Recently, Rob Wisner, leader of the banking and financial services practice at Crain Caton & James, gave a speech to provide Allegiance Bank’s Eldridge Parkway Branch insights into lending to Series LLCs.

Rob advised that the best practice for lenders who decide to lend to a series is to perform the following due diligence:

  1. Review the Certificate of Formation to determine that it contains the proper liability disclosures and that the Master LLC has the authority to create series of membership interests.
  2. Review the Assumed Name Certificate for the borrower series and confirm that it is not operating under any other name.
  3. Review the company agreement of the Master LLC to determine the rights, authorities and restrictions applicable to series.
  4. Review the company agreement of the borrower series, if any, to make sure that the rights, authorities and restrictions of the borrower series are consistent with those set forth in the company agreement of the Master LLC.
  5. Verify that the borrower series has all right, title and interest in the assets that to be used as collateral; and make sure the assets are readily identifiable and sufficiently described in any financing statements.
  6. Verify the authority of the individual who signs the legal instruments for the loan.
  7. Encourage the Master LLC and the associated series to amend their company agreements to expressly allow for cross-collateralization agreements between the Master LLC, the borrower series and among the related series.