waiver is determined shall be subject to the same limitations on liability as if the dissolution had never occurred; and
    2. the rights of a third party accruing under section 4104 of this title or arising out of conduct in reliance on the dissolution before the third party knew or received a notification of the waiver are not adversely affected.

      Added 2015, No. 17 , § 2.

§ 4103. Right to wind up limited liability company's business.

  1. After dissolution, a member may participate in winding up a limited liability company's business, but on application of any member, member's legal representative, or transferee, the Superior Court, for good cause shown, may order judicial supervision of the winding up.
  2. In winding up its activities, a limited liability company:
    1. shall discharge the company's debts, obligations, or other liabilities, settle and close the company's activities, and marshal and distribute the assets of the company; and
    2. may:
      1. deliver to the Secretary of State for filing a statement of dissolution stating the name of the company and that the company is dissolved;
      2. preserve the company activities and property as a going concern for a reasonable time;
      3. prosecute and defend actions and proceedings, whether civil, criminal, or administrative;
      4. transfer the company's property;
      5. settle disputes by mediation or arbitration; and
      6. perform other acts necessary or appropriate to the winding up.
  3. If a dissolved limited liability company has no members, the legal representative of the last person to have been a member may wind up the activities of the company. If the person does so, the person has the powers of a sole manager under subsection 4054(c) of this title and is deemed to be a manager for the purposes of subdivision 4042(a)(2) of this title.
    1. If the legal representative under subsection (c) of this section declines or fails to wind up the company's activities, a person may be appointed to do so by the consent of transferees who own a majority of the rights to receive distributions as transferees at the time the consent is to be effective. (d) (1)  If the legal representative under subsection (c) of this section declines or fails to wind up the company's activities, a person may be appointed to do so by the consent of transferees who own a majority of the rights to receive distributions as transferees at the time the consent is to be effective.
    2. A person appointed under this subsection:
      1. has the powers of a sole manager under subsection 4054(c) of this title and is deemed to be a manager for purposes of subdivision 4042(a)(2) of this title; and
      2. shall promptly deliver to the Secretary of State for filing an amendment to the company's certificate of organization to:
        1. state that the company has no members;
        2. state that the person has been appointed pursuant to this subsection (d) to wind up the company; and
        3. provide the street and mailing addresses of the person.
  4. The Superior Court may order judicial supervision of the winding up of a dissolved limited liability company, including the appointment of a person to wind up the company's activities:
    1. on application of a member, if the applicant establishes good cause;
    2. on the application of a transferee, if:
      1. the company does not have any members;
      2. the legal representative of the last person to have been a member declines or fails to wind up the company's activities; and
      3. within a reasonable time following the dissolution, a person has not been appointed pursuant to subsection (c) of this section; or
    3. in connection with a proceeding under subdivision 4101(a)(4) or (5) of this title.

      Added 2015, No. 17 , § 2.

§ 4104. Member's or manager's power and liability as agent after dissolution.

A limited liability company is bound by a member's or manager's act after dissolution that:

  1. is appropriate for winding up the company's business; or
  2. would have bound the company under section 4041 of this title before dissolution, if the other party to the transaction did not have notice of the dissolution.

    Added 2015, No. 17 , § 2.

§ 4105. Articles of termination.

  1. At any time after dissolution and winding up, a limited liability company may terminate its existence by filing with the Secretary of State articles of termination stating:
    1. the name of the company;
    2. the date of the dissolution; and
    3. that the company's business has been wound up and the legal existence of the company has been terminated.
  2. The existence of a limited liability company is terminated upon the filing of the articles of termination, or upon a later effective date, if specified in the articles of termination.

    Added 2015, No. 17 , § 2.

§ 4106. Distribution of assets in winding up limited liability company's business.

  1. In winding up a limited liability company's business, the assets of the company shall be applied to discharge its obligations to creditors, including members who are creditors. Any surplus shall be applied to pay in money the net amount distributable to members in accordance with their right to distributions under subsection (b) of this section.
  2. Each member is entitled to a distribution upon the winding up of the limited liability company's business consisting of a return of all contributions which have not previously been returned and a distribution of any remainder in proportion to each member's capital contributions.

    Added 2015, No. 17 , § 2.

§ 4107. Known claims against dissolved limited liability company.

  1. A dissolved limited liability company may dispose of the known claims against it by following the procedure described in this section.
  2. A dissolved limited liability company shall notify its known claimants in writing of the dissolution. The notice shall:
    1. specify the information required to be included in a claim;
    2. provide a mailing address where the claim is to be sent;
    3. state the deadline for receipt of the claim, which may not be less than 120 days after the date the written notice is received by the claimant; and
    4. state that the claim will be barred if not received by the deadline.
  3. A claim against a dissolved limited liability company is barred if the requirements of subsection (b) of this section are met, and:
    1. the claim is not received by the specified deadline; or
    2. in the case of a claim that is timely received but rejected by the company:
      1. the company causes the claimant to receive notice in a record stating that the claim is rejected and will be barred unless the claimant commences an action against the company to enforce the claim within 90 days after the claimant receives the notice; and
      2. the claimant does not commence the required action within the 90 days.
  4. This section does not apply to a claim based on an event occurring after the effective date of dissolution or a liability that on that date is contingent.

    Added 2015, No. 17 , § 2.

§ 4108. Other claims against dissolved limited liability company.

  1. A dissolved limited liability company may publish notice of its dissolution and request persons having claims against the company to present them in accordance with the notice.
  2. The notice shall:
    1. be published at least once in a newspaper of general circulation in the county in which the dissolved limited liability company's principal office is located or, if it has none in this State, in the county in which its designated office is or was last located, and sent to the Office of the Attorney General;
    2. describe the information required to be contained in a claim and provide a mailing address where the claim is to be sent; and
    3. state that a claim against the limited liability company is barred unless a proceeding to enforce the claim is commenced within five years after publication of the notice.
    1. If the dissolved limited liability company sends notice to the Attorney General and publishes a newspaper notice in accordance with subsection (b) of this section, a cause of action against a dissolved limited liability company, whether arising before or after the dissolution of the limited liability company, may be enforced only as follows: (c) (1)  If the dissolved limited liability company sends notice to the Attorney General and publishes a newspaper notice in accordance with subsection (b) of this section, a cause of action against a dissolved limited liability company, whether arising before or after the dissolution of the limited liability company, may be enforced only as follows:
      1. against the dissolved limited liability company; and
      2. if any of the assets of the dissolved limited liability company have been distributed to its members, against members of the dissolved limited liability company.
    2. A cause of action against a dissolved limited liability company arising under subdivision (1)(A) of this subsection is extinguished unless the claimant commences a proceeding to enforce the cause of action against the dissolved limited liability company prior to the expiration of the statute of limitations applicable to the cause of action.
    3. A cause of action against a dissolved limited liability company arising under subdivision (1)(B) of this subsection is extinguished unless the claimant commences a proceeding to enforce the cause of action against a member of a dissolved limited liability company prior to the earlier of the following:
      1. the expiration of the statute of limitations applicable to the cause of action; or
      2. five years after the effective date of the dissolution of the limited liability company.

        Added 2015, No. 17 , § 2.

§ 4109. Enforcement of claims against dissolved limited liability company.

A claim not barred under section 4108 of this title may be enforced against the dissolved limited liability company:

  1. to the extent of its undistributed assets, including any insurance assets held by the limited liability company that may be available to satisfy claims; or
  2. if the assets have been distributed in liquidation, against a member of the dissolved company to the extent of the member's proportionate share of the claim or the company's assets distributed to the member in liquidation, whichever is less, but a member's total liability for all claims under this section may not exceed the total amount of assets distributed to the member.

    Added 2015, No. 17 , § 2.

Subchapter 8. Foreign Limited Liability Companies

§ 4111. Law governing foreign limited liability companies.

  1. The laws of the state or other jurisdiction under which a foreign limited liability company is organized govern its organization and internal affairs and the liability of a member as a member, and a manager as a manager, for the debts, obligations, or other liabilities of the foreign limited liability company or series thereof.
  2. A foreign limited liability company may not be denied a certificate of authority by reason of any difference between the laws of another jurisdiction under which the foreign company is formed and the laws of this State.
  3. A certificate of authority does not authorize a foreign limited liability company to engage in any business or exercise any power that a limited liability company may not engage in or exercise in this State.

    Added 2015, No. 17 , § 2.

§ 4112. Application for certificate of authority.

  1. A foreign limited liability company may apply for a certificate of authority to transact business in this State by delivering an application to the Secretary of State for filing. The application shall set forth:
    1. the name of the foreign company and, if its name is unavailable for use in this State, an alternate name that satisfies the requirements of section 4116 of this title;
    2. the name of the state or country under whose law it is organized;
    3. the address of its initial designated office;
    4. the name and street address, and the mailing address if different from the street address, of its designated agent for service of process in this State.
  2. A foreign limited liability company shall deliver with the completed application a certificate of existence or a document of similar import, authenticated by the Secretary of State or other official having custody of company records in the state or country under whose law it is organized, dated no earlier than 90 days prior to filing of the application.

    Added 2015, No. 17 , § 2.

§ 4113. Activities not constituting transacting business.

  1. A foreign limited liability company may not transact business in this State until it obtains a certificate of authority from the Secretary of State.
  2. Except as provided in subsection (c) of this section, "doing business" or "transacting business" shall mean and include each act, power, or privilege exercised or enjoyed in this State by a foreign limited liability company.
  3. Among others, the following activities without more do not constitute transacting business for the purpose of determining whether a foreign limited liability company is required to obtain a certificate of authority under subsection (a) of this section:
    1. maintaining, defending, or settling any proceeding;
    2. holding meetings of its members or managers or carrying on any other activity concerning its internal affairs;
    3. maintaining bank accounts;
    4. maintaining offices or agencies for the transfer, exchange, and registration of the foreign company's own securities or maintaining trustees or depositories with respect to those securities;
    5. selling through independent contractors;
    6. soliciting or obtaining orders, whether by mail or electronic means, or through employees or agents or otherwise, if the orders require acceptance outside this State before they become contracts;
    7. creating or acquiring indebtedness, mortgages, or security interests in real or personal property;
    8. securing or collecting debts or enforcing mortgages or other security interests in property securing the debts, and holding, protecting, and maintaining property so acquired;
    9. owning real or personal property;
    10. conducting an isolated transaction that is not one in the course of repeated transactions of a like nature; or
    11. transacting business in interstate commerce.

      Added 2015, No. 17 , § 2.

§ 4114. Issuance of certificate of authority.

If the Secretary of State determines that an application for a certificate of authority complies as to form with the filing requirements of this chapter, and if all filing fees have been paid, the Secretary of State shall file the application and issue a certificate of authority to the foreign limited liability company or its representative.

Added 2015, No. 17 , § 2.

§ 4115. Amended certificate of authority.

  1. A foreign limited liability company authorized to transact business in this State shall obtain an amended certificate of authority from the Secretary of State if it:
    1. changes its name; and
    2. changes the state or country under whose law it is organized.
  2. The requirements of section 4114 of this title for obtaining an original certificate of authority apply to obtaining an amended certificate under this section.

    Added 2015, No. 17 , § 2.

§ 4116. Name of foreign limited liability company.

    1. A foreign limited liability company whose name does not comply with section 4005 of this title may not obtain a certificate of authority until it adopts, for the purpose of transacting business in this State, an alternate name that complies with section 4005 of this title. (a) (1)  A foreign limited liability company whose name does not comply with section 4005 of this title may not obtain a certificate of authority until it adopts, for the purpose of transacting business in this State, an alternate name that complies with section 4005 of this title.
    2. A foreign limited liability company that adopts an alternate name under this subsection and obtains a certificate of authority with the alternate name need not comply with chapter 15 of this title.
    3. After obtaining a certificate of authority with an alternate name, a foreign limited liability company shall transact business in this State under the alternate name unless the company is authorized under chapter 15 of this title to transact business in this State under another name.
  1. If a foreign limited liability company authorized to transact business in this State changes its name to one that does not satisfy the requirements of section 4005 of this title, it may not transact business in this State until it complies with subsection (a) of this section and obtains an amended certificate of authority.

    Added 2015, No. 17 , § 2.

§ 4117. Revocation of certificate of authority.

  1. The Secretary of State may revoke a certificate of authority of a foreign limited liability company to transact business in this State in the manner provided in subsections (b) and (c) of this section if:
    1. the company does not:
      1. pay, within 60 days after the due date, any fee, tax, or penalty due to the Secretary of State under this chapter;
      2. appoint and maintain an agent for service of process as required by section 4007 of this title; or
      3. deliver for filing a statement of change under section 4008 of this title within 30 days after a change has occurred in the name or address of the agent; or
    2. the Commissioner of Taxes notifies the Secretary of State that a foreign limited liability company has failed to make a return, to pay a tax, to file a bond, or to do any other act required under 32 V.S.A. chapter 211.
    1. To revoke a certificate of authority of a foreign limited liability company, the Secretary of State shall file a notice of revocation and send a copy to the company's agent for service of process in this State, or if the company does not appoint and maintain a proper agent in this State, to the company's designated office. (b) (1)  To revoke a certificate of authority of a foreign limited liability company, the Secretary of State shall file a notice of revocation and send a copy to the company's agent for service of process in this State, or if the company does not appoint and maintain a proper agent in this State, to the company's designated office.
    2. A notice of revocation shall state:
      1. the effective date of the revocation, which shall be at least 60 days after the date the Secretary of State sends the copy; and
      2. the grounds for revocation under subsection (a) of this section.
  2. The authority of a foreign limited liability company to transact business in this State shall cease on the effective date of the notice of revocation unless, before that date, the company cures each ground for revocation stated in the notice filed under subsection (b) of this section. If the company cures each ground, the Secretary of State shall file a record so stating.

    Added 2015, No. 17 , § 2.

§ 4118. Cancellation of authority.

A foreign limited liability company may cancel its authority to transact business in this State by filing a certificate of cancellation with the Secretary of State. Cancellation does not terminate the authority of the Secretary of State to accept service of process on the company for claims arising out of the transactions of business in this State.

Added 2015, No. 17 , § 2.

§ 4119. Effect of failure to obtain certificate of authority.

    1. A foreign limited liability company transacting business in this State may not maintain a proceeding or raise a counterclaim, crossclaim, or affirmative defense in any court in this State until it obtains a certificate of authority to transact business in this State. (a) (1)  A foreign limited liability company transacting business in this State may not maintain a proceeding or raise a counterclaim, crossclaim, or affirmative defense in any court in this State until it obtains a certificate of authority to transact business in this State.
    2. The successor to a foreign limited liability company that transacted business in this State without a certificate of authority and the assignee of a cause of action arising out of that business may not maintain a proceeding or raise a counterclaim, crossclaim, or affirmative defense based on that cause of action in any court in this State until the foreign limited liability company or its successor or assignee obtains a certificate of authority.
  1. The failure of a foreign limited liability company to have a certificate of authority to transact business in this State does not impair the validity of a contract or act of the company or prevent the foreign limited liability company from defending an action or proceeding in this State.
  2. A member or manager of a foreign limited liability company is not liable for the debts, obligations, or other liabilities of the company solely because the company transacted business in this State without a certificate of authority.
  3. If a foreign limited liability company transacts business in this State without a certificate of authority, it appoints the Secretary of State as its agent for service of process for claims arising out of the transaction of business in this State.
  4. A foreign limited liability company that transacts business in this State without a certificate of authority shall be liable to the State for:
    1. a civil penalty of $50.00 for each day, not to exceed a total of $10,000.00 for each year, it transacts business in this State without a certificate of authority;
    2. an amount equal to the fees due under this chapter during the period it transacted business in this State without a certificate of authority; and
    3. other penalties imposed by law.

      Added 2015, No. 17 , § 2; amended 2015, No. 128 (Adj. Sess.), § C.8.

History

Amendments--2015 (Adj. Sess.). Subsec. (a): Redesignated existing text as subdiv. (a)(1).

Subdiv. (a)(2): Added.

Subsec. (e): Added.

§ 4120. Action by Attorney General.

The Attorney General may maintain an action in the Civil Division of the Superior Court to collect the penalties imposed under section 4119 of this title and to restrain a foreign limited liability company from transacting business in this State in violation of this chapter.

Added 2015, No. 17 , § 2; amended 2015, No. 128 (Adj. Sess.), § C.9.

History

Amendments--2015 (Adj. Sess.). Inserted "in the Civil Division of the Superior Court to collect the penalties imposed under section 4119 of this title and" following "maintain an action".

§ 4121. Election.

A limited liability company formed under this chapter may elect to be a foreign law limited liability company by complying with all the following:

  1. designating itself as a foreign law limited liability company in its articles of organization filed pursuant to section 4023 of this title;
  2. including in its name either the term "foreign law limited liability company," the term "Foreign Law Company," or the abbreviation "F.L.L.L.C." or "F.L.C." in lieu of the words or abbreviations required under subsection 4005(a) of this title; and
  3. complying with the requirements of this subchapter and paying the filing fees pursuant to section 4012 of this title.

    Added 2015, No. 17 , § 2.

§ 4122. Designation of controlling foreign law.

  1. A foreign law limited liability company shall designate in its articles of organization all the following:
    1. a specific law or body of law of a foreign jurisdiction, either within or outside the United States of America, that will control the internal governance affairs of the company;
    2. the type of organization that will control how the foreign law limited liability company is treated under the foreign law and all matters that are required to be included in the constituent filing for that type of organization under that foreign law;
    3. any variations or limitations on the applicability of the foreign law and any mechanisms for amending, rescinding, or limiting the designation in the future;
    4. the courts, if any, that, in addition to the courts of the State of Vermont and the United States, will have jurisdiction over disputes relating to the internal governance affairs of the foreign law limited liability company; and
    5. a designation of those classes of individuals or officers within the chosen legal structure who shall have authority to act on behalf of the foreign law limited liability company equivalent to the authority of managers under subsections 4054(b) and (c) of this title, and any limitations on or clarification of that authority.
  2. Any bylaws, agreements, or other statements of principles governing the internal governance affairs of the foreign law limited liability company addressed in the applicable foreign law but not required to be in the constituent filing shall be set forth as part of, or in lieu of, the operating agreement required by section 4003 of this title. The prohibitions on a waiver under subsection 4003(b) shall not apply to foreign law limited liability companies.

    Added 2015, No. 17 , § 2.

§ 4123. Scope of designated foreign law.

  1. In any disputes over the internal governance affairs of a foreign law limited liability company, the designated foreign law or body of law shall be applied by any court having jurisdiction over the parties as the binding authority governing these matters, provided that no designated law shall be enforced that:
    1. is contrary to provisions of Vermont or U.S. law or public policy;
    2. cause fraud or manifest injustice under Vermont or U.S. law;
    3. purports to limit the civil or criminal liability of an individual, partnership, or entity under Vermont or U.S. law; or
    4. varies or limits the filing procedures for creating a limited liability company required by this title.
  2. As used in this subchapter, "internal governance affairs" means the relations among the limited liability company, its members, and managers. Whether an issue is a matter of internal governance affairs of the company shall be determined under Vermont law.
  3. If a court determines that the designated law does not address an internal governance matter or addresses it in a manner that is unenforceable pursuant to subsection (a) of this section, or a limitation or variation relating to the issue is specified in the articles of organization, Vermont law shall apply to the matter at issue.
  4. All the external affairs of the foreign law limited liability company shall be governed by the general provisions of this chapter, the articles of organization other than choice of foreign law, the operating agreement, and applicable Vermont and federal laws.

    Added 2015, No. 17 , § 2.

§ 4124. Jurisdiction.

  1. Vermont and other courts designated pursuant to section 4122 of this title shall have jurisdiction over all disputes relating to the internal governance affairs of a foreign law limited liability company.
  2. In adjudicating any dispute relating to the internal governance affairs of a foreign law limited liability company, the court may rely on its own English translation of the designated law and on testimony of experts, opinions of counsel, advisory opinions, or declaratory or binding judgments, and other appropriate evidence.

    Added 2015, No. 17 , § 2.

Subchapter 9. Actions by Members

§ 4131. Direct action by member.

  1. Subject to subsection (b) of this section, a member may maintain a direct action against another member, a manager, or the limited liability company to enforce the member's rights and protect the member's interests, including rights and interests under the operating agreement, under this title, or arising independently of the membership relationship.
  2. A member who maintains a direct action under this section must prove an actual or threatened injury to the member that is not solely the result of an injury suffered or threatened to be suffered by the limited liability company.

    Added 2015, No. 17 , § 2.

§ 4132. Derivative action.

A member may maintain a derivative action to enforce a right of a limited liability company if:

  1. the member first makes a demand on the other members in a member-managed limited liability company, or the managers of a manager-managed limited liability company, requesting that they cause the company to bring an action to enforce the right, and the other members or the managers do not bring the action within a reasonable time; or
  2. a demand under subdivision (1) of this section would be futile.

    Added 2015, No. 17 , § 2.

§ 4133. Proper plaintiff.

A derivative action under section 4132 of this title may be maintained only by a person that is a member of the company at the time the action is commenced, and:

  1. was a member when the conduct giving rise to the action occurred; or
  2. whose status as a member devolved on the person by operation of law or pursuant to the terms of the operating agreement from a person that was a member at the time of the transaction.

    Added 2015, No. 17 , § 2.

§ 4134. Pleading.

In a derivative action, the complaint shall state with particularity:

  1. the date and content of plaintiff's demand and the response to the demand by the other members or the managers; or
  2. why the demand should be excused as futile.

    Added 2015, No. 17 , § 2.

§ 4135. Special litigation committee.

    1. If a limited liability company is named as or made a party in a derivative proceeding, the company may appoint a special litigation committee to investigate the claims asserted in the proceeding and determine whether pursuing the action is in the best interests of the company. (a) (1)  If a limited liability company is named as or made a party in a derivative proceeding, the company may appoint a special litigation committee to investigate the claims asserted in the proceeding and determine whether pursuing the action is in the best interests of the company.
    2. If the company appoints a special litigation committee, on motion by the committee made in the name of the company, except for good cause shown, the court shall stay discovery for the time reasonably necessary to permit the committee to make its investigation.
    3. This subsection shall not prevent the court from:
      1. enforcing a person's right to information under section 4058 of this title; or
      2. granting extraordinary relief in the form of a temporary restraining order or preliminary injunction.
  1. A special litigation committee shall be composed of one or more disinterested and independent individuals, who may be members.
  2. A special litigation committee may be appointed:
    1. in a member-managed limited liability company:
      1. by the affirmative vote or consent of a majority of the members not named as parties in the proceeding; or
      2. if all members are named as defendants or plaintiffs in the proceeding, by a majority of the members named as defendants; or
    2. in a manager-managed limited liability company:
      1. by a majority of the managers not named as parties in the proceeding; or
      2. if all managers are named as parties in the proceeding, by a majority of the managers named as defendants.
  3. After appropriate investigation, a special litigation committee may determine that it is in the best interests of the limited liability company that the proceeding:
    1. continue under the control of the plaintiff;
    2. continue under the control of the committee;
    3. be settled on terms approved by the committee; or
    4. be dismissed.
    1. After making a determination under subsection (d) of this section, a special litigation committee shall file with the court a statement of its determination and its report supporting its determination, and shall serve each party with a copy of the determination and report. (e) (1)  After making a determination under subsection (d) of this section, a special litigation committee shall file with the court a statement of its determination and its report supporting its determination, and shall serve each party with a copy of the determination and report.
    2. The court shall determine whether the members of the committee were disinterested and independent and whether the committee conducted its investigation and made its recommendation in good faith, independently, and with reasonable care, with the committee having the burden of proof.
    3. If the court finds that the members of the committee were disinterested and independent and that the committee acted in good faith, independently, and with reasonable care, the court shall enforce the determination of the committee.
    4. Otherwise, the court shall dissolve the stay of discovery entered under subsection (a) of this section and allow the action to continue under the control of the plaintiff.

      Added 2015, No. 17 , § 2.

§ 4136. Proceeds and expenses.

  1. Except as otherwise provided in subsection (b) of this section:
    1. any proceeds or other benefits of a derivative action, whether by judgment, compromise, or settlement, belong to the limited liability company and not to the plaintiff; and
    2. if the plaintiff receives any proceeds, the plaintiff shall remit them immediately to the company.
  2. If a derivative action is successful, in whole or in part, the court may award the plaintiff reasonable expenses, including reasonable attorney's fees and costs, from the recovery of the limited liability company.
  3. A derivative action on behalf of a limited liability company may not be voluntarily dismissed or settled without the approval of the court.

    Added 2015, No. 17 , § 2.

Subchapter 10. Conversion, Merger, and Domestication

§ 4141. Definitions.

As used in this subchapter:

  1. "Constituent limited liability company" means a constituent organization that is a limited liability company.
  2. "Constituent organization" means an organization that is party to a merger.
  3. "Conversion" means a transaction authorized by sections 4142 through 4147 of this title.
  4. "Converted organization" means the converting organization as it continues in existence after a conversion.
  5. "Converting organization" means the domestic organization that approves a plan of conversion pursuant to section 4144 of this title or the foreign organization that approves a conversion pursuant to the law of its jurisdiction of formation.
  6. "Domestic," with respect to an organization, means an organization governed as to its internal affairs by the law of this State.
  7. "Domesticated company" means the company that exists after a domesticating foreign limited liability company or limited liability company effects a domestication pursuant to sections 4152 through 4155 of this title.
  8. "Domesticating company" means the company that effects a domestication pursuant to sections 4152 through 4155 of this title.
  9. "General partner" means a partner in a partnership and a general partner in a limited partnership.
  10. "Governing statute" means the statute that governs an organization's internal affairs.
  11. "Interest holder" means:
    1. a shareholder of a business corporation;
    2. a member of a nonprofit corporation;
    3. a general partner of a general partnership;
    4. a general partner of a limited partnership;
    5. a limited partner of a limited partnership;
    6. a member of a limited liability company;
    7. a shareholder of a general cooperative association;
    8. a member of a limited cooperative association or mutual benefit enterprise;
    9. a member of an unincorporated nonprofit association;
    10. a beneficiary or beneficial owner of a statutory trust, business trust, or common-law business trust; or
    11. any other direct holder of an interest.
  12. "Limited partner" means a limited partner in a limited partnership.
  13. "Limited partnership" means a limited partnership created under chapter 23 of this title, a predecessor law, or comparable law of another jurisdiction.
  14. "Organization":
    1. means any of the following, whether a domestic or foreign organization, and regardless of whether organized for profit:
      1. a business corporation;
      2. a nonprofit corporation;
      3. a general partnership, including a limited liability partnership;
      4. a limited partnership, including a limited liability limited partnership;
      5. a limited liability company;
      6. a general cooperative association;
      7. a limited cooperative association or mutual benefit enterprise;
      8. an unincorporated nonprofit association;
      9. a statutory trust, business trust, or common-law business trust; or
      10. any other person that has:
        1. a legal existence separate from any interest holder of that person; or
        2. the power to acquire an interest in real property in its own name; and
    2. does not include:
      1. an individual;
      2. a trust with a predominantly donative purpose or a charitable trust;
      3. an association or relationship that is not an organization listed in subdivision (A) of this subdivision (14) and is not a partnership under chapter 22 or 23 of this title, or a similar provision of the law of another jurisdiction;
      4. a decedent's estate; or
      5. a government or a governmental subdivision, agency, or instrumentality.
  15. "Organizational documents" means, whether or not in a record, documents governing the internal affairs of an organization that are binding on all its interest holders, including:
    1. for a domestic or foreign general partnership, its partnership agreement;
    2. for a limited partnership or foreign limited partnership, its certificate of limited partnership and partnership agreement;
    3. for a domestic or foreign limited liability company, its certificate or articles of organization and operating agreement, or comparable records as provided in its governing statute;
    4. for a business trust, its agreement of trust and declaration of trust;
    5. for a domestic or foreign corporation for profit, its certificate or articles of incorporation, bylaws, and other agreements among its shareholders which are authorized by its governing statute, or comparable records as provided in its governing statute; and
    6. for any other organization, the basic records that create the organization and determine its internal governance and the relations among the persons that own it, have an interest in it, or are members of it.
  16. "Partner" includes a general partner and a limited partner.
  17. "Partnership" means a general partnership under chapter 22 of this title, a predecessor law, or comparable law of another jurisdiction.
  18. "Partnership agreement" means an agreement among the partners concerning the partnership or limited partnership.
  19. "Personal liability" means:
    1. any liability for a debt, obligation, or other liability of an organization which is imposed on a person that co-owns, has an interest in, or is a member of the organization:
      1. by the governing statute solely by reason of the person co-owning, having an interest in, or being a member of the organization; or
      2. by the organization's organizational documents under a provision of the governing statute authorizing those documents to make one or more specified persons liable for all or specified debts, obligations, or other liabilities of the organization solely by reason of the person or persons co-owning, having an interest in, or being a member of the organization; or
    2. an obligation of an interest holder under the organizational documents of an organization to contribute to the organization.
  20. "Private organizational documents" means organizational documents or portions thereof that are not part of the organization's public record, if any, and includes:
    1. the bylaws of a business corporation;
    2. the bylaws of a nonprofit corporation;
    3. the partnership agreement of a general partnership;
    4. the partnership agreement of a limited partnership;
    5. the operating agreement of a limited liability company;
    6. the bylaws of a general cooperative association;
    7. the bylaws of a limited cooperative association or mutual benefit enterprise;
    8. the governing principles of an unincorporated nonprofit association; and
    9. the trust instrument of a statutory trust or similar rules of a business trust or common-law business trust.
  21. "Protected agreement" means:
    1. an instrument or agreement evidencing indebtedness of an organization in effect on July 1, 2016 or on the date the organization elects to become subject to this chapter, whichever is earlier;
    2. an agreement that is binding on an organization on July 1, 2016 or on the date the organization elects to become subject to this chapter, whichever is earlier;
    3. the organizational documents of an organization in effect on July 1, 2016 or on the date the organization elects to become subject to this chapter, whichever is earlier; or
    4. an agreement that is binding on any of the directors, officers, general partners, managers, or interest holders of an organization on July 1, 2016 or on the date the organization elects to become subject to this chapter, whichever is earlier.
  22. "Public organizational documents" means the record of organizational documents required to be filed with the Secretary of State to form an organization, and any amendment to or restatement of that record, and includes:
    1. the articles of incorporation of a business corporation;
    2. the articles of incorporation of a nonprofit corporation;
    3. the certificate of limited partnership of a limited partnership;
    4. the certificate of organization of a limited liability company;
    5. the articles of incorporation of a general cooperative association;
    6. the articles of organization of a limited cooperative association or mutual benefit enterprise; and
    7. the certificate of trust of a statutory trust or similar record of a business trust.
  23. "Registered foreign organization" means a foreign organization that is registered to do business in this State pursuant to a record filed by the Secretary of State.
  24. "Surviving organization" means an organization into which one or more other organizations are merged whether the organization preexisted the merger or was created by the merger.

    Added 2015, No. 17 , § 2; amended 2015, No. 97 (Adj. Sess.), § 43; 2015, No. 157 (Adj. Sess.), § E.3.

History

Amendments--2015 (Adj. Sess.). Subdiv. (3): Act Nos. 97 and 157 deleted "by" preceding "4142 through 4147".

Subdiv. (13): Act Nos. 97 and 157 substituted "chapter 23" for "chapter 11".

Subdiv. (17): Act Nos. 97 and 157 substituted "chapter 22" for "chapter 9".

Subdivs. (21)(A)-(D): Act No. 97 substituted "on July 1, 2016 or on the date the organization elects to become subject to this chapter, whichever is earlier" for "on the effective date set forth in section 4171 of this title".

Subdiv. (21): Amended generally by Act No. 157.

Effective date and applicability of 2015 (Adj. Sess.) amendment. 2015, No. 157 (Adj. Sess.), § U.1(d) provides: "(1) Notwithstanding 1 V.S.A. § 214, Sec. E.3 (technical corrections to LLC Act) [which amended this section and 11 V.S.A. §§ 4003, 4142, and 4149] shall take effect retroactively as of July 1, 2015, and apply only to:

"(A) a limited liability company formed on or after July 1, 2015; and

"(B) except as otherwise provided in subdivision (4) of this subsection, a limited liability company formed before July 1, 2015 that elects, in the manner provided in its operating agreement or by law for amending the operating agreement, to be subject to this act.

"(2) Sec. E.3 does not affect an action commenced, a proceeding brought, or a right accrued before July 1, 2015.

"(3) Except as otherwise provided in subdivision (4) of this subsection, Sec. E.3 shall apply to all limited liability companies on and after July 1, 2016.

"(4) For the purposes of applying Sec. E.3 to a limited liability company formed before July 1, 2015, for the purposes of applying 11 V.S.A. § 4023 and subject to 11 V.S.A. § 4003, language in the company's articles of organization designating the company's management structure operates as if that language were in the operating agreement."

§ 4142. Conversion authorized.

  1. By complying with sections 4143 through 4146 of this title, a domestic limited liability company may become a domestic organization that is a different type of organization.
  2. By complying with sections 4143 through 4146 of this title, a domestic limited liability company may convert into a different type of foreign organization if the conversion is authorized by the foreign statute that governs the organization after conversion and the converting organization complies with the statute.
  3. By complying with sections 4143 through 4146 of this title, a domestic organization may become a domestic limited liability company.
  4. By complying with sections 4143 through 4146 of this title applicable to foreign organizations, a foreign organization that is not a foreign limited liability company may become a domestic limited liability company if the conversion is authorized by the law of the foreign organization's jurisdiction of formation.
  5. If a protected agreement contains a provision that applies to a merger of a domestic limited liability company but does not refer to a conversion, the provision applies to a conversion of the company as if the conversion were a merger until the provision is amended after July 1, 2016 or after the date the organization elects to become subject to this chapter, whichever is earlier.

    Added 2015, No. 17 , § 2; amended 2015, No. 97 (Adj. Sess.), § 44; 2015, No. 157 (Adj. Sess.), § E.3.

History

Amendments--2015 (Adj. Sess.). Subsec. (a): Act No. 97 substituted "4143 through 4146" for "4142 through 4146".

Subsec. (b): Act No. 157 rewrote the subsec. and redesignated former subsecs. (b)-(d) as present subsecs. (c)-(e).

Subsec. (c): Act Nos. 97 and 157 substituted "4143 through 4146" for "4142 through 4146".

Subsec. (c): Act No. 157 substituted "organization" for "partnership or limited partnership" following "domestic".

Subsec. (d): Act No. 157 substituted "4143 through 4146" for "4142 through 4146".

Subsec. (e): Act No. 157 substituted "after July 1, 2016 or after the date the organization elects to become subject to this chapter, whichever is earlier" for "after the effective date set forth in section 4171 of this title".

Effective date and applicability of 2015 (Adj. Sess.) amendment. 2015, No. 157 (Adj. Sess.), § U.1(d) provides: "(1) Notwithstanding 1 V.S.A. § 214, Sec. E.3 (technical corrections to LLC Act) [which amended this section and 11 V.S.A. §§ 4003, 4141, and 4149] shall take effect retroactively as of July 1, 2015, and apply only to:

"(A) a limited liability company formed on or after July 1, 2015; and

"(B) except as otherwise provided in subdiv. (4) of this subsec., a limited liability company formed before July 1, 2015 that elects, in the manner provided in its operating agreement or by law for amending the operating agreement, to be subject to this act.

"(2) Sec. E.3 does not affect an action commenced, a proceeding brought, or a right accrued before July 1, 2015.

"(3) Except as otherwise provided in subdiv. (4) of this subsec., Sec. E.3 shall apply to all limited liability companies on and after July 1, 2016.

"(4) For the purposes of applying Sec. E.3 to a limited liability company formed before July 1, 2015, for the purposes of applying 11 V.S.A. § 4023 and subject to 11 V.S.A. § 4003, language in the company's articles of organization designating the company's management structure operates as if that language were in the operating agreement."

§ 4143. Plan of conversion.

  1. A domestic limited liability company may convert to a different type of organization under section 4142 of this title, by approving a plan of conversion. The plan shall be in a record and contain:
    1. the name of the converting limited liability company;
    2. the name, jurisdiction of formation, and type of organization of the converted organization;
    3. the manner of converting the interests in the converting limited liability company into interests, securities, obligations, money, other property, rights to acquire interests or securities, or any combination of the foregoing;
    4. the proposed public organizational documents of the converted organization if it will be an organization with public organizational documents filed with the Secretary of State;
    5. the full text of the private organizational documents of the converted organization which are proposed to be in a record;
    6. the other terms and conditions of the conversion; and
    7. any other provision required by the law of this State or the operating agreement of the converting limited liability company.
  2. A domestic general partnership or a domestic limited partnership may convert into a domestic limited liability company by approving a plan of conversion setting forth the terms and conditions of the conversion of the interests of partners of a partnership or of a limited partnership, as the case may be, into interests in the converted limited liability company or the cash or other consideration to be paid or delivered as a result of the conversion of the interests of the partners, or a combination thereof.
  3. In addition to the requirements of subsection (a) of this section, a plan of conversion may contain any other provision not prohibited by law.

    Added 2015, No. 17 , § 2.

§ 4144. Approval of conversion.

  1. For any conversion of a limited liability company into another type of organization, a plan of conversion is not effective unless it has been approved:
    1. by a domestic converting limited liability company, in accordance with the organizational documents of the limited liability company, or, in the absence of a provision governing approval of conversions, by all the members of the limited liability company entitled to vote on or consent to any matter; and
    2. in a record, by each member of a domestic converting limited liability company who will have personal liability for debts, obligations, and other liabilities that are incurred after the conversion becomes effective, unless:
      1. the operating agreement of the company provides in a record for the approval of a conversion or a merger in which some or all of its members become subject to personal liability by the affirmative vote or consent of fewer than all the members; and
      2. the member voted for or consented in a record to that provision of the operating agreement or became a member after the adoption of that provision.
  2. For a conversion of a domestic general partnership or domestic limited partnership into a domestic limited liability company, the plan of conversion shall be approved by all of the partners or by a number or percentage of the partners required for the conversion in the partnership agreement.
  3. A conversion involving a domestic converting organization is not effective unless it is approved by the domestic converting organization in accordance with its governing law and organizational documents.
  4. A conversion of a foreign converting organization is not effective unless it is approved by the foreign organization in accordance with the law of the foreign organization's jurisdiction of formation and its organizational documents.

    Added 2015, No. 17 , § 2.

§ 4145. Amendment or abandonment of plan of conversion.

  1. A plan of conversion of a domestic converting limited liability company may be amended:
    1. in the same manner as the plan was approved, if the plan does not provide for the manner in which it may be amended; or
    2. by its managers or members in the manner provided in the plan of conversion, but a member that was entitled to vote on or consent to approval of the conversion is entitled to vote on or consent to any amendment of the plan that will change:
      1. the amount or kind of interests, securities, obligations, money, other property, rights to acquire interests or securities, or any combination of the foregoing, to be received by any of the members of the converting company under the plan;
      2. the public organizational documents, if any, or private organizational documents of the converted organization which will be in effect immediately after the conversion becomes effective, except for changes that do not require approval of the interest holders of the converted organization under its governing law or organizational documents; or
      3. any other terms or conditions of the plan, if the change would adversely affect the member in any material respect.
  2. A plan of conversion of a general or limited partnership may be amended:
    1. in the same manner as the plan was approved, if the plan does not provide for the manner in which it may be amended; or
    2. by its general partner or general partners in the manner provided in the plan, but a partner that was entitled to vote on or consent to approval of the conversion is entitled to vote on or consent to any amendment of the plan that will change:
      1. the amount or kind of interests, securities, obligations, money, other property, rights to acquire interests or securities, or any combination of the foregoing, to be received by any of the partners of the converting company under the plan;
      2. the public organizational documents, if any, or private organizational documents of the converted organization which will be in effect immediately after the conversion becomes effective, except for changes that do not require approval of the interest holders of the converted organization under its governing statute or governing documents; or
      3. any other terms or conditions of the plan, if the change would adversely affect the partner in any material respect.
    1. After a plan of conversion has been approved by a domestic converting limited liability company and before a statement of conversion becomes effective, the plan may be abandoned as provided in the plan. (c) (1)  After a plan of conversion has been approved by a domestic converting limited liability company and before a statement of conversion becomes effective, the plan may be abandoned as provided in the plan.
    2. Unless prohibited by the plan, a domestic converting limited liability company may abandon the plan in the same manner as the plan was approved.
    1. If a plan of conversion is abandoned after a statement of conversion has been delivered to the Secretary of State for filing and before the statement becomes effective, a statement of abandonment, signed by the converting organization, shall be delivered to the Secretary of State for filing before the statement of conversion becomes effective. (d) (1)  If a plan of conversion is abandoned after a statement of conversion has been delivered to the Secretary of State for filing and before the statement becomes effective, a statement of abandonment, signed by the converting organization, shall be delivered to the Secretary of State for filing before the statement of conversion becomes effective.
    2. The statement of abandonment takes effect on filing, and the conversion is abandoned and does not become effective.
    3. The statement of abandonment shall contain:
      1. the name of the converting limited liability company;
      2. the date on which the statement of conversion was filed by the Secretary of State; and
      3. a statement that the conversion has been abandoned in accordance with this section.

        Added 2015, No. 17 , § 2.

§ 4146. Statement of conversion; effective date of conversion.

  1. A statement of conversion shall be signed by the converting organization and delivered to the Secretary of State for filing.
  2. A statement of conversion shall contain:
    1. the name, jurisdiction of formation, and type of organization of the converting organization;
    2. the name, jurisdiction of formation, and type of organization of the converted organization;
    3. if the converting organization is a domestic limited liability company, a statement that the plan of conversion was approved in accordance with this subchapter, or, if the converting organization is a foreign organization, a statement that the conversion was approved by the foreign organization in accordance with the law of its jurisdiction of formation;
    4. if the converted organization is a domestic organization, its public organizational documents, as an attachment; and
    5. if the converted organization is a foreign limited liability partnership, its certificate of authority to do business in the State, as an attachment.
  3. In addition to the requirements of subsection (b) of this section, a statement of conversion may contain any other provision not prohibited by law.
  4. If the converted organization is a domestic organization, its public organizational documents, if any, shall satisfy the requirements of the law of this State, except that the public organizational documents do not need to be signed.
    1. A plan of conversion that is signed by a domestic converting limited liability company and meets all the requirements of subsection (b) of this section may be delivered to the Secretary of State for filing instead of a statement of conversion and on filing has the same effect. (e) (1)  A plan of conversion that is signed by a domestic converting limited liability company and meets all the requirements of subsection (b) of this section may be delivered to the Secretary of State for filing instead of a statement of conversion and on filing has the same effect.
    2. If a plan of conversion is filed as provided in this subsection, references in this subchapter to a statement of conversion refer to the plan of conversion filed under this subsection.
    1. If the converted organization is a domestic limited liability company, the conversion becomes effective when the statement of conversion is effective. (f) (1)  If the converted organization is a domestic limited liability company, the conversion becomes effective when the statement of conversion is effective.
    2. In all other cases, the conversion becomes effective on the later of:
      1. the date and time provided by the governing statute of the converted organization; or
      2. when the statement is effective.

        Added 2015, No. 17 , § 2.

§ 4147. Effect of conversion.

  1. When a conversion becomes effective:
    1. the converted organization is:
      1. organized under and subject to the governing statute of the converted organization; and
      2. the same organization without interruption as the converting organization;
    2. all property of the converting organization continues to be vested in the converted organization without transfer, reversion, or impairment;
    3. all debts, obligations, and other liabilities of the converting organization continue as debts, obligations, and other liabilities of the converted organization;
    4. except as otherwise provided by law or the plan of conversion, all the rights, privileges, immunities, powers, and purposes of the converting organization remain in the converted organization;
    5. the name of the converted organization may be substituted for the name of the converting organization in any pending action or proceeding;
    6. the certificate of organization of the converted organization becomes effective;
    7. the provisions of the operating agreement of the converted organization which are to be in a record, if any, approved as part of the plan of conversion become effective; and
    8. the interests in the converting organization are converted, and the interest holders of the converting organization are entitled only to the rights provided to them under the plan of conversion.
  2. Except as otherwise provided in the operating agreement of a domestic converting limited liability company, the conversion does not give rise to any rights that a member, manager, or third party would have upon a dissolution, liquidation, or winding up of the converting organization.
  3. When a conversion becomes effective, a person that did not have personal liability with respect to the converting organization and becomes subject to personal liability with respect to a domestic organization as a result of the conversion has personal liability only to the extent provided by the governing statute of the organization and only for those debts, obligations, and other liabilities that are incurred after the conversion becomes effective.
  4. When a conversion becomes effective, the personal liability of a person that ceases to hold an interest in a domestic converting limited liability company with respect to which the person had personal liability is subject to the following rules:
    1. the conversion does not discharge any personal liability under this title to the extent the personal liability was incurred before the conversion became effective;
    2. the person does not have personal liability under this title for any debt, obligation, or other liability that arises after the conversion becomes effective;
    3. this title continues to apply to the release, collection, or discharge of any personal liability preserved under subdivision (1) of this subsection as if the conversion had not occurred; and
    4. the person has whatever rights of contribution from any other person as are provided by this title, law other than this title, or the organizational documents of the converting organization with respect to any personal liability preserved under subdivision (1) of this subsection as if the conversion had not occurred.
  5. When a conversion becomes effective, a foreign organization that is the converted organization may be served with process in this State for the collection and enforcement of any of its debts, obligations, and other liabilities as provided in section 4010 of this title.
  6. If the converting organization is a registered foreign organization, its registration to do business in this State is canceled when the conversion becomes effective.
  7. A conversion does not require the organization to wind up its affairs and does not constitute or cause the dissolution of the organization.

    Added 2015, No. 17 , § 2.

§ 4148. Merger of entities.

  1. A limited liability company may merge with one or more other constituent organizations pursuant to this section, sections 4149 through 4151 of this title, and a plan of merger, if:
    1. the governing statute of each of the other organizations authorizes the merger;
    2. the merger is not prohibited by the law of a jurisdiction that enacted any of the governing statutes; and
    3. each of the other organizations complies with its governing statute in effecting the merger.
  2. A plan of merger shall be in a record and shall include:
    1. the name and form of each constituent organization;
    2. the name and form of the surviving organization and, if the surviving organization is to be created by the merger, a statement to that effect;
    3. the terms and conditions of the merger, including the manner and basis for converting the interests in each constituent organization into any combination of money, interests in the surviving organization, and other consideration;
    4. if the surviving organization is to be created by the merger, the surviving organization's organizational documents that are proposed to be in a record; and
    5. if the surviving organization is not to be created by the merger, any amendments to be made by the merger to the surviving organization's organizational documents that are, or are proposed to be, in a record.

      Added 2015, No. 17 , § 2.

§ 4149. Action on plan of merger by constituent limited liability company.

  1. Subject to section 4156 of this title, a plan of merger shall be approved in accordance with the organizational documents of the constituent limited liability company, or, in the absence of a provision governing approval of a merger, by all the members of the limited liability company entitled to vote on or consent to any matter.
  2. Subject to section 4156 of this title and any contractual rights, after a merger is approved, and at any time before the articles of merger are delivered to the Secretary of State for filing under section 4150 of this title, a constituent limited liability company may amend the plan or abandon the merger:
    1. as provided in the plan; or
    2. except as otherwise prohibited in the plan, with the same consent as was required to approve the plan.

      Added 2015, No. 17 , § 2; amended 2015, No. 97 (Adj. Sess.), § 45; 2015, No. 157 (Adj. Sess.), § E.3.

History

Amendments--2015 (Adj. Sess.). Subsec. (a): Act Nos. 97 and 157 substituted "a merger" for "conversions" following "approval of".

Effective date and applicability of 2015 (Adj. Sess.) amendment. 2015, No. 157 (Adj. Sess.), § U.1(d) provides: "(1) Notwithstanding 1 V.S.A. § 214, Sec. E.3 (technical corrections to LLC Act) [which amended this section and 11 V.S.A. §§ 4003, 4141, and 4142] shall take effect retroactively as of July 1, 2015, and apply only to:

"(A) a limited liability company formed on or after July 1, 2015; and

"(B) except as otherwise provided in subdiv. (4) of this subsec., a limited liability company formed before July 1, 2015 that elects, in the manner provided in its operating agreement or by law for amending the operating agreement, to be subject to this act.

"(2) Sec. E.3 does not affect an action commenced, a proceeding brought, or a right accrued before July 1, 2015.

"(3) Except as otherwise provided in subdiv. (4) of this subsec., Sec. E.3 shall apply to all limited liability companies on and after July 1, 2016.

"(4) For the purposes of applying Sec. E.3 to a limited liability company formed before July 1, 2015, for the purposes of applying 11 V.S.A. § 4023 and subject to 11 V.S.A. § 4003, language in the company's articles of organization designating the company's management structure operates as if that language were in the operating agreement."

§ 4150. Filings required for merger; effective date.

  1. After each constituent organization has approved a merger, articles of merger shall be signed on behalf of:
    1. each constituent limited liability company, as provided in subsection 4025(a) of this title; and
    2. each other constituent organization, as provided in its governing statute.
  2. Articles of merger under this section shall include:
    1. the name and form of each constituent organization and the jurisdiction of its governing statute;
    2. the name and form of the surviving organization, the jurisdiction of its governing statute, and, if the surviving organization is created by the merger, a statement to that effect;
    3. the date the merger is effective under the governing statute of the surviving organization;
    4. if the surviving organization is to be created by the merger:
      1. if it will be a limited liability company, the company's certificate of organization; or
      2. if it will be an organization other than a limited liability company, the organizational document that creates the organization that is in a public record;
    5. if the surviving organization preexists the merger, any amendments provided for in the plan of merger for the organizational document that created the organization that are in a public record;
    6. a statement as to each constituent organization that the merger was approved as required by the organization's governing statute;
    7. if the surviving organization is a foreign organization not authorized to transact business in this State, the street and mailing addresses of an office that the Secretary of State may use for the purposes of subsection 4151(b) of this title; and
    8. any additional information required by the governing statute of any constituent organization.
  3. Each constituent limited liability company shall deliver the articles of merger for filing in the Office of the Secretary of State.
  4. A merger becomes effective under this subchapter:
    1. if the surviving organization is a limited liability company, upon the later of:
      1. compliance with subsection (c) of this section; or
      2. subject to section 4026 of this title, as specified in the articles of merger; or
    2. if the surviving organization is not a limited liability company, as provided by the governing statute of the surviving organization.

      Added 2015, No. 17 , § 2.

§ 4151. Effect of merger.

  1. When a merger becomes effective:
    1. the surviving organization continues or comes into existence;
    2. each constituent organization that merges into the surviving organization ceases to exist as a separate entity;
    3. all property owned by each constituent organization that ceases to exist vests in the surviving organization;
    4. all debts, obligations, or other liabilities of each constituent organization that ceases to exist continue as debts, obligations, or other liabilities of the surviving organization;
    5. an action or proceeding pending by or against any constituent organization that ceases to exist may be continued as if the merger had not occurred;
    6. except as prohibited by other law, all of the rights, privileges, immunities, powers, and purposes of each constituent organization that ceases to exist vest in the surviving organization;
    7. except as otherwise provided in the plan of merger, the terms and conditions of the plan of merger take effect;
    8. except as otherwise agreed, if a constituent limited liability company ceases to exist, the merger does not dissolve the limited liability company for the purposes of subchapter 7 of this chapter;
    9. if the surviving organization is created by the merger:
      1. if it is a limited liability company, the certificate of organization becomes effective; or
      2. if it is an organization other than a limited liability company, the organizational document that creates the organization becomes effective; and
    10. if the surviving organization preexisted the merger, any amendments provided for in the articles of merger for the organizational document that created the organization become effective.
    1. A surviving organization that is a foreign organization consents to the jurisdiction of the courts of this State to enforce any debt, obligation, or other liability owed by a constituent organization, if before the merger the constituent organization was subject to suit in this State on the debt, obligation, or other liability. (b) (1)  A surviving organization that is a foreign organization consents to the jurisdiction of the courts of this State to enforce any debt, obligation, or other liability owed by a constituent organization, if before the merger the constituent organization was subject to suit in this State on the debt, obligation, or other liability.
    2. A surviving organization that is a foreign organization and not authorized to transact business in this State appoints the Secretary of State as its agent for service of process for the purposes of enforcing a debt, obligation, or other liability under this subsection.
    3. Service on the Secretary of State under this subsection shall be made in the same manner and has the same consequences as in subsections 4010(c) and (d) of this title.

      Added 2015, No. 17 , § 2.

§ 4152. Domestication.

  1. A foreign limited liability company may become a limited liability company pursuant to this section, sections 4153 through 4155 of this title, and a plan of domestication, if:
    1. the foreign limited liability company's governing statute authorizes the domestication;
    2. the domestication is not prohibited by the law of the jurisdiction that enacted the governing statute; and
    3. the foreign limited liability company complies with its governing statute in effecting the domestication.
  2. A limited liability company may become a foreign limited liability company pursuant to this section, sections 4153 through 4155 of this title, and a plan of domestication, if:
    1. the foreign limited liability company's governing statute authorizes the domestication;
    2. the domestication is not prohibited by the law of the jurisdiction that enacted the governing statute; and
    3. the foreign limited liability company complies with its governing statute in effecting the domestication.
  3. A plan of domestication shall be in a record and shall include:
    1. the name of the domesticating company before domestication and the jurisdiction of its governing statute;
    2. the name of the domesticated company after domestication and the jurisdiction of its governing statute;
    3. the terms and conditions of the domestication, including the manner and basis for converting interests in the domesticating company into any combination of money, interests in the domesticated company, and other consideration; and
    4. the organizational documents of the domesticated company that are, or are proposed to be, in a record.

      Added 2015, No. 17 , § 2.

§ 4153. Action on plan of domestication by domesticating limited liability company.

  1. A plan of domestication shall be consented to:
    1. by all the members, subject to section 4156 of this title, if the domesticating company is a limited liability company; and
    2. as provided in the domesticating company's governing statute, if the company is a foreign limited liability company.
  2. Subject to any contractual rights, after a domestication is approved, and at any time before articles of domestication are delivered to the Secretary of State for filing under section 4154 of this title, a domesticating limited liability company may amend the plan or abandon the domestication:
    1. as provided in the plan; or
    2. except as otherwise prohibited in the plan, by the same consent as was required to approve the plan.

      Added 2015, No. 17 , § 2.

§ 4154. Filings required for domestication; effective date.

  1. After a plan of domestication is approved, a domesticating company shall deliver to the Secretary of State for filing articles of domestication, which shall include:
    1. a statement, as the case may be, that the company has been domesticated from or into another jurisdiction;
    2. the name of the domesticating company and the jurisdiction of its governing statute;
    3. the name of the domesticated company and the jurisdiction of its governing statute;
    4. the date the domestication is effective under the governing statute of the domesticated company;
    5. if the domesticating company was a limited liability company, a statement that the domestication was approved as required by this title;
    6. if the domesticating company was a foreign limited liability company, a statement that the domestication was approved as required by the governing statute of the other jurisdiction; and
    7. if the domesticated company was a foreign limited liability company not authorized to transact business in this State, the street and mailing addresses of an office that the Secretary of State may use for the purposes of subsection 4155(b) of this title.
  2. A domestication becomes effective:
    1. when the certificate of organization takes effect, if the domesticated company is a limited liability company; and
    2. according to the governing statute of the domesticated company, if the domesticated organization is a foreign limited liability company.

      Added 2015, No. 17 , § 2.

§ 4155. Effect of domestication.

  1. When a domestication takes effect:
    1. the domesticated company is for all purposes the company that existed before the domestication;
    2. all property owned by the domesticating company remains vested in the domesticated company;
    3. all debts, obligations, or other liabilities of the domesticating company continue as debts, obligations, or other liabilities of the domesticated company;
    4. an action or proceeding pending by or against a domesticating company may be continued as if the domestication had not occurred;
    5. except as prohibited by other law, all of the rights, privileges, immunities, powers, and purposes of the domesticating company remain vested in the domesticated company;
    6. except as otherwise provided in the plan of domestication, the terms and conditions of the plan of domestication take effect; and
    7. except as otherwise agreed, the domestication does not dissolve a domesticating limited liability company for the purposes of subchapter 7 of this chapter.
    1. A domesticated company that is a foreign limited liability company consents to the jurisdiction of the courts of this State to enforce any debt, obligation, or other liability owed by the domesticating company, if, before the domestication, the domesticating company was subject to suit in this State on the debt, obligation, or other liability. (b) (1)  A domesticated company that is a foreign limited liability company consents to the jurisdiction of the courts of this State to enforce any debt, obligation, or other liability owed by the domesticating company, if, before the domestication, the domesticating company was subject to suit in this State on the debt, obligation, or other liability.
    2. A domesticated company that is a foreign limited liability company and not authorized to transact business in this State appoints the Secretary of State as its agent for service of process for purposes of enforcing a debt, obligation, or other liability under this subsection.
    3. Service on the Secretary of State under this subsection must be made in the same manner and has the same consequences as in section 4010 of this title.
  2. If a limited liability company has adopted and approved a plan of domestication under section 4152 of this title providing for the company to be domesticated in a foreign jurisdiction, a statement surrendering the company's certificate of organization must be delivered to the Secretary of State for filing, setting forth:
    1. the name of the company;
    2. a statement that the certificate of organization is being surrendered in connection with the domestication of the company in a foreign jurisdiction;
    3. a statement the domestication was approved as required by this title; and
    4. the jurisdiction of formation of the domesticated foreign limited liability company.

      Added 2015, No. 17 , § 2.

§ 4156. Restrictions on approval of mergers, conversions, and domestications.

  1. If a member of a constituent, converting, or domesticating limited liability company will have personal liability with respect to a surviving, converted, or domesticated organization, approval or amendment of a plan of merger, conversion, or domestication is ineffective without the consent of the member, unless:
    1. the company's operating agreement provides for approval of a merger, conversion, or domestication with the consent of fewer than all the members; and
    2. the member has consented to the provision of the operating agreement.
  2. A member does not give the consent required by subsection (a) of this section merely by consenting to a provision of the operating agreement that permits the operating agreement to be amended with the consent of fewer than all the members.

    Added 2015, No. 17 , § 2.

§ 4157. Subchapter not exclusive.

This subchapter does not preclude an organization from being converted, merged, or domesticated under law other than this title.

Added 2015, No. 17 , § 2.

Subchapter 11. Low-Profit Limited Liability Companies

§ 4161. Election.

A limited liability company organized pursuant to this title may elect to be a low-profit limited liability company if and for so long at it satisfies the requirements of section 4162 of this title.

Added 2015, No. 17 , § 2.

§ 4162. Requirements.

A limited liability company shall be organized for a business purpose that satisfies, and shall at all times be operated to satisfy, each of the following requirements:

  1. The company:
    1. significantly furthers the accomplishment of one or more charitable or educational purposes within the meaning of 26 U.S.C. § 170(c) (2)(B); and
    2. would not have been formed but for the company's relationship to the accomplishment of charitable or educational purposes.
  2. No significant purpose of the company is the production of income or the appreciation of property; provided, however, that the fact that a person produces significant income or capital appreciation shall not, in the absence of other factors, be conclusive evidence of a significant purpose involving the production of income or the appreciation of property.
  3. No purpose of the company is to accomplish one or more political or legislative purposes within the meaning of 26 U.S.C. § 170(c) (2)(D).

    Added 2015, No. 17 , § 2.

§ 4163. Failure to meet requirements.

  1. A limited liability company that elects to be an L3C and subsequently fails to satisfy any one of the requirements set forth in section 4162 of this title shall immediately cease to be a low-profit limited liability company, but by continuing to meet all the other requirements of this chapter, continues to exist as a limited liability company.
  2. In the event an L3C fails to satisfy the requirements of section 4162 of this title, the company shall change its name to conform with subsection 4005(a) of this title.

    Added 2015, No. 17 , § 2.

Subchapter 12. Blockchain-Based Limited Liability Companies

§ 4171. Definitions.

As used in this section:

  1. "Blockchain technology" has the same meaning as in 12 V.S.A. § 1913 .
  2. "Participant" means:
    1. each person that has a partial or complete copy of the decentralized consensus ledger or database utilized by the blockchain technology, or otherwise participates in the validation processes of such ledger or database;
    2. each person in control of any digital asset native to the blockchain technology; and
    3. each person that makes a material contribution to the protocols.
  3. "Protocols" means the designated regulatory model of the software that governs the rules, operations, and communication between nodes on the network utilized by the participants.
  4. "Virtual currency" means a digital representation of value that:
    1. is used as a medium of exchange, unit of account, or store of value; and
    2. is not legal tender, whether or not denominated in legal tender.

      Added 2017, No. 205 (Adj. Sess.), § 7.

§ 4172. Election.

A limited liability company organized pursuant to this title for the purpose of operating a business that utilizes blockchain technology for a material portion of its business activities may elect to be a blockchain-based limited liability company (BBLLC) by:

  1. specifying in its articles of organization that it elects to be a BBLLC; and
  2. meeting the requirements in subdivision 4173(2) and subsection 4174(a) of this title.

    Added 2017, No. 205 (Adj. Sess.), § 7.

§ 4173. Authority; requirements.

Notwithstanding any provision of this chapter to the contrary:

  1. A BBLLC may provide for its governance, in whole or in part, through blockchain technology.
  2. The operating agreement for a BBLLC shall:
    1. provide a summary description of the mission or purpose of the BBLLC;
    2. specify whether the decentralized consensus ledger or database utilized or enabled by the BBLLC will be fully decentralized or partially decentralized and whether such ledger or database will be fully or partially public or private, including the extent of participants' access to information and read and write permissions with respect to protocols;
    3. adopt voting procedures, which may include smart contracts carried out on the blockchain technology, to address:
      1. proposals from managers, members, or other groups of participants in the BBLLC for upgrades or modifications to software systems or protocols, or both;
      2. other proposed changes to the BBLLC operating agreement; or
      3. any other matter of governance or activities within the purpose of the BBLLC;
    4. adopt protocols to respond to system security breaches or other unauthorized actions that affect the integrity of the blockchain technology utilized by the BBLLC;
    5. provide how a person becomes a member of the BBLLC with an interest, which may be denominated in the form of units, shares of capital stock, or other forms of ownership or profit interests; and
    6. specify the rights and obligations of each group of participants within the BBLLC, including which participants shall be entitled to the rights and obligations of members and managers.

      Added 2017, No. 205 (Adj. Sess.), § 7.

§ 4174. Multiple roles of members and managers.

  1. A member or manager of a BBLLC may interact with the BBLLC in multiple roles, including as a member, manager, developer, node, miner, or other participant in the BBLLC, or as a trader and holder of the currency in its own account and for the account of others, provided such member or manager complies with any applicable fiduciary duties.
  2. The activities of a member or manager who interacts with the BBLLC through multiple roles are not deemed to take place in this State solely because the BBLLC is organized in this State.

    Added 2017, No. 205 (Adj. Sess.), § 7.

§ 4175. Consensus formation algorithms and governance processes.

In its governance, a BBLLC may:

  1. adopt any reasonable algorithmic means for accomplishing the consensus process for validating records, as well as requirements, processes, and procedures for conducting operations, or making organizational decisions on the blockchain technology used by the BBLLC; and
  2. in accordance with any procedure specified pursuant to section 4173 of this title, modify the consensus process, requirements, processes, and procedures, or substitute a new consensus process, requirements, processes, or procedures that comply with the requirements of law and the governance provisions of the BBLLC.

    Added 2017, No. 205 (Adj. Sess.), § 7.

§ 4176. Scope of subchapter; other law.

Except as expressly provided otherwise, this subchapter does not exempt a BBLLC from any other judicial, statutory, or regulatory provision of Vermont law or federal law, including State and federal securities laws. Except to the extent inconsistent with the provisions of this subchapter, the provisions of the Vermont Limited Liability Company Act govern.

Added 2017, No. 205 (Adj. Sess.), § 7.