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decisions of the Managers or Members of an LLC. Attached is a form of this document. When Do You Need the Manager or Members to Take Action? This is really very interesting and a good distinction from corporations (and you can read about corporations (for free) on the preview page of my written consent of the board of directors form). Whereas in most states the corporation code specifies a range of actions that a corporation cannot take without board approval, the LLC has very few actions other than formation or dissolution or admission of new members that explicitly require consent of the members or managers. However, because LLCs are meant to be flexible but governed by whatever operating agreement or LLC agreement the members agree to, the operating agreement may specify that certain actions require a specific number or a unanimous consent to be done. For instance, in the form operating agreement for multiple members or a manager that I provide, I show you how to state that while a manager can manage things day to day, that for certain actions (like an acquisition or hiring someone with above a salary of X), you need the consent of the members. Can I Do a Meeting rather than a Written Consent? Yes … but unlike a corporation where there is established practice as to how to document meetings, unless your LLC agreement specifies how meetings of the manager or members are to be documented, if you only have a meeting, how exactly are you going to prove it to a 3rd party (or, god forbid, a court) that the requisite number of members or managers gave the consent. Frankly, many times you do a written consent is just for the benefit of 3rd parties. Under the LLC agreement the manager or members might have the right to just sign the document or just sign a document or do a deal after calling the other members up, but maybe a 3rd party wants written proof that the members signed off. Or maybe you want written proof to stick in your files. That’s what this is for. What if the 3rd Party Asks Me for a Secretary’s Certificate rather than this Consent? What Does That Mean? It means that you are dealing with someone who either isn’t that familiar with LLCs or is not thinking or both. But you should explain to them that LLCs, unlike corporations, don’t need secretaries (unless your operating agreement happened to create one, in which case you can just provide one, in which case this section is not relevant – but I rarely have seen that and have never seen it in a small business LLC operating agreement) and that since what the secretaries’ certificate does is just show proof that whatever thing the 3rd party wants (lets say banking resolutions) have been authorized by the persons running the company as long as you provide the written consent signed by the managers or members (and, if they insist, the operating agreement or portions thereof that
establish that its manager or member run), that should be sufficient. Or at most that and a statement by the members or managers that since that date they have not repealed those resolutions. The Form Has The Option of Managers or Members. Which is it and how many? That depends on (a) what you checked on the formation certificate (go check it – did you say it was manager managed or member managed) and (b) whats in your operating agreement/LLC agreement and (c) what the action is. For instance, lets say that you formed an LLC that you state is member managed but your operating agreement says the members appoint a manager who is authorized to do the day to day operations but that (a) entering into a contract that costs more than $100,000 a year requires a majority of the five members, and (b) acquiring the equity interests of any other company requires unanimous consent of the five members. Well then, if you just need it for bank resolutions, you could just do the manager since he has authority to do that. If you are hiring your VP of sales for $100,000 a year you need 3 members. If you are buying another company you need all 5 members.
Well. Note that “whereas” clauses are descriptive – it’s the “resolved” clause that actually constitutes the approval. So. otherwise it raises questions as to how they can approve it. Its probably best to provide them some kind of document. normally they start with the phrase “Resolved. whereas are sometimes helpful in proving that the [Managers/Members] met their fiduciary duties of care because it provides evidence of why approving the proposed action was in the interests of the company. the [Managers/Members] has determined that it is in the best interests of the Company to enter into an exclusive distribution arrangement with Big X on the terms described to the [Managers/Members] by management.” and then authorize the company to do something and then authorize the officers of the company (you can either simply say officers or authorized persons or list out which specific officers or even specific people) to act in furtherance of that resolution. Just kidding. Note that it says that the [Managers/Members] has been presented the form of agreement – if you don’t present it to them. don’t say that.” What if I Already Signed It and Now I Want the Members/Managers to Approve It The best way to handle it is to have the [Managers/Members] ratify the action. it is fairly common to add a preamble paragraph that explains why the [Managers/Members] is finding it in the best interests of the Company to enter into the agreement. You can either specifically call out the ratification in the resolution authorizing the agreement or you can do a general omnibus ratification. . that the Distribution and License Agreement by and between the Company and Big X in the form presented to the [Manager/Members] (the “Distribution Agreement”) is hereby approved and authorized both in terms of execution and performance of the terms herein and that the [Manager/Members] are hereby instructed and authorized to execute such Distribution Agreement. amend that language to reflect that fact (so replace “in the form presented to the [Managers/Members]” with “as summarized in materials delivered to the [Managers/Members]”. together with such changes as they deem reasonably necessary. If you summarize it for them in a memo or a slide deck. However. lets say that you are entering into a distribution agreement with company “Big X” and their lawyer says they want to see that your board approved the agreement. So. Lets say the title of the distribution agreement is “Distribution and License Agreement”. this is a Whereas clause you could stick before the action “Resolved” clause in the previous example: “Whereas. for example.Any Advice on Drafting the Actual Resolutions? No. As an addition. Then the resolution you might include in your written consent might be something like: Resolved. after careful consideration. for example.
lets say the CEO already has signed the Big X agreement and a week later Big X wants to see proof of approval by the [Managers/Members] so you need to ratify it.So as a variation on the previous example. approved and confirmed in all respects. Here’s the specific revised version: Resolved. ratified and authorized both in terms of execution and performance of the terms herein and that the execution by the [whoever signed it] of the Distribution Agreement is hereby ratified. ratified and confirmed in all respects as the proper acts and deeds of the Company. Here’s the omnibus ratification: Resolved. that all actions previously taken by any employee of the Company in connection with the transactions contemplated by the foregoing votes are hereby approved. . that the Distribution and License Agreement by and between the Company and Big X as presented to the [Managers/Members] is hereby approved.
Like unanimous written consents . [constituting the requisite number of Members required to authorize the actions below/ being the duly appointed manager] [pursuant to [Section __ ]3 of the [Operating Agreement/LLC Agreement] of ____________ [name of Company] (the “Company”)] adopt the following recitals and resolutions: [Insert text of recitals and resolutions. [signature]4 [print or type name] 1 As per your LLC agreement. The state of your entity The relevant section of your operating agreement. If you don’t have one. 20__ The undersigned. more is better. do as many of these as you have Members/Managers. 3 2 . If only one.] FURTHER RESOLVED. the foregoing resolutions shall be deemed to be adopted and in full force and effect as of the date hereof. it needs a little tweaking but even if you didn’t wouldn’t be legally fatal.[Unanimous]1 Written Consent of the [Members/Manager] of ____________________________ [name of company] a ____________2 limited liability company Dated: ___________________. to grammatically get it to read write.if in doubt. that this [Unanimous] Written Consent may be executed in one or more counterparts and when [each Member/the Manager] has executed at least one counterpart. 4 Obviously. I guess remove this..