The 2020 Legislative session added some specific legislative acts which may be of interest to those reading this article and receiving the Davenport Evans Banking e-News (to sign up, click on the button below.) Most of the legislation takes effect July 1, 2020, although some have a delayed implementation date. The following review was prepared by Davenport Evans lawyer Terry N. Prendergast.
Uniform Power of Attorney Act
After a few false starts in recent years, the Legislature adopted the Uniform Power of Attorney Act, a model act proposed by the Uniform Laws Commission and adopted in almost half the states including Iowa and Nebraska, Wyoming and Montana among our neighboring states. The act uses general default rules and definitions. It identifies certain areas of authority that must be granted with express language because of enhanced risk to the principal’s estate plan, and has an optional statutory form designed for use by lawyers as well as lay persons. The Act does not invalidate any current powers of attorney, but has provisions that financial institutions may wish to consult with legal counsel about, particularly with respect to acceptance of powers of attorney. Many times the front line person presented with a power of attorney may have suspicions relative to fraud or other motives, and in these cases, it is best to consult with counsel. This act passed both houses of the legislature and is currently on Governor Noem’s desk for signature.
Series Limited Liability Companies
Another act that passed both houses and is currently on Governor Noem’s desk is an act authorizing series limited liability companies. The Act has a delayed effective date until November 15, 2020, and allows one limited liability company to have various series which may have different managers, owners, voting rights, powers and duties. Each series may provide general liability protection from the other series, even though they are both series under the same limited liability company umbrella, so if a lender is making a loan to one series of a limited liability company, and wishes to have collateral of other assets or other series of the company, again it may be necessary to consult counsel. The use of guaranties or other collateral pledges may be necessary, depending upon the situation. The series limited liability companies essentially allow one limited liability company to create “silos” of separate liability under the umbrella of the master limited liability company, and it has been used in statutory trusts for assets such as real estate investment trusts and mutual funds for many years. By adopting the series limited liability companies, this planning tool is made available on a lesser (and less expensive) scale to South Dakota small businesses and individuals.
Other Business Legislation
Another bill that passed the legislature, already was signed by the Governor, allows remote participation in a shareholders’ meeting by shareholders and proxies not physically present. This again is a business friendly bill and updates our corporate code to recognize current remote communication uses. The Governor also signed a bill making clear that debts, obligations, or liabilities of a limited liability company are solely the obligations of the company, and members or managers of the company are not personally liable, directly or indirectly, for such debts or liabilities regardless of the dissolution of the company. Again, anyone entering into a contract solely with a limited liability company should consider other ancillary guaranties or collateral pledges if it is uncertain whether the assets of the limited liability company alone can support the obligation.
Davenport, Evans, Hurwitz & Smith, LLP, located in Sioux Falls, South Dakota, is one of the State’s largest law firms. The firm’s attorneys provide business and litigation counsel to individuals and corporate clients in a variety of practice areas. For more information about Davenport Evans, visit www.dehs.com.