LAWRENCE J. HOGAN, JR., Governor Ch. 295
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Chapter 295
(Senate Bill 261)
AN ACT concerning
Corporations and Associations – Limited Liability Companies and Partnerships
– Operating Agreements and Partnership Agreements
FOR the purpose of authorizing the operating agreement of a limited liability company to
provide for the transfer or assignment of an interest in the company to a certain
person on the occurrence of certain events regardless of whether the person is a
member; authorizing a member of a limited liability company to retain the member’s
noneconomic interest in the company on assignment of all of the member’s economic
interest in the company under certain circumstances; authorizing a partnership
agreement to provide for the transfer or assignment of an interest in the partnership
to a certain person on the occurrence of certain events regardless of whether the
person is a partner; establishing that transfers on death pursuant to an operating
agreement or a partnership agreement are not testamentary; and generally relating
to operating agreements of limited liability companies and partnership agreements.
BY repealing and reenacting, without amendments,
Article – Corporations and Associations
Section 4A–101(a), 4A–606, 9A–601, and 10–402
Annotated Code of Maryland
(2014 Replacement Volume and 2021 Supplement)
BY repealing and reenacting, with amendments,
Article – Corporations and Associations
Section 4A–101(q), 4A–203, 4A–402(a), 4A–603(d), 9A–503, and 10–702
Annotated Code of Maryland
(2014 Replacement Volume and 2021 Supplement)
BY repealing and reenacting, with amendments,
Article – Estates and Trusts
Section 1–401
Annotated Code of Maryland
(2017 Replacement Volume and 2021 Supplement)
SECTION 1. BE IT ENACTED BY THE GENERAL ASSEMBLY OF MARYLAND,
That the Laws of Maryland read as follows:
Article – Corporations and Associations
4A–101.
(a) In this title the following terms have the meanings indicated. Ch. 295 2022 LAWS OF MARYLAND
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(q) “Operating agreement” means the agreement of the members and any
amendments thereto[, as to the affairs of a limited liability company and the conduct of its
business] CONCERNING THE MATTE RS DESCRIBED IN § 4A–402(A) OF THIS TITLE.
4A–203.
Unless otherwise provided by law or unless otherwise agreed, a limited liability
company has the general powers, whether or not set forth in its articles of organization or
operating agreement, to:
(1) Have perpetual existence, although existence may be limited to a
specified period of time if the limitation is set forth in its articles of organization;
(2) Sue, be sued, complain, and defend in all courts;
(3) Transact its business, carry on its operations, and have and exercise
the powers granted by this article in any state and in any foreign country;
(4) Make contracts and guarantees, incur liabilities, and borrow money;
(5) Sell, lease, exchange, transfer, convey, mortgage, pledge, and otherwise
dispose of any of its assets;
(6) Acquire by purchase or in any other manner, take, receive, own, hold,
improve, and otherwise deal with any interest in real or personal property, wherever
located;
(7) Issue notes, bonds, and other obligations and secure any of them by
mortgage or deed of trust or security interest of any or all of its assets;
(8) Purchase, take, receive, subscribe for or otherwise acquire, own, hold,
vote, use, employ, sell, mortgage, loan, pledge, or otherwise dispose of and otherwise use
and deal in and with stock or other interests in and obligations of other corporations,
associations, general or limited partnerships, limited liability companies, foreign limited
liability companies, business trusts, and individuals;
(9) Invest its surplus funds, lend money in any manner which may be
appropriate to enable it to carry on the operations or fulfill the purposes of the limited
liability company, and take and hold real property and personal property as security for
the payment of funds so loaned or invested;
(10) Render professional services within or without this State;
(11) Elect or appoint agents and define their duties and fix their
compensation; LAWRENCE J. HOGAN, JR., Governor Ch. 295
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(12) Sell, convey, mortgage, pledge, lease, exchange, transfer, and otherwise
dispose of all or any part of its property and assets;
(13) Be a promoter, stockholder, partner, member, associate, or agent of any
corporation, partnership, limited liability company, foreign limited liability company, joint
venture, trust, or other enterprise;
(14) Indemnify and hold harmless any member, agent, or employee from and
against any and all claims and demands, except in the case of action or failure to act by the
member, agent, or employee which constitutes willful misconduct or recklessness, and
subject to the standards and restrictions, if any, set forth in the articles of organization or
operating agreement;
(15) Make and alter operating agreements[, not inconsistent with its
articles of organization or with the laws of this State, for the administration and regulation
of the affairs of the limited liability company] AS PROVIDED IN § 4A–402(A) OF THIS
TITLE;
(16) Cease its activities and dissolve; and
(17) Do every other act not inconsistent with law which is appropriate to
promote and attain the purposes of the limited liability company.
4A–402.
(a) Except for the requirement set forth in § 4A–404 of this subtitle that certain
consents be in writing, members may enter into an operating agreement NOT
INCONSISTENT WITH TH E ARTICLES OF ORGANI ZATION to regulate or establish any
aspect of the affairs of the limited liability company, THE CONDUCT OF ITS B USINESS, or
the relations of its members, including provisions establishing:
(1) The manner in which the business and affairs of the limited liability
company shall be managed, controlled, and operated, which may include the granting of
exclusive authority to manage, control, and operate the limited liability company to persons
who are not members;
(2) The manner in which the members will share the assets and earnings
of the limited liability company;
(3) The rights of the members to assign all or a portion of their membership
interest;
(4) The circumstances in which a person may be admitted as a member of
the limited liability company;
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(5) (i) The right to have and a procedure for having a memb er’s
membership interest evidenced by a certificate issued by the limited liability company,
which may be issued in bearer form only if specifically allowed by the operating agreement;
(ii) The procedure for assignment, pledge, or transfer of any
membership interest represented by the certificate; and
(iii) Any other provisions dealing with the certificate;
(6) The method by which the operating agreement may from time to time
be amended, which may include a requirement that an amendment be approved:
(i) By a person who is not a party to the operating agreement or who
is not a member of the limited liability company; or
(ii) On the satisfaction of other conditions specified in the operating
agreement;
(7) The rights of any person, including a person who is not a party to the
operating agreement or who is not a member of the limited liability company, to the extent
set forth in the operating agreement; [or]
(8) Procedures relating to:
(i) Notice of the time, place, or purpose of any meeting at which any
matter is to be voted on by members;
(ii) Waiver of notice of meetings;
(iii) Action by consent without a meeting;
(iv) The establishment of a record date;
(v) Quorum requirements;
(vi) Voting in person or by proxy;
(vii) Voting rights of various classes of members; or
(viii) Any other matter with respect to the exercise of voting rights by
members; OR
(9) THAT A MEMBERSHIP INT EREST, AN ECONOMIC INTEREST , OR A
NONECONOMIC INTEREST MAY OR SHALL BE TRAN SFERRED OR ASSIGNED IN WHOLE
OR IN PART TO ONE OR MORE PERSONS , INCLUDING ON THE OCC URRENCE OF ANY
OF THE EVENTS DESCRI BED IN § 4A–606 OF THIS TITLE, REGARDLESS OF WHETHER LAWRENCE J. HOGAN, JR., Governor Ch. 295
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THE PERSONS TO WHOM THE INTEREST IS TRAN SFERRED OR ASSIGNED ARE
MEMBERS.
4A–603.
(d) [On] UNLESS OTHERWISE AGRE ED, ON assignment of all of a member’s
economic interest in a limited liability company, the member ceases to be a member of the
limited liability company and forfeits the member’s noneconomic interest in the limited
liability company.
4A–606.
Unless otherwise agreed, a person ceases to be a member of a limited liability
company upon the occurrence of any of the following events:
(1) The person withdraws from the limited liability company as authorized
by § 4A–605 of this subtitle;
(2) The person is removed as a member in accordance with the operating
agreement;
(3) The person:
(i) Makes an assignment for the benefit of creditors;
(ii) Institutes a voluntary proceeding with respect to the person
under the federal bankruptcy code;
(iii) Is adjudged bankrupt or insolvent or has entered against the
person an order for relief in any bankruptcy or insolvency proceeding;
(iv) Files a petition or answer seeking for that person any
reorganization, arrangement, composition, readjustment, liquidation, dissolution, or
similar relief under any statute, law, or regulation;
(v) Seeks, consents to, or acquiesces in the appointment of a trustee
for, receiver for, or liquidation of the member or of all or any substantial part of the person’s
properties; or
(vi) Files an answer or other pleading admitting or failing to contest
the material allegations of a petition filed against the person in any proceeding described
in this item;
(4) The continuation of any proceeding against the person seeking
reorganization, arrangement, composition, readjustment, liquidation, dissolution, or
similar relief under any statute, law, or regulation, for 120 days after the commencement Ch. 295 2022 LAWS OF MARYLAND
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thereof, or the appointment of a trustee, receiver, or liquidator for the members or all or
any substantial part of the person’s properties without the person’s agreement or
acquiescence, which appointment is not vacated or stayed for 120 days or, if the
appointment is stayed, for 120 days after the expiration of the stay during which period the
appointment is not vacated;
(5) In the case of a member who is an individual, the individual’s:
(i) Death; or
(ii) Adjudication by a court of competent jurisdiction as incompetent
to manage the individual’s person or property;
(6) In the case of a member who is acting as a member by virtue of being a
trustee of a trust, the termination of the trust;
(7) In the case of a member that is a partnership or another limited liability
company, the dissolution and commencement of winding up of the partnership or limited
liability company;
(8) In the case of a member that is a corporation, the dissolution of the
corporation or the revocation of its charter;
(9) In the case of a member that is an estate, the distribution by the
fiduciary of the estate’s entire economic interest in the limited liability company; or
(10) On assignment of all of a person’s economic interest in the limited
liability company as provided in § 4A–603(d) of this subtitle.
9A–503.
(a) A transfer, in whole or in part, of a partner’s transferable interest in the
partnership:
(1) Is permissible;
(2) Does not by itself cause the partner’s dissociation or a dissolution and
winding up of the partnership business; and
(3) Does not, as against the other partners or the partnership, entitle the
transferee, during the continuance of the partnership, to participate in the management or
conduct of the partnership business, to require access to information concerning
partnership transactions, or to inspect or copy the partnership books or records.
(b) A transferee of a partner’s transferable interest in the partnership has a right:
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(1) To receive, in accordance with the transfer, distributions to which the
transferor would otherwise be entitled;
(2) To receive upon the dissolution and winding up of the partnership
business, in accordance with the transfer, the net amount otherwise distributable to the
transferor; and
(3) To seek under § 9A–801(6) of this title a judicial determination that it
is equitable to wind up the partnership business.
(c) In a dissolution and winding up, a transferee is entitled to an account of
partnership transactions only from the date of the latest account agreed to by all of the
partners.
(d) Upon transfer, the transferor retains the rights and duties of a partner other
than the interest in distributions transferred.
(e) A partnership need not give effect to a transferee’s rights under this section
until it has notice of the transfer.
(f) A transfer of a partner’s transferable interest in the partnership in violation
of a restriction on transfer contained in the partnership agreement is ineffective as to a
person having notice of the restriction at the time of transfer.
(G) A PARTNERSHIP AGREEMEN T MAY PROVIDE THAT A PARTNER’S
TRANSFERABLE INTERES T IN THE PARTNERSHIP MAY OR SHALL BE TRAN SFERRED
OR ASSIGNED IN WHOLE OR IN PART TO ONE OR MORE PERSONS, INCLUDING ON THE
OCCURRENCE OF ANY OF THE EVENTS DESCRIBED IN § 9A–601 OF THIS TITLE,
REGARDLESS OF WHETHE R THE PERSONS TO WHO M THE INTEREST IS
TRANSFERRED OR ASSIG NED ARE PARTNERS .
9A–601.
A partner is dissociated from a partnership upon the occurrence of any of the
following events:
(1) The partnership’s having notice of the partner’s express will to
withdraw as a partner or on a later date specified by the partner;
(2) An event agreed to in the partnership agreement as causing the
partner’s dissociation;
(3) The partner’s expulsion pursuant to the partnership agreement;
(4) The partner’s expulsion by the unanimous vote of the other partners if:
Ch. 295 2022 LAWS OF MARYLAND
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(i) It is unlawful to carry on the partnership business with that
partner;
(ii) There has been a transfer of all or substantially all of that
partner’s transferable interest in the partnership, other than a transfer for security
purposes, or a court order charging the partner’s interest, which has not been foreclosed;
(iii) Within 90 days after the partnership notifies a corporate partner
that it will be expelled because it has filed articles of dissolution or the equivalent, its
charter has been revoked, or its right to conduct business has been suspended by the
jurisdiction of its incorporation, there is no revocation of the articles of dissolution or no
reinstatement of its charter or its right to conduct business; or
(iv) A partnership that is a partner has been dissolved and its
business is being wound up;
(5) On application by the partnership or another partner, the partner’s
expulsion by judicial determination because:
(i) The partner engaged in wrongful conduct that adversely and
materially affected the partnership business;
(ii) The partner willfully or persistently committed a material
breach of the partnership agreement or of a duty owed to the partnership or the other
partners under § 9A–404 of this title; or
(iii) The partner engaged in conduct relating to the partnership
business which makes it not reasonably practicable to carry on the business in partnership
with the partner;
(6) The partner’s:
(i) Becoming a debtor in bankruptcy;
(ii) Executing an assignment for the benefit of creditors;
(iii) Seeking, consenting to, or acquiescing in the appointment of a
trustee, receiver, or liquidator of that partner or of all or substantially all of that partner’s
property; or
(iv) Failing, within 90 days after the appointment, to have vacated or
stayed the appointment of a trustee, receiver, or liquidator of the partner or of all or
substantially all of the partner’s property obtained without the partner’s consent or
acquiescence, or failing within 90 days after the expiration of a stay to have the
appointment vacated;
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(7) In the case of a partner who is an individual:
(i) The partner’s death;
(ii) The appointment of a guardian or general conservator for the
partner; or
(iii) A judicial determination that the partner has otherwise become
incapable of performing the partner’s duties under the partnership agreement;
(8) In the case of a partner that is a trust or is acting as a partner by virtue
of being a trustee of a trust, distribution of the trust’s entire transferable interest in the
partnership, but not merely by reason of the substitution of a successor trustee;
(9) In the case of a partner that is an estate or is acting as a partner by
virtue of being a personal representative of an estate, distribution of the estate’s entire
transferable interest in the partnership, but not merely by reason of the substitution of a
successor personal representative; or
(10) Termination of a partner who is not an individual, partnership,
corporation, trust, or estate.
10–402.
A person ceases to be a general partner of a limited partnership upon the happening
of any of the following events:
(1) The person’s withdrawal from the limited partnership as provided in §
10–602 of this title;
(2) The person’s removal as a general partner in accordance with the
partnership agreement;
(3) Unless otherwise provided in the partnership agreement or with the
consent of all partners, the person’s:
(i) Making an assignment for the benefit of creditors;
(ii) Filing a voluntary petition in bankruptcy;
(iii) Being adjudged bankrupt or insolvent or having entered against
him an order of relief in any bankruptcy or insolvency proceeding;
(iv) Filing a petition or answer seeking for himself any
reorganization, arrangement, composition, readjustment, liquidation, dissolution, or
similar relief under any statute, law, or regulation; Ch. 295 2022 LAWS OF MARYLAND
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(v) Filing an answer or other pleading admitting or failing to contest
the material allegations of a petition filed against him in any proceeding of this nature; or
(vi) Seeking, consenting to, or acquiescing in, the appointment of a
trustee, receiver, or liquidation of the general partner or of all or any substantial part of
his properties;
(4) Unless otherwise provided in the partnership agreement or with the
consent of all partners, the continuation of any proceeding against him seeking
reorganization, arrangement, composition, readjustment, liquidation, dissolution, or
similar relief under any statute, law, or regulation, for 120 days after the commencement
thereof or the appointment of a trustee, receiver, or liquidator for the general partner or all
or any substantial part of his properties without his agreement or acquiescence, which
appointment is not vacated or stayed for 120 days or, if the appointment is stayed, for 120
days after the expiration of the stay during which period the appointment is not vacated;
(5) In the case of a general partner who is an individual, the individual’s:
(i) Death; or
(ii) Adjudication by a court of competent jurisdiction as incompetent
to manage his person or his property;
(6) In the case of a general partner who is acting as a general partner by
virtue of being a trustee of a trust, the termination of the trust (but not merely the
substitution of a new trustee);
(7) In the case of a general partner that is a separate partnership or limited
partnership, the dissolution and commencement of winding up of the separate partnership
or limited partnership;
(8) In the case of a general partner that is a corporation, the dissolution of
the corporation or the revocation of its charter; or
(9) In the case of a general partner that is an estate, the distribution by the
fiduciary of the estate’s entire interest in the partnership.
10–702.
(A) Unless otherwise provided in the partnership agreement, a partnership
interest is assignable in whole or in part.
(B) An assignment of a partnership interest does not dissolve a limited
partnership or entitle the assignee to become a partner or, unless otherwise provided in the
partnership agreement, exercise any rights of a partner. LAWRENCE J. HOGAN, JR., Governor Ch. 295
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(C) Unless otherwise provided in the partnership agreement, an assignment
entitles the assignee to receive, to the extent assigned, only the distributions to which the
assignor would be entitled.
(D) A PARTNERSHIP AGREEMEN T MAY PROVIDE THAT A PARTNER’S
TRANSFERABLE PARTNERSHIP INTEREST IN THE PARTNERSHIP MAY OR SHALL BE
TRANSFERRED OR ASSIG NED IN WHOLE OR IN P ART TO ONE OR MORE P ERSONS,
INCLUDING ON THE OCC URRENCE OF ANY OF THE EVENTS DESCRI BED IN § 10–402
OF THIS TITLE, REGARDLESS OF WHETHE R THE PERSONS TO WHO M THE INTEREST
IS TRANSFERRED OR AS SIGNED ARE PARTNERS .
Article – Estates and Trusts
1–401.
(a) A provision in an account agreement, as defined in § 1–204(b)(2) of the
Financial Institutions Article, for a transfer on death is nontestamentary and shall be
effective according to the provisions of § 1–204 of the Financial Institutions Article.
(b) Transfers pursuant to § 1–204 of the Financial Institutions Article are
effective in the form and manner prescribed by that section and are not to be considered
testamentary.
(C) TRANSFERS ON DEATH PU RSUANT TO AN OPERATI NG AGREEMENT OF A
LIMITED LIABILITY CO MPANY OR A PARTNERSH IP AGREEMENT OF A GE NERAL OR
LIMITED PARTN ERSHIP ARE EFFECTIVE ACCORDING TO THE OPE RATING
AGREEMENT OR PARTNER SHIP AGREEMENT AND A RE NOT TO BE CONSIDE RED
TESTAMENTARY .
SECTION 2. AND BE IT FURTHER ENACTED, That this Act shall be construed to
apply to all limited liability company operating agreements, general partnership
agreements, and limited partnership agreements in effect on the effective date of this Act.
SECTION 3. AND BE IT FURTHER ENACTED, That this Act shall take effect
October 1, 2022.
Approved by the Governor, May 12, 2022.