BILL NUMBER: AB 601	CHAPTERED
	BILL TEXT

	CHAPTER  179
	FILED WITH SECRETARY OF STATE  JULY 15, 2002
	APPROVED BY GOVERNOR  JULY 13, 2002
	PASSED THE ASSEMBLY  JUNE 30, 2002
	PASSED THE SENATE  JUNE 27, 2002
	AMENDED IN SENATE  JUNE 3, 2002

INTRODUCED BY   Assembly Member Leach

                        FEBRUARY 22, 2001

   An act to amend Sections 16601, 16602, and 16602.5 of the Business
and Professions Code, relating to business contracts.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 601, Leach.  Business contracts.
   Existing law authorizes a person who sells the goodwill of a
business and a shareholder disposing of all of his or her shares in
the corporation or its subsidiary or disposing of all or
substantially all of the assets of the corporation or those of a
division or subsidiary together with the goodwill of the corporation
or its division or subsidiary, to contract with the buyer to refrain
from competing with the business so sold, under certain conditions.
Existing law additionally authorizes a member of a limited liability
company and a partner of a partnership to agree to refrain from
competing with a business upon the dissolution of the company or
partnership, upon the sale of the member's or partner's interest in
the entity, or upon the disassociation of the partner from the
partnership.
   This bill would extend this authorization to any owner's sale or
other disposition of the ownership interest or assets, together with
the goodwill, of a business entity or a division or subsidiary
thereof.  The bill would define "business entity," "owner," and
"ownership interest" for purposes of these provisions.  The bill
would include a partnership and a limited liability company within
the definition of a business entity and would make related changes
with respect to partnerships and limited liability companies.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:


  SECTION 1.  Section 16601 of the Business and Professions Code is
amended to read:
   16601.  Any person who sells the goodwill of a business, or any
owner of a business entity selling or otherwise disposing of all of
his or her ownership interest in the business entity, or any owner of
a business entity that sells (a) all or substantially all of its
operating assets together with the goodwill of the business entity,
(b) all or substantially all of the operating assets of a division or
a subsidiary of the business entity together with the goodwill of
that division or subsidiary, or (c) all of the ownership interest of
any subsidiary, may agree with the buyer to refrain from carrying on
a similar business within a specified  geographic area in which the
business so sold, or that of the business entity, division, or
subsidiary has been carried on, so long as the buyer, or any person
deriving title to the goodwill or ownership interest from the buyer,
carries on a like business therein.
   For the purposes of this section, "business entity" means any
partnership (including a limited partnership or a limited liability
partnership), limited liability company, or corporation.
   For the purposes of this section, "owner of a business entity"
means any partner, in the case of a business entity that is a
partnership (including a limited partnership or a limited liability
partnership), or any member, in the case of a business entity that is
a limited liability company, or any owner of capital stock, in the
case of a business entity that is a corporation.
   For the purposes of this section, "ownership interest" means a
partnership interest, in the case of a business entity that is a
partnership (including a limited partnership a limited liability
partnership), a membership interest, in the case of a business entity
that is a limited liability company, or a capital stockholder, in
the case of a business entity that is a corporation.
   For the purposes of this section, "subsidiary" means any business
entity over which the selling business entity has voting control or
from which the selling business entity has a right to receive a
majority share of distributions upon dissolution or other liquidation
of the business entity (or has both voting control and a right to
receive these distributions.)
  SEC. 2.  Section 16602 of the Business and Professions Code is
amended to read:
   16602.  (a) Any partner may, upon or in anticipation of any of the
circumstances described in subdivision (b), agree that he or she
will not carry on a similar business within a specified geographic
area where the partnership business has been transacted, so long as
any other member of the partnership, or any person deriving title to
the business or its goodwill from any such other member of the
partnership, carries on a like business therein.
   (b) Subdivision (a) applies to either of the following
circumstances:
   (1) A dissolution of the partnership.
   (2) Dissociation of the partner from the partnership.
  SEC. 3.  Section 16602.5 of the Business and Professions Code is
amended to read:
   16602.5.  Any member may, upon or in anticipation of a dissolution
of a limited liability company, agree that he or she or it will not
carry on a similar business within a specified geographic area where
the limited liability company business has been transacted, so long
as any other member of the limited liability company, or any person
deriving title to the business or its goodwill from any such other
member of the limited liability company, carries on a like business
therein.