MD
Maryland Senate Bill SB261

Maryland 2022 Regular Session

Maryland Senate Bill SB261 Compare Versions

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1- LAWRENCE J. HOGAN, JR., Governor Ch. 295
21
3-– 1 –
4-Chapter 295
5-(Senate Bill 261)
62
7-AN ACT concerning
3+EXPLANATION: CAPITALS INDICATE MAT TER ADDED TO EXISTIN G LAW.
4+ [Brackets] indicate matter deleted from existing law.
5+ Underlining indicates amendments to bill.
6+ Strike out indicates matter stricken from the bill by amendment or deleted from the law by
7+amendment.
8+ *sb0261*
89
9-Corporations and Associations – Limited Liability Companies and Partnerships
10-– Operating Agreements and Partnership Agreements
10+SENATE BILL 261
11+C1, N2 2lr1767
12+ CF HB 342
13+By: Senator West
14+Introduced and read first time: January 14, 2022
15+Assigned to: Judicial Proceedings
16+Committee Report: Favorable with amendments
17+Senate action: Adopted
18+Read second time: February 13, 2022
1119
12-FOR the purpose of authorizing the operating agreement of a limited liability company to
13-provide for the transfer or assignment of an interest in the company to a certain
14-person on the occurrence of certain events regardless of whether the person is a
15-member; authorizing a member of a limited liability company to retain the member’s
16-noneconomic interest in the company on assignment of all of the member’s economic
17-interest in the company under certain circumstances; authorizing a partnership
18-agreement to provide for the transfer or assignment of an interest in the partnership
19-to a certain person on the occurrence of certain events regardless of whether the
20-person is a partner; establishing that transfers on death pursuant to an operating
21-agreement or a partnership agreement are not testamentary; and generally relating
22-to operating agreements of limited liability companies and partnership agreements.
20+CHAPTER ______
2321
24-BY repealing and reenacting, without amendments,
25- Article – Corporations and Associations
26-Section 4A–101(a), 4A–606, 9A–601, and 10–402
27- Annotated Code of Maryland
28- (2014 Replacement Volume and 2021 Supplement)
22+AN ACT concerning 1
2923
30-BY repealing and reenacting, with amendments,
31- Article – Corporations and Associations
32-Section 4A–101(q), 4A–203, 4A–402(a), 4A–603(d), 9A–503, and 10–702
33- Annotated Code of Maryland
34- (2014 Replacement Volume and 2021 Supplement)
24+Corporations and Associations – Limited Liability Companies and Partnerships 2
25+– Operating Agreements and Partnership Agreements 3
3526
36-BY repealing and reenacting, with amendments,
37- Article – Estates and Trusts
38-Section 1–401
39- Annotated Code of Maryland
40- (2017 Replacement Volume and 2021 Supplement)
27+FOR the purpose of authorizing the operating agreement of a limited liability company to 4
28+provide for the transfer or assignment of an interest in the company to a certain 5
29+person on the occurrence of certain events regardless of whether the person is a 6
30+member; authorizing a member of a limited liability company to retain the member’s 7
31+noneconomic interest in the company on assignment of all of the member’s economic 8
32+interest in the company under certain circumstances; authorizing a partnership 9
33+agreement to provide for the transfer or assignment of an interest in the partnership 10
34+to a certain person on the occurrence of certain events regardless of whether the 11
35+person is a partner; establishing that transfers on death pursuant to an operating 12
36+agreement or a partnership agreement are not testamentary; and generally relating 13
37+to operating agreements of limited liability companies and partnership agreements. 14
4138
42- SECTION 1. BE IT ENACTED BY THE GENERAL ASSEMBLY OF MARYLAND,
43-That the Laws of Maryland read as follows:
39+BY repealing and reenacting, without amendments, 15
40+ Article – Corporations and Associations 16
41+Section 4A–101(a), 4A–606, 9A–601, and 10–402 17
42+ Annotated Code of Maryland 18
43+ (2014 Replacement Volume and 2021 Supplement) 19
4444
45-Article – Corporations and Associations
45+BY repealing and reenacting, with amendments, 20
46+ Article – Corporations and Associations 21
47+Section 4A–101(q), 4A–203, 4A–402(a), 4A–603(d), 9A–503, and 10–702 22
48+ Annotated Code of Maryland 23 2 SENATE BILL 261
4649
47-4A–101.
4850
49- (a) In this title the following terms have the meanings indicated. Ch. 295 2022 LAWS OF MARYLAND
51+ (2014 Replacement Volume and 2021 Supplement) 1
5052
51-– 2 –
53+BY repealing and reenacting, with amendments, 2
54+ Article – Estates and Trusts 3
55+Section 1–401 4
56+ Annotated Code of Maryland 5
57+ (2017 Replacement Volume and 2021 Supplement) 6
5258
53- (q) “Operating agreement” means the agreement of the members and any
54-amendments thereto[, as to the affairs of a limited liability company and the conduct of its
55-business] CONCERNING THE MATTE RS DESCRIBED IN § 4A–402(A) OF THIS TITLE.
59+ SECTION 1. BE IT ENACTED BY THE GENERAL ASSEMBLY OF MARYLAND, 7
60+That the Laws of Maryland read as follows: 8
5661
57-4A–203.
62+Article – Corporations and Associations 9
5863
59- Unless otherwise provided by law or unless otherwise agreed, a limited liability
60-company has the general powers, whether or not set forth in its articles of organization or
61-operating agreement, to:
64+4A–101. 10
6265
63- (1) Have perpetual existence, although existence may be limited to a
64-specified period of time if the limitation is set forth in its articles of organization;
66+ (a) In this title the following terms have the meanings indicated. 11
6567
66- (2) Sue, be sued, complain, and defend in all courts;
68+ (q) “Operating agreement” means the agreement of the members and any 12
69+amendments thereto[, as to the affairs of a limited liability company and the conduct of its 13
70+business] CONCERNING THE MATTE RS DESCRIBED IN § 4A–402(A) OF THIS TITLE. 14
6771
68- (3) Transact its business, carry on its operations, and have and exercise
69-the powers granted by this article in any state and in any foreign country;
72+4A–203. 15
7073
71- (4) Make contracts and guarantees, incur liabilities, and borrow money;
74+ Unless otherwise provided by law or unless otherwise agreed, a limited liability 16
75+company has the general powers, whether or not set forth in its articles of organization or 17
76+operating agreement, to: 18
7277
73- (5) Sell, lease, exchange, transfer, convey, mortgage, pledge, and otherwise
74-dispose of any of its assets;
78+ (1) Have perpetual existence, although existence may be limited to a 19
79+specified period of time if the limitation is set forth in its articles of organization; 20
7580
76- (6) Acquire by purchase or in any other manner, take, receive, own, hold,
77-improve, and otherwise deal with any interest in real or personal property, wherever
78-located;
81+ (2) Sue, be sued, complain, and defend in all courts; 21
7982
80- (7) Issue notes, bonds, and other obligations and secure any of them by
81-mortgage or deed of trust or security interest of any or all of its assets;
83+ (3) Transact its business, carry on its operations, and have and exercise 22
84+the powers granted by this article in any state and in any foreign country; 23
8285
83- (8) Purchase, take, receive, subscribe for or otherwise acquire, own, hold,
84-vote, use, employ, sell, mortgage, loan, pledge, or otherwise dispose of and otherwise use
85-and deal in and with stock or other interests in and obligations of other corporations,
86-associations, general or limited partnerships, limited liability companies, foreign limited
87-liability companies, business trusts, and individuals;
86+ (4) Make contracts and guarantees, incur liabilities, and borrow money; 24
8887
89- (9) Invest its surplus funds, lend money in any manner which may be
90-appropriate to enable it to carry on the operations or fulfill the purposes of the limited
91-liability company, and take and hold real property and personal property as security for
92-the payment of funds so loaned or invested;
88+ (5) Sell, lease, exchange, transfer, convey, mortgage, pledge, and otherwise 25
89+dispose of any of its assets; 26
9390
94- (10) Render professional services within or without this State;
91+ (6) Acquire by purchase or in any other manner, take, receive, own, hold, 27
92+improve, and otherwise deal with any interest in real or personal property, wherever 28
93+located; 29
9594
96- (11) Elect or appoint agents and define their duties and fix their
97-compensation; LAWRENCE J. HOGAN, JR., Governor Ch. 295
95+ (7) Issue notes, bonds, and other obligations and secure any of them by 30
96+mortgage or deed of trust or security interest of any or all of its assets; 31
97+ SENATE BILL 261 3
9898
99-– 3 –
10099
101- (12) Sell, convey, mortgage, pledge, lease, exchange, transfer, and otherwise
102-dispose of all or any part of its property and assets;
100+ (8) Purchase, take, receive, subscribe for or otherwise acquire, own, hold, 1
101+vote, use, employ, sell, mortgage, loan, pledge, or otherwise dispose of and otherwise use 2
102+and deal in and with stock or other interests in and obligations of other corporations, 3
103+associations, general or limited partnerships, limited liability companies, foreign limited 4
104+liability companies, business trusts, and individuals; 5
103105
104- (13) Be a promoter, stockholder, partner, member, associate, or agent of any
105-corporation, partnership, limited liability company, foreign limited liability company, joint
106-venture, trust, or other enterprise;
106+ (9) Invest its surplus funds, lend money in any manner which may be 6
107+appropriate to enable it to carry on the operations or fulfill the purposes of the limited 7
108+liability company, and take and hold real property and personal property as security for 8
109+the payment of funds so loaned or invested; 9
107110
108- (14) Indemnify and hold harmless any member, agent, or employee from and
109-against any and all claims and demands, except in the case of action or failure to act by the
110-member, agent, or employee which constitutes willful misconduct or recklessness, and
111-subject to the standards and restrictions, if any, set forth in the articles of organization or
112-operating agreement;
111+ (10) Render professional services within or without this State; 10
113112
114- (15) Make and alter operating agreements[, not inconsistent with its
115-articles of organization or with the laws of this State, for the administration and regulation
116-of the affairs of the limited liability company] AS PROVIDED IN § 4A–402(A) OF THIS
117-TITLE;
113+ (11) Elect or appoint agents and define their duties and fix their 11
114+compensation; 12
118115
119- (16) Cease its activities and dissolve; and
116+ (12) Sell, convey, mortgage, pledge, lease, exchange, transfer, and otherwise 13
117+dispose of all or any part of its property and assets; 14
120118
121- (17) Do every other act not inconsistent with law which is appropriate to
122-promote and attain the purposes of the limited liability company.
119+ (13) Be a promoter, stockholder, partner, member, associate, or agent of any 15
120+corporation, partnership, limited liability company, foreign limited liability company, joint 16
121+venture, trust, or other enterprise; 17
123122
124-4A–402.
123+ (14) Indemnify and hold harmless any member, agent, or employee from and 18
124+against any and all claims and demands, except in the case of action or failure to act by the 19
125+member, agent, or employee which constitutes willful misconduct or recklessness, and 20
126+subject to the standards and restrictions, if any, set forth in the articles of organization or 21
127+operating agreement; 22
125128
126- (a) Except for the requirement set forth in § 4A–404 of this subtitle that certain
127-consents be in writing, members may enter into an operating agreement NOT
128-INCONSISTENT WITH TH E ARTICLES OF ORGANI ZATION to regulate or establish any
129-aspect of the affairs of the limited liability company, THE CONDUCT OF ITS B USINESS, or
130-the relations of its members, including provisions establishing:
129+ (15) Make and alter operating agreements[, not inconsistent with its 23
130+articles of organization or with the laws of this State, for the administration and regulation 24
131+of the affairs of the limited liability company] AS PROVIDED IN § 4A–402(A) OF THIS 25
132+TITLE; 26
131133
132- (1) The manner in which the business and affairs of the limited liability
133-company shall be managed, controlled, and operated, which may include the granting of
134-exclusive authority to manage, control, and operate the limited liability company to persons
135-who are not members;
134+ (16) Cease its activities and dissolve; and 27
136135
137- (2) The manner in which the members will share the assets and earnings
138-of the limited liability company;
136+ (17) Do every other act not inconsistent with law which is appropriate to 28
137+promote and attain the purposes of the limited liability company. 29
139138
140- (3) The rights of the members to assign all or a portion of their membership
141-interest;
139+4A–402. 30
142140
143- (4) The circumstances in which a person may be admitted as a member of
144-the limited liability company;
145- Ch. 295 2022 LAWS OF MARYLAND
141+ (a) Except for the requirement set forth in § 4A–404 of this subtitle that certain 31
142+consents be in writing, members may enter into an operating agreement NOT 32
143+INCONSISTENT WITH TH E ARTICLES OF ORGANI ZATION to regulate or establish any 33
144+aspect of the affairs of the limited liability company, THE CONDUCT OF ITS B USINESS, or 34
145+the relations of its members, including provisions establishing: 35 4 SENATE BILL 261
146146
147-– 4 –
148- (5) (i) The right to have and a procedure for having a memb er’s
149-membership interest evidenced by a certificate issued by the limited liability company,
150-which may be issued in bearer form only if specifically allowed by the operating agreement;
151147
152- (ii) The procedure for assignment, pledge, or transfer of any
153-membership interest represented by the certificate; and
154148
155- (iii) Any other provisions dealing with the certificate;
149+ (1) The manner in which the business and affairs of the limited liability 1
150+company shall be managed, controlled, and operated, which may include the granting of 2
151+exclusive authority to manage, control, and operate the limited liability company to persons 3
152+who are not members; 4
156153
157- (6) The method by which the operating agreement may from time to time
158-be amended, which may include a requirement that an amendment be approved:
154+ (2) The manner in which the members will share the assets and earnings 5
155+of the limited liability company; 6
159156
160- (i) By a person who is not a party to the operating agreement or who
161-is not a member of the limited liability company; or
157+ (3) The rights of the members to assign all or a portion of their membership 7
158+interest; 8
162159
163- (ii) On the satisfaction of other conditions specified in the operating
164-agreement;
160+ (4) The circumstances in which a person may be admitted as a member of 9
161+the limited liability company; 10
165162
166- (7) The rights of any person, including a person who is not a party to the
167-operating agreement or who is not a member of the limited liability company, to the extent
168-set forth in the operating agreement; [or]
163+ (5) (i) The right to have and a procedure for having a mem ber’s 11
164+membership interest evidenced by a certificate issued by the limited liability company, 12
165+which may be issued in bearer form only if specifically allowed by the operating agreement; 13
169166
170- (8) Procedures relating to:
167+ (ii) The procedure for assignment, pledge, or transfer of any 14
168+membership interest represented by the certificate; and 15
171169
172- (i) Notice of the time, place, or purpose of any meeting at which any
173-matter is to be voted on by members;
170+ (iii) Any other provisions dealing with the certificate; 16
174171
175- (ii) Waiver of notice of meetings;
172+ (6) The method by which the operating agreement may from time to time 17
173+be amended, which may include a requirement that an amendment be approved: 18
176174
177- (iii) Action by consent without a meeting;
175+ (i) By a person who is not a party to the operating agreement or who 19
176+is not a member of the limited liability company; or 20
178177
179- (iv) The establishment of a record date;
178+ (ii) On the satisfaction of other conditions specified in the operating 21
179+agreement; 22
180180
181- (v) Quorum requirements;
181+ (7) The rights of any person, including a person who is not a party to the 23
182+operating agreement or who is not a member of the limited liability company, to the extent 24
183+set forth in the operating agreement; [or] 25
182184
183- (vi) Voting in person or by proxy;
185+ (8) Procedures relating to: 26
184186
185- (vii) Voting rights of various classes of members; or
187+ (i) Notice of the time, place, or purpose of any meeting at which any 27
188+matter is to be voted on by members; 28
186189
187- (viii) Any other matter with respect to the exercise of voting rights by
188-members; OR
190+ (ii) Waiver of notice of meetings; 29
189191
190- (9) THAT A MEMBERSHIP INT EREST, AN ECONOMIC INTEREST , OR A
191-NONECONOMIC INTEREST MAY OR SHALL BE TRAN SFERRED OR ASSIGNED IN WHOLE
192-OR IN PART TO ONE OR MORE PERSONS , INCLUDING ON THE OCC URRENCE OF ANY
193-OF THE EVENTS DESCRI BED IN § 4A–606 OF THIS TITLE, REGARDLESS OF WHETHER LAWRENCE J. HOGAN, JR., Governor Ch. 295
192+ (iii) Action by consent without a meeting; 30
194193
195-– 5 –
196-THE PERSONS TO WHOM THE INTEREST IS TRAN SFERRED OR ASSIGNED ARE
197-MEMBERS.
194+ (iv) The establishment of a record date; 31 SENATE BILL 261 5
198195
199-4A–603.
200196
201- (d) [On] UNLESS OTHERWISE AGRE ED, ON assignment of all of a member’s
202-economic interest in a limited liability company, the member ceases to be a member of the
203-limited liability company and forfeits the member’s noneconomic interest in the limited
204-liability company.
205197
206-4A–606.
198+ (v) Quorum requirements; 1
207199
208- Unless otherwise agreed, a person ceases to be a member of a limited liability
209-company upon the occurrence of any of the following events:
200+ (vi) Voting in person or by proxy; 2
210201
211- (1) The person withdraws from the limited liability company as authorized
212-by § 4A–605 of this subtitle;
202+ (vii) Voting rights of various classes of members; or 3
213203
214- (2) The person is removed as a member in accordance with the operating
215-agreement;
204+ (viii) Any other matter with respect to the exercise of voting rights by 4
205+members; OR 5
216206
217- (3) The person:
207+ (9) THAT A MEMBERSHIP INT EREST, AN ECONOMIC INTEREST , OR A 6
208+NONECONOMIC I NTEREST MAY OR SHALL BE TRANSFERRED OR AS SIGNED IN WHOLE 7
209+OR IN PART TO ONE OR MORE PERSONS , INCLUDING ON THE OCC URRENCE OF ANY 8
210+OF THE EVENTS DESCRI BED IN § 4A–606 OF THIS TITLE, REGARDLESS OF WHETHE R 9
211+THE PERSONS TO WHOM THE INTEREST IS TRAN SFERRED OR ASSIG NED ARE 10
212+MEMBERS. 11
218213
219- (i) Makes an assignment for the benefit of creditors;
214+4A–603. 12
220215
221- (ii) Institutes a voluntary proceeding with respect to the person
222-under the federal bankruptcy code;
216+ (d) [On] UNLESS OTHERWISE AGRE ED, ON assignment of all of a member’s 13
217+economic interest in a limited liability company, the member ceases to be a member of the 14
218+limited liability company and forfeits the member’s noneconomic interest in the limited 15
219+liability company. 16
223220
224- (iii) Is adjudged bankrupt or insolvent or has entered against the
225-person an order for relief in any bankruptcy or insolvency proceeding;
221+4A–606. 17
226222
227- (iv) Files a petition or answer seeking for that person any
228-reorganization, arrangement, composition, readjustment, liquidation, dissolution, or
229-similar relief under any statute, law, or regulation;
223+ Unless otherwise agreed, a person ceases to be a member of a limited liability 18
224+company upon the occurrence of any of the following events: 19
230225
231- (v) Seeks, consents to, or acquiesces in the appointment of a trustee
232-for, receiver for, or liquidation of the member or of all or any substantial part of the person’s
233-properties; or
226+ (1) The person withdraws from the limited liability company as authorized 20
227+by § 4A–605 of this subtitle; 21
234228
235- (vi) Files an answer or other pleading admitting or failing to contest
236-the material allegations of a petition filed against the person in any proceeding described
237-in this item;
229+ (2) The person is removed as a member in accordance with the operating 22
230+agreement; 23
238231
239- (4) The continuation of any proceeding against the person seeking
240-reorganization, arrangement, composition, readjustment, liquidation, dissolution, or
241-similar relief under any statute, law, or regulation, for 120 days after the commencement Ch. 295 2022 LAWS OF MARYLAND
232+ (3) The person: 24
242233
243-– 6 –
244-thereof, or the appointment of a trustee, receiver, or liquidator for the members or all or
245-any substantial part of the person’s properties without the person’s agreement or
246-acquiescence, which appointment is not vacated or stayed for 120 days or, if the
247-appointment is stayed, for 120 days after the expiration of the stay during which period the
248-appointment is not vacated;
234+ (i) Makes an assignment for the benefit of creditors; 25
249235
250- (5) In the case of a member who is an individual, the individual’s:
236+ (ii) Institutes a voluntary proceeding with respect to the person 26
237+under the federal bankruptcy code; 27
251238
252- (i) Death; or
239+ (iii) Is adjudged bankrupt or insolvent or has entered against the 28
240+person an order for relief in any bankruptcy or insolvency proceeding; 29
241+ 6 SENATE BILL 261
253242
254- (ii) Adjudication by a court of competent jurisdiction as incompetent
255-to manage the individual’s person or property;
256243
257- (6) In the case of a member who is acting as a member by virtue of being a
258-trustee of a trust, the termination of the trust;
244+ (iv) Files a petition or answer seeking for that pers on any 1
245+reorganization, arrangement, composition, readjustment, liquidation, dissolution, or 2
246+similar relief under any statute, law, or regulation; 3
259247
260- (7) In the case of a member that is a partnership or another limited liability
261-company, the dissolution and commencement of winding up of the partnership or limited
262-liability company;
248+ (v) Seeks, consents to, or acquiesces in the appointment of a trustee 4
249+for, receiver for, or liquidation of the member or of all or any substantial part of the person’s 5
250+properties; or 6
263251
264- (8) In the case of a member that is a corporation, the dissolution of the
265-corporation or the revocation of its charter;
252+ (vi) Files an answer or other pleading admitting or failing to contest 7
253+the material allegations of a petition filed against the person in any proceeding described 8
254+in this item; 9
266255
267- (9) In the case of a member that is an estate, the distribution by the
268-fiduciary of the estate’s entire economic interest in the limited liability company; or
256+ (4) The continuation of any proceeding against the person seeking 10
257+reorganization, arrangement, composition, readjustment, liquidation, dissolution, or 11
258+similar relief under any statute, law, or regulation, for 120 days after the commencement 12
259+thereof, or the appointment of a trustee, receiver, or liquidator for the members or all or 13
260+any substantial part of the person’s properties without the person’s agreement or 14
261+acquiescence, which appointment is not vacated or stayed for 120 days or, if the 15
262+appointment is stayed, for 120 days after the expiration of the stay during which period the 16
263+appointment is not vacated; 17
269264
270- (10) On assignment of all of a person’s economic interest in the limited
271-liability company as provided in § 4A–603(d) of this subtitle.
265+ (5) In the case of a member who is an individual, the individual’s: 18
272266
273-9A–503.
267+ (i) Death; or 19
274268
275- (a) A transfer, in whole or in part, of a partner’s transferable interest in the
276-partnership:
269+ (ii) Adjudication by a court of competent jurisdiction as incompetent 20
270+to manage the individual’s person or property; 21
277271
278- (1) Is permissible;
272+ (6) In the case of a member who is acting as a member by virtue of being a 22
273+trustee of a trust, the termination of the trust; 23
279274
280- (2) Does not by itself cause the partner’s dissociation or a dissolution and
281-winding up of the partnership business; and
275+ (7) In the case of a member that is a partnership or another limited liability 24
276+company, the dissolution and commencement of winding up of the partnership or limited 25
277+liability company; 26
282278
283- (3) Does not, as against the other partners or the partnership, entitle the
284-transferee, during the continuance of the partnership, to participate in the management or
285-conduct of the partnership business, to require access to information concerning
286-partnership transactions, or to inspect or copy the partnership books or records.
279+ (8) In the case of a member that is a corporation, the dissolution of the 27
280+corporation or the revocation of its charter; 28
287281
288- (b) A transferee of a partner’s transferable interest in the partnership has a right:
289- LAWRENCE J. HOGAN, JR., Governor Ch. 295
282+ (9) In the case of a member that is an estate, the distribution by the 29
283+fiduciary of the estate’s entire economic interest in the limited liability company; or 30
290284
291-– 7 –
292- (1) To receive, in accordance with the transfer, distributions to which the
293-transferor would otherwise be entitled;
285+ (10) On assignment of all of a person’s economic interest in the limited 31
286+liability company as provided in § 4A–603(d) of this subtitle. 32
294287
295- (2) To receive upon the dissolution and winding up of the partnership
296-business, in accordance with the transfer, the net amount otherwise distributable to the
297-transferor; and
288+9A–503. 33
289+ SENATE BILL 261 7
298290
299- (3) To seek under § 9A–801(6) of this title a judicial determination that it
300-is equitable to wind up the partnership business.
301291
302- (c) In a dissolution and winding up, a transferee is entitled to an account of
303-partnership transactions only from the date of the latest account agreed to by all of the
304-partners.
292+ (a) A transfer, in whole or in part, of a partner’s transferable interest in the 1
293+partnership: 2
305294
306- (d) Upon transfer, the transferor retains the rights and duties of a partner other
307-than the interest in distributions transferred.
295+ (1) Is permissible; 3
308296
309- (e) A partnership need not give effect to a transferee’s rights under this section
310-until it has notice of the transfer.
297+ (2) Does not by itself cause the partner’s dissociation or a dissolution and 4
298+winding up of the partnership business; and 5
311299
312- (f) A transfer of a partner’s transferable interest in the partnership in violation
313-of a restriction on transfer contained in the partnership agreement is ineffective as to a
314-person having notice of the restriction at the time of transfer.
300+ (3) Does not, as against the other partners or the partnership, entitle the 6
301+transferee, during the continuance of the partnership, to participate in the management or 7
302+conduct of the partnership business, to require access to information concerning 8
303+partnership transactions, or to inspect or copy the partnership books or records. 9
315304
316- (G) A PARTNERSHIP AGREEMEN T MAY PROVIDE THAT A PARTNER’S
317-TRANSFERABLE INTERES T IN THE PARTNERSHIP MAY OR SHALL BE TRAN SFERRED
318-OR ASSIGNED IN WHOLE OR IN PART TO ONE OR MORE PERSONS, INCLUDING ON THE
319-OCCURRENCE OF ANY OF THE EVENTS DESCRIBED IN § 9A–601 OF THIS TITLE,
320-REGARDLESS OF WHETHE R THE PERSONS TO WHO M THE INTEREST IS
321-TRANSFERRED OR ASSIG NED ARE PARTNERS .
305+ (b) A transferee of a partner’s transferable interest in the partnership has a right: 10
322306
323-9A–601.
307+ (1) To receive, in accordance with the transfer, distributions to which the 11
308+transferor would otherwise be entitled; 12
324309
325- A partner is dissociated from a partnership upon the occurrence of any of the
326-following events:
310+ (2) To receive upon the dissolution and winding up of the partnership 13
311+business, in accordance with the transfer, the net amount otherwise distributable to the 14
312+transferor; and 15
327313
328- (1) The partnership’s having notice of the partner’s express will to
329-withdraw as a partner or on a later date specified by the partner;
314+ (3) To seek under § 9A–801(6) of this title a judicial determination that it 16
315+is equitable to wind up the partnership business. 17
330316
331- (2) An event agreed to in the partnership agreement as causing the
332-partner’s dissociation;
317+ (c) In a dissolution and winding up, a transferee is entitled to an account of 18
318+partnership transactions only from the date of the latest account agreed to by all of the 19
319+partners. 20
333320
334- (3) The partner’s expulsion pursuant to the partnership agreement;
321+ (d) Upon transfer, the transferor retains the rights and duties of a partner other 21
322+than the interest in distributions transferred. 22
335323
336- (4) The partner’s expulsion by the unanimous vote of the other partners if:
337- Ch. 295 2022 LAWS OF MARYLAND
324+ (e) A partnership need not give effect to a transferee’s rights under this section 23
325+until it has notice of the transfer. 24
338326
339-– 8 –
340- (i) It is unlawful to carry on the partnership business with that
341-partner;
327+ (f) A transfer of a partner’s transferable interest in the partnership in violation 25
328+of a restriction on transfer contained in the partnership agreement is ineffective as to a 26
329+person having notice of the restriction at the time of transfer. 27
342330
343- (ii) There has been a transfer of all or substantially all of that
344-partner’s transferable interest in the partnership, other than a transfer for security
345-purposes, or a court order charging the partner’s interest, which has not been foreclosed;
331+ (G) A PARTNERSHIP AGREEMEN T MAY PROVIDE THAT A PARTNER’S 28
332+TRANSFERABLE INTERES T IN THE PARTNERSHIP MAY OR SHALL BE TRAN SFERRED 29
333+OR ASSIGNED IN WHOLE OR IN PART TO ONE OR MORE PERSONS , INCLUDING ON THE 30
334+OCCURRENCE OF ANY OF THE EVENTS DESCRIBED IN § 9A–601 OF THIS TITLE, 31
335+REGARDLESS OF WHETHE R THE PERSONS TO WHO M THE INTEREST IS 32
336+TRANSFERRED OR ASSIG NED ARE PARTNERS . 33
337+ 8 SENATE BILL 261
346338
347- (iii) Within 90 days after the partnership notifies a corporate partner
348-that it will be expelled because it has filed articles of dissolution or the equivalent, its
349-charter has been revoked, or its right to conduct business has been suspended by the
350-jurisdiction of its incorporation, there is no revocation of the articles of dissolution or no
351-reinstatement of its charter or its right to conduct business; or
352339
353- (iv) A partnership that is a partner has been dissolved and its
354-business is being wound up;
340+9A–601. 1
355341
356- (5) On application by the partnership or another partner, the partner’s
357-expulsion by judicial determination because:
342+ A partner is dissociated from a partnership upon the occurrence of any of the 2
343+following events: 3
358344
359- (i) The partner engaged in wrongful conduct that adversely and
360-materially affected the partnership business;
345+ (1) The partnership’s having notice of the partner’s express will to 4
346+withdraw as a partner or on a later date specified by the partner; 5
361347
362- (ii) The partner willfully or persistently committed a material
363-breach of the partnership agreement or of a duty owed to the partnership or the other
364-partners under § 9A–404 of this title; or
348+ (2) An event agreed to in the partnership agreement as causing the 6
349+partner’s dissociation; 7
365350
366- (iii) The partner engaged in conduct relating to the partnership
367-business which makes it not reasonably practicable to carry on the business in partnership
368-with the partner;
351+ (3) The partner’s expulsion pursuant to the partnership agreement; 8
369352
370- (6) The partner’s:
353+ (4) The partner’s expulsion by the unanimous vote of the other partners if: 9
371354
372- (i) Becoming a debtor in bankruptcy;
355+ (i) It is unlawful to carry on the partnership business with that 10
356+partner; 11
373357
374- (ii) Executing an assignment for the benefit of creditors;
358+ (ii) There has been a transfer of all or substantially all of that 12
359+partner’s transferable interest in the partnership, other than a transfer for security 13
360+purposes, or a court order charging the partner’s interest, which has not been foreclosed; 14
375361
376- (iii) Seeking, consenting to, or acquiescing in the appointment of a
377-trustee, receiver, or liquidator of that partner or of all or substantially all of that partner’s
378-property; or
362+ (iii) Within 90 days after the partnership notifies a corporate partner 15
363+that it will be expelled because it has filed articles of dissolution or the equivalent, its 16
364+charter has been revoked, or its right to conduct business has been suspended by the 17
365+jurisdiction of its incorporation, there is no revocation of the articles of dissolution or no 18
366+reinstatement of its charter or its right to conduct business; or 19
379367
380- (iv) Failing, within 90 days after the appointment, to have vacated or
381-stayed the appointment of a trustee, receiver, or liquidator of the partner or of all or
382-substantially all of the partner’s property obtained without the partner’s consent or
383-acquiescence, or failing within 90 days after the expiration of a stay to have the
384-appointment vacated;
385- LAWRENCE J. HOGAN, JR., Governor Ch. 295
368+ (iv) A partnership that is a partner has been dissolved and its 20
369+business is being wound up; 21
386370
387-– 9 –
388- (7) In the case of a partner who is an individual:
371+ (5) On application by the partnership or another partner, the partner’s 22
372+expulsion by judicial determination because: 23
389373
390- (i) The partner’s death;
374+ (i) The partner engaged in wrongful conduct that adversely and 24
375+materially affected the partnership business; 25
391376
392- (ii) The appointment of a guardian or general conservator for the
393-partner; or
377+ (ii) The partner willfully or persistently committed a material 26
378+breach of the partnership agreement or of a duty owed to the partnership or the other 27
379+partners under § 9A–404 of this title; or 28
394380
395- (iii) A judicial determination that the partner has otherwise become
396-incapable of performing the partner’s duties under the partnership agreement;
381+ (iii) The partner engaged in conduct relating to the partnership 29
382+business which makes it not reasonably practicable to carry on the business in partnership 30
383+with the partner; 31
397384
398- (8) In the case of a partner that is a trust or is acting as a partner by virtue
399-of being a trustee of a trust, distribution of the trust’s entire transferable interest in the
400-partnership, but not merely by reason of the substitution of a successor trustee;
385+ (6) The partner’s: 32
386+ SENATE BILL 261 9
401387
402- (9) In the case of a partner that is an estate or is acting as a partner by
403-virtue of being a personal representative of an estate, distribution of the estate’s entire
404-transferable interest in the partnership, but not merely by reason of the substitution of a
405-successor personal representative; or
406388
407- (10) Termination of a partner who is not an individual, partnership,
408-corporation, trust, or estate.
389+ (i) Becoming a debtor in bankruptcy; 1
409390
410-10–402.
391+ (ii) Executing an assignment for the benefit of creditors; 2
411392
412- A person ceases to be a general partner of a limited partnership upon the happening
413-of any of the following events:
393+ (iii) Seeking, consenting to, or acquiescing in the appointment of a 3
394+trustee, receiver, or liquidator of that partner or of all or substantially all of that partner’s 4
395+property; or 5
414396
415- (1) The person’s withdrawal from the limited partnership as provided in §
416-10–602 of this title;
397+ (iv) Failing, within 90 days after the appointment, to have vacated or 6
398+stayed the appointment of a trustee, receiver, or liquidator of the partner or of all or 7
399+substantially all of the partner’s property obtained without the partner’s consent or 8
400+acquiescence, or failing within 90 days after the expiration of a stay to have the 9
401+appointment vacated; 10
417402
418- (2) The person’s removal as a general partner in accordance with the
419-partnership agreement;
403+ (7) In the case of a partner who is an individual: 11
420404
421- (3) Unless otherwise provided in the partnership agreement or with the
422-consent of all partners, the person’s:
405+ (i) The partner’s death; 12
423406
424- (i) Making an assignment for the benefit of creditors;
407+ (ii) The appointment of a guardian or general conservator for the 13
408+partner; or 14
425409
426- (ii) Filing a voluntary petition in bankruptcy;
410+ (iii) A judicial determination that the partner has otherwise become 15
411+incapable of performing the partner’s duties under the partnership agreement; 16
427412
428- (iii) Being adjudged bankrupt or insolvent or having entered against
429-him an order of relief in any bankruptcy or insolvency proceeding;
413+ (8) In the case of a partner that is a trust or is acting as a partner by virtue 17
414+of being a trustee of a trust, distribution of the trust’s entire transferable interest in the 18
415+partnership, but not merely by reason of the substitution of a successor trustee; 19
430416
431- (iv) Filing a petition or answer seeking for himself any
432-reorganization, arrangement, composition, readjustment, liquidation, dissolution, or
433-similar relief under any statute, law, or regulation; Ch. 295 2022 LAWS OF MARYLAND
417+ (9) In the case of a partner that is an estate or is acting as a partner by 20
418+virtue of being a personal representative of an estate, distribution of the estate’s entire 21
419+transferable interest in the partnership, but not merely by reason of the substitution of a 22
420+successor personal representative; or 23
434421
435-– 10 –
422+ (10) Termination of a partner who is not an individual, partnership, 24
423+corporation, trust, or estate. 25
436424
437- (v) Filing an answer or other pleading admitting or failing to contest
438-the material allegations of a petition filed against him in any proceeding of this nature; or
425+10–402. 26
439426
440- (vi) Seeking, consenting to, or acquiescing in, the appointment of a
441-trustee, receiver, or liquidation of the general partner or of all or any substantial part of
442-his properties;
427+ A person ceases to be a general partner of a limited partnership upon the happening 27
428+of any of the following events: 28
443429
444- (4) Unless otherwise provided in the partnership agreement or with the
445-consent of all partners, the continuation of any proceeding against him seeking
446-reorganization, arrangement, composition, readjustment, liquidation, dissolution, or
447-similar relief under any statute, law, or regulation, for 120 days after the commencement
448-thereof or the appointment of a trustee, receiver, or liquidator for the general partner or all
449-or any substantial part of his properties without his agreement or acquiescence, which
450-appointment is not vacated or stayed for 120 days or, if the appointment is stayed, for 120
451-days after the expiration of the stay during which period the appointment is not vacated;
430+ (1) The person’s withdrawal from the limited partnership as provided in § 29
431+10–602 of this title; 30
452432
453- (5) In the case of a general partner who is an individual, the individual’s:
433+ (2) The person’s removal as a general partner in accordance with the 31
434+partnership agreement; 32
435+ 10 SENATE BILL 261
454436
455- (i) Death; or
456437
457- (ii) Adjudication by a court of competent jurisdiction as incompetent
458-to manage his person or his property;
438+ (3) Unless otherwise provided in the partnership agreement or with the 1
439+consent of all partners, the person’s: 2
459440
460- (6) In the case of a general partner who is acting as a general partner by
461-virtue of being a trustee of a trust, the termination of the trust (but not merely the
462-substitution of a new trustee);
441+ (i) Making an assignment for the benefit of creditors; 3
463442
464- (7) In the case of a general partner that is a separate partnership or limited
465-partnership, the dissolution and commencement of winding up of the separate partnership
466-or limited partnership;
443+ (ii) Filing a voluntary petition in bankruptcy; 4
467444
468- (8) In the case of a general partner that is a corporation, the dissolution of
469-the corporation or the revocation of its charter; or
445+ (iii) Being adjudged bankrupt or insolvent or having entered against 5
446+him an order of relief in any bankruptcy or insolvency proceeding; 6
470447
471- (9) In the case of a general partner that is an estate, the distribution by the
472-fiduciary of the estate’s entire interest in the partnership.
448+ (iv) Filing a petition or answer seeking for himself any 7
449+reorganization, arrangement, composition, readjustment, liquidation, dissolution, or 8
450+similar relief under any statute, law, or regulation; 9
473451
474-10–702.
452+ (v) Filing an answer or other pleading admitting or failing to contest 10
453+the material allegations of a petition filed against him in any proceeding of this nature; or 11
475454
476- (A) Unless otherwise provided in the partnership agreement, a partnership
477-interest is assignable in whole or in part.
455+ (vi) Seeking, consenting to, or acquiescing in, the appointment of a 12
456+trustee, receiver, or liquidation of the general partner or of all or any substantial part of 13
457+his properties; 14
478458
479- (B) An assignment of a partnership interest does not dissolve a limited
480-partnership or entitle the assignee to become a partner or, unless otherwise provided in the
481-partnership agreement, exercise any rights of a partner. LAWRENCE J. HOGAN, JR., Governor Ch. 295
459+ (4) Unless otherwise provided in the partnership agreement or with the 15
460+consent of all partners, the continuation of any proceeding against him se eking 16
461+reorganization, arrangement, composition, readjustment, liquidation, dissolution, or 17
462+similar relief under any statute, law, or regulation, for 120 days after the commencement 18
463+thereof or the appointment of a trustee, receiver, or liquidator for the general partner or all 19
464+or any substantial part of his properties without his agreement or acquiescence, which 20
465+appointment is not vacated or stayed for 120 days or, if the appointment is stayed, for 120 21
466+days after the expiration of the stay during which period the appointment is not vacated; 22
482467
483-– 11 –
468+ (5) In the case of a general partner who is an individual, the individual’s: 23
484469
485- (C) Unless otherwise provided in the partnership agreement, an assignment
486-entitles the assignee to receive, to the extent assigned, only the distributions to which the
487-assignor would be entitled.
470+ (i) Death; or 24
488471
489- (D) A PARTNERSHIP AGREEMEN T MAY PROVIDE THAT A PARTNER’S
490-TRANSFERABLE PARTNERSHIP INTEREST IN THE PARTNERSHIP MAY OR SHALL BE
491-TRANSFERRED OR ASSIG NED IN WHOLE OR IN P ART TO ONE OR MORE P ERSONS,
492-INCLUDING ON THE OCC URRENCE OF ANY OF THE EVENTS DESCRI BED IN § 10–402
493-OF THIS TITLE, REGARDLESS OF WHETHE R THE PERSONS TO WHO M THE INTEREST
494-IS TRANSFERRED OR AS SIGNED ARE PARTNERS .
472+ (ii) Adjudication by a court of competent jurisdiction as incompetent 25
473+to manage his person or his property; 26
495474
496-Article – Estates and Trusts
475+ (6) In the case of a general partner who is acting as a general partner by 27
476+virtue of being a trustee of a trust, the termination of the trust (but not merely the 28
477+substitution of a new trustee); 29
497478
498-1–401.
479+ (7) In the case of a general partner that is a separate partnership or limited 30
480+partnership, the dissolution and commencement of winding up of the separate partnership 31
481+or limited partnership; 32
499482
500- (a) A provision in an account agreement, as defined in § 1–204(b)(2) of the
501-Financial Institutions Article, for a transfer on death is nontestamentary and shall be
502-effective according to the provisions of § 1–204 of the Financial Institutions Article.
483+ (8) In the case of a general partner that is a corporation, the dissolution of 33
484+the corporation or the revocation of its charter; or 34 SENATE BILL 261 11
503485
504- (b) Transfers pursuant to § 1–204 of the Financial Institutions Article are
505-effective in the form and manner prescribed by that section and are not to be considered
506-testamentary.
507486
508- (C) TRANSFERS ON DEATH PU RSUANT TO AN OPERATI NG AGREEMENT OF A
509-LIMITED LIABILITY CO MPANY OR A PARTNERSH IP AGREEMENT OF A GE NERAL OR
510-LIMITED PARTN ERSHIP ARE EFFECTIVE ACCORDING TO THE OPE RATING
511-AGREEMENT OR PARTNER SHIP AGREEMENT AND A RE NOT TO BE CONSIDE RED
512-TESTAMENTARY .
513487
514- SECTION 2. AND BE IT FURTHER ENACTED, That this Act shall be construed to
515-apply to all limited liability company operating agreements, general partnership
516-agreements, and limited partnership agreements in effect on the effective date of this Act.
488+ (9) In the case of a general partner that is an estate, the distribution by the 1
489+fiduciary of the estate’s entire interest in the partnership. 2
517490
518- SECTION 3. AND BE IT FURTHER ENACTED, That this Act shall take effect
519-October 1, 2022.
491+10–702. 3
520492
521-Approved by the Governor, May 12, 2022.
493+ (A) Unless otherwise provided in the partnership agreement, a partnership 4
494+interest is assignable in whole or in part. 5
495+
496+ (B) An assignment of a partnership interest does not dissolve a limited 6
497+partnership or entitle the assignee to become a partner or, unless otherwise provided in the 7
498+partnership agreement, exercise any rights of a partner. 8
499+
500+ (C) Unless otherwise provided in the partnership agreement, an assignment 9
501+entitles the assignee to receive, to the extent assigned, only the distributions to which the 10
502+assignor would be entitled. 11
503+
504+ (D) A PARTNERSHIP AGREEMEN T MAY PROVIDE THAT A PARTNER’S 12
505+TRANSFERABLE PARTNERSHIP INTEREST IN THE PARTNERSHIP MAY OR SHALL BE 13
506+TRANSFERRED OR ASSIG NED IN WHOLE OR IN P ART TO ONE OR MORE P ERSONS, 14
507+INCLUDING ON THE OCC URRENCE OF ANY OF TH E EVENTS DESCRIBED I N § 10–402 15
508+OF THIS TITLE, REGARDLESS OF WHETHE R THE PERSONS TO W HOM THE INTEREST 16
509+IS TRANSFERRED OR AS SIGNED ARE PARTNERS . 17
510+
511+Article – Estates and Trusts 18
512+
513+1–401. 19
514+
515+ (a) A provision in an account agreement, as defined in § 1–204(b)(2) of the 20
516+Financial Institutions Article, for a transfer on death is nontestamentary and shall be 21
517+effective according to the provisions of § 1–204 of the Financial Institutions Article. 22
518+
519+ (b) Transfers pursuant to § 1–204 of the Financial Institutions Article are 23
520+effective in the form and manner prescribed by that section and are not to be considered 24
521+testamentary. 25
522+
523+ (C) TRANSFERS ON DEATH PU RSUANT TO AN OPERATI NG AGREEMENT OF A 26
524+LIMITED LIABILITY CO MPANY OR A PARTNERSH IP AGREEMENT OF A GE NERAL OR 27
525+LIMITED PARTNERSHIP ARE EFFECTIVE ACCORD ING TO THE OPERATING 28
526+AGREEMENT OR PARTNER SHIP AGREEMENT AND A RE NOT TO BE CONSIDERED 29
527+TESTAMENTARY . 30
528+
529+ SECTION 2. AND BE IT FURTHER ENACTED, That this Act shall be construed to 31
530+apply to all limited liability company operating agreements, general partnership 32
531+agreements, and limited partnership agreements in effect on the effective date of this Act. 33
532+ 12 SENATE BILL 261
533+
534+
535+ SECTION 3. AND BE IT FURTHER ENACTED, That this Act shall take effect 1
536+October 1, 2022. 2
537+
538+
539+
540+
541+Approved:
542+________________________________________________________________________________
543+ Governor.
544+________________________________________________________________________________
545+ President of the Senate.
546+________________________________________________________________________________
547+ Speaker of the House of Delegates.