Vol. 7, No. 1, Pg. 29. LEGAL OPINION WRITING FOR LIMITED LIABILITY COMPANIES.

• Author: By Scott Y. Barnes

South Carolina Lawyer

1995.

Vol. 7, No. 1, Pg. 29.

LEGAL OPINION WRITING FOR LIMITED LIABILITY COMPANIES

29LEGAL OPINION WRITING FOR LIMITED LIABILITY COMPANIESBy Scott Y. BarnesAs a result of the increased utilization of limited liability companies (LLC), lawyers will be asked by LLC lenders and others to give certain opinions relating to the formation of and powers granted to the LLC, its managers and members. These opinions will fall into three basic categories: opinions as to the status of the LLC as an LLC, opinions as to the powers granted the LLC and opinions as to the effect of an agreement on the LLC. The legal issues that will need to be examined by a lawyer giving one or more of these opinions are new and confusing. Unless the lawyer giving the opinion understands the controlling LLC statute and the history of the company and its members, the opining lawyer may unwittingly give an opinion that is legally or factually incorrect.

STATUS OPINIONS

Lawyers will often be asked to give an opinion that "The Company is a Limited Liability Company, duly organized, validly existingand in good standing under the laws of the state of South Carolina." This status opinion confirms that an LLC has been properly organized and is, in fact, in existence at the time the opinion is given. See Scott Fitzgibbons & Donald W. Glazer, Legal Opinions, What Opinions in Financial Transactions Say and What They Mean, (1992), Chapter 6, Opinions on Incorporation, Corporate Existence and Good Standing.

The phrase "The Company is a Limited Liability Company" is a confirmation by the lawyer giving the opinion that the LLC has complied in all material respects with the requirements for formation and that it has not subsequently ceased to exist. Id. at 111. The provisions of Article 2 of the South Carolina Limited Liability Company Act (Act) provide the opinion drafter with comfort as to this section of the opinion. The Act provides that a filed copy of the articles of organization is conclusive proof that all conditions precedent required to be performed by the organizers of the LLC have been satisfied and that the company hasbeen legally organized. S.C. Code Ann. § 33-43-201 and § 33-43-206(B). The Act requires "two or more persons to form a limited liability company by signing Articles of Organization and delivering the signed Articles to the Secretary of State" and further provides that the effective time of admission of a member to an LLC is the date the company is formed. S.C. Code Ann. § 33-43-201 and 33-43-801(B)(1)...