On August 1, 2015, House Bill H.F. No. 385, which was signed into law by Governor Mark Dayton in May 2015, will become effective. The new law streamlines the process for executing cross-entity and cross-border conversions under three key statutes applicable to business entities organized under the laws of Minnesota: Chapter 302A of the Minnesota Statutes (the Minnesota Business Corporation Act), Chapter 322B of the Minnesota Statutes (the Minnesota Limited Liability Company Act) and Chapter 322C of the Minnesota Statutes (the Minnesota Revised Uniform Limited Liability Company Act).
The changes included in House Bill H.F. No. 385 follow two noteworthy developments in the laws governing Minnesota business organizations from 2014:
- First, the Minnesota legislature approved, and the Governor signed, the Minnesota Revised Limited Liability Company Act, Chapter 322C. Starting August 1, 2015, all new limited liability companies organized in Minnesota must be formed under Chapter 322C. Limited liability companies in existence on August 1, 2015 may continue to be governed by the “old” LLC statute, Chapter 322B, until the end of a transition period, or may opt into new Chapter 322C. On January 1, 2018, the transition period will end, Chapter 322B will be repealed, and all Minnesota limited liability companies will thereafter be governed by Chapter 322C.
- Second, the Minnesota Business Corporation Act was amended to permit Minnesota corporations to re-incorporate in another state, or become a foreign limited liability company, using a one-step conversion process, so long as the relevant law of the other state also provides for such cross-border conversions. (See “2014 Changes to the Minnesota Business Corporation Act”)
House Bill H.F. No. 385 amends each of the corporation act (Chapter 302A), the “old” LLC act (Chapter 322B) and the “new” LLC act (Chapter 322C) to harmonize their respective provisions governing cross-entity and cross-border conversions. The changes to Chapter 302A, Chapter 322B and Chapter 322C permit a Minnesota corporation or limited liability company to convert into another “Organization”. An “Organization” is defined in Chapter 302A and Chapter 322C as:
a general partnership, including a limited liability partnership, limited partnership, including a limited liability limited partnership, limited liability company, business trust, corporation, or any other person having a governing statute. The term includes a domestic or foreign organization regardless of whether organized for profit.
A similarly broad definition of “Organization” is already contained in Chapter 322B. As a result, a domestic Minnesota business corporation or limited liability company will be able to convert, in a one-step transaction, into a Minnesota “Organization” or, as long as the law of the other state permits, into a business “Organization” governed by the laws of a state other than Minnesota. Importantly, the entity resulting from a conversion will be deemed to be a continuation of the same entity as the converting entity for all purposes.
Jonathan A. Van Horn is a member of the committee of the Minnesota State Bar Association that drafted the
2015 amendments to the Minnesota Business Corporation Act discussed in this eUpdate.
For further information on the 2015 amendments and their potential impact
on your business, please contact any member of Dorsey’s
Corporate Group in Minneapolis.