Protected Series Under the Uniform Protected Series Act (2017)
(February 24, 2021)
The Permanent Editorial Board for the Uniform Commercial Code acts under the authority of the American Law Institute and the Uniform Law Commission (also known as the National Conference of Commissioners on Uniform State Laws). The Permanent Editorial Board has resolved to issue from time to time supplementary commentary on the Uniform Commercial Code to be known as PEB Commentary. These PEB Commentaries seek to further the underlying policies of the Uniform Commercial Code by affording guidance in interpreting and resolving issues raised by the Uniform Commercial Code and/or the Official Comments. The Resolution states that:The underlying purposes and policies of the PEB Commentary are those specified in UCC Section 1-103(a). A PEB Commentary should come within one or more of the following specific purposes, which should be made apparent at the beginning of the Commentary: (1) to resolve an ambiguity in the UCC by restating more clearly what the PEB considers to be the legal rule; (2) to state a preferred resolution of an issue on which judicial opinion or scholarly writing diverges; (3) to elaborate on the application of the UCC where the statute and/or the Official Comment leaves doubt as to the inclusion or exclusion of, or application to, particular circumstances or transactions; (4) consistent with UCC Section 1-103(a)(2), to apply the principles of the UCC to new or changed circumstances; (5) to clarify or elaborate upon the operation of the UCC as it relates to other statutes (such as the Bankruptcy Code and federal and state consumer protection statutes) and general principles of law and equity pursuant to UCC Section 1-103(b); or (6) to otherwise improve the operation of the UCC.
For more information about the Permanent Editorial Board for the Uniform Commercial Code, visit www.ali.org or www.uniformlaws.org.
In 2017, the Uniform Law Commission promulgated the Uniform Protected Series Act ("UPSA"). This Commentary clarifies aspects of the relationship between UPSA and the Uniform Commercial Code (the "UCC").
A number of states have enacted statutes that provide for protected series (1) within a limited liability company. (2) A protected series is generally empowered by such a statute to conduct its own activities under its own name, and it has the rights and duties provided in the statute. It is contemplated that the protected series will keep the assets associated with it separate from those of the limited liability company and other protected series of the limited liability company. (3) Moreover, under such a statute, the protected series generally is obligated solely to creditors whose obligations arose from interaction with the protected series; the creditors of a protected series have no claim against the assets associated with the limited liability company or of another protected series of the limited liability company. A public filing indicating the creation or existence of any particular protected series may or may not be required under the relevant statute. UPSA will, where enacted, provide for protected series of...