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LLC and Partnership Transfer Restrictions and UCC Article 9 Overrides: Resolving the Conflict

Recording of a 90-minute premium CLE video webinar with Q&A

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Conducted on Wednesday, April 10, 2024

Recorded event now available

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This CLE course will analyze the complex issues associated with partners’ and LLC members' right to contractually restrict their partners from transferring their interests. These restrictions may in some cases come in sharp conflict with UCC Article 9 security interests that in some instances may override those restrictions. The panel will also discuss amendments to Article 9, not yet enacted by some states, to clarify the override provisions.


LLCs and partnerships have always embraced the "pick-your-partner principle," under which a statute or agreement restricts transfers of a member's or partner's ownership interest. In recent years, the pick-your-partner principle has interacted in complicated ways with Article 9. UCC 9-406 and 9-408 have sometimes overridden a broad range of statutory and agreement-based anti-assignment provisions, subject to some complex exceptions.

Application of these overrides varies depending on whether a financial transaction is an outright sale of a general intangible that is not a payment intangible, an ordinary security interest in a general intangible that is not a payment intangible, an outright sale of a payment intangible, or an ordinary security interest in a payment intangible. Counsel should have a thorough understanding of the operation of Article 9 in each scenario.

One established way for transactional lawyers to avoid the overrides altogether is to have the organization "opt-in" to Article 8 by adopting appropriate provisions in its organic documents. Related measures include providing for the security to be certificated or uncertificated and preventing the organization from opting back out of Article 8 without the parties' consent.

Recent UCC amendments would eliminate conflicts with the pick-your-partner principle that can remain despite the exceptions in Sections 9-406 and 9-408, without the need for an Article 8 opt-in. But the amendments need to be enacted in each state, and a conflict-of-laws question may arise if a transaction involves elements from multiple jurisdictions that have not all enacted the amendments.

Listen as our authoritative panel analyzes the complexities of "pick-your-partner" vs. the UCC override and discusses drafting and structuring solutions to avoid the conflict.



  1. The policy behind the pick-your-partner principle
  2. Conflicting goals under UCC Article 9
  3. Navigating unamended 9-406 and 9-408
  4. Opting into Article 8
  5. Recent amendments, non-uniform amendments, and choice of law


The panel will review these and other crucial issues:

  • When and how does the pick-your-partner principle conflict with the goals of Article 9?
  • When might UCC 9-406 and 9-408 be found to override anti-assignment provisions in partnership and LLC agreements?
  • What are the appropriate steps for opting into Article 8 to avoid the override?
  • Assuming enactment of recent amendments, how should counsel address choice-of-law issues when a transaction has elements in multiple states?


Bjerre, Carl
Professor Carl S. Bjerre

Kaapcke Professor of Business Law
University of Oregon

Professor Bjerre specializes in commercial law. Active in national and international projects to modernize commercial...  |  Read More

Kleinberger, Daniel
Professor Daniel S. Kleinberger

Emeritus Professor of Law
Mitchell Hamline School of Law

Professor Kleinberger is a consulting and testifying expert on business law and businesses practices. He has written...  |  Read More

Smith, Edwin
Edwin E. Smith

Morgan, Lewis & Bockius

Mr. Smith concentrates his practice in commercial law, debt financings, structured financings, workouts, bankruptcies,...  |  Read More

Weise, Steven
Steven O. Weise

Proskauer Rose

Mr. Weise practices in all areas of commercial law and has extensive experience in financing, especially in those...  |  Read More

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