House Bill 655, effective January 1, 2024, substantially rewrites and reorganizes Iowa Code chapter 489, formerly known as the Revised Uniform Limited Liability Company Act, and renamed the Uniform Limited Liability Company Act. Topics amended include the duty of loyalty and care of members and managers, charging orders, addition of a new member to prevent dissolution, and distributions upon the winding up of the LLC.
House Bill 2445, effective July 1, 2022, amends the state’s UCC law to adopt provisions regarding controllable electronic records, including amending Article 9 to address the perfection of a security interest in electronic money, controllable accounts, controllable payment intangibles, and controllable electronic records.
Senate Bill 2310 , effective July 1, 2022, amends the LLC law and Cooperative Associations Act to include multiple housing cooperatives in the definition of domestic cooperative.
House File 2469, effective July 1, 2022, amends the corporation law regarding a corporation sending notices and communications to shareholders by email.
House File 844, effective for new and existing domestic and foreign corporations on January 1, 2022, extensively revises the Iowa Business Corporation Act. For more information on the changes made by this bill see our article “Iowa Revises its Business Corporation Act” here.
Senate Bill 342, effective July 1, 2021, adds a new section to the state’s UCC law regarding the termination of wrongfully filed financing statements. It provides that a person identified as debtor in a filed financing statement may deliver to the filing office a notarized, sworn affidavit that identifies the financing statement by file number, indicates the affiant's mailing address, and states that the affiant believes that the filed record identifying the affiant as debtor was not authorized to be filed and was caused to be communicated to the filing office with the intent to harass or defraud the affiant. The filing office shall then file a termination statement with respect to that financing statement and provide notice of the termination to the secured party of record. The secured party may seek an administrative review or file an action against the filing office seeking reinstatement. A separate procedure is included where an affidavit relates to a filed record communicated to the filing office by a “trusted filer”, as that term is defined.
SB 342 also provides that a person shall not cause to be communicated to the filing office for filing a record if the person is not authorized to file the record, the record is not related to an existing or anticipated transaction that is or will be governed by Article 9, and the record is filed with the intent to harass or defraud the person identified as debtor in the record. A violation is a simple misdemeanor for a first offense and a serious misdemeanor for a second or subsequent offense.
House Bill 2402, effective July 1, 2020, revises provisions relating to resignations of registered agents serving certain business entities.
Senate Bill 569 (Laws of 2019), effective July 1, 2020, enacts the Uniform Protected Series Act, governing a series limited liability company formed, or a protected series established, on or after July 1, 2020 and a limited liability company that is a series limited liability company before July 1, 2020, that elects, in the manner provided in its operating agreement or by law for amending the operating agreement, to be subject to this Act. On and after July 1, 2021, this Act governs all series limited liability companies and protected series.
Case summaries
Minority Shareholder’s Fiduciary Duty
Manatt’s Inc. v. Tanam Real Estate LLC, No. 22-0341, decided March 8, 2023. The Iowa Court of Appeals reversed a jury’s verdict holding a minority shareholder liable for breaching his fiduciary duties by usurping a corporate opportunity. The court held that an instruction to the jury stating that shareholders owe a fiduciary duty to the corporation was a misstatement of law. Shareholders, without more, do not owe fiduciary duties. The court also held the instruction was not harmless because the plaintiff could not affirmatively show that the jury did not use the improper instruction in finding the shareholder liable.
Appraisal Rights
EMC Insurance Group, Inc. v. Shepard, No. 20-0698, decided June 11, 2021. The Iowa Supreme Court affirmed the district court’s ruling that a shareholder failed to exercise his appraisal rights because he failed to obtain the written consent of the record shareholder as required by the Iowa corporation law. The court held that the record owner is the shareholder listed on the corporation’s records. In this case, the corporation’s records listed Cede & Co. as the record shareholder and not the plaintiff, who was the beneficial owner, or the brokerage firm with which he held the shares.
Attorney-Client Relationship
Liquor Bike, LLC v. Iowa District Court, No. 20-0268, decided May 21, 2021. The Iowa Supreme Court reversed the district court’s ruling disqualifying a law firm from representing a client on the grounds that the sole shareholder of a professional corporation the law firm represented in an unrelated matter had an adverse interest. In reversing, the court noted that it was the corporation that was the law firm’s client. A corporation has an existence separate and apart from its shareholders. Even though the shareholder testified he believed the law firm represented him, when a law firm represents an organization only the organization is the client.
Repurchase of LLC Interests
Homeland Energy Solutions, LLC v. Retterath, No. 18-0950, decided February 7, 2020. The Iowa Supreme Court held that an LLC’s action to enforce an agreement to repurchase the defendant’s membership interests had to be tried in equity as the purpose of the agreement was to extinguish the member’s interest and influence and money damages would not be an adequate remedy.
Other notices
There are no new notices at this time.