Running a business can be hard, but navigating the twists and turns required to maintain a business’ corporate structure can be even harder. In Texas, corporate structure for corporations, limited liability companies, limited partnerships, and other entities is governed by the Texas Business Organizations Code (the “TBOC”). While the TBOC was first published in the mid-2000s, it became the law governing all entities effective January 1, 2010.
Waive or Modify LLCA and TBOC Provisions
One entity type the TBOC governs is the limited liability company (“LLC”). While other chapters of the TBOC are applicable to LLCs, the main governing body is the Limited Liability Company Act found in TBOC Chapter 101 (the “LLCA”).
What I believe may be the most crucial provision in the LLCA is Section 101.052(c). This provision allows LLCs to waive or modify most LLCA and TBOC provisions by including alternative provisions in their governing document. An LLC’s governing document is generally referred to as an operating agreement or a company agreement (for purposes of this article, the “Company Agreement”). In short, unless expressly prohibited by the LLCA, an LLC can include its own governance requirements in its Company Agreement.
LLC Meeting Notice
One aspect a Company Agreement can alter is the meeting requirements for LLC members and managers. Holding regular and special meetings for LLC actions is a prudent practice for an LLC’s continued corporate identity. The meeting processes, however, can be modified for personal preference.
One such process is meeting notice. LLC meeting notice is governed by TBOC Sections 101.352 and 6.051. Collectively, these provisions require that “owners, members, or governing persons” of the LLC be provided notice in writing of a meeting’s date, time, and place. The notice should also include the authorized communication media that may be utilized during the meeting, such as teleconference or videoconference.
The TBOC’s notification provisions do not provide specific requirements for noticing an LLC’s managing authority, only the non-managing members (between 10 and 60 days’ notice). (Tex. Bus. Org. C. §101.352(b)). This is where experienced guidance is crucial. A delicate balance exists between facilitating timely corporate action and providing adequate notice to members or managers for attendance. One suggestion is to provide a range for the notice requirements. As an example, requiring not less than 5, but not more than 10 days’ meeting notice.
The Company Agreement can also restrict or expand the meeting notice forms required. While Section 6.051 does not explicitly set forth available notice forms, it suggests that U.S. Postal Service and facsimile and electronic message transmission are acceptable by measurements for their respective timing. (Tex. Bus. Org. C. §6.051(b)). A cautious client may wish to require notice via certified mail, return receipt requested, confirming notice is received. An expediency minded client, however, may instead wish to include courier service or hand delivery as acceptable notice forms.
Having an Experienced Corporate Counsel
Finally, experienced corporate counsel should review a Company Agreement prior to execution. In addition to providing guidance on the above, this will also limit the possibility of conflicting provisions. Many clients have come to us with internet-procured forms containing unenumerable inconsistencies, including excess notice provisions. The client must then decide whether to follow one or the other to remain in compliance. The confusion is very disruptive.
The transactional attorneys at Shields Legal Group have extensive experience with both preparing and interpreting LLC Company Agreements, including notice requirements. We have assisted countless clients by ensuring their documents are both reasonable and consistent, and correcting any problem provisions.
Please let us know if we can help you with your documentation and other LLC needs.