Colorado Limited Liability Company Act

Colorado Limited Liability Company Act

ARTICLE 80

LIMITED LIABILITY COMPANIES

Annotations

Cross references: For the "Uniform Records Retention Act", see article 17 of title 6.

Annotations

Law reviews: For article, "Colorado Enacts Limited Liability Company Legislation", see 19 Colo. Law. 1029 (1990); for article, "Choice of Entities in Colorado", see 23 Colo. Law. 293 (1994); for article, "Colorado LLCs: New and Improved", see 24 Colo. Law. 1473 (1994); for article, "Classifying LLCs Under New IRS Ruling Guidelines", see 24 Colo. Law. 741 (1995); for article, "Choice of Entity in Colorado: An Update", see 25 Colo. Law. 3 (October 1996); for article, "Colorado Choice of Entity 1998", see 27 Colo. Law. 5 (June 1998); for article, "Colorado LLCs as Nonprofit Organizations", see 27 Colo. Law. 57 (August 1998); for article, "Contractually Binding Colorado Entities", see 28 Colo. Law. 33 (December 1999); for article, "Colorado Choice of Form of Organization and Structure 2001", see 30 Colo. Law. 11 (October 2001); for article, "Entity and Trade Name Registration: 2001 Update", see 30 Colo. Law. 81 (October 2001); for article, "LLCs in Acquisitions: Increased Utility Under Recent Regulation", see 31 Colo. Law. 73 (August 2002); for article, "No Paper Required: Business Entity Legislation Makes Life Easier for Business Lawyers", see 33 Colo. Law. 6 (June 2004); for article, "Entity and Trade Name Registration: 2004 Update", see 34 Colo. Law. 11 (January 2005).

PART 1 DEFINITION AND APPLICATION

7-80-101. Short title.

Statute text

This article shall be known and may be cited as the "Colorado Limited Liability Company Act".

History

Source: L. 90: Entire article added, p. 414, § 1, effective April 18.

7-80-102. Definitions.

Statute text

As used in this article, unless the context otherwise requires:

(1) "Articles of organization" means the articles of organization filed in the records of the secretary of state for the purpose of forming a limited liability company as specified in sections 7-80-203 and 7-80-204. "Articles of organization" includes amended articles of organization, restated articles of organization, statements of merger, and other instruments, however designated, on file in the records of the secretary of state that have the effect of amending or supplementing, in some respect, the original or amended articles of organization.

(2) "Bankrupt" means bankrupt or a debtor under the federal bankruptcy code of 1978, title 11 of the United States Code, as amended, or an insolvent under any state insolvency act.

(3) "Business" means any lawful activity, including ownership of real or personal property, whether or not engaged in for profit.

(4) "Contribution" means anything of value that a person contributes to a limited liability company as a prerequisite to becoming a member in the limited liability company or in the capacity of a member in the limited liability company, including cash, property, or services rendered or a promissory note or other binding obligation to contribute cash or property or to perform services.

(5) "Court" includes every court and judge having jurisdiction in a case.

(6) and (6.5) (Deleted by amendment, L. 2003, p. 2263, § 174, effective July 1, 2004.)

(7) "Limited liability company" or "company" means a limited liability company formed under this article.

(7.5) and (7.6) (Deleted by amendment, L. 2003, p. 2263, § 174, effective July 1, 2004.)

(8) "Manager" means a person designated as a manager of a limited liability company to manage the company pursuant to section 7-80-402.

(9) "Member" means a person with an ownership interest in a limited liability company with the rights and obligations specified under this article. In the case of a limited liability company with only one member, "members" and "all of the members" refers to such one member.

(10) "Membership interest" means a member's share of the profits and losses of a limited liability company and the right to receive distributions of such company's assets.

(11) (a) "Operating agreement" means any agreement of all of the members as to the affairs of a limited liability company and the conduct of its business. Except as otherwise provided in this article or as otherwise required by a written operating agreement, the operating agreement need not be in writing. An operating agreement may contain any provisions required or permitted by section 7-80-108 (1). An operating agreement includes any amendments to the operating agreement.

(b) In the case of a limited liability company with only one member, "operating agreement" includes:

(I) Any writing, without regard to whether such writing otherwise constitutes an agreement, as to such company's affairs and the conduct of the limited liability company's business signed by the sole member;

(II) Any written agreement between the member and the company as to the limited liability company's affairs and the conduct of the limited liability company's business; or

(III) Any agreement, whether or not the agreement is in writing, between the member and the limited liability company as to a limited liability company's affairs and the conduct of its business if the limited liability company is managed by a manager who is a person other than the member.

(12) to (16) (Deleted by amendment, L. 2003, p. 2263, § 174, effective July 1, 2004.)

History

Source: L. 90: Entire article added, p. 414, § 1, effective April 18. L. 94: (3), (7), and (11) amended and (6.5), (7.5), (7.6), (14), (15), and (16) added, p. 709, § 1, effective July 1. L. 95: (7.6), (11), and (13) amended, p. 805, § 21, effective May 24. L. 97: (8), (9), and (11) amended and (14.5) added, p. 1502, § 11, effective June 3; (13) amended, p. 917, § 8, effective January 1, 1998. L. 2002: (1) amended, p. 1832, § 70, effective July 1; (1) amended, p. 1697, § 68, effective October 1. L. 2003: (1), (6) to (7.6), and (12) to (16) amended, p. 2263, § 174, effective July 1, 2004. L. 2004: (11)(a) amended, p. 936, § 1, effective July 1. L. 2006: (1), (4), and (8) amended, p. 854, § 18, effective July 1.

Annotations

Cross references: For additional definitions applicable to this title, see § 7-90-102.

7-80-103. Nature of business.

Statute text

A limited liability company may be formed under this article for any lawful business, subject to any provisions of law governing or regulating such business within this state.

History

Source: L. 90: Entire article added, p. 415, § 1, effective April 18. L. 94: Entire section amended, p. 710, § 2, effective July 1. L. 2003: Entire section amended, p. 2264, § 175, effective July 1, 2004.

Annotations

Law reviews. For article, "Partnership or LLC: Alternative to an Irrevocable Life Insurance Trust?", see 25 Colo. Law. 43 (January 1996).

7-80-104. Powers.

Statute text

(1) Each limited liability company formed and existing under this article may:

(a) Sue and be sued, complain and defend, and participate in administrative or other proceedings, in its name;

(b) Purchase, take, receive, lease or otherwise acquire, own, hold, improve, use, and otherwise deal in and with real or personal property, or an interest in it, wherever situated;

(c) Sell, convey, assign, encumber, mortgage, pledge, lease, exchange, transfer, and otherwise dispose of all or any part of its property and assets;

(d) Lend money to and otherwise assist its members and employees;

(e) Purchase, take, receive, subscribe for or otherwise acquire, own, hold, vote, use, employ, sell, mortgage, lend, pledge, or otherwise dispose of, and otherwise use and deal in and with, shares or other interests in or obligations of any other person;

(f) Make contracts and guarantees and incur liabilities, borrow money at such rates of interest as the limited liability company may determine, issue its notes, bonds, and other obligations, and secure any of its obligations by mortgage or pledge of all or any part of its property, franchises, and income;

(g) Lend money for its proper purposes, invest and reinvest its funds, and take and hold real property and personal property for the payment of funds so loaned or invested;

(h) Conduct its business, carry on its operations, and have and exercise the powers granted by this article in any jurisdiction;

(i) Have managers and other agents;

(j) Be a party to the operating agreement;

(k) Indemnify a member or manager or former member or manager of the limited liability company as provided in section 7-80-407;

(l) (Deleted by amendment, L. 2003, p. 2264, § 176, effective July 1, 2004.)

(m) Have and exercise all powers necessary or convenient to effect any or all of the purposes for which the limited liability company is formed;

(n) Be an agent, an associate, a fiduciary, a manager, a member, a partner, a promoter, or a trustee of, or hold any similar position with, any entity, trust, or estate. History

Source: L. 90: Entire article added, p. 415, § 1, effective April 18. L. 94: (1)(d) amended, p. 710, § 3, effective July 1. L. 2003: IP(1), (1)(e), (1)(h), (1)(j), (1)(l), (1)(m), and (1)(n) amended, p. 2264, § 176, effective July 1, 2004. L. 2004: (1)(k) amended, p. 936, § 2, effective July 1. L. 2006: (1)(i), (1)(j), and (1)(n) amended, p. 854, § 19, effective July 1.

7-80-105. Unauthorized assumption of powers.

Statute text

All persons who assume to act as a limited liability company without authority to do so and without good faith belief that they have such authority shall be jointly and severally liable for all debts and liabilities incurred by such persons so acting.

History

Source: L. 90: Entire article added, p. 416, § 1, effective April 18.

7-80-106. Transaction of business outside state.

Statute text

It is the intention of the general assembly by the enactment of this article that the legal existence of limited liability companies formed under this article be recognized beyond the limits of this state and that, subject to any reasonable registration requirements, any such limited liability company transacting business outside this state be granted the protection of full faith and credit under section 1 of article IV of the constitution of the United States.

History

Source: L. 90: Entire article added, p. 416, § 1, effective April 18.

7-80-107. Application of corporation case law to set aside limited liability.

Statute text

(1) In any case in which a party seeks to hold the members of a limited liability company personally responsible for the alleged improper actions of the limited liability company, the court shall apply the case law which interprets the conditions and circumstances under which the corporate veil of a corporation may be pierced under Colorado law.

(2) For purposes of this section, the failure of a limited liability company to observe the formalities or requirements relating to the management of its business and affairs is not in itself a ground for imposing personal liability on the members for liabilities of the limited liability company.

History

Source: L. 90: Entire article added, p. 416, § 1, effective April 18. L. 94: Entire section amended, p. 710, § 4, effective July 1.

7-80-108. Effect of operating agreement - nonwaivable provisions.

Statute text

(1) (a) The operating agreement may contain any provisions for the affairs of the limited liability company and the conduct of its business to the extent such provisions are consistent with law. Except as otherwise provided in subsection (1.5), (2), or (3) of this section, an operating agreement governs the rights, duties, limitations, qualifications, and relations among the managers, the members, the members' assignees and transferees, and the limited liability company. Such provisions shall control over any provision of this article to the contrary except as set forth in subsection (1.5), (2), or (3) of this section. To the extent the operating agreement does not otherwise provide, this article shall control.

(b) A limited liability company is bound by any operating agreement of its members.

(c) An operating agreement may be entered into before, after, or at the time of filing of articles of organization and, whether entered into before, after, or at the time of such filing, may be made effective as of the formation of the limited liability company or as of the time or date provided in the operating agreement.

(1.5) To the extent that a member or manager or other person that is a party to, or is otherwise bound by, the operating agreement has duties, including, but not limited to, fiduciary duties, to a limited liability company or to another member, manager, or other person that is a party to or is otherwise bound by an operating agreement, the duties of such member, manager, or other person may be restricted or eliminated by provisions in the operating agreement, as long as any such provision is not manifestly unreasonable.

(2) An operating agreement may not:

(a) (Deleted by amendment, L. 2006, p. 855, § 20, effective July 1, 2006.)

(b) Unreasonably restrict the rights of members and managers under section 7-80-408;

(c) (Deleted by amendment, L. 2006, p. 855, § 20, effective July 1, 2006.)

(d) Eliminate the obligation of good faith and fair dealing under section 7-80-404 (3); except that the operating agreement may prescribe the standards by which the performance of the obligation is to be measured, if such standards are not unreasonable;

(d.5) Eliminate or modify the provisions of section 7-80-801 (1) (c) (I), except to extend the time set forth therein to a time not later than the first anniversary of the date of the termination of the membership of the last remaining member; or

(e) Restrict rights of, or impose duties on, persons other than the members, their assignees and transferees, and the limited liability company without the consent of such persons.

(2.5) (a) An operating agreement may contain one or more provisions concerning the enforcement, interpretation, construction, application, severability of provisions, integration, effect of parole evidence, and other matters with respect to the operating agreement or any of its provisions.

(b) Unless otherwise provided in the operating agreement, if any provision of an operating agreement or application thereof to any person or circumstance is unenforceable or otherwise invalid under subsection (1.5) or (2) of this section or otherwise, the provision shall be limited, construed, and applied in a manner that is valid and enforceable, and, in any event, the remaining provisions of the operating agreement shall be given effect without the invalid provision or application.

(c) Unless otherwise provided in the operating agreement with respect to the unenforceability, invalidity, or application of any provision of the operating agreement under subsection (1.5) or (2) of this section, when it is claimed or appears to the court that any provision of the operating agreement may violate subsection (1.5) or (2) of this section, the parties shall be afforded a reasonable opportunity to present evidence as to its commercial setting, purpose, and effect, to aid the court in making the determination.

(3) Unless contained in a written operating agreement or other writing approved in accordance with a written operating agreement, no operating agreement may:

(a) (Deleted by amendment, L. 2004, p. 936, § 3, effective July 1, 2004.)

(b) (Deleted by amendment, L. 97, p. 1503, 12, effective June 3, 1997.)

(c) (Deleted by amendment, L. 2004, p. 936, § 3, effective July 1, 2004.)

(d) Vary any requirement under this article that a particular action or provision be reflected in a writing.

(4) It is the intent of this article to give the maximum effect to the principle of freedom of contract and to the enforceability of operating agreements.

History

Source: L. 94: Entire section added, p. 711, § 5, effective July 1. L. 97: IP(3) and (3)(b) amended, p. 1503, § 12, effective June 3. L. 2003: (2)(d) amended, p. 2265, § 177, effective July 1, 2004. L. 2004: (2) and (3) amended and (4) added, p. 936, § 3, effective July 1. L. 2005: (2)(d) amended, p. 1203, § 2, effective October 1. L. 2006: (1) and (2) amended and (1.5) and (2.5) added, p. 855, § 20, effective July 1.

7-80-109. Construction of article.

Statute text

The rule that statutes in derogation of the common law are to be strictly construed shall have no application to this article. History

Source: L. 2004: Entire section added, p. 938, § 4, effective July 1.

PART 2 FORMATION

7-80-201. Limited liability company name. (Repealed)

History

Source: L. 90: Entire article added, p. 417, § 1, effective April 18. L. 93: (1) amended, p. 63, § 1, effective March 22; (4)(a) and (4)(c) amended, p. 859, § 20, effective July 1, 1994. L. 94: (4)(d) added, p. 88, § 15, effective July 1. L. 97: (4)(a) amended, p. 760, § 24, effective July 1, 1998. L. 2000: Entire section repealed, p. 990, § 109, effective July 1.

7-80-202. Reservation of name - repeal. (Repealed)

History

Source: L. 90: Entire article added, p. 418, § 1, effective April 18. L. 2003: (3) added by revision, pp. 2356, 2357, §§ 347, 348.

Annotations

Editor's note: Subsection (3) provided for the repeal of this section, effective July 1, 2004. (See L. 2003, pp. 2356, 2357.

7-80-203. Formation.

Statute text

(1) One or more persons may form a limited liability company by delivering articles of organization to the secretary of state for filing pursuant to part 3 of article 90 of this title. Any such person who is an individual shall be of the age of eighteen years or older. Such person or persons need not be members of the limited liability company after formation has occurred.

(2) Repealed.

History

Source: L. 90: Entire article added, p. 418, § 1, effective April 18. L. 94: (2) repealed, p. 712, § 6, effective July 1. L. 97: (1) amended, p. 1503, § 13, effective June 3. L. 2002: (1) amended, p. 1833, § 71, effective July 1; (1) amended, p. 1697, § 69, effective October 1. L. 2003: (1) amended, p. 2265, § 178, effective July 1, 2004. L. 2004: (1) amended, p. 1459, § 181, effective July 1.

7-80-204. Articles of organization.

Statute text

(1) The articles of organization shall state:

(a) The domestic entity name of the limited liability company, which domestic entity name shall comply with part 6 of article 90 of this title;

(b) (Deleted by amendment, L. 94, p. 712, § 7, effective July 1, 1994.)

(b.5) The principal office address of the limited liability company's initial principal office;

(c) The registered agent name and registered agent address of the limited liability company's initial registered agent;

(d) The true name and mailing address of each person forming the limited liability company pursuant to section 7-80-203;

(e) That management of the limited liability company is vested in one or more managers or is vested in the members, whichever be the case;

(f) (Deleted by amendment, L. 2003, p. 2265, § 179, effective July 1, 2004.)

(g) That there is at least one member of the limited liability company; and

(h) Any other matters relating to the limited liability company or the articles of organization the persons forming the limited liability company determine to include therein.

(2) (Deleted by amendment, L. 2003, p. 2265, § 179, effective July 1, 2004.)

History

Source: L. 90: Entire article added, p. 418, § 1, effective April 18. L. 94: (1)(b), (1)(d), and (1)(e) amended and (1)(f) added, p. 712, § 7, effective July 1. L. 97: (2) amended, p. 1503, § 14, effective June 3. L. 2003: Entire section amended, p. 2265, § 179, effective July 1, 2004. L. 2004: (1)(b.5) and (1)(d) amended and (1)(g) and (1)(h) added, p. 1460, § 182, effective July 1.

7-80-205. Filing of articles of organization - repeal. (Repealed)

History

Source: L. 90: Entire article added, p. 419, § 1, effective April 18. L. 2003: (3) added by revision, pp. 2356, 2357, §§ 347, 348. Annotations

Editor's note: Subsection (3) provided for the repeal of this section, effective July 1, 2004. (See L. 2003, pp. 2356, 2357.)

7-80-206. Appeal from secretary of state. (Repealed)

History

Source: L. 90: Entire article added, p. 419, § 1, effective April 18. L. 2002: Entire section repealed, p. 1861, § 163, effective July 1; entire section repealed, p. 1728, § 163, effective October 1.

7-80-207. Effect of filing of articles of organization.

Statute text

A limited liability company is formed when its articles of organization become effective.

History

Source: L. 90: Entire article added, p. 419, § 1, effective April 18. L. 2000: (3) amended, p. 959, § 41, effective July 1. L. 2002: (2) amended, p. 1833, § 72, effective July 1; (2) amended, p. 1697, § 70, effective October 1. L. 2003: Entire section R&RE, p. 2266, § 180, effective July 1, 2004.

7-80-208. Notice of existence of limited liability company.

Statute text

The fact that the articles of organization are on file in the records of the secretary of state is notice that the limited liability company is a limited liability company and is notice of all other facts stated therein that are required to be stated in the articles of organization by section 7-80-204.

History

Source: L. 90: Entire article added, p. 420, § 1, effective April 18. L. 97: Entire section amended, p. 1503, § 15, effective June 3. L. 2003: Entire section amended, p. 2266, § 181, effective July 1, 2004. L. 2004: Entire section amended, p. 1460, § 183, effective July 1.

Annotations

This notice provision applies only where a third party seeks to impose liability on a limited liability company's (LLC) members or managers simply because of their status as members or managers of the LLC. When a third party sues a manager or member of an LLC under an agency theory, the principles of agency law apply notwithstanding the Colorado Limited Liability Company Act's statutory notice rules. Water, Waste & Land, Inc. v. Lanham, 955 P.2d 997 (Colo. 1998).

The general assembly did not intend this notice provision to alter the partially disclosed principal doctrine. The legislature did not intend the notice language to relieve the agent of an LLC of the duty to disclose its identity in order to avoid personal liability. Water, Waste & Land, Inc. v. Lanham, 955 P.2d 997 (Colo. 1998).

Where an agent fails to disclose either the fact that he is acting on behalf of a principal or the identity of the principal, this notice provision cannot relieve the agent of liability to a third party. Water, Waste & Land, Inc. v. Lanham, 955 P.2d 997 (Colo. 1998).

When a third party deals with an agent acting on behalf of an LLC, the existence and identity of which has been disclosed, the third party is conclusively presumed to know that the entity is an LLC and not a partnership or some other type of business organization. Water, Waste & Land, Inc. v. Lanham, 955 P.2d 997 (Colo. 1998).

7-80-209. Amendment of articles of organization.

Statute text

(1) The articles of organization may be amended at any time for any purpose and shall be amended when:

(a) There is a change in the domestic entity name of the limited liability company;

(b) There is a false or erroneous statement in the articles of organization.

(c) and (d) (Deleted by amendment, L. 94, p. 713, § 8, effective July 1, 1994.)

(1.5) An amendment to the articles of organization is invalid unless approved by all of the members or in such other manner as may be provided in the operating agreement.

(2) (Deleted by amendment, L. 2003, p. 2266, § 182, effective July 1, 2004.)

(3) and (4) (Deleted by amendment, L. 2002, p. 1833, § 73, effective July 1, 2002; p. 1697, § 71, effective October 1, 2002.)

(5) A limited liability company amends its articles of organization by delivering articles of amendment to its articles of organization to the secretary of state, for filing pursuant to part 3 of article 90 of this title, stating:

(a) The domestic entity name of the limited liability company; and

(b) The amendment to the articles of organization.

History

Source: L. 90: Entire article added, p. 420, § 1, effective April 18. L. 94: (1)(c), (1)(d), and (2) amended and (1.5) added, p. 713, § 8, effective July 1. L. 2002: (2) to (4) amended, p. 1833, § 73, effective July 1; (2) to (4) amended, p. 1697, § 71, effective October 1. L. 2003: IP(1), (1)(a), and (2) amended, p. 2266, § 182, effective July 1, 2004. L. 2004: (1.5) amended, p. 938, § 5, effective July 1; (5) added, p. 1460, § 184, effective July 1.

PART 3 REGISTERED AGENTS, SERVICE OF PROCESS, AND ANNUAL REPORTS

Annotations

Editor's note: This part was originally enacted in 1990. The substantive provisions of this part were repealed and reenacted in 2003, causing some addition, relocation, and elimination of sections as well as subject matter. For prior amendments, consult the red book table distributed with the session laws; the 1997 through 2002 Colorado Revised Statutes; and the 1996 annual supplement to the 1986 replacement volume.

7-80-301. Limited liability companies - registered agents - service of process - annual reports.

Statute text

Part 7 of article 90 of this title, providing for registered agents and service of process, applies to limited liability companies formed under this article. Part 5 of article 90 of this title, providing for annual reports, applies to limited liability companies formed under this article.

History

Source: L. 2003: Entire part R&RE, p. 2267, § 183, effective July 1, 2004.

PART 4 MANAGEMENT

Annotations

Editor's note: This part was originally enacted in 1990. The substantive provisions were repealed and reenacted in 2004, causing some addition, relocation, and elimination of sections as well as subject matter. For prior amendments, consult the red book table distributed with the session laws; the 1997 through 2003 Colorado Revised Statutes; and the 1996 annual supplement to the 1986 replacement volume.

7-80-401. Management of limited liability company.

Statute text

(1) Except as provided in subsection (2) of this section, decisions with respect to a limited liability company shall be made by a majority of the members or, if the limited liability company has one or more managers, by a majority of the managers.

(2) The consent of each member is necessary to:

(a) Amend the articles of organization;

(b) Amend the operating agreement; and

(c) Authorize an act of the limited liability company that is not in the ordinary course of the business of the limited liability company.

(3) A person or persons who will be admitted as a member or members pursuant to section 7-80-701 (2) may, by unanimous consent, amend the operating agreement to be effective immediately before the admission of the person or persons.

History

Source: L. 2004: Entire part R&RE, p. 938, § 6, effective July 1. L. 2006: (1) amended and (3) added, p. 857, § 21, effective July 1.

Annotations

Editor's note: This section was contained in a part that was repealed and reenacted in 2004. Provisions of this section, as it existed in 2004, are similar to those contained in § 7-80-401 as said section existed in 2003, the year prior to the repeal and reenactment of this part.

7-80-402. Designation of managers.

Statute text

The members of a limited liability company, the articles of organization of which provide that management of the limited liability company is vested in one or more managers, may designate one or more persons to be managers. A manager who is an individual shall be eighteen years of age or older. Managers may be designated and removed by the consent of a majority of the members.

History

Source: L. 2004: Entire part R&RE, p. 939, § 6, effective July 1. L. 2006: Entire section amended, p. 857, § 22, effective July 1.

Annotations

Editor's note: This section was contained in a part that was repealed and reenacted in 2004. Provisions of this section, as it existed in 2004, are similar to those contained in § 7-80-402 as said section existed in 2003, the year prior to the repeal and reenactment of this part.

7-80-403. Officers and other agents.

Statute text

(1) A limited liability company may have one or more officers or other agents with such titles, rights, duties, and authority as the limited liability company may determine. An officer or an agent who is an individual shall be eighteen years of age or older. Except as provided in subsection (2) of this section, officers and other agents may be designated or removed, and their titles, rights, duties, and authority may be established, by the consent of a majority of the members or, if the limited liability company has one or more managers, by a majority of the managers.

(2) Officers and other agents may be given authority to do any act that is not in the ordinary course of the business of the limited liability company only with the consent of all of the members.

History

Source: L. 2004: Entire part R&RE, p. 939, § 6, effective July 1. L. 2006: Entire section amended, p. 857, § 23, effective July 1.

7-80-404. Duties of members and managers.

Statute text

(1) In addition to the duties established elsewhere in this article, the duties that each member in a limited liability company in which management is vested in the members and that each manager owes to the limited liability company include the duties to:

(a) Account to the limited liability company and hold as trustee for it any property, profit, or benefit derived by the member or manager in the conduct or winding up of the limited liability company business or derived from a use by the member or manager of property of the limited liability company, including the appropriation of an opportunity of the limited liability company;

(b) Refrain from dealing with the limited liability company in the conduct or winding up of the limited liability company business as or on behalf of a party having an interest adverse to the limited liability company; and

(c) Refrain from competing with the limited liability company in the conduct of the limited liability company business before the dissolution of the limited liability company.

(d) (Deleted by amendment, L. 2006, p. 857, § 24, effective July 1, 2006.)

(2) Each member in a limited liability company, the articles of organization of which provide that management is vested in the members, and each manager owes to the limited liability company a duty of care in the conduct and winding up of the business of the limited liability company, which shall be limited to refraining from engaging in grossly negligent or reckless conduct, intentional misconduct, or a knowing violation of law.

(3) Each member and each manager shall discharge the member's or manager's duties to the limited liability company and exercise any rights consistently with the contractual obligation of good faith and fair dealing.

(4) A member in a limited liability company, the articles of organization of which provide that management is vested in the members, or a manager does not violate a duty or obligation to the limited liability company solely because the member's or manager's conduct furthers the member's or manager's own interest.

(5) A member or a manager may lend money to, and transact other business with, the limited liability company, and as to each loan or transaction the rights and obligations of the member or manager may be exercised or performed in the same manner as those of a person who is not a member or manager, subject to other applicable law. History

Source: L. 2004: Entire part R&RE, p. 939, § 6, effective July 1. L. 2006: Entire section amended, p. 857, § 24, effective July 1.

Annotations

Editor's note: This section was contained in a part that was repealed and reenacted in 2004. Provisions of this section, as it existed in 2004, are similar to those contained in § 7-80-406 as said section existed in 2003, the year prior to the repeal and reenactment of this part.

Annotations

Law reviews. For article, "No Paper Required: Business Entity Legislation Makes Life Easier for Business Lawyers", see 33 Colo. Law. 11 (June 2004).

7-80-405. Members and managers as agents of the limited liability company.

Statute text

(1) If the articles of organization provide that management of the limited liability company is vested in one or more managers:

(a) A member is not an agent of the limited liability company and has no authority to bind the limited liability company solely by virtue of being a member; and

(b) Each manager is an agent of the limited liability company for the purposes of its business and an act of a manager, including the execution of an instrument in the name of the limited liability company, for apparently carrying on in the ordinary course the business of the limited liability company or business of the kind carried on by the limited liability company binds the limited liability company, unless the manager had no authority to act for the limited liability company in the particular matter and the person with whom the manager was dealing had notice that the manager lacked authority.

(2) If the articles of organization provide that management of the limited liability company is vested in the members, each member is an agent of the limited liability company for the purposes of its business and an act of a member, including the execution of an instrument in the name of the limited liability company, for apparently carrying on in the ordinary course the business of the limited liability company or business of the kind carried on by the limited liability company binds the limited liability company, unless the member had no authority to act for the limited liability company in the particular matter and the person with whom the member was dealing had notice that the member lacked authority.

History

Source: L. 2004: Entire part R&RE, p. 940, § 6, effective July 1. L. 2006: Entire section amended, p. 858, § 25, effective July 1.

7-80-406. Business transactions of member or manager with the limited liability company. (Repealed)

History

Source: L. 2004: Entire part R&RE, p. 940, § 6, effective July 1. L. 2006: Entire section repealed, p. 884, § 87, effective July 1.

Annotations

Editor's note: This section was contained in a part that was repealed and reenacted in 2004. Provisions of this section, as it existed in 2004, are the same as those contained in § 7-80-409 as said section existed in 2003, the year prior to the repeal and reenactment of this part.

7-80-407. Reimbursement and indemnification of members and managers.

Statute text

A limited liability company shall reimburse a person who is or was a member or manager for payments made, and indemnify a person who is or was a member or manager for liabilities incurred by the person, in the ordinary course of the business of the limited liability company or for the preservation of its business or property, if such payments were made or liabilities incurred without violation of the person's duties to the limited liability company.

History

Source: L. 2004: Entire part R&RE, p. 940, § 6, effective July 1. L. 2006: Entire section amended, p. 859, § 26, effective July 1.

Annotations

Editor's note: This section was contained in a part that was repealed and reenacted in 2004. Provisions of this section, as it existed in 2004, are similar to those contained in § 7-80-410 as said section existed in 2003, the year prior to the repeal and reenactment of this part.

7-80-408. Access to and confidentiality of information - records - accounting.

Statute text

(1) Each member of a limited liability company has the right, subject to such reasonable standards as may be established by the members or managers pursuant to section 7-80-401 (1), to inspect and copy at the expense of the requesting member the following records of the limited liability company from time to time upon reasonable demand for any purpose reasonably related to the member's interest as a member of the limited liability company:

(a) True and full information regarding the business and financial condition of the limited liability company, including written resolutions and minutes, if any, of the limited liability company;

(b) A copy of the limited liability company's federal, state, and local income tax returns for each year;

(c) A current list of the name and last-known business, residence, or mailing address of each member and manager;

(d) A copy of the limited liability company's articles of organization and a copy of any written operating agreement of the limited liability company;

(e) True and full information regarding the amount of cash and a description and statement of the agreed value of any other property or services contributed by each member and that each member has agreed to contribute in the future, and the date on which each became a member; and

(f) Other information regarding the affairs of the limited liability company as is just and reasonable.

(2) Each manager shall have the right to examine all of the information described in paragraph (a) of subsection (1) of this section for a purpose reasonably related to the position of manager.

(3) Each member of a limited liability company and each manager shall have the right to keep confidential from the members, for such period of time as the members or managers deem reasonable, any information that the members or managers reasonably believe to be in the nature of trade secrets or that the limited liability company is required by law or by agreement with a third party to keep confidential.

(4) A limited liability company may maintain its records in other than a written form if such form is capable of conversion into written form within a reasonable time.

(5) Any demand by a member under this section shall be in writing and shall state the purpose of the demand.

(6) A member of a limited liability company shall have the right to have a formal accounting of limited liability company affairs whenever circumstances render it just and reasonable. History

Source: L. 2004: Entire part R&RE, p. 941, § 6, effective July 1. L. 2006: (1)(d) and (3) amended, p. 859, § 27, effective July 1. L. 2007: (6) added, p. 226, § 16, effective May 29.

Annotations

Editor's note: This section was contained in a part that was repealed and reenacted in 2004. Provisions of this section, as it existed in 2004, are similar to those contained in § 7-80-411 as said section existed in 2003, the year prior to the repeal and reenactment of this part.

PART 5 FINANCE

7-80-501. Form of contribution.

Statute text

The contribution of a member may be in cash, property, or services rendered or a promissory note or other obligation to contribute cash or property or to perform services. A person may be admitted to a limited liability company as a member of the limited liability company and may receive a membership interest in the limited liability company without making a contribution or being obligated to make a contribution to the limited liability company. Unless otherwise provided in the operating agreement, a person may be admitted to a limited liability company as a member of the limited liability company without acquiring a membership interest in the limited liability company. Unless otherwise provided in the operating agreement, a person may be admitted as the sole member of a limited liability company without making a contribution or being obligated to make a contribution to the limited liability company or without acquiring a membership interest in the limited liability company.

History

Source: L. 90: Entire article added, p. 431, § 1, effective April 18. L. 2004: Entire section amended, p. 942, § 7, effective July 1. L. 2005: Entire section amended, p. 1203, § 3, effective October 1.

7-80-502. Liability for contributions.

Statute text

(1) A member is obligated to the limited liability company to perform any enforceable promise to contribute cash or property or to perform services, even if the member is unable to perform because of death, disability, or any other reason. If a member does not make the required contribution of property or services, the member is obligated at the option of the limited liability company to contribute cash equal to that portion of the value, as stated in the limited liability records required to be kept by section 7-80-408, of such contribution that has not been made.

(2) The obligation of a member to make a contribution or return money or other property paid or distributed in violation of this article may be compromised only by consent in writing of all the members. Notwithstanding the compromise, a creditor of a limited liability company who extends credit or otherwise acts in reliance on the original obligation may enforce the original obligation.

(3) No promise by a member to contribute to the limited liability company is enforceable unless set out in a writing signed by the member.

History

Source: L. 90: Entire article added, p. 431, § 1, effective April 18. L. 94: (1) and (2) amended, p. 716, § 18, effective July 1. L. 2004: (1) amended, p. 942, § 8, effective July 1.

7-80-503. Sharing of profits and losses.

Statute text

The profits and losses of a limited liability company shall be allocated among the members and among classes of members on the basis of the value, as stated in the limited liability company records required to be kept pursuant to section 7-80-408, of the contributions made by each member.

History

Source: L. 90: Entire article added, p. 431, § 1, effective April 18. L. 94: Entire section amended, p. 717, § 19, effective July 1. L. 2004: Entire section amended, p. 942, § 9, effective July 1.

7-80-504. Sharing of distributions.

Statute text

Distributions of cash or other assets of a limited liability company shall be allocated among the members and among classes of members on the basis of the value, as stated in the limited liability company records required to be kept pursuant to section 7-80-408, of the contributions made by each member.

History

Source: L. 90: Entire article added, p. 431, § 1, effective April 18. L. 94: Entire section amended, p. 717, § 20, effective July 1. L. 2004: Entire section amended, p. 942, § 10, effective July 1.

PART 6 DISTRIBUTIONS AND RESIGNATION

Annotations

Law reviews: For article, "Limited Liability Companies: Structuring Members' Economic Rights", see 34 Colo. Law. 73 (August 2005).

7-80-601. Interim distributions.

Statute text

Except as provided in this part 6, a member is entitled to receive distributions from a limited liability company before the member's resignation from the limited liability company and before the dissolution and winding up thereof to the extent and at the times or upon the happening of the events stated in the operating agreement or as otherwise agreed by all of the members.

History

Source: L. 90: Entire article added, p. 432, § 1, effective April 18. L. 97: Entire section amended, p. 1505, § 18, effective June 3. L. 2003: Entire section amended, p. 2267, § 186, effective July 1, 2004.

7-80-602. Resignation of member.

Statute text

A member may resign from a limited liability company at any time by giving notice to the other members, but, if the resignation violates the operating agreement, the limited liability company may recover from the resigning member damages for breach of the operating agreement and offset the damages against the amount otherwise distributable to the resigning member.

History

Source: L. 90: Entire article added, p. 432, § 1, effective April 18. L. 94: Entire section amended, p. 717, § 21, effective July 1. L. 2004: Entire section amended, p. 943, § 11, effective July 1.

7-80-603. Interest of member upon resignation.

Statute text

A member who has resigned shall have no right to participate in the management of the business and affairs of the limited liability company and is entitled only to receive the share of the profits or other compensation by way of income and the return of contributions, to which such member would have been entitled if the member had not resigned.

History

Source: L. 90: Entire article added, p. 432, § 1, effective April 18. L. 94: Entire section amended, p. 717, § 22, effective July 1. L. 2007: Entire section amended, p. 227, § 17, effective May 29.

7-80-604. Distribution in kind.

Statute text

A member, regardless of the nature of the member's contribution, has no right to demand and receive any distribution from a limited liability company in any form other than cash. A member may not be compelled to accept a distribution of any asset in kind from a limited liability company to the extent that the percentage of the asset distributed to the member exceeds a percentage of that asset that is equal to the percentage in which the member shares in distributions from the limited liability company.

History

Source: L. 90: Entire article added, p. 432, § 1, effective April 18. L. 94: Entire section amended, p. 718, § 23, effective July 1. L. 2004: Entire section amended, p. 1460, § 185, effective July 1.

7-80-605. Right to distribution.

Statute text

At the time a member becomes entitled to receive a distribution, the member has the status of and is entitled to all remedies available to a creditor of the limited liability company with respect to the distribution.

History

Source: L. 90: Entire article added, p. 432, § 1, effective April 18. L. 2004: Entire section amended, p. 1461, § 186, effective July 1.

7-80-606. Limitations on distribution.

Statute text

(1) A limited liability company shall not make a distribution to a member to the extent that at the time of distribution, after giving effect to the distribution, all liabilities of the limited liability company, other than liabilities to members on account of their membership interests and liabilities for which the recourse of creditors is limited to a specific property of the limited liability company, exceed the fair value of the assets of the limited liability company; except that the fair value of property that is subject to a liability for which the recourse of creditors is limited shall be included in the assets of the limited liability company only to the extent that the fair value of that property exceeds that liability. For purposes of this subsection (1), the term "distribution" shall not include payments to the extent that the payments do not exceed amounts equal to or constituting reasonable compensation for present or past services or reasonable payments made in the ordinary course of business pursuant to a bona fide retirement plan or other benefits program.

(2) A member who receives a distribution in violation of subsection (1) of this section, and who knew at the time of the distribution that the distribution violated subsection (1) of this section, shall be liable to the limited liability company for the amount of the distribution. A member who receives a distribution in violation of subsection (1) of this section, and who did not know at the time of the distribution that the distribution violated subsection (1) of this section, shall not be liable for the amount of the distribution. Subject to subsection (3) of this section, this subsection (2) shall not affect any obligation or liability of a member under an agreement or other applicable law for the amount of a distribution.

(3) Unless otherwise agreed, a member who receives a distribution from a limited liability company shall have no liability under this article or other applicable law for the amount of the distribution after the expiration of three years from the date of the distribution unless an action to recover the distribution from such member is commenced prior to the expiration of the said three-year period and an adjudication of liability against such member is made in the said action.

History

Source: L. 90: Entire article added, p. 432, § 1, effective April 18. L. 2006: Entire section amended, p. 860, § 28, effective July 1. L. 2007: (1) amended, p. 227, § 18, effective May 29.

7-80-607. Liability upon return of contribution. (Repealed)

History

Source: L. 90: Entire article added, p. 432, § 1, effective April 18. L. 94: (1) repealed, p. 718, § 24, effective July 1. L. 2004: (2) and (3) amended, p. 943, § 12, effective July 1. L. 2006: Entire section repealed, p. 884, § 87, effective July 1.

PART 7 MEMBERS

7-80-701. Admission of members.

Statute text

(1) After the filing of a limited liability company's original articles of organization, one or more persons may be admitted as an additional member or members upon the consent of all members.

(2) At any time that a limited liability company has no members, upon the unanimous consent of all the persons holding by assignment or transfer any of the membership interest of the last remaining member of the limited liability company, one or more persons, including an assignee or transferee of the last remaining member, may be admitted as a member or members.

History

Source: L. 90: Entire article added, p. 433, § 1, effective April 18. L. 2004: Entire section amended, p. 943, § 13, effective July 1. L. 2006: Entire section amended, p. 860, § 29, effective July 1.

7-80-702. Interest in limited liability company - transferability of interest.

Statute text

(1) The interest of each member in a limited liability company constitutes the personal property of the member and may be assigned or transferred. Unless the assignee or transferee is admitted as a member, the assignee or transferee shall only be entitled to receive the share of profits or other compensation by way of income and the return of contributions to which that member would otherwise be entitled and shall have no right to participate in the management of the business and activities of the limited liability company or to become a member.

(2) A member ceases to be a member upon assignment or transfer of all the member's membership interest. A person to whom all of a member's membership interest has been assigned or transferred and who has been admitted as a member has all the rights and powers and is subject to all the restrictions and liabilities of the assignor or transferor with respect to the portion of the membership interest assigned or transferred. The admission of the assignee or transferee releases the assignor or transferor from liability to the limited liability company other than for liabilities under section 7-80-502 or 7-80-606.

(3) A person to whom a portion of a member's membership interest has been assigned or transferred and who has been admitted as a member has all the rights and powers and is subject to all the restrictions and liabilities of the assignor or transferor with respect to the portion of the membership interest assigned or transferred. The admission of the assignee or transferee terminates the assignor's or transferor's rights and powers as a member with respect to the portion of the membership interest assigned or transferred and releases the assignor or transferor from liability to the limited liability company with respect to the portion of the membership interest assigned or transferred other than for liabilities under section 7-80-502 or 7-80-606.

History

Source: L. 90: Entire article added, p. 433, § 1, effective April 18. L. 94: (1) amended, p. 718, § 25, effective July 1. L. 2004: Entire section amended, p. 943, § 14, effective July 1. L. 2006: Entire section amended, p. 861, § 30, effective July 1. L. 2007: (2) amended, p. 227, § 19, effective May 29.

Annotations

Where there are no other members in the limited liability company (LLC), the debtor's bankruptcy filing effectively assigned her entire membership interest in the LLC to the bankruptcy estate, and the trustee obtained all of the debtor's rights, including the right to control the management of the LLC. In re Albright, 291 B.R. 538 (Bankr. D. Colo. 2003).

Because the trustee became the sole member of the LLC upon the debtor's bankruptcy filing, the trustee controls, directly or indirectly, all governance of that entity, including any decision regarding liquidation of the entity's assets. Therefore, the trustee may cause the LLC to sell its property and distribute net proceeds to the bankruptcy estate. Alternatively, the trustee may elect to distribute the LLC's property to the bankruptcy estate, and, in turn, liquidate the property himself. In re Albright, 291 B.R. 538 (Bankr. D. Colo. 2003).

Membership interest may be a "security". The presumption that a general partnership interest is not a security is not applicable to a limited liability partnership interest in Colorado. Instead, the structure of the entity and the terms of the agreement will control. Toothman v. Freeborn & Peters, 80 P.3d 804 (Colo. App. 2002).

7-80-703. Rights of creditor against a member.

Statute text

On application to a court of competent jurisdiction by any judgment creditor of a member, the court may charge the membership interest of the member with payment of the unsatisfied amount of the judgment with interest thereon and may then or later appoint a receiver of the member's share of the profits and of any other money due or to become due to the member in respect of the limited liability company and make all other orders, directions, accounts, and inquiries that the debtor member might have made, or that the circumstances of the case may require. To the extent so charged, except as provided in this section, the judgment creditor has only the rights of an assignee or transferee of the membership interest. The membership interest charged may be redeemed at any time before foreclosure. If the sale is directed by the court, the membership interest may be purchased without causing a dissolution with separate property by any one or more of the members. With the consent of all members whose membership interests are not being charged or sold, the membership interest may be purchased without causing a dissolution with property of the limited liability company. This article shall not deprive any member of the benefit of any exemption laws applicable to the member's membership interest. History

Source: L. 90: Entire article added, p. 433, § 1, effective April 18. L. 97: Entire section amended, p. 1505, § 19, effective June 3. L. 2006: Entire section amended, p. 862, § 31, effective July 1.

Annotations

Law reviews. For article, "Charging Partnership and LLC Interests To Satisfy Debts of Individuals", see 23 Colo. Law. 2743 (1994).

Where there are no other members in the limited liability company (LLC), the debtor's bankruptcy filing effectively assigned her entire membership interest in the LLC to the bankruptcy estate, and the trustee obtained all of the debtor's rights, including the right to control the management of the LLC. In re Albright, 291 B.R. 538 (Bankr. D. Colo. 2003).

Because the trustee became the sole member of the LLC upon the debtor's bankruptcy filing, the trustee controls, directly or indirectly, all governance of that entity, including any decision regarding liquidation of the entity's assets. Therefore, the trustee may cause the LLC to sell its property and distribute net proceeds to the bankruptcy estate. Alternatively, the trustee may elect to distribute the LLC's property to the bankruptcy estate, and, in turn, liquidate the property himself. In re Albright, 291 B.R. 538 (Bankr. D. Colo. 2003).

7-80-704. Deceased or incompetent members who are individuals - dissolved or terminated members who are legal entities.

Statute text

(1) If a member who is an individual dies or a court of competent jurisdiction appoints a guardian or general conservator for the member, the member's executor, administrator, guardian, conservator, or other legal representative may exercise all of the powers of an assignee or transferee of the member.

(2) If a member other than an individual is dissolved or terminated, the legal representative or successor of the member may exercise all of the powers of an assignee or transferee of the member.

(3) (Deleted by amendment, L. 2006, p. 862, § 32, effective July 1, 2006.)

History

Source: L. 90: Entire article added, p. 433, § 1, effective April 18. L. 94: Entire section amended, p. 718, § 26, effective July 1. L. 2004: (1) amended, p. 1461, § 187, effective July 1. L. 2006: (2) and (3) amended, p. 862, § 32, effective July 1.

7-80-705. Liability of members and managers.

Statute text

Members and managers of limited liability companies are not liable under a judgment, decree, or order of a court, or in any other manner, for a debt, obligation, or liability of the limited liability company.

History

Source: L. 90: Entire article added, p. 434, § 1, effective April 18.

7-80-706. Voting.

Statute text

(1) Subject to the provisions of this article that require majority or unanimous consent, vote, or agreement of the members, the operating agreement may grant to all or a stated group of the members the right to consent, vote, or agree, on a per capita or other basis, upon any matter.

(2) Any member may vote in person or by proxy.

History

Source: L. 90: Entire article added, p. 434, § 1, effective April 18. L. 94: (2) amended, p. 719, § 27, effective July 1. L. 2003: (1) amended, p. 2267, § 187, effective July 1, 2004.

7-80-707. Meetings of members. (Repealed)

History

Source: L. 90: Entire article added, p. 434, § 1, effective April 18. L. 94: (3) amended, p. 719, § 28, effective July 1. L. 2003: (1) and (4)(b) amended, p. 2268, § 188, effective July 1, 2004. L. 2004: Entire section repealed, p. 944, § 15, effective July 1; entire section repealed, p. 1461, § 188, effective July 1.

7-80-708. Quorum of members - vote required. (Repealed)

History

Source: L. 90: Entire article added, p. 435, § 1, effective April 18. L. 94: Entire section amended, p. 719, § 29, effective July 1. L. 2004: Entire section repealed, p. 944, § 16, effective July 1; entire section repealed, p. 1462, § 189, effective July 1.

7-80-709. Notice of members' meetings. (Repealed)

History

Source: L. 90: Entire article added, p. 435, § 1, effective April 18. L. 94: (3) amended, p. 719, § 30, effective July 1. L. 2004: Entire section repealed, p. 944, § 17, effective July 1; entire section repealed, p. 1462, § 190, effective July 1.

7-80-710. Waiver of notice. (Repealed)

History

Source: L. 90: Entire article added, p. 435, § 1, effective April 18. L. 2004: Entire section repealed, p. 945, § 18, effective July 1; entire section repealed, p. 1462, § 191, effective July 1.

7-80-711. Action by members without a meeting. (Repealed)

History

Source: L. 90: Entire article added, p. 435, § 1, effective April 18. L. 94: (1) amended, p. 719, § 31, effective July 1. L. 2003: (1) amended, p. 2268, § 189, effective July 1, 2004. L. 2004: Entire section repealed, p. 945, § 19, effective July 1; entire section repealed, p. 1463, § 192, effective July 1.

7-80-712. Information and accounting. (Repealed)

History

Source: L. 90: Entire article added, p. 436, § 1, effective April 18. L. 2003: IP(1)(b) amended, p. 2268, § 190, effective July 1, 2004. L. 2004: Entire section repealed, p. 946, § 20, effective July 1.

7-80-713. Derivative proceeding - standing - definition.

Statute text

(1) A member may commence or maintain a derivative proceeding pursuant to this part 7 only where:

(a) The member was a member of the limited liability company at the time of the act or omission complained of or the membership interest in such company thereafter devolved by operation of law; and

(b) It appears that the member fairly and adequately represents the interests of the members similarly situated in enforcing the right of the limited liability company.

(2) For purposes of this part 7, "derivative proceeding" means a civil suit in the right of a domestic limited liability company or, to the extent provided in section 7-80-719, in the right of a foreign limited liability company.

History

Source: L. 2002: Entire section added, p. 1725, § 160, effective October 1.

Annotations

Law reviews. For article, "Business Entity Legislation 2002: Filing Procedures and LLC Changes", see 31 Colo. Law. 55 (November 2002).

7-80-714. Derivative proceeding - demand.

Statute text

(1) No member shall commence a derivative proceeding pursuant to this part 7 unless:

(a) A written demand has been made upon the limited liability company to take suitable action; and

(b) Thirty days have expired from the date the demand was made; except that the thirty-day limitation shall not be required where:

(I) The member has been notified prior to the expiration of the thirty-day period that the demand has been rejected by the limited liability company; or

(II) Irreparable injury to the limited liability company would result from waiting for the expiration of the thirty-day period.

History

Source: L. 2002: Entire section added, p. 1725, § 160, effective October 1.

7-80-715. Stay of derivative proceeding.

Statute text

For the purpose of allowing the limited liability company time to undertake an inquiry into the allegations made in a demand or complaint commenced pursuant to this part 7, the court may stay any derivative proceeding for such period as the court deems appropriate.

History

Source: L. 2002: Entire section added, p. 1725, § 160, effective October 1.

7-80-716. Dismissal of derivative proceeding.

Statute text

(1) A derivative proceeding commenced pursuant to this part 7 shall be dismissed by the court on motion by the limited liability company if any one of the groups specified in subsection (2) of this section has determined in good faith, after conducting an inquiry upon which the determination is based, that the maintenance of the derivative action is not in the best interests of the limited liability company.

(2) (a) Subject to the requirements of paragraph (b) of this subsection (2), the determination whether the maintenance of the derivative proceeding is in the best interests of the limited liability company shall be made by the independent manager of the limited liability company or, where there is more than one such manager, by a majority of said managers; except that, if there is no independent manager of the limited liability company or if the majority of such managers is unable to make the determination, the determination shall be made by a majority of the independent members of the limited liability company.

(b) If the determination is not made pursuant to paragraph (a) of this subsection (2), the determination shall be made by the person, or, in the case of more than one person, by a majority of such persons, sitting upon a panel of one or more persons appointed by a court upon motion filed with the court by the limited liability company for such purposes.

(3) The court shall appoint only independent persons to the panel described in paragraph (b) of subsection (2) of this section.

(4) None of the following shall by itself cause a person not to be considered independent for purposes of subsection (2) of this section:

(a) The naming of the person as a defendant in the derivative proceeding or as a person against whom action is demanded;

(b) The approval by such person of the act being challenged in the derivative proceeding or demand where the act did not result in personal benefit to such person;

(c) The making of the demand pursuant to section 7-80-714 or the commencement of the derivative proceeding pursuant to this section.

(5) Subject to section 7-80-717, a panel appointed by the court pursuant to paragraph (b) of subsection (2) of this section shall have such authority to continue, settle, or discontinue the derivative proceeding as the court may confer upon such panel.

(6) The plaintiff in the derivative proceeding shall have the burden of proving that any of the requirements of subsections (1) and (2) of this section have not been met.

History

Source: L. 2002: Entire section added, p. 1725, § 160, effective October 1.

7-80-717. Discontinuance or settlement of derivative proceeding.

Statute text

No derivative proceeding commenced pursuant to this part 7 shall be discontinued or settled without the approval of the court. Where the court determines that a proposed discontinuance or settlement will substantially affect the interests of the members of the limited liability company, the court shall direct that notice be given to the members affected.

History

Source: L. 2002: Entire section added, p. 1726, § 160, effective October 1.

7-80-718. Payment of expenses - derivative proceeding.

Statute text

On the termination of a derivative proceeding commenced pursuant to this part 7, where the court finds that the proceeding has resulted in a substantial benefit to the limited liability company, the court may order the limited liability company to pay the plaintiff's reasonable expenses, including attorney fees, incurred by the plaintiff in connection with the maintenance of such proceeding. On the termination of a derivative proceeding commenced pursuant to this part 7, where the court finds that the proceeding was commenced or maintained without reasonable cause or for an improper purpose, the court may order the plaintiff to pay any of the defendant's reasonable expenses, including attorney fees, incurred by the defendant in connection with the defense of such proceeding.

History

Source: L. 2002: Entire section added, p. 1726, § 160, effective October 1.

7-80-719. Applicability of derivative proceeding to foreign limited liability companies.

Statute text

In any derivative proceeding in the right of a foreign limited liability company, the right of a person to commence or maintain a derivative proceeding in the right of a foreign limited liability company and any matters raised in such proceeding covered by sections 7-80-713 to 7-80-718 shall be governed by the law of the jurisdiction under which the foreign limited liability company was formed; except that any matters raised in such proceeding covered by sections 7-80-715 and 7-80-717 shall be governed by the law of this state.

History

Source: L. 2002: Entire section added, p. 1727, § 160, effective October 1. L. 2003: Entire section amended, p. 2268, § 191, effective July 1, 2004.

PART 8 DISSOLUTION

Annotations

Editor's note: This part was originally enacted in 1990. The substantive provisions of this part 8 were repealed and reenacted in 2003, causing some addition, relocation, and elimination of sections as well as subject matter. For prior amendments, consult the red book table distributed with the session laws; the 1997 through 2002 Colorado Revised Statutes; and the 1996 annual supplement to the 1986 replacement volume.

SUBPART 1 VOLUNTARY DISSOLUTION

7-80-801. Dissolution - time and notice of dissolution.

Statute text

(1) A limited liability company formed under this article is dissolved:

(a) Upon the agreement of all members;

(b) At the time or upon the occurrence of the events stated in the operating agreement; or

(c) After the limited liability company ceases to have members, on the earlier of:

(I) The ninety-first day after the limited liability company ceases to have members unless, prior to that date, a person has been admitted as a member; or

(II) The date on which a statement of dissolution of the limited liability company becomes effective pursuant to section 7-90-304.

History

Source: L. 2003: Entire part R&RE, p. 2269, § 192, effective July 1, 2004. L. 2004: Entire section amended, p. 946, § 21, effective July 1. L. 2006: Entire section amended, p. 862, § 33, effective July 1.

Annotations

Editor's note: This section was contained in a part that was repealed and reenacted in 2003. Provisions of this section, as it existed in 2003, are similar to those contained in § 7-80-801 as said section existed in 2002, the year prior to the repeal and reenactment of this part.

7-80-802. Statement of dissolution.

Statute text

(1) Upon dissolution, the limited liability company shall deliver to the secretary of state, for filing pursuant to part 3 of article 90 of this title, a statement of dissolution stating:

(a) The domestic entity name of the limited liability company; and

(b) The principal office address of the limited liability company's principal office.

(c) and (d) (Deleted by amendment, L. 2004, p. 1463, § 193, effective July 1, 2004.)

(2) A limited liability company is dissolved as provided in section 7-80-801.

(3) For purposes of sections 7-80-405 and 7-80-803.5, a person who is not a manager or member has notice of the dissolution of a limited liability company on the earlier of:

(a) The ninetieth day after the limited liability company's statement of dissolution is on file with the secretary of state; or

(b) The date on which such person first has actual knowledge of the dissolution.

History

Source: L. 2003: Entire part R&RE, p. 2269, § 192, effective July 1, 2004. L. 2004: (1) amended, p. 1463, § 193, effective July 1. L. 2006: (2) amended and (3) added, p. 863, § 34, effective July 1.

Annotations

Editor's note: This section was contained in a part that was repealed and reenacted in 2003. Provisions of this section, as it existed in 2003, are similar to those contained in § 7-80-806 as it existed in 2002, the year prior to the repeal and reenactment of this part.

7-80-803. Effect of dissolution.

Statute text

(1) A dissolved limited liability company continues its existence as a limited liability company but shall not carry on any business except as is appropriate to wind up and liquidate its business and affairs, including:

(a) Collecting its assets;

(b) Disposing of its properties that will not be distributed in kind to its members;

(c) Discharging or making provision for discharging its liabilities;

(d) Distributing its remaining property among its members; and

(e) Doing every other act necessary to wind up and liquidate its business and affairs.

(2) A dissolved limited liability company may dispose of claims against it pursuant to sections 7-90-911 and 7-90-912.

History

Source: L. 2003: Entire part R&RE, p. 2269, § 192, effective July 1, 2004. L. 2006: (2) added, p. 863, § 35, effective July 1.

Annotations

Editor's note: This section was contained in a part that was repealed and reenacted in 2003. Provisions of this section, as it existed in 2003, are similar to those contained in § 8-80-807 as said section existed in 2002, the year prior to the repeal and reenactment of this part.

7-80-803.3. Right to wind up business.

Statute text

(1) After dissolution, the manager or, if there is no manager, any member may wind up the limited liability company's business, but on application of any member, member's legal representative, or member's assignee or transferee, the district court, for good cause shown, may order judicial supervision of the winding up.

(2) The legal representative, assignee, or transferee of the last remaining member may wind up the limited liability company's business if the limited liability company dissolves.

(3) A person winding up a limited liability company's business may preserve the business or property as a going concern for a reasonable time, prosecute and defend actions and proceedings, whether civil, criminal, or administrative, settle disputes, settle and close the limited liability company's business, dispose of and transfer the limited liability company's property, discharge or provide for obligations of the limited liability company, distribute the assets of the limited liability company pursuant to section 7-80-803 (1) (d), and perform other necessary acts.

History

Source: L. 2006: Entire section added, p. 863, § 36, effective July 1.

7-80-803.5. Manager's or member's power to bind limited liability company after dissolution.

Statute text

(1) Subject to section 7-80-802 (3), a limited liability company is bound by a manager's act or, in the case of a limited liability company, the articles of organization of which provide that management is vested in members, a member's act after dissolution that:

(a) Is appropriate for winding up the limited liability company's business; or

(b) Would have bound the limited liability company under section 7-80-405 before dissolution, if the other party to the transaction did not have notice of the dissolution.

History

Source: L. 2006: Entire section added, p. 863, § 36, effective July 1.

7-80-804. Disposition of known claims by notification. (Repealed)

History

Source: L. 2003: Entire part R&RE, p. 2269, § 192, effective July 1, 2004. L. 2006: Entire section repealed, p. 884, § 87, effective July 1.

7-80-805. Disposition of claims by publication. (Repealed)

History

Source: L. 2003: Entire part R&RE, p. 2270, § 192, effective July 1, 2004. L. 2006: Entire section repealed, p. 884, § 87, effective July 1.

7-80-806. Enforcement of claims against dissolved limited liability company. (Repealed)

History

Source: L. 2003: Entire part R&RE, p. 2271, § 192, effective July 1, 2004. L. 2006: Entire section repealed, p. 884, § 87, effective July 1.

SUBPART 2 ADMINISTRATIVE DISSOLUTION

7-80-807. Grounds for administrative dissolution. (Repealed)

History

Source: L. 2003: Entire part R&RE, p. 2271, § 192, effective July 1, 2004. L. 2004: IP(1) amended, p. 1463, § 194, effective July 1. L. 2005: Entire section repealed, p. 1218, § 26, effective October 1.

7-80-808. Procedure for and effect of administrative dissolution. (Repealed)

History

Source: L. 2003: Entire part R&RE, p. 2272, § 192, effective July 1, 2004. L. 2004: (1) and (2) amended, p. 946, § 22, effective July 1; (1) and (2) amended, p. 1463, § 195, effective July 1. L. 2005: Entire section repealed, p. 1218, § 26, effective October 1.

Annotations

Editor's note: (1) Amendments to subsection (1) by House Bill 04-1398 and House Bill 04-1399 were harmonized.

(2) Subsection (2) was amended in House Bill 04-1399. Those amendments were superseded by amendments made to that section by House Bill 04-1398.

SUBPART 3 JUDICIAL DISSOLUTION

7-80-809. Approval by judicial act. (Repealed)

History

Source: L. 2003: Entire part R&RE, p. 2272, § 192, effective July 1, 2004. L. 2004: Entire section repealed, p. 1464, § 196, effective July 1.

7-80-810. Judicial dissolution.

Statute text

(1) A limited liability company may be dissolved in a proceeding by the attorney general if it is established that:

(a) The limited liability company obtained its articles of organization through fraud; or

(b) The limited liability company has continued to exceed or abuse the authority conferred upon it by law.

(2) A limited liability company may be dissolved in a proceeding by or for a member or manager of the limited liability company if it is established that it is not reasonably practicable to carry on the business of the limited liability company in conformity with the operating agreement of said company.

(3) A limited liability company may be dissolved in a proceeding by a creditor of the limited liability company if it is established that:

(a) The creditor's claim has been reduced to judgment, execution upon such judgment has been returned unsatisfied, and the limited liability company is insolvent; or

(b) The limited liability company is insolvent and the limited liability company has admitted in writing that the creditor's claim is due and owing.

(4) (a) If a limited liability company has been dissolved by voluntary action taken under subpart 1 of this part 8:

(I) The limited liability company may bring a proceeding to wind up and liquidate its business and affairs under judicial supervision in accordance with section 7-80-803; and

(II) The attorney general, a member, a manager, or a creditor, as the case may be, may bring a proceeding to wind up and liquidate the business and affairs of the limited liability company under judicial supervision in accordance with section 7-80-803, upon establishing the grounds set forth for such person, respectively, in subsections (1) to (3) of this section.

(b) As used in sections 7-80-811 to 7-80-813, a "judicial proceeding brought to dissolve a limited liability company" includes a proceeding brought under this subsection (4), and a "decree of dissolution" includes an order of court entered in a proceeding under this subsection (4) that directs that the business and affairs of a limited liability company shall be wound up and liquidated under judicial supervision. History

Source: L. 2003: Entire part R&RE, p. 2273, § 192, effective July 1, 2004. L. 2004: (4)(b) amended, p. 1464, § 197, effective July 1. L. 2005: IP(4)(a) amended, p. 1219, § 28, effective October 1.

Annotations

Editor's note: This section was contained in a part that was repealed and reenacted in 2003. Provisions of this section, as it existed in 2003, are similar to those contained in § 7-80-808 as said section existed in 2002, the year prior to the repeal and reenactment of this part 8.

Annotations

Law reviews. For article, "Business Entity Legislation 2002: Filing Procedures and LLC Changes", see 31 Colo. Law. 55 (November 2002).

7-80-811. Procedure for judicial dissolution.

Statute text

(1) A judicial proceeding by the attorney general to dissolve a limited liability company shall be brought in the district court for the county in this state in which the street address of the limited liability company's principal office or the street address of its registered agent is located or, if the limited liability company has no principal office in this state and no registered agent, in the district court for the city and county of Denver. A judicial proceeding brought by any other party named in section 7-80-810 to dissolve a limited liability company shall be brought in the district court for the county in this state in which the street address of the limited liability company's principal office is located or, if it has no principal office in this state, in the district court for the county in which the street address of its registered agent is located, or, if the limited liability company has no registered agent, in the district court for the city and county of Denver.

(2) It is not necessary to make managers or members parties to a judicial proceeding to dissolve a limited liability company unless relief is sought against them individually.

(3) A court in a judicial proceeding brought to dissolve a limited liability company may issue injunctions, appoint a receiver or custodian pendente lite with all powers and duties the court directs, take other action required to preserve the limited liability company's assets wherever located, and carry on the business of the limited liability company until a full hearing can be held.

History

Source: L. 2003: Entire part R&RE, p. 2274, § 192, effective July 1, 2004. L. 2004: Entire section amended, p. 1464, § 198, effective July 1. L. 2006: (2) amended, p. 864, § 37, effective July 1.

7-80-812. Receivership or custodianship.

Statute text

(1) A court in a judicial proceeding brought to dissolve a limited liability company may appoint one or more receivers to wind up and liquidate, or one or more custodians to manage, the business and affairs of the limited liability company. The court shall hold a hearing, after giving notice to all parties to the proceeding and any interested persons designated by the court, before appointing a receiver or custodian. The court appointing a receiver or custodian has exclusive jurisdiction over the limited liability company and all of its property, wherever located.

(2) The court may appoint an individual, a domestic entity, or a foreign entity authorized to transact business or conduct activities in this state as a receiver or custodian. The court may require the receiver or custodian to post bond, with or without sureties, in an amount the court directs.

(3) The court shall describe the powers and duties of the receiver or custodian in its appointing order, which may be amended from time to time. Among other powers:

(a) The receiver:

(I) May dispose of all or any part of the property of the limited liability company wherever located, at a public or private sale, if authorized by the court; and

(II) May sue and defend in the receiver's own name as receiver of the limited liability company in all courts; or

(b) The custodian, with the authority of a manager of a limited liability company, the articles of organization of which provide that it is to be managed by managers, may exercise all of the powers of the limited liability company, through or in place of its managers or members, to the extent necessary to manage the affairs of the limited liability company in the best interests of its members and creditors.

(4) The court during a receivership may redesignate the receiver a custodian, and during a custodianship may redesignate the custodian a receiver, if doing so is in the best interests of the limited liability company and its members and creditors.

(5) The court from time to time during the receivership or custodianship may order compensation paid and expense disbursements or reimbursements made to the receiver or custodian and such person's counsel from the assets of the limited liability company or proceeds from the sale of the assets.

History

Source: L. 2003: Entire part R&RE, p. 2274, § 192, effective July 1, 2004. L. 2006: (3)(b) amended, p. 864, § 38, effective July 1.

7-80-813. Decree of dissolution.

Statute text

(1) If, in a judicial proceeding brought to dissolve a limited liability company, after a hearing the court determines that one or more grounds for judicial dissolution described in section 7-80-810 exist, it may enter a decree dissolving the limited liability company and stating the effective date of the dissolution, and the clerk of the court shall deliver a certified copy of the decree to the secretary of state for filing pursuant to part 3 of article 90 of this title.

(2) After entering the decree of dissolution, the court shall direct the winding up and liquidation of the limited liability company's business and affairs in accordance with section 7-80-803 and the giving of notice to claimants in accordance with sections 7-90-911 and 7-90-912.

(3) The court's order or decision may be appealed as in other civil proceedings.

History

Source: L. 2003: Entire part R&RE, p. 2275, § 192, effective July 1, 2004. L. 2004: (1) and (2) amended, p. 1465, § 199, effective July 1. L. 2006: (2) amended, p. 864, § 39, effective July 1.

PART 9 FOREIGN LIMITED LIABILITY COMPANIES

Annotations

Editor's note: This part was originally enacted in 1990. The substantive provisions of this part 9 were repealed and reenacted in 2003, causing some addition, relocation, and elimination of sections as well as subject matter. For prior amendments, consult the red book table distributed with the session laws; the 1997 through 2002 Colorado Revised Statutes; and the 1996 annual supplement to the 1986 replacement volume.

7-80-901. Foreign limited liability companies.

Statute text

Part 8 of article 90 of this title, providing for the transaction of business or the conduct of activities by foreign entities, applies to foreign limited liability companies.

History

Source: L. 2003: Entire part R&RE, p. 2275, § 193, effective July 1, 2004.

7-80-902. Registered agent - service of process.

Statute text

Part 7 of article 90 of this title, providing for registered agents and service of process, applies to foreign limited liability companies.

History

Source: L. 2003: Entire part R&RE, p. 2275, § 193, effective July 1, 2004.

PART 10 MERGER AND CONVERSION

7-80-1001 to 7-80-1007. (Repealed)

Annotations

Editor's note: (1) This part was originally enacted in 1994. For amendments prior to its repeal in 2004, consult the red book table distributed with the session laws; the 1997 through 2003 Colorado Revised Statutes; and the annual supplements to the 1986 Replacement Volume prior to 1997.

(2) Section 7-80-1007 provided for the repeal of this part, effective July 1, 2004. (See L. 2003, pp. 2356, 2357.)

PART 11 APPLICABILITY OF ARTICLE

7-80-1101. Application to limited liability companies formed prior to July 1, 1994.

Statute text

(1) A limited liability company formed under this article prior to July 1, 1994, shall be governed by the provisions of this article.

(2) (Deleted by amendment, L. 2004, p. 1465, § 200, effective July 1, 2004.)

History

Source: L. 94: Entire part added, p. 725, § 34, effective July 1. L. 2004: Entire section amended, p. 1465, § 200, effective July 1.

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