Who is Authorized Under New LLC Statute - April 2014

Terry Jessop & Bitner Newsletter

Issue 8, April 2014

Under Utah's old limited liability company act, which is still effective through December 31, 2015, any member of a member-managed LLC, or any manager of a manger-managed LLC, has apparent authority to sign documents on behalf of the LLC. The law requires the names and addresses of these authorized persons to be listed in the LLC's Articles of Organization. However, under Utah's new LLC act, which became effective January 1st of this year, the organizing document does not need to list anyone who has authority. In fact, even a person listed as a manager in the LLC's Certificate of Organization, has no apparent authority to sign documents on behalf of the LLC.

Make A Statement . . . Of Authority!

The new LLC act creates a whole new public filing to designate who has authority to bind the LLC. Any LLC desiring to publicly designate who has authority will need to file a "Statement of Authority" with the Division of Corporations. The Statement of Authority must include the LLC's name and its registered mailing and street address. The LLC may then designate a position (President, General Manager, etc.) or a specific person and state the authority or limitations of authority of that position or person. A person, who is not a member of the LLC, can then rely on the Statement of Authority to enter into a transaction with the LLC unless: (1) the person has actual knowledge that the Statement of Authority is wrong; (2) the Statement of Authority has been cancelled, amended or restricted by another filing; or (3) the transaction involves a transfer of real property.

For transactions involving the transfer of real property, the LLC must take an additional step to justify reliance on the Statement of Authority. The LLC must record a certified copy of the filed Statement of Authority in the county recorder's office where the property is located. If the Statement of Authority is filed with the Division and the certified copy is filed with the county recorder's office, then, subject to the first two caveats above, a person may rely on the Statement of Authority to close real property transfers.

"A Man's Got To Know His Limitations"

An LLC may also file a Statement of Authority to limit a person's authority. The same filing rules apply to Statements of Authority that limit authority as to those that grant authority. For transactions involving real property, if the certified copy of the Statement of Authority is filed in the county recorder where the property is located, then all persons, regardless of actual knowledge, are deemed to know the limitation included in the Statement of Authority. Therefore, before relying on a certified copy of the LLC's Statement of Authority filed with the county recorder's office, a thorough review of every recorded copy of the Statement of Authority must be done to verify that a person's authority has not been cancelled, amended or limited.

When Will It End?

An LLC may cancel its Statement of Authority by filing with the Division a statement of cancellation of authority. If not canceled beforehand, a Statement of Authority is canceled automatically five years after it (or its most recent amendment) became effective. We would be happy to answer your questions about the new LLC act or assist you with the review of any Statement of Authority. Feel free to contact us.

©Terry Jessop & Bitner April 2014