Springing Members – Hopping Into Action
Posted by Gennine
April 24, 2019
Spring is all about rejuvenation, organization, and cleaning! Businesses bring new products to their clients while clearing out weeds that can restrict the growth of their company. What a better way to start the season of clean than by evaluating whether a Springing Member would be a helpful additional to your company?
What is a Springing Member?
A Springing Member is similar to an Independent Manager/Director. The Springing Member sits independent of a company’s board of directors. A Springing Member serves during times of need. For example, this individual may spring into action if a board member dies, during a personal bankruptcy hearing, or another event that may have a negative impact on a company’s health. The contract signed at the appointment of a Springing Member allows for the designated person to take on the role immediately so the company has at least one member. This ensures that the company continues to flourish even in the face of hardship.
Springing Member vs. Independent Manager- what’s the difference?
Although similar, the difference in the type of representation you need comes down to your company’s entity type. For example, Springing Members are typically utilized for Single Purpose Entities (SPEs) and Delaware Limited Liability Companies. These types of entities usually have one member handling all facets of the company. Should something happen to that sole member the company does not automatically dissolve if they have a springing member. At this point, the springing member could hop in to ensure the entity is properly closed so as to not add financial burden to the sole owner’s family.
Why is a Springing Member necessary?
A Springing Member or Independent Manager becomes necessary when large sums
(totals into the millions of dollars) of money are lent to company owners. Transactions involving real estate investment companies and asset management companies may be required by the lender to appoint a Springing Member/ Independent Manager to their company. The springing member provides the lender some security that the loan will be repaid, even in the event of extenuating circumstances. For example, should the company be forced to file bankruptcy, the springing member/independent manager steps in to provide leadership that would help the company regain its financial footing.
Incorporating Services, Ltd. is ready and equipped to take on your Springing Member/ Independent Manager appointments. For more information, please visit our website, fill out our contact form online, call us at 800-346-4646, or email us at firstname.lastname@example.org.
Amanda Archambault, Registered Agent Associate