Security Interest Owner's Interest In Business Entity

Under current law, the 'Uniform Commercial Code' (Code) invalidates contractual limits on the transferability of some assets that can be subject to a security interest. In 2006, the 'Colorado Corporations and Associations Act' (Act) was amended to clearly and broadly exempt an owner's interest in a business entity from these Code provisions to effectuate the 'pick your partner' principle that allows small businesses to control their ownership. Section 3 of the act narrows the exemption in the Act to that necessary for 'pick your partner', and sections 1 and 2 codify this narrowed exemption in the Code.

(Note: This summary applies to this bill as enacted.)