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the corporation law committee of the Ohio State Bar Association is the keeper of the Ohio code let's talk with their chairman about their newest creation Senate bill 181 thank you for joining us today and it's a real pleasure for us to have with us Jeff wall chairman of the corporation law committee for the Ohio State Bar Association and Jeff really glad to let the world know that per usual the corporation law committee has done some great work and just recently enacted Senate bill 181 through the legislative process and the governor just recently signed it what have you come in today tell us a little bit about what what does Senate bill 181 do well thanks Todd pleased to be here and so Senate bill 181 really affects two parts of the corporate code the first is what we call general corporation law chapter 1701 where we add in fiduciary duty provisions for officers of corporations and then the second piece of a deals with LLC's and does the same officer duty provisions for LLC's generally but then make some other important changes in the LLC Act 1705 before we get too much into the LLC I clis the fiduciary duty part i always remember from law school fiduciary duties for for the directors of corporations what provoked this fiduciary duties for for officers so there's been a long time gap right in Ohio's corporate code and frankly several other states where directors are addressed with a detailed framework with what are the duties and then what are the consequences of not fulfilling those duties there was absolute silence and officers I mean we had an Ohio case or two that kind of generally said officers have the same duties as directors and that's what everybody basically assumed but this was a chance to go ahead and put that framework in place so everybody knows exactly how it works it was driven in part by us looking around at the state of the country and seeing more and more derivative lawsuits and officers more and more frequently being named and alleged breach their fiduciary duties and watching officers around the country not sure what that meant and judge is not sure what that meant yeah so it was a kind of a reaction a little bit to the economic downturn of 2008 and just the rise of these lawsuits well there's certainly an uptick as we you know as the economy goes down one way to find dollars is you know plaintiff's law firm suing sort and everybody's looking at everything harder and it's also just the nature of I think where we're going right there's more and more corporate litigation each year I'd say is this more of a trend than kind of nationally to we're seeing this same type of approach yes this was not a Ohio specific trend by any means this was something we've observed nationally okay so that's one part of the bill the other part dealt more with specifically with LLC's what were just some of the changes relating to to LLC frameworks so for LLC's it there's really four things this act does the first is it installs the officer concept for LLC's that was not in the statute and imposes the same kind of fiduciary duty framework that we use in the corporate context the next important piece was there has been for the last several years a default duty for members of an LLC that they not compete with the business of the LLC I mean that was like census put in to put in in 2012 and that's caused some consternation among passive investors and so that default non-competition Duty has been removed then the third one which i think is probably the biggest maybe the biggest news out of Senate bill 181 is now in Ohio law an LLC can buy its operating agreement wave what modify wave or fully eliminate fiduciary duties for members managers and officers or any combination thereof and the last one was a change to bolster and llcs corporate veil if you will you've heard the concept piercing the corporate veil well we added a provision to the LLC act that says a failure to follow all the formalities of the entity doesn't necessarily lead to it's not a factor to be used in piercing the corporate veil and so on a basis for piercing the corporate veil strengthen LLC's a little bit more yeah respect I know that this bill is important to the corporation law committee glad to see it enacted I also know that by most estimates ninety percent of the corporate code comes from your committee and the changes to it look into the future a little bit what are some of the things that your committee is working on that practitioners could expect to see in the near future sure probably the thing most clearly on the horizon is some amendments regarding benefit corporations okay that's been a movement around the country to allow a for-profit corporation to also have kind of a plank of their mission be nonprofit or charitable in nature sometimes these are referred to a social purpose or social benefit corporations so we've got some amendments work through the Bar Association process that are looking for you know home at the Statehouse and we have to yeah we're working with some representatives now to do that and it looks like over over 30 some states now have this type of approach from places that right that's correct that's correct anything else you guys got well in general the general assembly is quite interested in streamlining and making more business friendly or pro-business or more common sense all of the business any statutes and so we're taking a look at LLC's and corporations just in general and see what else can be modified and made more business friendly in our statutes well I per usual you guys are staying busy which keeps me busy and I appreciate that and I appreciate you talking with us today and give us an update on 181 Senate bill 181 and also some of the things we can expect in the near future thanks you're welcome thanks I want to thank the chairman for being with us today Jeff wall does a great job for the corporation law committee for himself and for all the members of the OSB a and I ask you to be on the lookout for upcoming episodes where we focus on benefit corporations as well as the LLC changes that chairman wall discussed Oh
Thanks for your comment Milo Kindrick, have a nice day.
- Cordell Henshall, Staff Member
thank you so good afternoon everybody it's wonderful to have you all participating remotely my name is juliette kastritsky i'm the director of the center for business law at the case western reserve university school of law today we're really thrilled to have a webinar and presentation on ohio's new limited liability company act our presenters today are glenn moracle and lugi la rochelle with significant contribution from dan shy who is unable to be here today so i want to introduce our two presenters first glenn oracle is a partner in the corporate and securities practice of the cleveland office of tucker ellis llp over a career spanning more than 40 years he's served clients in a wide range of industries as diverse as financial services investment management manufacturing retail mining oil and gas and software development he's helped clients form and operate entities ranging from single member llc's to hedge funds and other investment funds with complex management and income sharing provisions he has assisted borrowers needing to form bankruptcy remote special purpose entities to satisfy lenders who sell into the securitization market marcus he has served on the corporation law committee of the ohio state bar association since the 1980s and has a hand in shaping many of ohio's business entity statutes mr oracle holds a ba from the ohio state university an mba from cleveland state university and a jd from the harvard law school so our other presenter today is luci la rochelle and he is a council in the corporate and securities practice group of the cleveland office of tucker ellis llp luigi counsels businesses of all structures and sizes through various phases of the business life cycle from initial formation operations and restructuring through maturity and succession planning he provides tailor-made solutions to clients in the areas of mergers and acquisitions capital markets corporate governance regulatory compliance and general commercial transactions lugi was tapped to lead tucker ellis's opportunity zone initiative and currently heads its cares act task force muji also co-leads the cmba's dismantling systemic and negotiated racism real work group lugi holds a bs from the university of michigan a jd from the dayton's university of dayton school of law and an mba from cleveland state university and with that i'm going to turn it over to our presenters thank you julia for that kind introduction um i want to mention that i was looking over the list of participants as people were signing on and i saw a very familiar name uh gene rickard and that is of some real significance here because jean also served for many decades on the corporation law committee of the ohio state bar association and she was the principal draft person of our current llc statute so this feels a little bit to me as if i volunteered to give a basketball clinic and while you know setting up i look out into the audience and realize that lebron james is is in the audience so uh welcome welcome gene i hope you're able to join in through q a or whatever whatever method but uh again thank you to the center for business law if you're like me when you hear there's a new statute or statute has been amended one of the first questions is when does this really start to apply when do i have to be ready for the changes and in this case it's not a very complicated answer but it does have some wrinkles the new ohio llc act is part of amended substitute senate bill 276 which is more than 220 pages of of enactment by the general assembly and that act actually goes effective on april 12th of this year but the more important question is when do the new uh provisions of law for llcs when do they really become applicable to our llc's and the answer to that one for the time being is january 1st of 2022 and when that magic date comes it's kind of a big bang all currently existing llc's one be once formed before the new act they all have to conform to the new law anything any new llcs formed on or after that date need to conform to the new law and they have the opportunity to take advantage of the new law and it governs both domestic and foreign llcs formed before on or after that date now one aspect of the law is that the secretary of state the ohio secretary of state will need to adopt forms and have some new procedures that don't exist under the current statute and the scuttlebutt i've heard through the ohio state bar association is that the secretary of state's office has expressed some doubt about whether they will be ready by january 1st of next year to have all the forms all the procedures all the all the filing opportunities have those ready uh to go so there is discussion that i've heard just through the the state bar association that the effective date of this statute may be uh delayed i'm not sure how much it might be delayed but january 1st may turn out not to be the magic date that it appears to be right now uh luigi let's go to the next slide here now given the fact that the statute won't become applicable until january of next year you might wonder well why are we focusing attention on it right now that seems a long way off and one answer i have to that is this is such a sweeping change of the statute that we really need to be preparing early to think about how we want to operate under the new statute this is not amendments to an existing act this is the complete deletion of chapter 1705 and the adoption of chapter 1706 the provisions do not line up head to head in some way you can compare section by section to see how things have changed i guess one way to think about that is there's no really useful redlining we can do to try to show how this statute has been changed now the materials that are available at the website for this webinar include the provisions from the the bill that well include chapter 1706 and if you look at it you'll see that it is redlined every single word in chapter 1706 is underlined as being new uh so it doesn't help flag where the changes are so understanding the the difference between the old law and the new law is going to be uh more challenging than under some circumstances and this webinar is going to attempt to to highlight some key aspects of of the new law and differences as a result of the new law but it is not going to be complete it is not going to be comprehensive there will be some aspects of the new act that we won't touch on at all today and on some of the aspects that we will touch on we're not going to be able to cover every every little bit of them there might be parts there that would be important to you in your practice that we don't really try to bring out in today's conversation so it's a it's a high level roadmap of some areas that are going to be deserving of some further study now one thing about the the new act is i would say for the most part it doesn't uh put in requirements that are going to mean you have to change operating agreements in order to come come into compliance with the new act for the most part it is allowing more freedom for what you can do within your llc and so it presents opportunities that you could t
Thanks Catharine your participation is very much appreciated
- Cordell Henshall
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I've studied fuzzy logic group theory at University of Louisiana at Lafayette in Lafayette and I am an expert in amateur astronomy. I usually feel mellow. My previous job was secretary I held this position for 27 years, I love talking about longboarding and memory training. Huge fan of Fred Stoller I practice football and collect disney pin trading.
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