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Independent Manager Series – Part Two

I need an Independent Manager, now what?

Independent, ManagerIn the first part of the series I outline what the Independent Manager is, and what role they play with the LLC.  In this part of the series, I outline how a typical engagement proceeds.  Working with Incserv as an Independent Manager is easy.

      1.)  Initial Reach Out

Establishing an Independent Manager relationship is easy! – But it is an iterative process.  Before the engagement starts, we will need a copy of the Operating Agreement so we can learn what your needs and expectations are for the Independent Manager.  Clarifying questions or follow ups may fall out of this document.

      2.)  Complete an Engagement Contract

Once it is determined that we can assist with your needs, we will send an Engagement Contract.  This is a separate agreement that outlines each party’s role with respect to the relationship.

      3.)  Sign the Necessary Documentsindependent, Manager

Once the Engagement Contract and Operating Agreement are agreed upon, all parties sign the documents!  We will require a set of signed documents for our records, and we are complete.

We can move QUICKLY!  It is important to make us aware of any deadlines so we can make sure your expectations are met.  While engagements can usually be processed in hours, if the operating agreement is complex or if you need multiple managers, we may need additional time for document review.  It’s always best to reach out as soon as you are aware you will need a manager so we can begin the iterative process!

If you would like to learn more about the process, or are ready to hire an Independent Manager, you can reach out to us info@incserv.com.  We look forward to hearing from you!

Josh Twilley, President

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Independent Manager Series – Part One

Independent, ManagerIs an Independent Manager right for you?

With real estate markets heating up, there has been a growing number of requests for Independent Manager services.  This post outlines what this service is, and the next post in the series outlines how a typical Independent Manager engagement works.

An Independent Manager is one type of “Independent Representation” engagement that we offer – the others being Independent Director (in the case of a Corporate entity type), Springing Member (which is a dormant member/manager/director who is called into action if certain conditions are met), and Special Member (a broad term for an independent member whose role is defined in the operating agreement).  The Independent Manager refers specifically to a manager for an LLC.

What is an Independent Manager?

An Independent Manager is a manager of an LLC who is independent of the owner/operators of the LLC, and has no financial relationship with the LLC.  The operating agreement typically outlines the roles and responsibilities of the independent manager, which is usually very narrow in scope.  The independent manager is NOT an active manager of the entity, but generally sits in the background until needed.

Why would an entity require an Independent Manager?

The Independent Manager is generally a lender driven request – a bank or financier would require an Independent Manager to sit on the board and operate in the interest of the lender.  This interest is outlined in the operating agreement, but generally it is to prevent the LLC from going insolvent or declaring bankruptcy.  This is an added protection for the lender to make sure their investment is secure.

Are there other uses for an Independent Manager?

From time to time we receive requests for Independent Managers to be the sole manager of the entity – generally to keep the true owner hidden.  There are many risks associated with this type of engagement, and we will NOT contract for these purposes.

If you have any questions about the Independent Manager, feel free to email us at info@incserv.com!

Josh Twilley, President

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How to Appoint an Independent Manager or Director in 3 Easy Steps

Appointing an Independent Manager or Director is an easy three step process. Chances are if you’re reading this, you already know what an Independent Manager or Director is and why you need one. So, the only question that remains is ‘How do I appoint an Independent Manager?’ (If you need a crash course in the what and why, you may want to check out one of our previous blogs about the topic by clicking here and/or here.) 

Step One – Operating Agreement Review
Once you’ve reached out to us to inquire about appointing independent representation, you will need to provide us Independent Managerwith a copy of the operating agreement, for review.

Step Two – The Contract
Next, we will provide you with a contract for the independent representation engagement, tailored to your specific needs. If it’s not already included within the operating agreement, you will also need to provide us the lender contact information at this time.

Step Three – Payment and Filing
Finally, when the independent representation contract is agreed upon, payment will be due, and we will sign the operating agreement.

We understand Independent Manager and Director engagements are time sensitive, so we do everything we can to make the process as quick, smooth, and seamless as possible. If you have any questions or need additional information regarding Independent Representation, please feel free to reach out to us.

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Independent Manager – Why?

In our blog “What is an Independent Manager?” we briefly touched on why an LLC would appoint an Independent Manager.independent manager - why? Before we dig a little deeper into the why of Independent Representation – did you know there are other names this special role goes by, dependent upon the type of entity? Independent Director, Springing Member, and Special Member are some of the other terms you will hear when referring to this special type of representation within a company’s board. An Independent Director and a Springing Member are both types of Special Members. A Springing Member is a member that sits dormant until an event triggers the need to bring the Member into action. This could then cause them to be an Independent Manager. For the sake of this blog, we’ll stick to discussing an Independent Manager on an LLC’s board of managers.

So, why appoint someone to this special role? There are various reasons for appointing this position, but a common motive for appointment is to protect the lender.    As an independent party with no financial relationship with the LLC, an Independent Manager simply fulfills their obligation as indicated in the operating agreement. This section of the operating agreement is drafted with consent by the lending party, so this independent party acts as a representative for the financial institution.

As long as there is a debt held by the lender or financial institution, the Independent Manager would remain active and required to vote in the interest of the lender or financial institution, including voting against bankruptcy, thus safeguarding the lender.

While the situations and names may vary, the role is rather consistent. If you have any questions about or need to appoint Independent Representation, just give us a call or email us.

 

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What is an Independent Manager?

This week’s informational blog covers the basics of what Independent Representation is byIndependent Manager answering the question – What is an Independent Manager?

A Limited Liability Company (LLC) is managed by a board of managers.  The board of managers oversees the activities of  an LLC.  An Independent Manager is a special type of manager appointed to the LLC’s board that has no equity relationship with the entity and thus is considered to be independent of the LLC’s ownership.  The role of this unique position is usually outlined in the LLC’s operating agreement.

So…Why would an LLC appoint an Independent Manager? Appointment of Independent Representation may be a lender or third party requirement in a transaction. This special position provides a level of security for the third party. (Think of it as insurance.) As we previously mentioned, the third party will detail the Independent Manager’s duties when drafting the operating agreement. These duties generally require the Independent Manager be a party to and vote in certain major board decisions. Again, the specific types of decisions the Independent Manager must give consent for are also outlined in the operating agreement of the LLC.  By requiring this unique position, the third party retains some control over the LLC without actively managing the entity.

These are just the basics. If you want to learn more, have questions about, or need to appoint Independent Representation, feel free to reach out to us. We would be happy to assist you. And don’t forget to keep an eye on our blog for more info to come…