¶ B01
Overview
Purpose of the appendix. This appendix sets out two forms of operating agreement for a limited liability company formed under the Nevis Limited Liability Company Ordinance, Cap. 7.04(N) (rev. ed. 2020), as amended by Ordinance No. 2 of 2022, Ordinance No. 3 of 2023 and the 2025 amending Ordinance. Form 1 (¶ B10) is a single-member agreement for a manager-managed company whose sole member is the trustee of a Nevis international trust or a Nevis multiform foundation. Form 2 (¶ B20) is a multi-member agreement for a manager-managed company with several members, such as a family investment company or a joint venture. The commentary at ¶ B30 explains each clause and refers to the chapter in which the rule it applies is examined. The schedules at ¶ B40 complete both forms.
How the forms were built. Each form collects the model provisions set out in chapters 13 to 17 and fits them into a complete agreement. Where a chapter supplied a model provision, the form uses its text, adjusted only so that defined terms and cross-references agree. Where no chapter supplied one, the clause is drafted from the text of the Ordinance itself. NLLCO §§ 27, 48–60, 65–67A, 72C–72E, 74. The commentary identifies the source of each clause. A reader who wants the reasoning behind a clause should read the chapter paragraph cited for it, because the commentary states conclusions without repeating the analysis.
The operating agreement under the Ordinance. The members of a Nevis company may agree on any provision about the company's business, the conduct of its affairs and the rights and relationships of the company, its members and its managers, so long as the provision is not inconsistent with the Ordinance, any other Nevis Ordinance, any federal Act or the Articles of Organisation. NLLCO § 27(1). The agreement must be agreed to by all members before it becomes effective. Id. § 27(2). It need not be in writing unless the Articles require writing, and if it does not provide a method of amendment, every member must agree to any amendment. Id. § 27(3)–(4). Both forms are written, both are signed by the company as well as the members, and both state their own amendment procedure (see supra ¶¶ 1310.04–1310.08, 1390.03).
The Articles must match. The Articles of Organisation must state whether the company is managed by managers exclusive of the members or by all of the members. NLLCO § 22(g). Both forms assume that the Articles state that the company is manager-managed. An agreement that appoints a manager while the Articles state that the members manage creates a conflict that the Ordinance resolves in favour of the Articles, because the agreement may not be inconsistent with them. Id. § 27(1). The first step in using either form is to confirm the Articles (see supra ¶¶ 1240.04, 1310.02–1310.03).
Choices in brackets. Words in square brackets are choices or blanks. A bracket containing a description, such as [name] or [number], is to be completed. A bracket containing alternatives separated by "or" requires a choice, and the alternative not chosen is to be deleted. A bracket that begins "Optional:" contains a provision that the drafter may delete. No bracket should remain in an executed agreement.
The default rules the forms displace. The Ordinance contains several default rules that do not suit a protective company, and both forms displace them expressly. The most important are the following:
- the measure of member consent by capital contributions (NLLCO § 49(1)), which leaves a member admitted without a contribution with no vote (see supra ¶¶ 1330.04, 1360.02);
- the sharing of distributions by the value of contributions (id. § 33(2)), which the forms replace with discretionary distributions by the manager (see supra ¶¶ 1370.05, 1590.02);
- the termination of membership on a member's death, bankruptcy or dissolution (id. § 57(1)(a)) and the dissolution of the company on the same events (id. § 74(1)(c)), which can end a single-member company at the moment its protection is needed (see supra ¶¶ 1260.05, 1570.02, 1620.06–1620.10);
- the manager's power to dispose of all or substantially all the assets (id. § 54), which the forms make subject to the members' approval and to the two-thirds vote that section 72C requires for a disposition outside the usual course of business (see supra ¶¶ 1340.06, 1670.09).
Rules the forms cannot change. Some rules apply whatever the agreement says. The manager's duty of good faith and care under section 53 is a floor (see supra ¶ 1460.02). The right of inspection is protected by section 68(7) (see supra ¶ 1320.04). The members' vote under section 72C(2) for a disposition of all or substantially all the assets outside the usual course of business has no words permitting the agreement to reduce it (see supra ¶ 1340.06). The charging-order rules of section 60 protect the member whatever the agreement provides, although several of them (redemption under section 60(4), capital calls under section 60(17) and tax payments under section 60(18)) operate only to the extent the agreement adopts them (see supra ¶¶ 1520, 1550.04, 1560.04).
United States tax. Both forms contain a classification clause and an information clause drawn from chapter 17 (see supra ¶¶ 1790.02–1790.08). The forms do not decide the company's classification. That choice depends on who owns the company and on the owner's tax position, which chapters 17 and 29 examine (see supra ¶¶ 1740, 1750, 2950.01–2950.07). The tax-payment clause adopts section 60(18). For a company classified as a partnership for federal tax purposes, a payment under that clause is treated as a distribution to the member for federal income tax purposes whatever its character under the Ordinance (see supra ¶ 2950.06).