Section 411. Continuation of Term Company
After Expiration of Specified Term

(a) If a term company is continued after the expiration of the specified term, the rights and duties of the members and managers remain the same as they were at the expiration of the term except to the extent inconsistent with rights and duties of members and managers of an at-will company.

(b) If the members in a member-managed company or the managers in a manager-managed company continue the business without any winding up of the business of the company, it continues as an at-will company.

Comment

A term company will generally dissolve upon the expiration of its term unless either its articles are amended before the expiration of the original specified term to provide for an additional specified term or the members or managers simply continue the company as an at-will company under this section. Amendment of the articles specifying an additional term requires the unanimous consent of the members. See Section 404(c)(3). Therefore, any member has the right to block the amendment. Absent an amendment to the articles, a company may only be continued under subsection (b) as an at-will company. The decision to continue a term company as an at-will company does not require the unanimous consent of the members and is treated as an ordinary business matter with disputes resolved by a simple majority vote of either the members or managers. See Section 404. In that case, subsection (b) provides that the members' conduct amends or becomes part of an operating agreement to "continue" the company as an at-will company. The amendment to the operating agreement does not alter the rights of creditors who suffer detrimental reliance because the company does not liquidate after the expiration of its specified term. See Section 203(c)(2).

Preexisting operating-agreement provisions continue to control the relationship of the members under subsection (a) except to the extent inconsistent with the rights and duties of members of an at-will company with an operating agreement containing the same provisions. However, the members could agree in advance that, if the company's business continues after the expiration of its specified term, the company continues as a company with a new specified term or that the provisions of its operating agreement survive the expiration of the specified term.