PROTECTED SERIES ORGANIZATIONS
( a/k/a Series LLCs )
PROTECTED SERIES ORGANIZATIONS § 11
(a) In this section:
(1) “Protected series” means an arrangement, however denominated, created by a series organization that, pursuant to the law under which the series organization is organized, has the characteristics set forth in paragraph (2).
(2) “Series organization” means an organization that, pursuant to the law under which it is organized, has the following characteristics:
(i) The organic record of the organization provides for creation by the organization of one or more protected series, however denominated, with respect to specified property of the organization, and for records to be maintained for each protected series that identify the property of or associated with the protected series.
(ii) Debt incurred or existing with respect to the activities of, or property of or associated with, a particular protected series is enforceable against the property of or associated with the protected series only, and not against the property of or associated with the organization or other protected series of the organization.
(iii) Debt incurred or existing with respect to the activities or property of the organization is enforceable against the property of the organization only, and not against the property of or associated with a protected series of the organization.
(b) A series organization and each protected series of the organization is a separate person for purposes of this [Act], even if for other purposes a protected series is not a person separate from the organization or other protected series of the organization.
This section should be enacted even if the enacting jurisdiction does not itself have legislation enabling the creation of protected series.
For example, in such an enacting jurisdiction this section will apply if a protected series of a series organization organized under the law of a different jurisdiction makes a transfer to another protected series of that organization and, under applicable choice of law rules, the voidability of the transfer is governed by the law of the enacting jurisdiction.
Prefatory Note (UVTA 2014). Series Organizations.
A new § 11 provides that each “protected series” of a “series organization” is to be treated as a person for purposes of the Act, even if it is not treated as a person for other purposes.
This change responds to the emergence of the “series organization” as a significant form of business organization.
Reporter's Comment to § 11 ¶ 1.
This section, added in 2014, accommodates developments in business organization statutes exemplified by the Uniform Statutory Trust Entity Act §§ 401-404 (2009) and Del. Code Ann. tit. 6, § 18-215 (2012) (pertaining to Delaware limited liability companies).
The definition of “series organization” in subsection (a)(2) is adapted from §§ 401-402 of the Uniform Statutory Trust Entity Act.
If the statute under which an organization is organized permits it to divide its assets and debts among “protected series” (however denominated), such that assets and debts of, or associated with, each “protected series” are separated in accordance with subsections (a)(2)(ii) and (iii), and if the organization does so, then the provisions of this Act apply to each “protected series” as if it were a legal entity, regardless of whether it is considered to be a legal entity for other purposes.
The conditions referred to in subsections (a)(2)(ii) and (iii) are satisfied if the law under which the organization is organized so provides.
It does not matter whether the separation of assets and debts described in subsections (a)(2)(ii) and (iii) would be respected by another jurisdiction in which the organization does business, or would be given effect by the Bankruptcy Code in the bankruptcy of the organization.
An organization may be a “series organization” having “protected series,” as those terms are used in this section, even though the statute under which the organization is organized uses different terminology.
This section uses the term “protected series,” which is not used in either the Uniform Statutory Trust Entity Act or the Delaware provisions cited above, to emphasize that the application of this section does not depend upon the terminology used by the applicable statute.
Reporter's Comment to § 11 ¶ 2.
The addition of this section to the Act does not imply any judgment about the desirability of legislation enabling the creation of protected series.
This section applies the UVTA to Series LLCs and similar forms of entities, and treats each individual protected cell as a separate person, i.e., Series A could be found to have made an avoidable transfer to Series B.
SERIES ORGANIZATIONS TOPICS AND OPINIONS