BILL NUMBER: SB 323 INTRODUCED
BILL TEXT
INTRODUCED BY Senator Vargas
FEBRUARY 14, 2011
An act to add Section 17657 to, and to add Title 2.5 (commencing
with Section 17701.01) to, the Corporations Code, relating to limited
liability companies.
LEGISLATIVE COUNSEL'S DIGEST
SB 323, as introduced, Vargas. California Revised Uniform Limited
Liability Company Act.
(1) Existing law, the Beverly-Killea Limited Liability Company
Act, authorizes a limited liability company to engage in any lawful
business activity, as specified, and governs the formation of limited
liability companies, including requiring the members to enter into
an operating agreement that shall be in writing or oral and to
execute and file articles of organization with the Secretary of
State.
This bill would repeal that act and enact the California Revised
Uniform Limited Liability Company Act which would recast provisions
governing the formation and operation of limited liability companies.
The bill would also authorize an operating agreement to be in a
record or implied, in addition to being in writing or oral, and
authorize a combination of those forms. The bill would rename the
term that refers to the document members are required to file with
the Secretary of State as a certificate of organization. The bill
would also provide for a new, low-profit limited liability company
that would be authorized to be formed and operated to accomplish
charitable purposes, as specified.
(2) Existing law establishes requirements and procedures for
membership interests in limited liability companies, including
voting, meeting, and inspection rights. Existing law also specifies
the duties and obligations of the managers of a limited liability
company, including member-managers, as specified. Existing law does
not provide for the existence of a series of a limited liability
company.
This bill would provide that a member is not an agent of a limited
liability company merely by being a member. The bill would also
distinguish between a manager-managed limited liability company and a
member-managed limited liability company for purposes of imposing
fiduciary duties only on persons in control of a limited liability
company. The bill would also provide for a series of a limited
liability company comprised of certain assets and liabilities
identified by a limited liability company as separate from the assets
and liabilities of the other series of the limited liability
company.
(3) Existing law allows a person to reserve a name for a limited
liability company for no longer than 2 consecutive 60-day periods and
provides that a limited liability company is not formed until it has
at least one member.
This bill would instead allow a person to reserve a name for a
limited liability company for up to 2 consecutive 90-day periods. The
bill would also allow a person to file a certificate of organization
up to 90 days before delivering to the Secretary of State a notice
that the limited liability company has at least one member.
(4) Existing law provides that the Secretary of State may issue a
certificate of good standing with respect to a limited liability
company. Existing law requires that a limited liability company file
with the Secretary of State a statement of information biannually.
This bill would also authorize the Secretary of State to issue a
certificate of existence with respect to a limited liability company
and a certificate of authorization with respect to a foreign limited
liability company. The bill would require a limited liability company
to file biannually with the Secretary of State a report in lieu of a
statement of information.
(5) Existing law does not specifically provide for jurisdiction of
courts in matters regarding a limited liability company.
This bill would allow a limited liability company to be subject to
the nonexclusive jurisdiction of courts in another state or the
exclusive jurisdiction of California courts. The bill would also
allow a member to consent to arbitration, as specified.
(6) Existing law provides that a manager of a manager-managed
limited liability company and the members of a member-managed limited
liability company have authority to execute documents on behalf of,
and to bind, the limited liability company.
This bill would provide that a limited liability company may
deliver to the Secretary of State a statement of authority
identifying the individuals who have the ability to execute documents
on behalf of, and to bind, the limited liability company.
(7) Existing law does not specifically provide for a member to
dissociate from a limited liability company.
This bill would specify when a member would be dissociated from a
limited liability company and the effects of dissociation on the
member.
(8) Existing law establishes capital contribution standards and
liability of members, and regulates the allocation of profits and
losses, distributions of money and property, withdrawal of
membership, assignment of interests, and dissolution of limited
liability companies. Existing law requires the registration of
foreign limited liability companies, as defined, with the Secretary
of State, and prohibits the transaction of business in this state by
an unregistered foreign limited liability company, subject to
specified penalties. Existing law also regulates the merger of a
limited liability company with one or more limited liability
companies or other business entities, as specified, including
requiring an agreement of merger and protection of the rights and
liabilities of limited liability companies, creditors, and dissenting
members.
This bill would revise and recast those provisions.
(9) Because this bill would make certain actions unlawful, the
bill would impose a state-mandated local program by expanding the
scope of certain crimes.
The California Constitution requires the state to reimburse local
agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
This bill would provide that no reimbursement is required by this
act for a specified reason.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: yes.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 17657 is added to the Corporations Code, to
read:
17657. This title shall become inoperative on January 1, 2013,
and is repealed on January 1, 2015.
SEC. 2. Title 2.5 (commencing with Section 17701.01) is added to
the Corporations Code, to read:
TITLE 2.5. California Revised Uniform Limited Liability
Company Act
Article 1. General Provisions
17701.01. This title may be cited as the California Revised
Uniform Limited Liability Company Act.
17701.02. In this title:
(a) "Certificate of organization" means the certificate required
by Section 17702.01. The term includes the certificate as amended or
restated.
(b) "Contribution" means any benefit provided by a person to a
limited liability company:
(1) In order to become a member upon formation of the limited
liability company and in accordance with an agreement between or
among the persons that have agreed to become the initial members of
the limited liability company.
(2) In order to become a member after formation of the limited
liability company and in accordance with an agreement between the
person and the limited liability company.
(3) In the person's capacity as a member and in accordance with
the operating agreement or an agreement between the member and the
limited liability company.
(c) "Debtor in bankruptcy" means a person that is the subject of
either of the following:
(1) An order for relief under Title 11 of the United States Code
or a successor statute of general application.
(2) A comparable order under federal, state, or foreign law
governing bankruptcy or insolvency, an assignment for the benefit of
creditors, or an order appointing a trustee, receiver, or liquidator
of the person or of all or substantially all of the person's
property.
(d) "Designated office" means either of the following:
(1) The office that a limited liability company is required to
designate and maintain under Section 17701.13.
(2) The principal office of a foreign limited liability company.
(e) "Distribution," except as otherwise provided in subdivision
(g) of Section 17704.05, means a transfer of money or other property
from a limited liability company to another person on account of a
transferable interest.
(f) "Domestic" means organized under the laws of this state when
used in relation to any limited liability company, other business
entity, or person other than a natural person.
(g) "Effective," with respect to a record required or permitted to
be delivered to the Secretary of State for filing under this title,
means effective under subdivision (c) of Section 17702.05.
(h) "Foreign limited liability company" means an unincorporated
entity formed under the law of a jurisdiction other than this state
and denominated by that law as a limited liability company.
(i) "Limited liability company," except in the phrase "foreign
limited liability company," means an entity formed under this title.
(j) "Low-profit limited liability company" means a limited
liability company that has set forth in its certificate of
organization a business purpose that satisfies, and which limited
liability company is at all times operated to satisfy, each of the
following requirements:
(1) The entity (A) significantly furthers the accomplishment of
one or more charitable or educational purposes within the meaning of
Section 170(c)(2)(B) of the Internal Revenue Code, and (B) would not
have been formed but for the entity's relationship to the
accomplishment of charitable or educational purposes.
(2) No significant purpose of the entity is the production of
income or the appreciation of property; provided however, that the
fact that an entity produces significant income or capital
appreciation shall not, in the absence of other factors, be
conclusive evidence of a significant purpose involving the production
of income or the appreciation of property.
(3) No purpose of the entity is to accomplish one or more
political or legislative purposes within the meaning of Section 170
(c)(2)(D) of the Internal Revenue Code.
(k) "Majority of the managers" unless otherwise provided in the
operating agreement, means more than 50 percent of the interests of
managers in current profits of the limited liability company.
(l) "Majority of the members" unless otherwise provided in the
operating agreement, means more than 50 percent of the membership
interests of members in current profits of the limited liability
company.
(m) "Manager" means a person that under the operating agreement of
a manager-managed limited liability company is responsible, alone or
in concert with others, for performing the management functions
stated in subdivision (c) of Section 17704.07.
(n) "Manager-managed limited liability company" means a limited
liability company that qualifies under subdivision (a) of Section
17704.07.
(o) "Member" means a person that has become a member of a limited
liability company under Section 17704.01 and has not dissociated
under Section 17706.02.
(p) "Member-managed limited liability company" means a limited
liability company that is not a manager-managed limited liability
company.
(q) "Membership interest" means a member's rights in the limited
liability company, including the member's transferrable interest, any
right to vote or participate in management, and any right to
information concerning the business and affairs of the limited
liability company provided by this title.
(r) "Operating agreement" means the agreement, whether or not
referred to as an operating agreement and whether oral, in a record,
implied, or in any combination thereof, of all the members of a
limited liability company, including a sole member, concerning the
matters described in subdivision (a) of Section 17701.10. An
operating agreement of a limited liability company having only one
member shall not be unenforceable by reason of there being only one
person who is a party to the operating agreement. The term includes
the agreement as amended or restated.
(s) "Organization" means, whether domestic or foreign, a
partnership whether general or limited, limited liability company,
association, corporation, professional corporation, professional
association, nonprofit corporation, business trust, or statutory
business trust having a governing statute.
(t) "Organizer" means a person that acts under Section 17702.01 to
form a limited liability company.
(u) "Person" means an individual, corporation, business trust,
estate, trust, partnership, limited liability company, association,
joint venture, public corporation, government or governmental
subdivision, agency, instrumentality, or any other legal or
commercial entity.
(v) "Principal office" means the principal executive office of a
limited liability company or foreign limited liability company,
whether or not the office is located in this state.
(w) "Record" means information that is inscribed on a tangible
medium or that is stored in an electronic or other medium and is
retrievable in perceivable form.
(x) "Series" means one or more designated series of assets of a
limited liability company established in accordance with Section
17712.01.
(y) "Sign" means, with the present intent to authenticate or adopt
a record either of the following:
(1) To execute or adopt a tangible symbol.
(2) To attach to or logically associate with the record an
electronic symbol, sound, or process.
(z) "State" means a state of the United States, the District of
Columbia, Puerto Rico, the United States Virgin Islands, or any
territory or insular possession subject to the jurisdiction of the
United States.
(aa) "Transfer" includes an assignment, conveyance, deed, bill of
sale, lease, mortgage, security interest, encumbrance, gift, and
transfer by operation of law.
(ab) "Transferable interest" means the right, as originally
associated with a person's capacity as a member, to receive
distributions from a limited liability company in accordance with the
operating agreement, whether or not the person remains a member or
continues to own any part of the right.
(ac) "Transferee" means a person to which all or part of a
transferable interest has been transferred, whether or not the
transferor is a member.
17701.03. (a) A person knows a fact when either of the following
applies:
(1) The person has actual knowledge of the fact.
(2) The person is deemed to know the fact under paragraph (1) of
subdivision (d) or law other than this title.
(b) A person has notice of a fact when either of the following
applies:
(1) The person has reason to know the fact from all of the facts
known to the person at the time in question.
(2) The person is deemed to have notice of the fact under
paragraph (2) of subdivision (d).
(c) A person notifies another of a fact by taking steps reasonably
required to inform the other person in ordinary course, whether or
not the other person knows the fact.
(d) A person that is not a member is deemed:
(1) To know of a limitation on authority to transfer real property
as provided in subdivision (g) of Section 17703.02.
(2) To have notice, with respect to a limited liability company,
of all of the following:
(A) Dissolution, 90 days after a certificate of dissolution under
subdivision (a) of Section 17707.08 has been filed.
(B) Termination, 90 days after a certificate of cancellation under
either Section 17707.02 or subdivision (b) of Section 17707.08 has
been filed.
(C) Merger or conversion, 90 days after certificate of merger or
conversion under Article 10 (commencing with Section 17710.01)
becomes effective.
(D) Revival, 90 days after a certificate of revival under Section
17707.10 has been filed.
(e) A member's knowledge, notice, or receipt of a notification of
a fact relating to the limited liability company is not knowledge,
notice, or receipt of a notification of a fact by the limited
liability company solely by reason of the member's capacity as a
member.
17701.04. (a) A limited liability company is an entity distinct
from its members.
(b) A limited liability company may have any lawful purpose,
regardless of whether for profit, except the banking business, the
business of issuing policies of insurance and assuming insurance
risks, or the trust company business. A domestic or foreign limited
liability company may render services that may be lawfully rendered
only pursuant to a license, certificate, or registration authorized
by the Business and Professions Code, the Chiropractic Act, the
Osteopathic Act, or the Yacht and Ship Brokers Act, if the applicable
provisions of the Business and Professions Code, the Chiropractic
Act, the Osteopathic Act, or the Yacht and Ship Brokers Act authorize
a limited liability company to hold that license, certificate, or
registration.
(c) A limited liability company has perpetual duration.
(d) If the limited liability company is a low-profit limited
liability company described in subdivision (j) of Section 17701.02,
that the limited liability company is a low-profit limited liability
company.
(e) Notwithstanding subdivision (a) and as specifically provided
in this subdivision, a limited liability company may operate as a
health care service plan licensed pursuant to Chapter 2.2 (commencing
with Section 1340) of Division 2 of the Health and Safety Code if
the limited liability company is a subsidiary of a health care
service plan licensed pursuant to those provisions and the limited
liability company is established to serve an existing line of
business of the parent health care service plan. Notwithstanding any
other law, the tort or contract liability of a limited liability
company created to operate as a health care service plan under this
subdivision and its members is not limited or restricted in any
manner because of the limited liability company status of the health
care service plan.
17701.05. (a) A limited liability company established under this
title has the power and capacity in the limited liability company's
own name to do all of the following:
(1) Sue and be sued.
(2) Contract.
(3) Hold and convey title to assets of the limited liability
company, including real property, personal property, and intangible
property.
(4) Grant lien and security interests in the assets of the limited
liability company.
(b) A series established under this title has the power and
capacity in the series' own name to do all of the following:
(1) Sue and be sued.
(2) Contract.
(3) Hold and convey title to assets of the series, including real
property, personal property and intangible property.
(4) Grant liens and security interests in assets of the series.
17701.06. The law of this state governs all of the following:
(a) The internal affairs of a limited liability company.
(b) The liability of a member as member and a manager as manager
for the debts, obligations, or other liabilities of a limited
liability company.
(c) The authority of the members and agents of a limited liability
company.
(d) The availability of the assets of a series or the obligations
of another series or the limited liability company.
17701.07. (a) It is the policy of this title and this state to
give maximum effect to the principles of freedom of contract and to
the enforceability of operating agreements.
(b) Unless displaced by particular provisions of this title, the
principles of law and equity supplement this title.
(c) Rules that statutes in derogation of the common law are to be
strictly construed shall have no application to this title.
(d) Unless the context otherwise requires, as used in this title,
the singular shall include the plural and the plural may refer to
only the singular. The use of any gender shall be applicable to all
genders.
17701.08. (a) The name of a limited liability company shall
contain the words "limited liability company" or "limited company" or
the abbreviation "L.L.C.," "LLC," "L.C.," or "LC." "Limited" may be
abbreviated as "Ltd.," and "company" may be abbreviated as "Co.,"
provided, however, that if the limited liability company is a
low-profit limited liability company described in subdivision (j) of
Section 17701.02, the last words of its name shall contain either the
words "low-profit limited liability company" or the abbreviation
"L3C" or "L.3.C."
(b) Unless authorized by subdivision (c), the name of a limited
liability company shall be distinguishable in the records of the
Secretary of State from all of the following:
(1) The name of each person that is not an individual and that is
incorporated, organized, or authorized to transact business in this
state.
(2) The limited liability company name stated in each certificate
of organization that contains the statement as provided in paragraph
(3) of subdivision (b) of Section 17702.01 and that has not lapsed.
(3) Each name reserved under Section 17701.09.
(c) A limited liability company may apply to the Secretary of
State for authorization to use a name that does not comply with
subdivision (b). The Secretary of State shall authorize use of the
name applied for if, as to each noncomplying name, either of the
following applies:
(1) The present user, registrant, or owner of the noncomplying
name consents in a signed record to the use and submits an
undertaking in a form satisfactory to the Secretary of State to
change the noncomplying name to a name that complies with subdivision
(b) and is distinguishable in the records of the Secretary of State
from the name applied for.
(2) The applicant delivers to the Secretary of State a certified
copy of the final judgment of a court establishing the applicant's
right to use in this state the name applied for.
(d) Subject to Section 17708.04, this section applies to a foreign
limited liability company transacting business in this state that
has a certificate of authority to transact business in this state or
that has applied for a certificate of authority.
17701.09. (a) A person may reserve the exclusive use of the name
of a limited liability company, including a fictitious or assumed
name for a foreign limited liability company whose name is not
available, by delivering an application to the Secretary of State for
filing. The application shall state the name and address of the
applicant and the name proposed to be reserved. If the Secretary of
State finds that the name applied for is available, it shall be
reserved for the applicant's exclusive use for up to two consecutive
90-day periods.
(b) The owner of a name reserved for a limited liability company
may transfer the reservation to another person by delivering to the
Secretary of State for filing a signed notice of the transfer which
states the name and address of the transferee.
17701.10. (a) Except as otherwise provided in subdivisions (b)
and (c), the operating agreement governs all of the following:
(1) Relations among the members as members and between the members
and the limited liability company.
(2) The rights and duties under this title of a person in the
capacity of manager.
(3) The activities of the limited liability company and the
conduct of those activities.
(4) The means and conditions for amending the operating agreement.
(b) To the extent the operating agreement does not otherwise
provide for a matter described in subdivision (a), this title governs
the matter.
(c) An operating agreement shall not do any of the following:
(1) Vary a limited liability company's capacity, or a series
thereof, under Section 17701.05 to sue and be sued in its own name.
(2) Vary the law applicable under Section 17701.06.
(3) Vary the power of the court under Section 17702.04.
(4) Subject to subdivisions (d) to (g), inclusive, eliminate the
duty of loyalty, the duty of care, or any other fiduciary duty.
(5) Subject to subdivisions (d) to (g), inclusive, eliminate the
contractual obligation of good faith and fair dealing under
subdivision (d) of Section 17704.09.
(6) Unreasonably restrict the duties and rights stated in Section
17704.10.
(7) Vary the power of a court to decree dissolution in the
circumstances specified in subdivision (a) of Section 17707.03 or the
provisions for avoidance of dissolution in subdivision (b) of
Section 17707.03.
(8) Except as otherwise expressly provided in the operating
agreement, vary the requirements of Sections 17707.04 to 17707.08,
inclusive.
(9) Unreasonably restrict the right of a member to maintain an
action under Article 9 (commencing with Section 17709.01).
(10) Restrict the right to approve a merger, conversion, or
domestication under Section 17710.14 to a member that will have
personal liability with respect to a surviving, converted, or
domesticated organization.
(11) Except as otherwise provided in subdivision (b) of Section
17701.12, restrict the rights under this title of a person other than
a member or manager.
(12) Vary any provision under Article 10 (commencing with Section
17710.01).
(13) Vary any provision under Article 12 (commencing with Section
17712.01).
(d) Eliminate the duty of loyalty under subdivision (b) of Section
17704.09, but the operating agreement may do any of the following:
(1) Identify specific types or categories of activities that do
not violate the duty of loyalty, if not manifestly unreasonable.
(2) Specify the number or percentage of members that may authorize
or ratify, after full disclosure to all members of all material
facts, a specific act or transaction that otherwise would violate the
duty of loyalty.
(e) Unreasonably reduce the duty of care under subdivision (c) of
Section 17704.09.
(f) Eliminate the obligation of good faith and fair dealing under
subdivision (d) of Section 17704.09, but the operating agreement may
prescribe the standards by which the performance of the obligation is
to be measured, if the standards are not manifestly unreasonable.
(g) To the extent the operating agreement of a member-managed
limited liability company expressly relieves a member of a
responsibility that the member would otherwise have under this title
and imposes the responsibility on one or more other members, the
operating agreement may, to the benefit of the member that the
operating agreement relieves of the responsibility, also eliminate or
limit any fiduciary duty that would have pertained to the
responsibility.
(h) The operating agreement may alter or eliminate the
indemnification for a member or manager provided by subdivision (a)
of Section 17704.08 and may eliminate or limit a member or manager's
liability to the limited liability company and members for money
damages, except for the following:
(1) Breach of the duty of loyalty.
(2) A financial benefit received by the member or manager to which
the member or manager is not entitled.
(3) A breach of a duty under Section 17704.06.
(4) Intentional infliction of harm on the limited liability
company or a member.
(5) An intentional violation of criminal law.
(i) A court shall decide any claim under subdivision (d) that a
term of an operating agreement is manifestly unreasonable.
(1) The court shall make its determination as of the time the
challenged term became part of the operating agreement and by
considering only circumstances existing at that time.
(2) The court may invalidate the term only if, in light of the
purposes and activities of the limited liability company, it is
readily apparent that either of the following apply:
(A) The objective of the term is unreasonable.
(B) The term is an unreasonable means to achieve the provision's
objective.
(j) An operating agreement may provide that:
(1) A member or transferee that fails to perform in accordance
with, or to comply with the terms and conditions of, the operating
agreement shall be subject to specified penalties or specified
consequences.
(2) At the time or upon the happening of events specified in the
operating agreement, a member or transferee may be subject to
specified penalties or specified consequences. The penalty or
consequence may include and take the form of reducing or eliminating
the defaulting member's or transferee's proportionate interest in a
limited liability company, subordinating the member's or transferee's
membership interest to that of nondefaulting members or transferees,
forcing a sale of that membership interest, forfeiting the
defaulting member's or transferee's membership interest, the lending
by other members or transferees of the amount necessary to meet the
defaulting member's or transferee's commitment, a fixing of the value
of the defaulting member's or transferee's membership interest by
appraisal or by formula and redemption or sale of the membership
interest at that value, or other penalty or consequence.
17701.11. (a) A limited liability company is bound by and may
enforce the operating agreement, whether or not the limited liability
company has itself manifested assent to the operating agreement.
(b) A person that becomes a member of a limited liability company
is deemed to assent to the operating agreement.
(c) Two or more persons intending to become the initial members of
a limited liability company may make an agreement providing that
upon the formation of the limited liability company the agreement
will become the operating agreement. One person intending to become
the initial member of a limited liability company may assent to terms
providing that upon the formation of the limited liability company
the terms will become the operating agreement.
17701.12. (a) An operating agreement may specify that its
amendment requires the approval of a person that is not a party to
the operating agreement or the satisfaction of a condition. An
amendment is ineffective if its adoption does not include the
required approval or satisfy the specified condition.
(b) The obligations of a limited liability company and its members
to a person in the person's capacity as a transferee or dissociated
member are governed by the operating agreement. Subject only to any
court order issued under paragraph (2) of subdivision (b) of Section
17705.03 to effectuate a charging order, an amendment to the
operating agreement made after a person becomes a transferee or
dissociated member is effective with regard to any debt, obligation,
or other liability of the limited liability company or its members to
the person in the person's capacity as a transferee or dissociated
member.
(c) If a record that has been delivered by a limited liability
company to the Secretary of State for filing and has become effective
under this title contains a provision that would be ineffective
under subdivision (c) of Section 17701.10 if contained in the
operating agreement, the provision is likewise ineffective in the
record.
(d) Subject to subdivision (c), if a record that has been
delivered by a limited liability company to the Secretary of State
for filing and has become effective under this title conflicts with a
provision of the operating agreement both of the following apply:
(1) The operating agreement prevails as to members, dissociated
members, transferees, and managers.
(2) The record prevails as to other persons to the extent they
reasonably rely on the record.
17701.13. (a) A limited liability company shall designate and
continuously maintain in this state both of the following:
(1) An office, which need not be a place of its activity in this
state.
(2) An agent for service of process.
(b) A foreign limited liability company that has a certificate of
authority under Section 17708.02 shall designate and continuously
maintain in this state an agent for service of process.
(c) An agent for service of process of a limited liability company
or foreign limited liability company shall be an individual who is a
resident of this state or other person with authority to transact
business in this state.
17701.14. (a) A limited liability company or foreign limited
liability company may change its designated office, its agent for
service of process, or the address of its agent for service of
process by delivering to the Secretary of State for filing a
statement of change containing all of the following:
(1) The name of the limited liability company.
(2) The street and mailing addresses of its current designated
office.
(3) If the current designated office is to be changed, the street
and mailing addresses of the new designated office.
(4) The name, street, and mailing addresses of its current agent
for service of process.
(5) If the current agent for service of
process or an address of the agent is to be changed, the new
information.
(b) Subject to subdivision (c) of Section 17702.05, a statement of
change is effective when filed by the Secretary of State.
17701.15. (a) To resign as an agent for service of process of a
limited liability company or foreign limited liability company, the
agent shall deliver to the Secretary of State for filing a statement
of resignation containing the limited liability company name and
stating that the agent is resigning.
(b) The Secretary of State shall file a statement of resignation
delivered under subdivision (a) and mail or otherwise provide or
deliver a copy to the designated office of the limited liability
company or foreign limited liability company and another copy to the
principal office of the limited liability company if the mailing
address of the principal office appears in the records of the
Secretary of State and is different from the mailing address of the
designated office.
(c) An agency for service of process terminates on the earlier of
the following:
(1) The 31st day after the Secretary of State files the statement
of resignation.
(2) When a record designating a new agent for service of process
is delivered to the Secretary of State for filing on behalf of the
limited liability company and becomes effective.
17701.16. (a) An agent for service of process appointed by a
limited liability company or foreign limited liability company is an
agent of the limited liability company for service of any process,
notice, or demand required or permitted by law to be served on the
limited liability company.
(b) If a limited liability company or foreign limited liability
company does not appoint or maintain an agent for service of process
in this state or the agent for service of process cannot with
reasonable diligence be found at the agent's street address, the
Secretary of State is an agent of the limited liability company upon
whom process, notice, or demand may be served.
(c) Service of any process, notice, or demand on the Secretary of
State as an agent for a limited liability company or foreign limited
liability company may be made by delivering to the Secretary of State
duplicate copies of the process, notice, or demand. If a process,
notice, or demand is served on the Secretary of State, the Secretary
of State shall forward one of the copies by registered or certified
mail, return receipt requested, to the limited liability company at
its designated office.
(d) Service is effected under subdivision (c) at the earliest of
the following:
(1) The date the limited liability company or foreign limited
liability company receives the process, notice, or demand.
(2) The date shown on the return receipt, if signed on behalf of
the limited liability company.
(3) Five days after the process, notice, or demand is deposited
with the United States Postal Service, if correctly addressed and
with sufficient postage.
(e) The Secretary of State shall keep a record of each process,
notice, and demand served pursuant to this section and record the
time of, and the action taken regarding, the service.
(f) This section does not affect the right to serve process,
notice, or demand in any other manner provided by law.
17701.17. (a) A member may, in a written operating agreement or
other writing, consent to be subject to the nonexclusive jurisdiction
of the courts of a specified jurisdiction, or the exclusive
jurisdiction of the courts of this state.
(b) If a member desires to use the arbitration process, that
member may, in a written operating agreement or other writing,
consent to be nonexclusively subject to arbitration in a specified
state, or to be exclusively subject to arbitration in this state.
(c) Along with this consent to the jurisdiction of courts or
arbitration, a member may consent to be served with legal process in
the manner prescribed in the operating agreement or other writing.
Article 2. Formation: Certificate of Organization and Other
Filings
17702.01. (a) One or more persons may act as organizers to form a
limited liability company by signing and delivering to the Secretary
of State for filing a certificate of organization.
(b) A certificate of organization shall state all of the
following:
(1) The name of the limited liability company, which shall comply
with Section 17701.08.
(2) The street and mailing addresses of the initial designated
office and the name and the street and mailing addresses of the
initial agent for service of process of the limited liability
company.
(3) If the limited liability company will have no members when the
Secretary of State files the certificate, a statement to that
effect.
(4) If the limited liability company will have one or more
designated series of assets subject to limitations on liabilities, a
statement to that effect.
(c) Subject to subdivision (c) of Section 17701.12, a certificate
of organization may also contain statements as to matters other than
those required by subdivision (b). However, a statement in a
certificate of organization is not effective as a statement of
authority.
(d) Unless the filed certificate of organization contains the
statement as provided in paragraph (3) of subdivision (b), all of the
following rules apply:
(1) A limited liability company is formed when the Secretary of
State has filed the certificate of organization and the limited
liability company has at least one member, unless the certificate
states a delayed effective date pursuant to subdivision (c) of
Section 17702.05.
(2) If the certificate states a delayed effective date, a limited
liability company is not formed if, before the certificate takes
effect, a statement of cancellation is signed and delivered to the
Secretary of State for filing and the Secretary of State files the
certificate.
(3) Subject to any delayed effective date and except in a
proceeding by this state to dissolve a limited liability company, the
filing of the certificate of organization by the Secretary of State
is conclusive proof that the organizer satisfied all conditions to
the formation of a limited liability company.
(e) If a filed certificate of organization contains a statement as
provided in paragraph (3) of subdivision (b), all of the following
rules apply:
(1) The certificate lapses and is void unless, within 90 days from
the date the Secretary of State files the certificate, an organizer
signs and delivers to the Secretary of State for filing, a notice
stating both of the following:
(A) That the limited liability company has at least one member.
(B) The date on which a person or persons became the limited
liability company's initial member or members.
(2) If an organizer complies with paragraph (1), a limited
liability company is deemed formed as of the date of initial
membership stated in the notice delivered pursuant to paragraph (1).
(3) Except in a proceeding by this state to dissolve a limited
liability company, the filing of the notice described in paragraph
(1) by the Secretary of State is conclusive proof that the organizer
satisfied all conditions to the formation of a limited liability
17702.02. (a) A certificate of organization may be amended or
restated at any time.
(b) To amend its certificate of organization, a limited liability
company shall deliver to the Secretary of State for filing an
amendment stating all of the following:
(1) The name of the limited liability company.
(2) The date of filing of its certificate of organization.
(3) The changes the amendment makes to the certificate as most
recently amended or restated.
(c) To restate its certificate of organization, a limited
liability company shall deliver to the Secretary of State for filing
a restatement, designated as such in its heading, stating, as
applicable, the following:
(1) In the heading or an introductory paragraph, the limited
liability company's present name and the date of the filing of the
limited liability company's initial certificate of organization.
(2) If the limited liability company's name has been changed at
any time since the limited liability company's formation, each of the
limited liability company's former names.
(3) The changes the restatement makes to the certificate as most
recently amended or restated.
(d) Subject to subdivision (c) of Section 17701.12 and subdivision
(c) of Section 17702.05, an amendment to or restatement of a
certificate of organization is effective when filed by the Secretary
of State.
(e) If a member of a member-managed limited liability company, or
a manager of a manager-managed limited liability company, knows that
any information in a filed certificate of organization was inaccurate
when the certificate was filed or has become inaccurate owing to
changed circumstances, the member or manager shall promptly do the
following:
(1) Cause the certificate to be amended.
(2) If appropriate, deliver to the Secretary of State for filing a
statement of change under Section 17701.14 or a statement of
correction under Section 17702.06.
(f) If the limited liability company is a low-profit limited
liability company described in subdivision (j) of Section 17701.02
that has ceased to meet any of the requirements of subdivision (j) of
Section 17701.02, the limited liability company shall file a
certificate of amendment with the Secretary of State within 30 days
after ceasing to meet those requirements and amend its name to
conform with the requirements in Section 17701.08 governing limited
liability company names.
17702.03. (a) A record delivered to the Secretary of State for
filing pursuant to this title shall be signed as follows:
(1) Except as otherwise provided in paragraphs (2) to (4),
inclusive, a record signed on behalf of a limited liability company
shall be signed by a person authorized by the limited liability
company.
(2) A limited liability company's initial certificate of
organization shall be signed by at least one person acting as an
organizer.
(3) A notice under paragraph (1) of subdivision (e) of Section
17702.01 shall be signed by an organizer.
(4) A record filed on behalf of a dissolved limited liability
company that has no members shall be signed by the person winding up
the limited liability company's activities or a person appointed
under Section 17707.04 to wind up those activities.
(5) A statement of cancellation under paragraph (2) of subdivision
(d) Section 17702.01 shall be signed by each organizer that signed
the initial certificate of organization, but a personal
representative of a deceased or incompetent organizer may sign in the
place of the decedent or incompetent.
(6) A statement of denial by a person under Section 17703.03 shall
be signed by that person.
(7) Any other record shall be signed by the person on whose behalf
the record is delivered to the Secretary of State.
(b) Any record filed under this title may be signed by an agent.
(c) A limited liability company may record in the office of the
county recorder of any county in this state, and county recorders, on
request, shall record a certified copy of the limited liability
company certificate of organization and any exhibit or attachment, or
any amendment or correction thereto, that has been filed in the
office of the Secretary of State. A foreign limited liability company
may record in the office of the county recorder of any county in the
state a certified copy of the limited liability company certificate
of authority, or any amendment thereto, that has been filed in the
office of the Secretary of State. The recording shall create a
conclusive presumption in favor of any bona fide purchaser or
encumbrancer for value of the limited liability company real property
located in the county in which the certified copy has been recorded,
of the statements contained therein.
(d) If the Secretary of State determines that an instrument
submitted for filing or otherwise submitted does not conform to the
law and returns it to the person submitting it, the instrument may be
resubmitted accompanied by a written opinion of a member of the
State Bar of California submitting the instrument or representing the
person submitting it, to the effect that the specific provisions of
the instrument objected to by the Secretary of State do conform to
law and stating the points and authorities upon which the opinion is
based. The Secretary of State shall rely, with respect to any
disputed point of law, other than the application of Sections
17701.08, 17701.09, 17708.02, and 17708.03, upon that written opinion
in determining whether the instrument conforms to law. The date of
filing in that case shall be the date the instrument is received on
resubmission.
17702.04. (a) If a person required by this title to sign a record
or deliver a record to the Secretary of State for filing under this
title does not do so, any other person that is aggrieved may petition
the superior court to order any of the following:
(1) The person to sign the record.
(2) The person to deliver the record to the Secretary of State for
filing.
(3) The Secretary of State to file the record unsigned.
(b) If a petitioner under subdivision (a) is not the limited
liability company or foreign limited liability company to which the
record pertains, the petitioner shall make the limited liability
company a party to the action.
17702.5. (a) A record authorized or required to be delivered to
the Secretary of State for filing under this title shall be captioned
to describe the record's purpose, be in a medium permitted by the
Secretary of State, and be delivered to the Secretary of State. If
the filing fees have been paid, unless the Secretary of State
determines that a record does not comply with the filing requirements
of this title, the Secretary of State shall file the record and do
the following:
(1) For a statement of denial under Section 17703.03, send a copy
of the filed statement and a receipt for the fees to the person on
whose behalf the statement was delivered for filing and to the
limited liability company.
(2) For all other records, send a copy of the filed record and a
receipt for the fees to the person on whose behalf the record was
filed.
(b) Upon request and payment of the requisite fee, the Secretary
of State shall send to the requester a certified copy of a requested
record.
(c) Except as otherwise provided in Sections 17701.15 and 17702.06
and except for a certificate of organization that contains a
statement as provided in paragraph (3) of subdivision (b) Section
17702.01, a record delivered to the Secretary of State for filing
under this title may specify a delayed effective date. Subject to
Section 17701.15, paragraph (1) of subdivision (d) of Section
17702.01, and Section 17702.06, a record filed by the Secretary of
State is effective as follows:
(1) If the record does not specify a delayed effective date, on
the date the record is filed as evidenced by the Secretary of State's
endorsement of the date on the record.
(2) If the record specifies a delayed effective date, on the
earlier of the following:
(A) The specified date.
(B) The 90th day after the record is filed.
17702.06. (a) A limited liability company or foreign limited
liability company may deliver to the Secretary of State for filing a
statement of correction to correct a record previously delivered by
the limited liability company to the Secretary of State and filed by
the Secretary of State, if at the time of filing the record contained
inaccurate information or was defectively signed.
(b) A statement of correction under subdivision (a) may not state
a delayed effective date and shall do all of the following:
(1) Describe the record to be corrected, including its filing
date, or attach a copy of the record as filed.
(2) Specify the inaccurate information and the reason it is
inaccurate or the manner in which the signing was defective.
(3) Correct the defective signature or inaccurate information.
(c) When filed by the Secretary of State, a statement of
correction under subdivision (a) is effective retroactively as of the
effective date of the record the statement corrects, but the
statement is effective when filed:
(1) For the purposes of subdivision (d) of Section 17701.03.
(2) As to persons that previously relied on the uncorrected record
and would be adversely affected by the retroactive effect.
17702.07. (a) If a record delivered to the Secretary of State for
filing under this title and filed by the Secretary of State contains
inaccurate information, a person that suffers a loss by reliance on
the information may recover damages for the loss as follows:
(1) A person that signed the record, or caused another to sign it
on the person's behalf, and knew the information to be inaccurate at
the time the record was signed.
(2) Subject to subdivision (b), a member of a member-managed
limited liability company or the manager of a manager-managed limited
liability company, if all of the following apply:
(A) The record was delivered for filing on behalf of the limited
liability company.
(B) The member or manager had notice of the inaccuracy for a
reasonably sufficient time before the information was relied upon so
that, before the reliance, the member or manager reasonably could
have done all of the following:
(i) Effected an amendment under Section 17702.02.
(ii) Filed a petition under Section 17702.04.
(iii) Delivered to the Secretary of State for filing a statement
of change under Section 17701.14 or a statement of correction under
Section 17702.06.
(b) To the extent that the operating agreement of a member-managed
limited liability company expressly relieves a member of
responsibility for maintaining the accuracy of information contained
in records delivered on behalf of the limited liability company to
the Secretary of State for filing under this title and imposes that
responsibility on one or more other members, the liability stated in
paragraph (2) of subdivision (a) applies to those other members and
not to the member that the operating agreement relieves of the
responsibility.
(c) An individual who signs a record authorized or required to be
filed under this title affirms under penalty of perjury that the
information stated in the record is accurate.
17702.08. (a) The Secretary of State, upon request and payment of
the requisite fee, shall furnish to any person a certificate of
existence for a limited liability company if the records filed in the
office of the Secretary of State show that the limited liability
company has been formed under Section 17702.01 and the Secretary of
State has not filed a certificate of dissolution under Section
17707.08 pertaining to the limited liability company. A certificate
of existence shall state all of the following:
(1) The limited liability company's name.
(2) That the limited liability company was duly formed under the
laws of this state and the date of formation.
(3) Whether all fees, taxes, and penalties due under this title or
other law to the Secretary of State have been paid.
(4) Whether the limited liability company's most recent annual
report required by Section 17702.09 has been filed by the Secretary
of State.
(5) Other facts of record in the office of the Secretary of State
which are specified by the person requesting the certificate.
(b) The Secretary of State, upon request and payment of the
requisite fee, shall furnish to any person a certificate of
authorization for a foreign limited liability company if the records
filed in the office of the Secretary of State show that the Secretary
of State has filed a certificate of authority under Section 17708.04
and has not revoked the certificate of authority. A certificate of
authorization shall state all of the following:
(1) The limited liability company's name and any alternate name
adopted under subdivision (a) of Section 17708.05 for use in this
state.
(2) That the limited liability company is authorized to transact
business in this state.
(3) Whether all fees, taxes, and penalties due under this title or
other law to the Secretary of State have been paid.
(4) Whether the limited liability company's most recent annual
report required by Section 17702.09 has been filed by the Secretary
of State.
(5) That the Secretary of State has not revoked the limited
liability company's certificate of authority.
(6) Other facts of record in the office of the Secretary of State
that are specified by the person requesting the certificate.
(c) Subject to any qualification stated in the certificate, a
certificate of existence, or certificate of authorization issued by
the Secretary of State is conclusive evidence that the limited
liability company is in existence or the foreign limited liability
company is authorized to transact business in this state.
17702.09. (a) Once every two years, a limited liability company
or a foreign limited liability company authorized to transact
business in this state shall deliver to the Secretary of State for
filing a report that states all of the following:
(1) The name of the limited liability company.
(2) The street and mailing addresses of the limited liability
company's designated office and the name and the street and mailing
addresses of its agent for service of process in this state.
(3) The street and mailing addresses of its principal office.
(4) In the case of a foreign limited liability company, the state
or other jurisdiction under whose law the limited liability company
is formed and any alternate name adopted under subdivision (a) of
Section 17708.05.
(b) Information in an annual report under this section shall be
current as of the date the report is delivered to the Secretary of
State for filing.
(c) The first annual report under this section shall be delivered
to the Secretary of State within 90 days following the date on which
a limited liability company was formed or a foreign limited liability
company was authorized to transact business and biannually
thereafter during the applicable filing period, on a form prescribed
by the Secretary of State.
(d) If a biannual report under this section does not contain the
information required by subdivision (a), the Secretary of State shall
promptly notify the reporting limited liability company or foreign
limited liability company and return the report to it for correction.
If the report is corrected to contain the information required by
subdivision (a) and delivered to the Secretary of State within 30
days after the effective date of the notice, it is timely delivered.
(e) If a biannual report under this section contains an address of
a designated office or the name or address of an agent for service
of process which differs from the information shown in the records of
the Secretary of State immediately before the biannual report
becomes effective, the differing information in the annual report is
considered a statement of change under Section 17701.14.
17702.10. An instrument shall be deemed filed, and the date of
filing endorsed thereon, upon receipt by the Secretary of State of
any instrument accompanied by the fee prescribed by the Secretary of
State. The date of filing shall be the date the instrument is
received by the Secretary of State unless the instrument is withheld
from filing for a period of time not to exceed 90 days pursuant to a
request by the party submitting it for filing or unless, in the
judgment of the Secretary of State, the filing is intended to be
coordinated with the filing of some other document that cannot be
filed. The Secretary of State shall file a document as of any
requested future date not more than 90 days after its receipt,
including a Saturday, Sunday, or legal holiday, if that document is
received in the Secretary of State's office at least one business day
prior to the requested date of filing. Upon receipt and after filing
of any document under this title, the Secretary of State may
microfilm or reproduce by other techniques any filings or documents
and destroy the original filing or document. The microfilm or other
reproduction of any document under the provision of this section
shall be admissible in any court of law.
Article 3. Relations of Members and Managers to Persons
Dealing with Limited Liability Company
17703.01. (a) A member is not an agent of a limited liability
company solely by reason of being a member.
(b) A person's status as a member does not prevent or restrict law
other than this title from imposing liability on a limited liability
company because of the person's conduct.
17703.02. (a) A limited liability company on behalf of itself, or
a series thereof, may deliver to the Secretary of State for filing a
statement of authority.
(1) The statement shall include the name of the limited liability
company and the street and mailing addresses of its designated
office.
(2) With respect to any position that exists in or with respect to
the limited liability company, or a series thereof, the statement
may state the authority, or limitations on the authority, of all
persons holding the position to do any of the following:
(A) Execute an instrument transferring real property held in the
name of the limited liability company or a series thereof of the
limited liability company.
(B) Enter into other transactions on behalf of, or otherwise act
for or bind, the limited liability company or a series of the limited
liability company.
(3) The statement may state the authority, or limitations on the
authority, of a specific person to do the following:
(A) Execute an instrument transferring real property held in the
name of the limited liability company or a series of the limited
liability company.
(B) Enter into other transactions on behalf of, or otherwise act
for or bind, the limited liability company or a series of the limited
liability company.
(b) To amend or cancel a statement of authority filed by the
Secretary of State under subdivision (a) of Section 17702.05, a
limited liability company, or a series of the limited liability
company, shall deliver to the Secretary of State for filing an
amendment or cancellation stating all of the following:
(1) The name of the limited liability company.
(2) The street and mailing addresses of the limited liability
company's designated office.
(3) The caption of the statement being amended or canceled and the
date the statement being affected became effective.
(4) The contents of the amendment or a
declaration that the statement being affected is canceled.
(c) A statement of authority affects only the power of a person to
bind a limited liability company, or a series of the limited
liability company, to persons that are not members.
(d) Subject to subdivision (c) of this section and subdivision (d)
of Section 17701.03 and except as otherwise provided in subdivisions
(f), (g), and (h), a limitation on the authority of a person or a
position contained in an effective statement of authority is not by
itself evidence of knowledge or notice of the limitation by any
person.
(e) Subject to subdivision (c), a grant of authority not
pertaining to transfers of real property and contained in an
effective statement of authority is conclusive in favor of a person
that gives value in reliance on the grant, except to the extent that
when the person gives value any of the following apply:
(1) The person has knowledge to the contrary.
(2) The statement has been canceled or restrictively amended under
subdivision (b).
(3) A limitation on the grant is contained in another statement of
authority that became effective after the statement containing the
grant became effective.
(f) Subject to subdivision (c), an effective statement of
authority that grants authority to transfer real property held in the
name of the limited liability company, or a series of the limited
liability company, and that is recorded by certified copy in the
office for recording transfers of the real property, is conclusive in
favor of a person that gives value in reliance on the grant without
knowledge to the contrary, except to the extent that when the person
gives value any of the following apply:
(1) The statement has been canceled or restrictively amended under
subdivision (b) and a certified copy of the certificate of
cancellation or restrictive amendment has been recorded in the office
for recording transfers of the real property.
(2) A limitation on the grant is contained in another statement of
authority that became effective after the statement containing the
grant became effective and a certified copy of the later-effective
statement is recorded in the office for recording transfers of the
real property.
(g) Subject to subdivision (c), if a certified copy of an
effective statement containing a limitation on the authority to
transfer real property held in the name of a limited liability
company, or a series of a limited liability company, is recorded in
the office for recording transfers of that real property, all persons
are deemed to know of the limitation.
(h) Subject to subdivision (i), an effective certificate of
dissolution is a cancellation of any filed statement of authority for
the purposes of subdivision (f) and is a limitation on authority for
the purposes of subdivision (g).
(i) A limited liability company, or a series of a limited
liability company, may deliver to the Secretary of State for filing
and, if appropriate, may record a statement of authority that is
designated as a post-dissolution statement of authority. The
statement operates as provided in subdivisions (f) and (g).
(j) Unless earlier canceled, an effective statement of authority
is canceled by operation of law five years after the date on which
the statement, or its most recent amendment, becomes effective. This
cancellation operates without need for any recording under
subdivisions (f) or (g).
(k) An effective statement of denial operates as a restrictive
amendment under this section and may be recorded by certified copy
for the purposes of paragraph (1) of subdivision (f).
11703.03. A person named in a filed statement of authority
granting that person authority may deliver to the Secretary of State
for filing a statement of denial.
(a) The statement of denial shall provide the name of the limited
liability company and the caption of the statement of authority to
which the statement of denial pertains.
(b) The statement of denial shall deny the grant of authority.
17703.04. (a) All of the following apply to debts, obligations,
or other liabilities of a limited liability company, or a series of a
limited liability company, whether arising in contract, tort, or
otherwise:
(1) They are solely the debts, obligations, or other liabilities
of the limited liability company, or a series of a limited liability
company.
(2) They do not become the debts, obligations, or other
liabilities of a member or manager or any other series solely by
reason of the member acting as a member or manager acting as a
manager for the limited liability company or a series of a limited
liability company.
(b) A member of a limited liability company shall be subject to
liability under the common law governing alter ego liability, and
shall also be personally liable under a judgment of a court or for
any debt, obligation, or liability of the limited liability company,
whether that liability or obligation arises in contract, tort, or
otherwise, under the same or similar circumstances and to the same
extent as a shareholder of a corporation may be personally liable for
any debt, obligation, or liability of the corporation; except that
the failure to hold meetings of members or managers or the failure to
observe formalities pertaining to the calling or conduct of meetings
shall not be considered a factor tending to establish that a member
or the members have alter ego or personal liability for any debt,
obligation, or liability of the limited liability company where the
articles of organization or operating agreement do not expressly
require the holding of meetings of members or managers.
(c) Nothing in this section shall be construed to affect the
liability of a member of a limited liability company to third parties
for the member's participation in tortious conduct, or pursuant to
the terms of a written guarantee or other contractual obligation
entered into by the member, other than an operating agreement.
(d) A limited liability company or foreign limited liability
company shall carry insurance or provide an undertaking to the same
extent and in the same amount as is required by any law, rule, or
regulation of this state that would be applicable to the limited
liability company or foreign limited liability company were it a
corporation organized and existing or duly qualified for the
transaction of intrastate business under the General Corporation Law.
(e) Notwithstanding subdivision (a), a member of a limited
liability company may agree to be obligated personally for any or all
of the debts, obligations, and liabilities of the limited liability
company as long as the agreement to be so obligated is set forth in
the certificate of organization or in a written operating agreement
that specifically references this subdivision.
Article 4. Relations of Members to Each Other and to Limited
Liability Company
17704.01. (a) If a limited liability company is to have only one
member upon formation, the person becomes a member as agreed by that
person and the organizer of the limited liability company. That
person and the organizer may be, but need not be, different persons.
If different, the organizer acts on behalf of the initial member.
(b) If a limited liability company, or a series thereof, is to
have more than one member upon formation, those persons become
members as agreed by the persons before the formation of the limited
liability company. The organizer acts on behalf of the persons in
forming the limited liability company and may be, but need not be,
one of the persons.
(c) If a filed certificate of organization contains the statement
required by paragraph (3) of subdivision (b) of Section 17702.01, a
person becomes an initial member of the limited liability company, or
a series of the limited liability company, with the consent of a
majority of the organizers. The organizers may consent to more than
one person simultaneously becoming the limited liability company's,
or a series' of the limited liability company, initial members.
(d) After formation of a limited liability company, a person
becomes a member as follows:
(1) As provided in the operating agreement.
(2) As the result of a transaction effective under Article 10
(commencing with Section 17710.01).
(3) With the consent of all the members.
(4) If, within 90 consecutive days after the limited liability
company ceases to have any members, the last person to have been a
member, or the legal representative of that person, designates a
person to become a member, and the designated person consents to
become a member.
(e) A person may become a member without acquiring a transferable
interest and without making or being obligated to make a contribution
to the limited liability company.
(f) A person may be admitted as the sole member without acquiring
a membership interest and without making or being obligated to make a
contribution to the limited liability company.
17704.02. A contribution may consist of tangible or intangible
property or other benefit to a limited liability company, or a series
of a limited liability company, including money, services performed,
promissory notes, other agreements to contribute money or property,
and contracts for services to be performed.
17704.03. (a) A person's obligation to make a contribution to a
limited liability company, or a series of a limited liability
company, is not excused by the person's death, disability, or other
inability to perform personally. If a person does not make a required
contribution, the person or the person's estate is obligated to
contribute money equal to the value of the part of the contribution
that has not been made, at the option of the limited liability
company or a series of a limited liability company.
(b) The election described in subdivision (a) shall be in addition
to, and not in lieu of, any other rights, including the right to
specific performance, that the limited liability company, or a series
of a limited liability company, may have under the operating
agreement or applicable law.
(1) The obligation of a member to make a contribution to a limited
liability company may be compromised only by consent of all the
members. A conditional obligation of a member to make a contribution
to a limited liability company shall not be enforced unless the
conditions of the obligation have been satisfied or waived as to or
by that member. Conditional obligations include contributions payable
upon a discretionary call of a limited liability company before the
time the call occurs.
(2) The obligation of a member of a series to make a contribution
to the series may be compromised only by consent of all the members
of that series. A conditional obligation of a member to make a
contribution to a series shall not be enforced unless the conditions
of the obligation have been satisfied or waived as to or by that
member. Conditional obligations include contributions payable upon a
discretionary call of that series before the time the call occurs.
(3) Paragraph (1) shall not apply to a member's obligation to make
a contribution to a series of a limited liability company.
(c) A creditor of a limited liability company that extends credit
or otherwise acts in reliance on an obligation described in
subdivision (a) may enforce the obligation.
17704.04. (a) Any distributions made by a limited liability
company before its dissolution and winding up shall be in equal
shares among members and dissociated members, except to the extent
necessary to comply with any transfer effective under Section
17705.02 and any charging order in effect under Section 17705.03.
(b) A person has a right to a distribution before the dissolution
and winding up of a limited liability company only if the limited
liability company decides to make an interim distribution. A person's
dissociation does not entitle the person to a distribution.
(c) A person does not have a right to demand or receive a
distribution from a limited liability company in any form other than
money. A limited liability company may distribute an asset in kind if
each part of the asset is fungible with each other part and each
person receives a percentage of the asset equal in value to the
person's share of distributions.
(d) If a member or transferee becomes entitled to receive a
distribution, the member or transferee has the status of, and is
entitled to all remedies available to, a creditor of the limited
liability company with respect to the distribution.
(e) (1) All members of a series shall share equally in any
distributions made by the series before its dissolution and winding
up.
(2) A member of a series has a right to a distribution before the
dissolution and winding up of the series as provided in the operating
agreement. A decision of the series to make a distribution before
the dissolution and winding up of the series is a decision in the
ordinary course of activities of the series. A member's dissociation
from a series with which the member is associated does not entitle
the dissociated member to a distribution from the series.
(3) A member of a series does not have a right to demand and
receive a distribution from the series in any form other than money.
A series may distribute an asset in kind if each member of the series
receives a percentage of the asset in proportion to the member's
share of distributions from the series.
(4) If a member of a series becomes entitled to receive a
distribution from the series, the member has the status of, and is
entitled to all remedies available to, a creditor of the series with
respect to the distribution.
(f) Subdivision (a) shall not apply to a distribution made by a
series.
17704.05. (a) A limited liability company shall not make a
distribution if after the distribution either of the following
applies:
(1) The limited liability company would not be able to pay its
debts as they become due in the ordinary course of the limited
liability company's activities.
(2) The limited liability company's total assets would be less
than the sum of its total liabilities plus the amount that would be
needed, if the limited liability company were to be dissolved, wound
up, and terminated at the time of the distribution, to satisfy the
preferential rights upon dissolution, winding up, and termination of
members whose preferential rights are superior to those of persons
receiving the distribution.
(b) A limited liability company may base a determination that a
distribution is not prohibited under subdivision (a) on financial
statements prepared on the basis of accounting practices and
principles that are reasonable in the circumstances or on a fair
valuation or other method that is reasonable under the circumstances.
(c) Except as otherwise provided in subdivision (f), the effect of
a distribution under subdivision (a) is measured as follows:
(1) In the case of a distribution by purchase, redemption, or
other acquisition of a transferable interest in the limited liability
company, as of the date money or other property is transferred or
debt incurred by the limited liability company.
(2) In all other cases, as of the date the distribution is
authorized, if the payment occurs within 120 days after that date, or
the payment is made, if the payment occurs more than 120 days after
the distribution is authorized.
(d) A limited liability company's indebtedness to a member
incurred by reason of a distribution made in accordance with this
section is at parity with the limited liability company's
indebtedness to its general, unsecured creditors.
(e) A limited liability company's indebtedness, including
indebtedness issued in connection with or as part of a distribution,
is not a liability for purposes of subdivision (a) if the terms of
the indebtedness provide that payment of principal and interest are
made only to the extent that a distribution could be made to members
under this section.
(f) If indebtedness is issued as a distribution, each payment of
principal or interest on the indebtedness is treated as a
distribution, the effect of which is measured on the date the payment
is made.
(g) In subdivision (a), "distribution" does not include amounts
constituting reasonable compensation for present or past services or
reasonable payments made in the ordinary course of business under a
bona fide retirement plan or other benefits program.
(h) (1) A series shall not make a distribution to a member of the
series to the extent that at the time of the distribution, after
giving effect to the distribution, all liabilities of the series,
other than liabilities to members of the series on account of their
membership interests and liabilities for which the recourse of
creditors is limited to specific property of the series, exceed the
fair value of the assets of the series, except that the fair value of
the property that is subject to a liability for which recourse of
creditors is limited shall be included in the assets of the series
only to the extent that the fair value of the property exceeds that
liability.
(2) A member of a series who receives a distribution in violation
of paragraph (1) or the operating agreement, and who knew at the time
of the distribution that the distribution violated paragraph (1) or
the operating agreement, shall be personally liable to that series
for the amount of the distribution. A member of a series who receives
a distribution in violation of paragraph (1) or the limited
liability company agreement, and who did not know at the time of the
distribution that the distribution violated paragraph (1) or the
operating agreement, shall not be liable for the amount of the
distribution.
(3) Subdivision (a) shall not apply to a distribution made by a
series.
17704.06. (a) Except as otherwise provided in subdivision (b) and
paragraph (2) of subdivision (h) of Section 17704.05, if a member of
a member-managed limited liability company or manager of a
manager-managed limited liability company consents to a distribution
made in violation of Section 17704.05 and in consenting to the
distribution fails to comply with Section 17704.09, the member or
manager is personally liable to the limited liability company for the
amount of the distribution that exceeds the amount that could have
been distributed without the violation of Section 17704.05.
(b) To the extent the operating agreement of a member-managed
limited liability company expressly relieves a member of the
authority and responsibility to consent to distributions and imposes
that authority and responsibility on one or more other members, the
liability stated in subdivision (a) applies to the other members and
not the member that the operating agreement relieves of authority and
responsibility.
(c) A person that receives a distribution knowing that the
distribution to that person was made in violation of Section 17704.05
is personally liable to the limited liability company but only to
the extent that the distribution received by the person exceeded the
amount that could have been properly paid under Section 17704.05.
(d) A person against which an action is commenced because the
person is liable under subdivision (a) may do all of the following:
(1) Implead any other person that is subject to liability under
subdivision (a) and seek to compel contribution from the person.
(2) Implead any person that received a distribution in violation
of subdivision (c) and seek to compel contribution from the person in
the amount the person received in violation of subdivision (c).
(e) An action under this section is barred if not commenced within
four years after the distribution.
17704.07. (a) A limited liability company is a member-managed
limited liability company unless the operating agreement does either
of the following:
(1) Expressly provides that:
(A) The limited liability company is or will be "manager-managed."
(B) The limited liability company is or will be "managed by
managers."
(C) Management of the limited liability company is or will be
"vested in managers."
(2) Includes words of similar import.
(b) In a member-managed limited liability company, the following
rules apply:
(1) The management and conduct of the limited liability company
are vested in the members.
(2) The management and conduct of a series are vested in the
members of that series.
(3) Paragraph (1) shall not apply to the management and conduct of
a series.
(4) Each member has equal rights in the management and conduct of
the limited liability company's activities.
(5) Each member of a series has equal rights in the management and
conduct of the series' activities.
(6) Paragraph (4) shall not apply to the management and conduct of
the series.
(7) A difference arising among members as to a matter in the
ordinary course of the activities of the limited liability company
shall be decided by a majority of the members of the limited
liability company.
(8) An act outside the ordinary course of the activities of the
limited liability company may be undertaken only with the consent of
all members.
(9) The operating agreement may be amended only with the consent
of all members.
(c) In a manager-managed limited liability company, the following
rules apply:
(1) Except as otherwise expressly provided in this title, any
matter relating to the activities of the limited liability company is
decided exclusively by the managers.
(2) Except as otherwise expressly provided in this title, any
matter related to the activity of the series is decided exclusively
by the managers of the series.
(3) Paragraph (1) shall not apply to the activities of a series.
(4) Each manager has equal rights in the management and conduct of
the activities of the limited liability company.
(5) Each manager of a series has equal rights in the management
and conduct of the activity of the series.
(6) Paragraph (4) shall not apply to the management and conduct of
the activity of the series.
(7) A difference arising among managers as to a matter in the
ordinary course of the activities of the limited liability company
may be decided by a majority of the managers of the limited liability
company.
(8) The consent of all members of the limited liability company is
required to do any of the following:
(A) Sell, lease, exchange, or otherwise dispose of all, or
substantially all, of the limited liability company's property, with
or without the goodwill, outside the ordinary course of the limited
liability company's activities.
(B) Approve a merger or conversion under Article 10 (commencing
with Section 17710.01).
(C) Undertake any other act outside the ordinary course of the
limited liability company's activities.
(D) Amend the operating agreement.
(9) The consent of all members of a series is required to any of
the following:
(A) Sell, lease, exchange, or afterward dispose of all or
substantially all, of the series' property, with or without the
goodwill, outside the ordinary course of the series activities.
(B) Approve a merger or conversion of the series under Article 10
(commencing with Section 17710.01).
(C) Undertake any other act outside the ordinary course of the
series' activities.
(D) Amend the operating agreement with respect to the series.
(10) A manager may be chosen at any time by the consent of a
majority of the members and remains a manager until a successor has
been chosen, unless the manager at an earlier time resigns, is
removed, or dies, or, in the case of a manager that is not an
individual, terminates. A manager may be removed at any time by the
consent of a majority of the members without notice or cause.
(11) A manager of a series may be chosen at any time by the
consent of a majority of members of that series and remains a manager
until a successor has been chosen, unless the manager at an earlier
time resigns, is removed, or dies, or in the case of a manager that
is not an individual, terminates. A manager of a series may be
removed at any time by the consent of a majority of the members of
that series without notice or cause.
(12) A person need not be a member to be a manager, but the
dissociation of a member that is also a manager removes the person as
a manager. If a person that is both a manager and a member ceases to
be a manager, that cessation does not by itself dissociate the
person as a member.
(13) A person's ceasing to be a manager does not discharge any
debt, obligation, or other liability to the limited liability company
or members which the person incurred while a manager.
(d) An action requiring the consent of members under this title
may be taken without a meeting, and a member may appoint a proxy or
other agent to consent or otherwise act for the member by signing an
appointing record, personally or by the member's agent.
(e) The dissolution of a limited liability company, or a series of
a limited liability company, does not affect the applicability of
this section. However, a person that wrongfully causes dissolution of
the limited liability company loses the right to participate in
management as a member and a manager.
(f) This title does not entitle a member to remuneration for
services performed for a member-managed limited liability company,
except for reasonable compensation for services rendered in winding
up the activities of a limited liability company.
17704.08. (a) A limited liability company, or a series of a
limited liability company, shall reimburse for any payment made and
indemnify for any debt, obligation, or other liability incurred by a
member of a member-managed limited liability company or the manager
of a manager-managed limited liability company in the course of the
member's or manager's activities on behalf of the limited liability
company, if, in making the payment or incurring the debt, obligation,
or other liability, the member or manager complied with the duties
stated in Sections 17704.05 and 17704.09.
(b) A limited liability company, or a series of a limited
liability company, may purchase and maintain insurance on behalf of a
member or manager of the limited liability company against liability
asserted against or incurred by the member or manager in that
capacity or arising from that status even if, under subdivision (g)
of Section 17701.10, the operating agreement could not eliminate or
limit the person's liability to the limited liability company for the
conduct giving rise to the liability.
17704.09. (a) The fiduciary duties that a member owes to a
member-managed limited liability company, or a series of a limited
liability company,
and the other members of the limited liability company, or a series
of a limited liability company, are the duties of loyalty and care
under subdivisions (b) and (c).
(b) A member's duty of loyalty to a limited liability company, or
a series of a limited liability company, and the other members is
limited to the following:
(1) To account to a limited liability company, or a series of a
limited liability company, and hold as trustee for it any property,
profit, or benefit derived by the member in the conduct and winding
up of the activities of a limited liability company, or a series of
the limited liability company, or derived from a use by the member of
a limited liability company, or a series of a limited liability
company, property, including the appropriation of a limited liability
company, or a series of a limited liability company, opportunity.
(2) To refrain from dealing with a limited liability company, or a
series of a limited liability company, in the conduct or winding up
of the activities of a limited liability company, or a series of a
limited liability company, as or on behalf of a party having an
interest adverse to a limited liability company, or a series of a
limited liability company.
(3) To refrain from competing with a limited liability company, or
a series of a limited liability company, in the conduct or winding
up of the activities of the limited liability company, or a series of
the limited liability company.
(c) A member's duty of care to a limited liability company, or a
series of a limited liability company, and the other members in the
conduct and winding up the activities of the limited liability
company, or a series of the limited liability company, is limited to
refraining from engaging in grossly negligent or reckless conduct,
intentional misconduct, or a knowing violation of law.
(d) A member shall discharge the duties to a limited liability
company, or a series of a limited liability company, and the other
members under this title or under the operating agreement and
exercise any rights consistent with the obligation of good faith and
fair dealing.
(e) A member does not violate a duty or obligation under this
chapter or under the operating agreement merely because the member's
conduct furthers the member's own interest.
(f) In a manager-managed limited liability company, all of the
following rules apply:
(1) Subdivisions (a), (b), (c), and (e) apply to the manager or
managers and not the members.
(2) Subdivision (d) applies to the members and managers.
(3) A member does not have any fiduciary duty to the limited
liability company, or a series of a limited liability company, or to
any other member solely by reason of being a member.
17704.10. (a) In a member-managed limited liability company, all
of the following rules apply:
(1) On reasonable notice, a member may inspect and copy during
regular business hours, at a reasonable location specified by the
limited liability company, any record maintained by the limited
liability company regarding the limited liability company's
activities, financial condition, and other circumstances, to the
extent the information is material to the member's rights and duties
under the operating agreement or this title.
(2) The limited liability company shall furnish to each member all
of the following:
(A) Without demand, any information concerning the limited
liability company's activities, financial condition, and other
circumstances that the limited liability company knows and that is
material to the proper exercise of the member's rights and duties
under the operating agreement or this title, except to the extent the
limited liability company can establish that it reasonably believes
the member already knows the information.
(B) On demand, any other information concerning the limited
liability company's activities, financial condition, and other
circumstances, except to the extent the demand or information
demanded is unreasonable or otherwise improper under the
circumstances.
(3) The duty to furnish information under paragraph (2) also
applies to each member to the extent the member knows any of the
information described in paragraph (2).
(b) In a manager-managed limited liability company, all of the
following rules apply:
(1) The informational rights stated in subdivision (a) and the
duty stated in paragraph (3) of subdivision (a) apply to the managers
and not the members.
(2) During regular business hours and at a reasonable location
specified by the limited liability company, a member may obtain from
the limited liability company and inspect and copy full information
regarding the activities, financial condition, and other
circumstances of the limited liability company as is just and
reasonable if all of the following apply:
(A) The member seeks the information for a purpose material to the
member's interest as a member.
(B) The member makes a demand in a record received by the limited
liability company, describing with reasonable particularity the
information sought, and the purpose for seeking the information.
(C) The information sought is directly connected to the member's
purpose.
(3) Within 10 days after receiving a demand pursuant to
subparagraph (B) of paragraph (2), the limited liability company
shall in a record inform the member that made the demand of all the
following:
(A) The information that the limited liability company will
provide in response to the demand and when and where the limited
liability company will provide the information.
(B) If the limited liability company declines to provide any
demanded information, the limited liability company's reasons for
declining.
(4) Whenever this title or an operating agreement provides for a
member to give or withhold consent to a matter, before the consent is
given or withheld, the limited liability company shall, without
demand, provide the member with all information that is known to the
limited liability company and is material to the member's decision.
(c) On 10 days' demand made in a record received by a limited
liability company, a dissociated member may have access to
information to which the person was entitled while a member if the
information pertains to the period during which the person was a
member, the person seeks the information in good faith, and the
person satisfies the requirements imposed on a member by paragraph
(2) of subdivision (b). The limited liability company shall respond
to a demand made pursuant to this subdivision in the manner provided
in paragraph (3) of subdivision (b).
(d) A limited liability company may charge a person that makes a
demand under this section the reasonable costs of copying the
information, limited to the costs of labor and material.
(e) A member or dissociated member may exercise rights under this
section through an agent or, in the case of an individual under legal
disability, a legal representative. Any restriction or condition
imposed by the operating agreement or under subdivision (g) applies
both to the agent or legal representative and the member or
dissociated member.
(f) The rights under this section do not extend to a person as
transferee.
(g) In addition to any restriction or condition stated in its
operating agreement, a limited liability company, as a matter within
the ordinary course of its activities, may impose reasonable
restrictions and conditions on access to and use of information to be
furnished under this section, including designating information
confidential and imposing nondisclosure and safeguarding obligations
on the recipient. In a dispute concerning the reasonableness of a
restriction under this subdivision, the limited liability company has
the burden of proving reasonableness.
Article 5. Transferable Interests and Rights of Transferees
and Creditors
17705.01. A transferable interest is personal property.
17705.02. (a) With respect to a transfer, in whole or in part, of
a transferable interest, all of the following apply:
(1) A transfer is permissible.
(2) A transfer does not by itself cause a member's dissociation or
a dissolution and winding up of the activities of a limited
liability company, or a series of a limited liability company.
(3) Subject to Section 17705.04, a transfer does not entitle the
transferee to do any of the following:
(A) Participate in the management or conduct of the activities of
a limited liability company or a series of a limited liability
company.
(B) Except as otherwise provided in subdivision (c), have access
to records or other information concerning the activities of a
limited liability company or a series of a limited liability company.
(b) A transferee has the right to receive, in accordance with the
transfer, distributions to which the transferor would otherwise be
entitled.
(c) In a dissolution and winding up of a limited liability
company, a transferee is entitled to an account of the limited
liability company's transactions only from the date of dissolution.
(d) A transferable interest may be evidenced by a certificate of
the interest issued by the limited liability company, or a series of
a limited liability company, in a record, and, subject to this
section, the interest represented by the certificate may be
transferred by a transfer of the certificate.
(e) A limited liability company, or a series of a limited
liability company, need not give effect to a transferee's rights
under this section until the limited liability company, or a series
of a limited liability company, has notice of the transfer.
(f) A transfer of a transferable interest in violation of a
restriction on transfer contained in the operating agreement is
ineffective as to a person having notice of the restriction at the
time of transfer.
(g) Except as otherwise provided in paragraph (2) of subdivision
(d) of Section 17706.02, when a member transfers a transferable
interest, the transferor retains the rights of a member, other than
the interest in distributions transferred, and retains all duties and
obligations of a member.
(h) When a member transfers a transferable interest to a person
that becomes a member with respect to the transferred interest, the
transferee is liable for the member's obligations under Section
17704.03 and subdivision (c) of Section 17704.06 known to the
transferee when the transferee becomes a member.
17705.03. (a) On application by a judgment creditor of a member
or transferee, a court may enter a charging order against the
transferable interest of the judgment debtor for the unsatisfied
amount of the judgment. A charging order constitutes a lien on a
judgment debtor's transferable interest and requires the limited
liability company to pay over to the person to which the charging
order was issued any distribution that would otherwise be paid to the
judgment debtor.
(b) To the extent necessary to effectuate the collection of
distributions pursuant to a charging order in effect under
subdivision (a), the court may do any of the following:
(1) Appoint a receiver of the distributions subject to the
charging order, with the power to make all inquiries the judgment
debtor might have made.
(2) Make all other orders necessary to give effect to the charging
order.
(c) Upon a showing that distributions under a charging order will
not pay the judgment debt within a reasonable time, foreclose the
lien and order the sale of the transferable interest. The purchaser
at the foreclosure sale obtains only the transferable interest, does
not thereby become a member, and is subject to Section 17705.02.
(d) At any time before foreclosure under subdivision (c), the
member or transferee whose transferable interest is subject to a
charging order under subdivision (a) may extinguish the charging
order by satisfying the judgment and filing a certified copy of the
satisfaction with the court that issued the charging order.
(e) At any time before foreclosure under subdivision (c), a
limited liability company or one or more members whose transferable
interests are not subject to the charging order may pay to the
judgment creditor the full amount due under the judgment and thereby
succeed to the rights of the judgment creditor, including the
charging order.
(f) This title does not deprive any member or transferee of the
benefit of any exemption laws applicable to the member's or
transferee's transferable interest.
(g) This section provides the exclusive remedy by which a person
seeking to enforce a judgment against a member or transferee may, in
the capacity of judgment creditor, satisfy the judgment from the
judgment debtor's transferable interest.
17705.04. (a) If a member dies, the deceased member's personal
representative or other legal representative may exercise the rights
of a transferee provided in subdivision (c) of Section 17705.02 and,
for the purposes of settling the estate, the rights of a current
member under Section 17704.10.
Article 6. Member's Dissociation
17706.01. (a) A person has the power to dissociate as a member at
any time, rightfully or wrongfully, by withdrawing as a member by
express will pursuant to paragraph (1) of subdivision (a) of Section
17706.02.
(b) A person's dissociation from a limited liability company is
wrongful only if either of the following apply to the dissociation:
(1) The dissociation is in breach of an express provision of the
operating agreement.
(2) The dissociation occurs before the termination of the limited
liability company and any of the following:
(A) The person withdraws as a member by express will.
(B) The person is expelled as a member by judicial order under
paragraph (5) of subdivision (a) of Section 17706.02.
(C) The person is dissociated under subparagraph (A) of paragraph
(7) of subdivision (a) of Section 17706.02 by becoming a debtor in
bankruptcy.
(D) In the case of a person that is not a trust other than a
business trust, an estate, or an individual, the person is expelled
or otherwise dissociated as a member because it dissolved or
terminated.
(c) A person that wrongfully dissociates as a member is liable to
the limited liability company and, subject to Section 17709.01, to
the other members for damages caused by the dissociation. The
liability is in addition to any other debt, obligation, or other
liability of the member to the limited liability company or the other
members.
17706.02. A person is dissociated as a member from a limited
liability company when any of the following occur:
(a) The limited liability company has notice of the person's
express will to withdraw as a member, but, if the person specified a
withdrawal date later than the date the limited liability company had
notice, on that later date.
(b) An event stated in the operating agreement as causing the
person's dissociation to occur.
(c) The person is expelled as a member pursuant to the operating
agreement.
(d) The person is expelled as a member by the unanimous consent of
the other members because any of the following applies:
(1) It is unlawful to carry on the limited liability company's
activities with the person as a member.
(2) There has been a transfer of all of the person's transferable
interest in the limited liability company, other than either of the
following:
(A) A transfer for security purposes.
(B) A charging order in effect under Section 17705.03 that has not
been foreclosed.
(3) The person is a corporation and, within 90 days after the
limited liability company notifies the person that it will be
expelled as a member because the person has filed a certificate of
dissolution or the equivalent, its charter has been revoked, or its
right to conduct business has been suspended by the jurisdiction of
its incorporation and the certificate of dissolution has not been
revoked or its charter or right to conduct business has not been
reinstated.
(4) The person is a limited liability company or partnership that
has been dissolved and whose business is being wound up.
(e) On application by the limited liability company, the person is
expelled as a member by judicial order because the person has done
any of the following:
(1) Engaged, or is engaging, in wrongful conduct that has
adversely and materially affected, or will adversely and materially
affect, the limited liability company's activities.
(2) Willfully or persistently committed, or is willfully and
persistently committing, a material breach of the operating agreement
or the person's duties or obligations under Section 17704.09.
(3) Engaged, or is engaging, in conduct relating to the limited
liability company's activities that makes it not reasonably
practicable to carry on the activities with the person as a member:
(f) In the case of a person who is an individual, if either of the
following applies:
(1) The person dies.
(2) In a member-managed limited liability company if either of the
following applies:
(A) A guardian or general conservator for the person is appointed.
(B) There is a judicial order that the person has otherwise become
incapable of performing the person's duties as a member under this
title or the operating agreement.
(g) In a member-managed limited liability company, the person
becomes a debtor in bankruptcy.
(h) In the case of a person that is a trust or is acting as a
member by virtue of being a trustee of a trust, the trust's entire
transferable interest in the limited liability company is distributed
but not solely by reason of a substitution of a successor trustee.
(i) In the case of a person that is an estate or is acting as a
member by virtue of being a personal representative of an estate, the
estate's entire transferable interest in the limited liability
company is distributed but not solely by reason of a substitution of
a successor personal representative.
(j) In the case of a member that is not an individual,
partnership, limited liability company, corporation, trust, or
estate, the termination of the member.
(k) The limited liability company participates in a merger under
Article 10 (commencing with Section 17710.01), if either of the
following applies:
(1) The limited liability company is not the surviving entity.
(2) Otherwise as a result of the merger, the person ceases to be a
member.
(l) The limited liability company terminates.
17706.03. (a) When a person is dissociated as a member of a
limited liability company all of the following apply:
(1) The person's right to participate as a member in the
management and conduct of the limited liability company's activities
terminates.
(2) If the limited liability company is member-managed, the person'
s fiduciary duties as a member end with regard to matters arising and
events occurring after the person's dissociation.
(3) Subject to Section 17705.04 and Article 10 (commencing with
Section 17710.01), any transferable interest owned by the person
immediately before dissociation in the person's capacity as a member
is owned by the person solely as a transferee.
(b) A person's dissociation as a member of a limited liability
company does not of itself discharge the person from any debt,
obligation, or other liability to the limited liability company or
the other members that the person incurred while a member.
Article 7. Dissolution and Winding Up
17707.01. A limited liability company, or a series of a limited
liability company, is dissolved, and its activities shall be wound
up, upon the happening of the first to occur of the following:
(a) On the happening of an event set forth in a written operating
agreement or the certificate of organization.
(b) By the vote of a majority in interest of the members of the
limited liability company, or a series of a limited liability
company, or a greater percentage of the voting interests of members
as may be specified in the certificate of organization, or a written
operating agreement.
(c) The passage of 90 consecutive days during which the limited
liability company, or a series of a limited liability company, has no
members, except on the death of a natural person who is the sole
member of a limited liability company, or a series of a limited
liability company, the status of the member, including a membership
interest, may pass to the heirs, successors, and assigns of the
member by will or applicable law. The heir, successor, or assign of
the member's interest becomes a substituted member pursuant to
Section 17705.02, subject to administration as provided by applicable
law, without the permission or consent of the heirs, successors, or
assigns or, those administering the estate of the deceased member.
(d) Entry of a decree of judicial dissolution pursuant to Section
17707.03.
17707.02. (a) Notwithstanding any other provision of this title,
if a domestic limited liability company has not conducted any
business, only a majority of the members, or, if there are no
members, the majority of the managers, if any, or if no members or
managers, the person or a majority of the persons signing the
certificate of organization, may execute and acknowledge a
certificate of cancellation of certificate of organization, on a form
prescribed by the Secretary of State, stating all of the following:
(1) The name of the domestic limited liability company and the
Secretary of State's file number.
(2) That the certificate of cancellation is being filed within 12
months from the date the certificate of organization was filed.
(3) That the limited liability company does not have any debts or
other liabilities, except as provided in paragraph (4).
(4) That a final franchise tax return, as described by Section
23332 of the Revenue and Taxation Code, or a final annual tax return,
as described by Section 17947 of the Revenue and Taxation Code, has
been or will be filed with the Franchise Tax Board, as required under
Part 10.2 (commencing with Section 18401) of Division 2 of the
Revenue and Taxation Code.
(5) That the known assets of the limited liability company
remaining after payment of, or adequately providing for, known debts
and liabilities have been distributed to the persons entitled thereto
or that the limited liability company acquired no known assets, as
the case may be.
(6) That the limited liability company has not conducted any
business from the time of the filing of the certificate of
organization.
(7) That a majority of the managers or members voted, or, if no
managers or members, the person or a majority of the persons signing
the certificate of organization, voted to dissolve the limited
liability company.
(8) If the limited liability company has received payments for
interests from investors, that those payments have been returned to
those investors.
(b) A certificate of cancellation executed and acknowledged
pursuant to subdivision (a) shall be filed with the Secretary of
State within 12 months from the date that the certificate of
organization was filed. The Secretary of State shall notify the
Franchise Tax Board of the cancellation.
(c) Upon filing a certificate of cancellation pursuant to
subdivision (a), a limited liability company shall be cancelled and
its powers, rights, and privileges shall cease.
(d) A domestic limited liability company that filed certificate of
organization on or after January 1, 2004, and that meets all of the
conditions described in subdivision (a) may file a certificate of
cancellation under this section.
17707.03. (a) Pursuant to an action filed by any manager or by
any member or members of a limited liability company, a court of
competent jurisdiction may decree the dissolution of a limited
liability company whenever any of the events specified in subdivision
(b) occurs. Pursuant to an action filed by a manager or by any
member or members of a series, a court of competent jurisdiction may
decree the dissolution of that series whenever any of the events
specified in subdivision (b) with respect to that series occurs.
(b) (1) It is not reasonably practicable to carry on the business
in conformity with the certificate of organization or operating
agreement.
(2) Dissolution is reasonably necessary for the protection of the
rights or interests of the complaining members.
(3) The business of the limited liability company, or a series of
a limited liability company, has been abandoned.
(4) The management of the limited liability company, or a series
of a limited liability company, is deadlocked or subject to internal
dissention.
(5) Those in control of the limited liability company, or a series
of a limited liability company, have been guilty of, or have
knowingly countenanced persistent and pervasive fraud, mismanagement,
or abuse of authority.
(c) (1) In any suit for judicial dissolution, the other members
may avoid the dissolution of the limited liability company, or a
series of a limited liability company, by purchasing for cash the
membership interests owned by the members so initiating the
proceeding, the "moving parties," at their fair market value. In
fixing the value, the amount of any damages resulting if the
initiation of the dissolution is a breach by any moving party or
parties of an agreement with the purchasing party or parties,
including, without limitation, the operating agreement, may be
deducted from the amount payable to the moving party or parties;
provided, that no member who sues for dissolution on the grounds set
forth in paragraphs (3), (4), or (5) of subdivision (a) shall be
liable for damages for breach of contract in bringing that action.
(2) If the purchasing parties elect to purchase the membership
interests owned by the moving parties, are unable to agree with the
moving parties upon the fair market value of the membership
interests, and give bond with sufficient security to pay the
estimated reasonable expenses, including attorneys' fees, of the
moving parties if the expenses are recoverable under paragraph (3),
the court, upon application of the purchasing parties, either in the
pending action or in a proceeding initiated in the superior court of
the proper county by the purchasing parties, shall stay the winding
up and dissolution proceeding and shall proceed to ascertain and fix
the fair market value of the membership interests owned by the moving
parties.
(3) The court shall appoint three disinterested appraisers to
appraise the fair market value of the membership interests owned by
the moving parties, and shall make an order referring the matter to
the appraisers so appointed for the purpose of ascertaining that
value. The order shall prescribe the time and manner
of producing evidence, if evidence is
required. The award of the appraisers or a majority of them, when
confirmed by the court, shall be final and conclusive upon all
parties. The court shall enter a decree that shall provide in the
alternative for winding up and dissolution of the limited liability
company, or a series of a limited liability company, unless payment
is made for the membership interests within the time specified by the
decree. If the purchasing parties do not make payment for the
membership interests within the time specified, judgment shall be
entered against them and the surety or sureties on the bond for the
amount of the expenses, including attorneys' fees, of the moving
parties. Any member aggrieved by the action of the court may appeal
therefrom.
(4) If the purchasing parties desire to prevent the winding up and
dissolution of the limited liability company, or a series of a
limited liability company, they shall pay to the moving parties the
value of their membership interests ascertained and decreed within
the time specified pursuant to this section, or, in the case of an
appeal, as fixed on appeal. On receiving that payment or the tender
of payment, the moving parties shall transfer their membership
interests to the purchasing parties.
(5) For the purposes of this section, the valuation date shall be
the date upon which the action for judicial dissolution was
commenced. However, the court may, upon the hearing of a motion by
any party, and for good cause shown, designate some other date as the
valuation date.
(6) A dismissal of any suit for judicial dissolution by a manager,
member, or members shall not affect the other members' rights to
avoid dissolution pursuant to this section.
17707.04. In the event of a dissolution of a limited liability
company all of the following apply:
(a) The managers who have not wrongfully dissolved the limited
liability company, or a series of a limited liability company, or, if
none, the members, or, if none, the person or a majority of the
persons signing the certificate of organization, may wind up the
affairs of the limited liability company, or a series of the limited
liability company, unless the dissolution occurs pursuant to Section
17707.03, in which event the winding up shall be conducted in
accordance with the decree of dissolution. The persons winding up the
affairs of the limited liability company, or a series of a limited
liability company, shall give written notice of the commencement of
winding up by mail to all known creditors and claimants whose
addresses appear on the records of the limited liability company.
(b) Upon the petition of any manager or of any member or members,
or three or more creditors of a limited liability company, a court of
competent jurisdiction may enter a decree ordering the winding up of
the limited liability company, or a series of a limited liability
company, if that appears necessary for the protection of any parties
in interest. The decree shall designate the managers or members, or
if good cause is shown, another person or persons, who are to wind up
the affairs of the limited liability company, or a series of the
limited liability company.
(c) Except as otherwise provided in the certificate of
organization or a written operating agreement, the persons winding up
the affairs of the limited liability company, or a series of a
limited liability company, pursuant to this section shall be entitled
to reasonable compensation.
17707.05. (a) Except as otherwise provided in the certificate of
organization or the written operating agreement, after determining
that all the known debts and liabilities of a limited liability
company, or a series of a limited liability company, in the process
of winding up, including, without limitation, debts and liabilities
to members who are creditors of the limited liability company, or a
series of a limited liability company, have been paid or adequately
provided for, the remaining assets shall be distributed among the
members according to their respective rights and preferences as
follows:
(1) To members in satisfaction of liabilities for distributions
pursuant to Sections 17704.04, 17704.05 and 17704.06.
(2) To members of the limited liability company, or a series of a
limited liability company, for the return of their contributions.
(3) To members in the proportions in which those members share in
distributions.
(b) If the winding up is by court proceeding or subject to court
supervision, the distribution shall not be made until after the
expiration of any period for the presentation of claims that has been
prescribed by order of the court.
(c) (1) The payment of a debt or liability, whether the
whereabouts of the creditor is known or unknown, has been adequately
provided for if the payment has been provided for by either of the
following means:
(A) Payment for the debt or liability has been assumed or
guaranteed in good faith by one or more financially responsible
persons or by the United States government or any agency of the
United States government, and the provision, including the financial
responsibility of the person, was determined in good faith and with
reasonable care by the members or managers of the limited liability
company to be adequate at the time of any distribution of the assets
pursuant to this section.
(B) The amount of the debt or liability has been deposited as
provided in Section 2008 of the General Corporation Law.
(2) This subdivision shall not prescribe the exclusive means of
making adequate provision for debts and liabilities.
17707.06. (a) A limited liability company, or a series of a
limited liability company, that is dissolved nevertheless continues
to exist for the purpose of winding up its affairs, prosecuting and
defending actions by or against it in order to collect and discharge
obligations, disposing of and conveying its property, and collecting
and dividing its assets. A limited liability company, or a series of
a limited liability company, shall not continue business except so
far as necessary for its winding up.
(b) No action or proceeding to which a limited liability company
is a party abates by the dissolution of the limited liability
company, or a series of a limited liability company, or by reason of
proceedings for its winding up and dissolution.
(c) Any assets inadvertently or otherwise omitted from the winding
up continue in the dissolved limited liability company, or a series
of a limited liability company, for the benefit of the persons
entitled to those assets upon dissolution and on realization shall be
distributed accordingly.
(d) After dissolution of the limited liability company, or a
series of a limited liability company, the limited liability company,
or a series of a limited liability company, is bound by both of the
following:
(1) The act of a person authorized to wind up the affairs of the
limited liability company, or a series of a limited liability
company, if the act is appropriate for winding up the activities of
the limited liability company, or a series of the limited liability
company.
(2) The act of a person authorized to act on behalf of the limited
liability company, or a series of a limited liability company, if
the act would have bound the limited liability company, or a series
of a limited liability company, before dissolution, if the other
party to the transaction did not have notice of the dissolution.
17707.07. (a) (1) Causes of action against a dissolved limited
liability company, or a series of a limited liability company,
whether arising before or after the dissolution of the limited
liability company, or a series of a limited liability company, may be
enforced against any of the following:
(A) Against the dissolved limited liability company, or a series
of a limited liability company, to the extent of its undistributed
assets, including, without limitation, any insurance assets held by
the limited liability company, or a series of a limited liability
company, that may be available to satisfy claims.
(B) If any of the assets of the dissolved limited liability
company, or a series of a limited liability company, have been
distributed to members, against members of the dissolved limited
liability company, or a series of a limited liability company, to the
extent of the limited liability company, or a series of a limited
liability company, assets distributed to them upon dissolution of the
limited liability company, or a series of a limited liability
company.
Any member compelled to return distributed assets in an amount
that exceeds the sum of the member's pro rata share of the claim and
the amount for which the member could otherwise be held liable under
Section 17704.05 or 17704.06 may seek contribution for the excess
from any other member or manager, up to the sum of that other person'
s pro rata share of the claim and that other person's liabilities
under Section 17704.05 or 17704.06; provided that in case of
dissolution of a series, such member may seek contribution as
provided in this section only from another member or manager of that
series.
(2) Except as set forth in subdivision (c), all causes of action
against a member of a dissolved limited liability company, or a
series of a limited liability company, arising under this section are
extinguished unless the claimant commences a proceeding to enforce
the cause of action against that member of a dissolved limited
liability company, or a series of a limited liability company, prior
to the earlier of the following:
(A) The expiration of the statute of limitations applicable to the
cause of action.
(B) Four years after the effective date of the dissolution of the
limited liability company or a series of a limited liability company.
(3) As a matter of procedure only, and not for purposes of
determining liability, members of the dissolved limited liability
company, or a series of a limited liability company, may be sued in
the name of the limited liability company, or a series of a limited
liability company, upon any cause of action against the limited
liability company, or a series of a limited liability company. This
section does not affect the rights of the limited liability company,
or a series of a limited liability company, or its creditors under
Sections 17704.05 and 17704.06, or the rights, if any, of creditors
under the Uniform Fraudulent Transfer Act, that may arise against the
member of a limited liability company, or a series of a limited
liability company.
(b) Summons or other process against a limited liability company,
or a series of a limited liability company, may be served by
delivering a copy of a limited liability company to a manager,
member, officer, or person having charge of its assets or, if none of
these persons can be found, to any agent upon whom process might be
served at the time of dissolution. If none of those persons can be
found with due diligence and it is so shown by affidavit to the
satisfaction of the court, then the court may make an order that
summons or other process be served upon the dissolved limited
liability company, or a series of a limited liability company, by
personally delivering a copy of the summons or other process,
together with a copy of the order, to the Secretary of State or an
assistant or deputy Secretary of State. Service in this manner is
deemed complete on the 10th day after delivery of the process to the
Secretary of State. Upon receipt of process and the fee therefor, the
Secretary of State shall give notice to the limited liability
company as provided in Section 17717.02.
(c) Every limited liability company and each series of a limited
liability company shall survive and continue to exist indefinitely
for the purpose of being sued in any quiet title action. Any judgment
rendered in that action shall bind each and all of its members or
other persons having any equity or other interest in the limited
liability company, or a series of a limited liability company, to the
extent of that interest and the action shall have the same force and
effect as an action brought under the provisions of Sections 410.50
and 410.60 of the Code of Civil Procedure. Service of summons or
other process in any action may be made as provided in Chapter 4
(commencing with Section 413.10) of Title 5 of Part 2 of the Code of
Civil Procedure or as provided in subdivision (b).
(d) For purposes of Article 4 (commencing with Section 19071) of
Chapter 4 of Part 10.2 of Division 2 of the Revenue and Taxation
Code, the liability described in this section shall be considered a
liability at law within respect to a dissolved limited liability
company, or a series of a limited liability company.
17707.08. (a) (1) The managers shall cause to be filed in the
office of, and on a form prescribed by, the Secretary of State, a
certificate of dissolution upon the dissolution of the limited
liability company pursuant to Article 7 (commencing with Section
17707.01), unless the event causing the dissolution is that specified
in subdivision (c) of Section 17707.01, in which case the persons
conducting the winding up of the limited liability company's affairs
pursuant to Section 17707.04 shall have the obligation to file the
certificate of dissolution.
(2) The certificate of dissolution shall set forth all of the
following:
(A) The name of the limited liability company and the Secretary of
State's file number.
(B) Any other information the persons filing the certificate of
dissolution determine to include.
(3) If a dissolution pursuant to subdivision (b) of Section
17707.01 is made by the vote of all of the members and a statement to
that effect is added to the certificate of cancellation of
certificate of organization pursuant to subdivision (b), the separate
filing of a certificate of dissolution pursuant to this subdivision
is not required.
(b) (1) The persons who filed the certificate of dissolution shall
cause to be filed in the office of, and on a form prescribed by, the
Secretary of State, a certificate of cancellation of certificate of
organization upon the completion of the winding up of the affairs of
the limited liability company pursuant to Section 17707.06, unless
the event causing the dissolution is that specified in subdivision
(c) of Section 17707.01, in that case the persons conducting the
winding up of the limited liability company's affairs pursuant to
Section 17707.04 shall have the obligation to file the certificate of
cancellation of certificate of organization.
(2) The certificate of cancellation of certificate of organization
shall set forth all of the following:
(A) The name of the limited liability company and the Secretary of
State's file number.
(B) That a final franchise tax return, as described by Section
23332 of the Revenue and Taxation Code, or a final annual tax return,
as described by Section 17947 of the Revenue and Taxation Code, has
been or will be filed with the Franchise Tax Board, as required under
Part 10.2 (commencing with Section 18401) of Division 2 of the
Revenue and Taxation Code.
(C) Any other information the persons filing the certificate of
cancellation of certificate of organization determine to include.
(3) The Secretary of State shall notify the Franchise Tax Board of
the filing.
17707.09. (a) Notwithstanding the filing of a certificate of
dissolution, a majority in interest of the members may cause to be
filed, in the office of, and on a form prescribed by, the Secretary
of State, a certificate of continuation, in any of the following
circumstances:
(1) The business of the limited liability company is to be
continued pursuant to a unanimous vote of the remaining members.
(2) The dissolution of the limited liability company was by vote
of the members pursuant to subdivision (b) of Section 17707.01 and
each member who consented to the dissolution has agreed in writing to
revoke his or her vote in favor of or consent to the dissolution.
(3) The limited liability company was not, in fact, dissolved.
(b) The certificate of continuation shall set forth all of the
following:
(1) The name of the limited liability company and the Secretary of
State's file number.
(2) The grounds provided by subdivision (a) that are the basis for
filing the certificate of continuation.
(3) Upon the filing of a certificate of continuation, the
certificate of dissolution shall be of no effect from the time of the
filing of the certificate of dissolution.
17707.10. (a) A domestic limited liability company whose
certificate of organization has been canceled pursuant to Section
17707.08 may be revived by filing with, and on a form prescribed by,
the Secretary of State, a certificate of revival. The certificate of
revival shall be accompanied by written confirmation by the Franchise
Tax Board that all of the following have been paid to the Franchise
Tax Board:
(1) The annual tax due under Section 23038 of the Revenue and
Taxation Code.
(2) The annual fee due under Section 17943 of the Revenue and
Taxation Code.
(3) All penalties and interest for each year for which the
domestic limited liability company failed to pay the annual tax,
including each year between the cancellation of its certificate of
organization and its revival.
(b) The certificate of revival shall set forth all of the
following:
(1) The name of the limited liability company at the time its
certificate of organization was cancelled, and if the name is not
available at the time of revival, the name under which the limited
liability company is to be revived.
(2) The date of filing of the original certificate of
organization.
(3) The address of the limited liability company's designated
office.
(4) The name and address of the initial agent for service of
process in accordance with paragraph (1) of subdivision (a) of
Section 17701.13.
(5) A statement that the certificate of revival is filed by one or
more managers of a manager-managed limited liability company or one
or more members of a member-managed limited liability company
authorized to execute and file the certificate of revival to revive
the limited liability company.
(6) The Secretary of State's file number for the original limited
liability company.
(7) The name and address of each manager of a manager-managed
limited liability company or each member of a member-managed limited
liability company.
(8) Any other matters the managers or members executing the
certificate of revival determine to include in the certificate.
(c) The certificate of revival should be deemed to be an amendment
to the certificate of organization, and the limited liability
company shall not be required to take any further action to amend its
certificate of organization pursuant to Section 17702.02 with
respect to the matter set forth in the certificate of revival.
(d) Upon the filing of the certificate of revival, the limited
liability company shall be revived with the same force and effect as
if the certificate of organization had not been canceled pursuant to
Section 17707.08. The revival shall validate all contracts, acts,
matters, and things made, done, and performed by the limited
liability company, its managers, members, employees, and agents
following the time its certificate of organization was canceled
pursuant to Section 17702.08 with the same force and effect and all
intents and purposes as if the certificate of organization had
remained in full force and effect. This provision shall apply
provided that third parties are relying on the acts of the limited
liability company, its managers, members, employees, and agents. All
real and personal property, and all rights and interests, that belong
to a limited liability company at the time its certificate of
organization was canceled pursuant to Section 17707.08 or that were
acquired by the limited liability company following the cancellation
of the certificate of organization, that were not disposed of prior
to the time of its revival, shall be vested in the limited liability
company after its revival as fully as if they were held by the
limited liability company at, and during the time after, as the case
may be, the time the certificate of organization was cancelled. After
its revival, the limited liability company and its managers or
members shall have all of the same liability for contracts, acts,
matters, and things made, done, or performed in the limited liability
company's name and on behalf of its managers, members, employees,
and agents, as the limited liability company and its members would
have had if the limited liability company's certificate of
organization had at all times remained in full force and effect.
17707.11. (a) A series that has been dissolved may be revived
upon compliance with all of the following conditions:
(1) The affirmative vote or consent shall have been obtained from
the members or other persons of the series entitled to vote or
consent at the time that is either of the following:
(A) Required for revival under its operating agreement.
(B) If its operating agreement does not state the vote or consent
required for reinstatement of that series, sufficient for dissolution
of a series under this title, or such greater or lesser vote or
consent as is required for dissolution of a series under its
operating agreement.
(2) The members and other persons of a series having authority
under the title and under the operating agreement to bring about or
prevent dissolution of a series shall not have, before or at the time
of the vote or consent required by paragraph (1), voted against
revival of a series or delivered to the limited liability company
their written objection to revival of a series.
(3) In the case of a series dissolved in a judicial proceeding
pursuant to Section 17707.03 initiated by one or more of the members
of the series, the affirmative vote or consent of each member
described in paragraph (1) shall have been obtained and shall be
included in the vote or consent required by paragraph (1).
(b) To the extent that an operating agreement provides for the
voting rights of members or other persons of a series, for the
calling of meetings, for notices of meetings, for consents and
actions of members and other persons of the series without a meeting,
for establishing a record date for meetings, or for other matters
concerning the voting or consent of members and other persons of the
series, those provisions shall govern the vote or consent required by
paragraph (1) of subdivision (a) with respect to the series and the
vote or objection of members and other persons of the series provided
for in paragraph (2) of subdivision (a) with respect to the series.
(c) The revival shall validate all contracts, acts, matters, and
things made, done, and performed by the series, its managers,
members, employees, and agents following the time its dissolution
with the same force and effect and all intents and purposes as if the
series had remained in full force and effect. This subdivision shall
apply provided that third parties are relying on the acts of the
limited liability company, its managers, members, employees, and
agents. All real and personal property, and all rights and interests,
that belong to a series at the time its dissolution or that were
acquired by the series following the dissolution, that were not
disposed of prior to the time of its revival, shall be vested in the
series after its revival as fully as if they were held by the series
at, and during the time after, as the case may be, the time the
dissolution. After its revival, the series and its managers or
members shall have all of the same liability for contracts, acts,
matters, and things made, done, or performed in the series' name and
on behalf of its managers, members, employees, and agents, as the
series and its members would have had if the series had at all times
remained in full force and effect.
Article 8. Foreign Limited Liability Companies
17708.01. (a) The law of the state or other jurisdiction under
which a foreign limited liability company is formed governs all of
the following:
(1) The organization of the limited liability company, its
internal affairs, and the authority of its members and managers.
(2) The liability of a member as member and a manager as manager
for the debts, obligations, or other liabilities of the limited
liability company or a series of the limited liability company.
(b) A foreign limited liability company shall not be denied a
certificate of authority by reason of any difference between the law
of the jurisdiction under which the limited liability company is
formed and the law of this state.
(c) A certificate of authority does not authorize a foreign
limited liability company to engage in any business or exercise any
power that a limited liability company shall not engage in or
exercise in this state.
17708.02. (a) A foreign limited liability company, or a series of
a limited liability company, may apply for a certificate of
authority to transact business in this state by delivering an
application to the Secretary of State for filing. The application
shall state all of the following:
(1) The name of the limited liability company and, if the name
does not comply with Section 17701.08, an alternate name adopted
pursuant to subdivision (a) of Section 17708.05.
(2) The name of the state or other jurisdiction under whose law
the limited liability company is formed.
(3) The street and mailing addresses of the limited liability
company's principal office and, if the law of the jurisdiction under
which the limited liability company is formed requires the limited
liability company to maintain an office in that jurisdiction, the
street and mailing addresses of the required office.
(4) The name, street, and mailing addresses of the limited
liability company's initial agent for service of process in this
state.
(5) If the foreign limited liability company is a low-profit
limited liability company, the foreign limited liability company
shall comply with Section 17701.08.
(b) A foreign limited liability company shall deliver with a
completed application under subdivision (a) a certificate of
existence or a record of similar import signed by the Secretary of
State or other official having custody of the limited liability
company's publicly filed records in the state or other jurisdiction
under whose law the limited liability company is formed.
(c) The Secretary of State shall include with instructional
materials, provided in conjunction with registration under
subdivision (a), a notice that filing the registration will obligate
the limited liability company to
pay an annual tax to the Franchise Tax Board pursuant to
Section 17941 of the Revenue and Taxation Code. That notice shall be
updated annually to specify the dollar amount of the tax.
(d) If a foreign limited liability company establishes or provides
for the establishment of one or more series of assets, that fact
shall be stated on the statement of foreign qualification. In
addition, the foreign limited liability company shall state on the
statement of foreign qualification whether the debts, liabilities,
and obligations incurred, contracted for or otherwise existing with
respect to a series, if any, shall be enforceable against the assets
of that series only, and not against the assets of the foreign
limited liability company generally or any other series of the
foreign limited liability company, and whether any of the debts,
liabilities, obligations, and expenses incurred, contracted for, or
otherwise existing with respect to the foreign limited liability
company generally or any other series of the foreign limited
liability company shall be enforceable against the assets of that
series
17708.03. (a) A foreign limited liability company that enters
into repeated and successive transactions of business in this state,
other than in interstate or foreign commerce, is considered to be
transacting business in this state within the meaning of this
article.
(b) Without excluding other activities that may not be considered
to be transacting business in this state within the meaning of this
article, activities of a foreign limited liability company, or a
series of the foreign limited liability company, that do not
constitute transacting business in this state include all of the
following:
(1) Maintaining or defending any action or suit or any
administrative or arbitration proceeding, or effecting the settlement
of those, or the settlement of claims or disputes.
(2) Carrying on any activity concerning its internal affairs,
including holding meetings of its members or managers.
(3) Maintaining accounts in financial institutions.
(4) Maintaining offices or agencies for the transfer, exchange,
and registration of the limited liability company's own securities or
maintaining trustees or depositories with respect to those
securities.
(5) Selling through independent contractors.
(6) Soliciting or procuring orders, whether by mail or electronic
means or through employees or agents or otherwise, if the orders
require acceptance outside this state before they become contracts.
(7) Creating or acquiring indebtedness, evidences of indebtedness,
mortgages, liens, or security interests in real or personal
property.
(8) Securing or collecting debts or enforcing mortgages or other
security interests in property securing the debts and holding,
protecting, or maintaining property so acquired.
(9) Conducting an isolated transaction that is completed within
180 days and is not in the course of a number of repeated
transactions of a like nature.
(10) Transacting business in interstate commerce.
(c) Without excluding other activities that may not be considered
to be transacting business in this state within the meaning of this
article, a foreign limited liability company, or a series of a
foreign limited liability company, shall not be considered to be
transacting that business in this state merely because its subsidiary
transacts that business in this state, or merely because of its
status as any one or more of the following:
(1) A shareholder of a domestic corporation.
(2) A shareholder of a foreign corporation transacting intrastate
business.
(3) A limited partner of a foreign limited partnership transacting
intrastate business.
(4) A limited partner of a domestic limited partnership.
(5) A member or manager of a foreign limited liability company
transacting intrastate business.
(6) A member or manager of a domestic limited liability company.
(d) A person shall not be deemed to be transacting business in
this state within the meaning of this article merely because of its
status as a member or manager of a domestic limited liability
company, or a series of a domestic limited liability company, or a
foreign limited liability company registered to transact intrastate
business in this state.
(e) This section does not apply in determining the contacts or
activities that may subject a foreign limited liability company, or a
series of a foreign limited liability company, to service of
process, taxation, or regulation under law of this state other than
this article.
17708.04. Unless the Secretary of State determines that an
application for a certificate of authority does not comply with the
filing requirements of this article, the Secretary of State, upon
payment of all required filing fees, shall file the application of a
foreign limited liability company, prepare, sign, and file a
certificate of authority to transact business in this state, and send
a copy of the filed certificate, together with a receipt for the
fees paid, to the limited liability company or its representative.
17708.05. (a) A foreign limited liability company whose name does
not comply with Section 17701.08 shall not obtain a certificate of
authority until it adopts, for the purpose of transacting business in
this state, an alternate name that complies with Section 17701.08. A
foreign limited liability company that adopts an alternate name
under this subdivision and obtains a certificate of authority with
the alternate name need not comply with fictitious or assumed name
statutes. After obtaining a certificate of authority with an
alternate name, a foreign limited liability company shall transact
business in this state under the alternate name unless the limited
liability company is authorized under fictitious or assumed name
statutes to transact business in this state under another name.
(b) If a foreign limited liability company, or a series of a
foreign limited liability company authorized to transact business in
this state changes its name to one that does not comply with Section
17701.08, it shall not thereafter transact business in this state
until it complies with subdivision (a) and obtains an amended
certificate of authority.
17708.06. (a) A certificate of authority of a foreign limited
liability company to transact business in this state may be revoked
by the Secretary of State in the manner provided in subdivisions (b)
and (c) if the limited liability company does not do any of the
following:
(1) Pay, within 60 days after the due date, any fee, tax, or
penalty due to the Secretary of State under this article or law other
than this article.
(2) Deliver, within 60 days after the due date, its annual report
required under Section 17702.09.
(3) Appoint and maintain an agent for service of process as
required by subdivision (b) of Section 17701.13.
(4) Deliver, for filing, a statement of a change under Section
17701.14 within 30 days after a change has occurred in the name or
address of the agent.
(b) To revoke a certificate of authority of a foreign limited
liability company, the Secretary of State shall prepare, sign, and
file a notice of revocation and send a copy to the limited liability
company's agent for service of process in this state, or if the
limited liability company does not appoint and maintain a proper
agent in this state, to the limited liability company's designated
office. The notice shall state all of the following:
(1) The revocation's effective date, that shall be at least 60
days after the date the Secretary of State sends the copy.
(2) The grounds for revocation under subdivision (a).
(c) The authority of a foreign limited liability company and all
series of a foreign limited liability company, to transact business
in this state ceases on the effective date of the notice of
revocation unless before that date the limited liability company
cures each ground for revocation stated in the notice filed under
subdivision (b). If the limited liability company cures each ground,
the Secretary of State shall file a record stating that fact.
17708.07. To cancel its certificate of authority to transact
business in this state, a foreign limited liability company shall
deliver to the Secretary of State for filing a notice of cancellation
stating the name of the limited liability company and that the
limited liability company desires to cancel its certificate of
authority. The certificate is canceled when the notice becomes
effective.
17708.08. (a) A foreign limited liability company, or a series of
a foreign limited liability company, transacting business in this
state shall not maintain an action or proceeding in this state unless
it has a certificate of authority to transact business in this
state.
(b) The failure of a foreign limited liability company, or a
series of a foreign limited liability company, to have a certificate
of authority to transact business in this state does not impair the
validity of a contract or act of the limited liability company or
prevent the limited liability company from defending an action or
proceeding in this state.
(c) A member or manager of a foreign limited liability company, or
a series of a foreign limited liability company, is not liable for
the debts, obligations, or other liabilities of the limited liability
company solely because the limited liability company transacted
business in this state without a certificate of authority.
(d) If a foreign limited liability company, or a series of a
foreign limited liability company, transacts business in this state
without a certificate of authority or cancels its certificate of
authority, it shall be deemed to have appointed the Secretary of
State as its agent for service of process for rights of action
arising out of the transaction of business in this state.
17708.09. The Attorney General may maintain an action to enjoin a
foreign limited liability company from transacting business in this
state in violation of this title.
Article 9. Actions by Members
17709.01. Any member of a series, foreign, or domestic limited
liability company may bring a class action on behalf of all or a
class of members to enforce any claim common to those members and any
of those actions shall be governed by the law governing class
actions generally, provided that in order to maintain the class
action there shall be no requirement that the class be so numerous
that joinder of all members of the class is impracticable.
17709.02. (a) No action shall be instituted or maintained in
right of any domestic or foreign limited liability company by any
member of the limited liability company, or a series of a limited
liability company, unless both of the following conditions exist:
(1) The plaintiff alleges in the complaint that the plaintiff was
a member of record, or beneficiary, at the time of the transaction or
any part of the transaction of which the plaintiff complains, or
that the plaintiff's interest later devolved upon the plaintiff by
operation of law from a member who was a member at the time of the
transaction or any part of the transaction complained of. Any member
who does not meet these requirements may nevertheless be allowed in
the discretion of the court to maintain the action on a preliminary
showing to and determination by the court, by motion and after a
hearing at which the court shall consider any evidence, by affidavit
or testimony, as it deems material, of all of the following:
(A) There is a strong prima facie case in favor of the claim
asserted on behalf of the limited liability company or a series of a
limited liability company.
(B) No other similar action has been or is likely to be
instituted.
(C) The plaintiff acquired the interest before there was
disclosure to the public or to the plaintiff of the wrongdoing of
which plaintiff complains.
(D) Unless the action can be maintained, the defendant may retain
a gain derived from defendant's willful breach of a fiduciary duty.
(E) The requested relief will not result in unjust enrichment of
the limited liability company or any member of the limited liability
company or a series of a limited liability company.
(2) The plaintiff alleges in the complaint with particularity the
plaintiff's efforts to secure from the managers the action the
plaintiff desires or the reasons for not making that effort, and
alleges further that the plaintiff has either informed the limited
liability company, or a series of a limited liability company, or the
managers in writing of the ultimate facts of each cause of action
against each defendant or delivered to the limited liability company
or the managers a true copy of the complaint that the plaintiff
proposes to file.
(b) In any action referred to in subdivision (a), at any time
within 30 days after service of summons upon the limited liability
company or upon any defendant who is a manager of the limited
liability company, or a series of the limited liability company, or
held that position at the time of the acts complained of, the limited
liability company or the defendant may move the court for an order,
upon notice and hearing, requiring the plaintiff to furnish security
as hereinafter provided. The motion shall be based upon one or both
of the following grounds:
(1) That there is no reasonable possibility that the prosecution
of the cause of action alleged in the complaint against the moving
party will benefit the limited liability company, or a series of the
limited liability company, or its members.
(2) That the moving party, if other than the limited liability
company, or a series of the limited liability company, did not
participate in the transaction complained of in any capacity. The
court, on application of the limited liability company, or a series
of the limited liability company, or any defendant, may, for good
cause shown, extend the 30-day period for an additional period not
exceeding 60 days.
(c) (1) At the hearing upon any motion pursuant to subdivision
(b), the court shall consider evidence, written or oral, by witnesses
or affidavit, as may be material to the ground upon which the motion
is based, or to a determination of the probable reasonable expenses,
including attorneys' fees, of the limited liability company, or a
series of the limited liability company, and the moving party that
will be incurred in the defense of the action.
(2) If the court determines, after hearing the evidence adduced by
the parties, that the moving party has established a probability in
support of any of the grounds upon which the motion is based, the
court shall fix the nature and amount of security, not to exceed
fifty thousand dollars ($50,000), to be furnished by the plaintiff
for reasonable expenses, including attorney's fees, that may be
incurred by the moving party and the limited liability company in
connection with the action. A ruling by the court on the motion shall
not be a determination of any issue in the action or of the merits
of the action. The amount of the security may thereafter be increased
or decreased in the discretion of the court upon a showing that the
security provided has or may become inadequate or is excessive, but
the court shall not in any event increase the total amount of the
security beyond fifty thousand dollars ($50,000) in the aggregate for
all defendants. If the court, upon a motion, makes a determination
that security shall be furnished by the plaintiff as to any one or
more defendants, the action shall be dismissed as to that defendant
or those defendants, unless the security required by the court has
been furnished within any reasonable time as shall be fixed by the
court. The limited liability company and the moving party shall have
recourse to the security in the amount that the court determines upon
the termination of the action.
(d) If the plaintiff, either before or after a motion is made
pursuant to subdivision (b), or any order or determination pursuant
to that motion, posts good and sufficient bond or bonds in the
aggregate amount of fifty thousand dollars ($50,000) to secure the
reasonable expenses of the parties entitled to make the motion, the
plaintiff shall be deemed to have complied with the requirements of
this section and with any order for security made pursuant to this
section. Any motion then pending shall be dismissed and no further or
additional bond or other security shall be required.
(e) If a motion is filed pursuant to subdivision (b), no pleadings
need be filed by the limited liability company or any other
defendant and the prosecution of the action shall be stayed until 10
days after the motion has been disposed of.
17709.03. (a) If a limited liability company is named as or made
a party in a derivative proceeding, the limited liability company may
appoint a special litigation committee to investigate the claims
asserted in the proceeding and determine whether pursuing the action
is in the best interests of the limited liability company. If the
limited liability company appoints a special litigation committee, on
motion by the committee made in the name of the limited liability
company, except for good cause shown, the court shall stay discovery
for the time reasonably necessary to permit the committee to make its
investigation. This subdivision does not prevent the court from
enforcing a person's right to information under Section 17704.10 or,
for good cause shown, granting extraordinary relief in the form of a
temporary restraining order or preliminary injunction.
(b) A special litigation committee may be composed of one or more
disinterested and independent individuals, who may be members.
(c) A special litigation committee may be appointed as follows:
(1) In a member-managed limited liability company as follows:
(A) By the consent of a majority of the members not named as
defendants or plaintiffs in the proceeding.
(B) If all members are named as defendants or plaintiffs in the
proceeding, by a majority of the members named as defendants.
(2) In a manager-managed limited liability company as follows:
(A) By a majority of the managers not named as defendants or
plaintiffs in the proceeding.
(B) If all managers are named as defendants or plaintiffs in the
proceeding, by a majority of the managers named as defendants.
(d) After appropriate investigation, a special litigation
committee may determine that it is in the best interests of the
limited liability company that the proceeding do any of the
following:
(1) Continue under the control of the plaintiff.
(2) Continue under the control of the committee.
(3) Be settled on terms approved by the committee.
(4) Be dismissed.
(e) After making a determination under subdivision (d), a special
litigation committee shall file with the court a statement of its
determination and its report supporting its determination, giving
notice to the plaintiff. The court shall determine whether the
members of the committee were disinterested and independent and
whether the committee conducted its investigation and made its
recommendation in good faith, independently, and with reasonable
care, with the committee having the burden of proof. If the court
finds that the members of the committee were disinterested and
independent and that the committee acted in good faith,
independently, and with reasonable care, the court shall enforce the
determination of the committee. Otherwise, the court shall dissolve
the stay of discovery entered under subdivision (a) and allow the
action to proceed under the direction of the plaintiff.
Article 10. Merger and Conversion
17710.01. For purposes of this article, the following definitions
apply:
(a) "Converted entity" means the other business entity or foreign
other business entity or foreign limited liability company that
results from a conversion of a domestic limited liability company
under this title.
(b) "Converted limited liability company" means a domestic limited
liability company that results from a conversion of an other
business entity or a foreign other business entity or a foreign
limited liability company pursuant to Section 17710.08.
(c) "Converting limited liability company" means a domestic
limited liability company that converts to an other business entity
or a foreign other business entity or a foreign limited liability
company pursuant to this title.
(d) "Converting entity" means an other business entity or a
foreign other business entity or a foreign limited liability company
that converts to a domestic limited liability company pursuant to
Section 17710.08.
(e) "Constituent corporation" means a corporation that is merged
with or into one or more limited liability companies or other
business entities and that includes a surviving corporation.
(f) "Constituent limited liability company" means a limited
liability company that is merged with or into one or more other
limited liability companies or other business entities and that
includes a surviving limited liability company.
(g) "Constituent other business entity" means an other business
entity that is merged with or into one or more limited liability
companies and that includes a surviving other business entity.
(h) "Disappearing limited liability company" means a constituent
limited liability company that is not the surviving limited liability
company.
(i) "Disappearing other business entity" means a constituent other
business entity that is not the surviving other business entity.
(j) "Foreign other business entity" means an other business entity
formed under the laws of any state other than this state or under
the laws of a foreign country.
(k) "Other business entity" means a corporation, general liability
company, limited membership, business trust, real estate investment
trust, or unincorporated association, other than a nonprofit
association, but excludes a limited liability company.
(l) "Surviving limited liability company" means a limited
liability company into which one or more other limited liability
companies or other business entities are merged.
(m) "Surviving other business entity" means an other business
entity into which one or more limited liability companies are merged.
17710.02. (a) A limited liability company may be converted into
an other business entity or a foreign other business entity or a
foreign limited liability company pursuant to this article if both of
the following apply:
(1) Pursuant to a conversion into a domestic or foreign liability
company or limited liability company or into a foreign limited
liability company, each of the members of the converting limited
liability company receives a percentage interest in the profits and
capital of the converted entity equal to that member's percentage
interest in profits and capital of the converting limited liability
company as of the effective time of the conversion.
(2) Pursuant to a conversion into an other business entity or
foreign other business entity not specified in paragraph (1), both of
the following occur:
(A) Each limited liability company interest of the same class is
treated equally with respect to any distribution of cash, property,
rights, interests, or securities of the converted entity, unless all
limited members of the class consent.
(B) The nonredeemable limited liability company interests of the
converting limited liability company are converted only into
nonredeemable interests or securities of the converted entity, unless
all holders of the unredeemable interests consent.
(b) The conversion of a limited liability company to an other
business entity or a foreign other business entity or a foreign
limited liability company may be effected only if both of the
following conditions are satisfied:
(1) The law under which the converted entity will exist expressly
permits the formation of that entity pursuant to a conversion.
(2) The limited liability company complies with all other
requirements of any other law that applies to conversion to the
converted entity.
17710.03. (a) A limited liability company that desires to convert
to an other business entity or a foreign other business entity or a
foreign limited liability company shall approve a plan of conversion.
The plan of conversion shall state all of the following:
(1) The terms and conditions of the conversion.
(2) The place of the organization of the converted entity and of
the converting limited liability company and the name of the
converted entity after conversion.
(3) The manner of converting the membership interests of each of
the members into shares of, securities of, or interests in, the
converted entity.
(4) The provisions of the governing documents for the converted
entity, including the limited liability company certificate of
organization and operating agreement, or articles or certificate of
incorporation if the converted entity is a corporation, to which the
holders of interests in the converted entity are to be bound.
(5) Any other details or provisions that are required by the laws
under which the converted entity is organized, or that are desired by
the parties.
(b) (1) The plan of conversion shall be approved by all managers
and a majority in interest of each class of membership interest or if
there are no managers, a majority in interest of each class of
membership of the converting limited liability company, unless a
greater or lesser approval is required by the operating agreement of
the converting limited liability company.
(2) However, if the members of the limited liability company would
become personally liable for any obligations of the converted entity
as a result of the conversion, the plan of conversion shall be
approved by all of the limited members of the converting limited
liability company, unless the plan of conversion provides that all
members will have dissenters' rights as provided in Article 11
(commencing with Section 17711.01).
(c) Upon the effectiveness of the conversion, all members of the
converting limited liability company, except those that exercise
dissenters' rights as provided in Article 11 (commencing with Section
17711.01), shall be deemed parties to any governing documents for
the converted entity adopted as part of the plan of conversion,
regardless of whether or not the member has executed the plan of
conversion or the governing documents for the converted entity. Any
adoption of governing documents made pursuant to the conversion shall
be effective at the effective time or date of the conversion.
(d) Notwithstanding its prior approval, a plan of conversion may
be amended before the conversion takes effect if the amendment
is approved by all
managers and a majority of the members or if there are no managers, a
majority of the members of the converting limited liability company
and, if the amendment changes any of the principal terms of the plan
of conversion, the amendment is approved by the managers and members
of the converting limited liability company in the same manner and to
the same extent as required for the approval of the original plan of
conversion.
(e) The managers by unanimous approval and the members of a
converting limited liability company may, by majority approval at any
time before the conversion is effective, in their discretion,
abandon a conversion, without further approval by the managers or
members, subject to the contractual rights of third parties other
than managers or members.
(f) The converted entity shall keep the plan of conversion at the
principal place of business of the converted entity if the converted
entity is a domestic liability company or foreign other business
entity, at the principal executive office of, or registrar or
transfer agent of, the converted entity, if the converted entity is a
domestic corporation, or at the office where records are to be kept
pursuant to Section 17701.13 if the converted entity is a domestic
limited liability company. Upon the request of a member of a
converting limited liability company, the authorized person on behalf
of the converted entity shall promptly deliver to the member or the
holder of shares, interests, or other securities, at the expense of
the converted entity, a copy of the plan of conversion. A waiver by a
member of the rights provided in this subdivision shall be
unenforceable.
17710.04. (a) A conversion into an other business entity or a
foreign other business entity or a foreign limited liability company
shall become effective upon the earliest date that all of the
following occur:
(1) The plan of conversion is approved by the members of the
converting limited liability company, as provided in Section
17710.03.
(2) All documents required by law to create the converted entity
are filed, which documents shall also contain a statement of
conversion, if required under Section 17710.06.
(3) The effective date, if set forth in the plan of conversion,
occurs.
(b) A copy of the statement of liability company authority or
certificate of organization complying with Section 17710.06, if
applicable, duly certified by the Secretary of State, is conclusive
evidence of the conversion of the limited liability company.
17710.05. (a) The conversion of a limited liability company into
a foreign limited liability company or foreign other business entity
shall comply with Section 17710.02.
(b) If the limited liability company is converting into a foreign
limited liability company or foreign other business entity, those
conversion proceedings shall be in accordance with the laws of the
state or place of organization of the foreign limited liability
company or foreign other business entity and the conversion shall
become effective in accordance with that law.
(c) (1) To enforce an obligation of a limited liability company
that has converted to a foreign limited liability company or foreign
other business entity, the Secretary of State shall only be the agent
for service of process in an action or proceeding against that
converted foreign entity, if the agent designated for the service of
process for that entity is a natural person and cannot be found with
due diligence or if the agent is a corporation and no person, to whom
delivery may be made, may be located with due diligence, or if no
agent has been designated and if none of the officers, members,
managers, members, or agents of that entity may be located after
diligent search, and it is shown by affidavit to the satisfaction of
the court. The court then may make an order that service be made by
personal delivery to the Secretary of State or to an assistant or
deputy Secretary of State of two copies of the process together with
two copies of the order, and the order shall set forth an address to
which the process shall be sent by the Secretary of State. Service in
this manner is deemed complete on the 10th day after delivery of the
process to the Secretary of State.
(2) Upon receipt of the process and order and the fee set forth in
Section 12206 of the Government Code, the Secretary of State shall
provide notice to that entity of the service of the process by
forwarding by certified mail, return receipt requested, a copy of the
process and order to the address specified in the order.
(3) The Secretary of State shall keep a record of all process
served upon the Secretary of State and shall record the time of
service and the Secretary of State's action with respect to the
process served. The certificate of the Secretary of State, under the
Secretary of State's official seal, certifying to the receipt of
process, the providing of notice of process to that entity, and the
forwarding of the process shall be competent and prima facie evidence
of the matters stated therein.
17710.06. (a) Upon conversion of a limited liability company, one
of the following applies:
(1) If the limited liability company is converting into a domestic
limited partnership, a statement of conversion shall be completed on
a certificate of limited partnership for the converted entity and
shall be filed with the Secretary of State.
(2) If the limited liability company is converting into a domestic
partnership, a statement of conversion shall be completed on the
statement of partnership authority for the converted entity. If no
statement of partnership authority is filed, a certificate of
conversion shall be filed separately with the Secretary of State.
(3) If the limited liability company is converting into a domestic
corporation, a statement of conversion shall be completed on the
articles of incorporation for the converted entity and shall be filed
with the Secretary of State.
(4) If the limited liability company is converting to a foreign
limited liability company or foreign other business entity, a
certificate of conversion shall be filed with the Secretary of State.
(b) Any certificate or statement of conversion shall be executed
and acknowledged by all members, unless a lesser number is provided
in the certificate of organization or operating agreement, and shall
set forth all of the following:
(1) The name and the Secretary of State's file number of the
converting limited liability company.
(2) A statement that the principal terms of the plan of conversion
were approved by a vote of the members, that equaled or exceeded the
vote required under Section 17710.03, specifying each class entitled
to vote and the percentage vote required of each class.
(3) The form of organization of the converted entity.
(4) The mailing address of the converted entity's agent for
service of process and the chief executive office of the converted
entity.
(c) The filing with the Secretary of State of a certificate of
conversion or a statement of partnership authority, certificate of
organization, or articles of incorporation containing a statement of
conversion as set forth in subdivision (a) shall have the effect of
the filing of a certificate of cancellation by the converting limited
liability company, and no converting limited liability company that
has made the filing is required to take any action under Article 7
(commencing with Section 17707.01) as a result of that conversion.
17710.07. (a) Whenever a limited liability company or other
business entity having any real property in this state converts into
a limited liability company or an other business entity pursuant to
the laws of this state or of the state or place where the limited
liability company or other business entity was organized, and the
laws of the state or place of organization, including this state, of
the converting limited liability company or other converting entity
provide substantially that the conversion vests in the converted
limited liability company or other converted entity all the real
property of the converting limited liability company or other
converting entity, the filing for record in the office of the county
recorder of any county in this state where any of the real property
of the converting limited liability company or other converting
entity is located shall evidence record ownership in the converted
limited liability company or other converted entity of all interest
of the converting limited liability company or other converting
entity in and to the real property located in that county if both of
the following apply:
(1) A certificate of conversion or statement of partnership
authority, certificate of limited partnership, or certificate of
organization complying with Section 17710.06, in the form prescribed
and certified by the Secretary of State.
(2) A copy of a certificate of conversion on a statement of
limited partnership authority, certificate of limited partnership,
certificate of organization, articles of incorporation, or other
certificate or document evidencing the creation of a foreign other
business entity or foreign limited liability company by conversion,
containing a statement of conversion, certified by the Secretary of
State or an authorized public official of the state or place pursuant
to the laws of which the conversion is effected.
(b) A filed and, if appropriate, recorded certificate of
conversion or a statement of partnership authority, certificate of
limited partnership, certificate of organization, articles or
certificate of incorporation, or other certificate evidencing the
creation of a foreign other business entity or foreign limited
liability company by conversion, containing a statement of
conversion, filed pursuant to subdivision (a) of Section 17710.06,
stating the name of the converting limited liability company or other
converting entity in whose name property was held before the
conversion and the name of the converted entity or converted limited
liability company, but not containing all of the other information
required by Section 17710.06, operates with respect to the entities
named to the extent provided in subdivision (a).
(c) Recording of a certificate of conversion, or a statement of
partnership authority, certificate of limited partnership,
certificate of organization, articles of incorporation, or other
certificate evidencing the creation of an other business entity or a
limited liability company by conversion, containing a statement of
conversion, in accordance with subdivision (a), shall create, in
favor of bona fide purchasers or encumbrances for value, a conclusive
presumption that the conversion was validly completed.
17710.08. (a) An other business entity or a foreign other
business entity or a foreign limited liability company may be
converted to a domestic limited liability company pursuant to this
article only if the converting entity is authorized by the laws
pursuant to which it is organized to effect the conversion.
(b) An other business entity or a foreign other business entity or
a foreign limited liability company that desires to convert into a
domestic limited liability company shall approve a plan of conversion
or another instrument as is required to be approved to effect the
conversion pursuant to the laws under which that entity is organized.
(c) The conversion of an other business entity or a foreign other
business entity or a foreign limited liability company into a
domestic limited liability company shall be approved by the number or
percentage of the members, members, shareholders, or holders of
interest of the converting entity as is required by the laws under
which that entity is organized, or a greater or lesser percentage,
subject to applicable laws, as set forth in the converting entity's
partnership agreement, certificate of organization, operating
agreement, articles or certificate of incorporation, or other
governing document.
(d) The conversion by an other business entity or a foreign other
business entity or a foreign limited liability company into a
domestic limited liability company shall be effective under this
article at the time the conversion is effective under the laws under
which the converting entity is organized, as long as a certificate of
organization containing a statement of conversion has been filed
with the Secretary of State. If the converting entity's governing law
is silent as to the effectiveness of the conversion, the conversion
shall be effective upon the completion of all acts required under
this title to form a limited liability company.
(e) The filing with the Secretary of State of a certificate of
conversion or a certificate of organization containing a statement of
conversion pursuant to subdivision (a) shall have the effect of the
filing of a certificate of cancellation by the converting foreign
limited liability company or foreign limited liability company and no
converting foreign limited liability company or foreign limited
liability company that has made the filing is required to take any
action under Article 7 (commencing with Section 17701.01) concerning
dissolution as a result of that conversion. If a converting other
business entity is a foreign corporation qualified to transact
business in this state, the foreign corporation shall, by virtue of
the filing, automatically surrender its right to transact intrastate
business.
17710.09. (a) An entity that converts into another entity
pursuant to this article is for all purposes other than for the
purposes of Part 10 (commencing with Section 17701), Part 10.20
(commencing with Section 18401), and Part 11 (commencing with Section
23001) of Division 2 of the Revenue and Taxation Code, the same
entity that existed before the conversion and the conversion shall
not be deemed a transfer of property.
(b) Upon a conversion taking effect, all of the following apply:
(1) All the rights and property, whether real, personal, or mixed,
of the converting entity or converting limited liability company are
vested in the converted entity or converted limited liability
company.
(2) All debts, liabilities, and obligations of the converting
entity or converting limited liability company continue as debts,
liabilities, and obligations of the converted entity or converted
limited liability company.
(3) All rights of creditors and liens upon the property of the
converting entity or converting limited liability company shall be
preserved unimpaired and remain enforceable against the converted
entity or converted limited liability company to the same extent as
against the converting entity or converting limited liability company
as if the conversion had not occurred.
(4) Any action or proceeding pending by or against the converting
entity or converting limited liability company may be continued
against the converted entity or converted limited liability company
as if the conversion had not occurred.
(c) A member of a converting limited liability company is liable
for all of the following:
(1) All obligations of the converting limited liability company
for which the member was personally liable before the conversion.
(2) All obligations of the converted entity incurred after the
conversion takes effect, but those obligations may be satisfied only
out of property of the entity if that member of a limited liability
company, or a shareholder in a corporation, or unless expressly
provided otherwise in the certificate of organization or other
governing documents, a limited partner of a limited partnership, or a
holder of equity securities in another converted entity if the
holders of equity securities in that entity are not personally liable
for the obligations of that entity under the law under which the
entity is organized or its governing documents.
(d) A member of a converted limited liability company remains
liable for any and all obligations of the converting entity for which
the member was personally liable before the conversion, but only to
the extent that the member was liable for the obligations of the
converting entity prior to the conversion.
17710.10. Mergers of limited liability companies shall be
governed by Sections 17710.11 to 17710.19, inclusive.
17710.11. The following entities may be merged pursuant to this
article:
(a) Two or more limited liability companies into one limited
liability company.
(b) One or more limited liability companies and one or more other
business entities into one of those other business entities.
(c) (1) One or more limited liability companies and one or more
other business entities into one limited liability company.
(2) Notwithstanding this section, the merger of any number of
limited liability companies with any number of other business
entities may be effected only if the other business entities that are
organized in California are authorized by the laws under which they
are organized to effect the merger, and the following apply:
(A) If a limited liability company is the surviving limited
liability company, the foreign other business entities are not
prohibited by the laws under which they are organized from effecting
that merger.
(B) If a foreign limited liability company or foreign other
business entity is the survivor of the merger, the laws of the
jurisdiction under which the survivor is organized authorize that
merger. Notwithstanding the first sentence of this paragraph, if one
or more domestic corporations is also a party to the merger described
in that sentence, the merger may be effected only if, with respect
to any foreign other business entity that is a corporation, the
foreign corporation is authorized by the laws under which it is
organized to effect that merger.
17710.12. (a) Each limited liability company and other business
entity that desires to merge shall approve an agreement of merger.
The agreement of merger shall be approved by all managers and a
majority in interest of each class of membership interests of each
constituent limited liability company, unless a greater approval is
required by the operating agreement of the constituent limited
liability company. Notwithstanding the previous sentence, if the
members of any constituent limited liability company become
personally liable for any obligations of a constituent limited
liability company or constituent other business entity as a result of
the merger, the principal terms of the agreement of merger shall be
approved by all of the members of the constituent limited liability
company, unless the agreement of merger provides that all members
shall have the dissenters' rights provided in Article 11 (commencing
with Section 17711.01). The agreement of merger shall be approved on
behalf of each constituent other business entity by those persons
required to approve the merger by the laws under which it is
organized. Other persons, including a parent of a constituent limited
liability company, may be parties to the agreement of merger. The
agreement of merger shall state all of the following:
(1) The terms and conditions of the merger.
(2) The name and place of the organization of the surviving
limited liability company or surviving other business entity, and of
each disappearing limited liability company and disappearing other
business entity, and the agreement of merger may change the name of
the surviving limited liability company, the new name may be the same
as or similar to the name of a disappearing domestic or foreign
limited liability company, subject to Section 17710.08.
(3) The manner of converting the membership interests of each of
the constituent limited liability companies into interests, shares,
or other securities of the surviving limited liability company or
surviving other business entity, and if limited liability company
interests of any of the constituent limited liability companies are
not to be converted solely into interests, shares, or other
securities of the surviving limited liability company or surviving
other business entity, the cash, property, rights, interests, or
securities that the holders of the limited liability company
interests are to receive in exchange for the membership interests,
the cash, property, rights, interests, or securities that may be in
addition to or in lieu of interests, shares, or other securities of
the surviving limited liability company or surviving other business
entity, or that the liability company interests are canceled without
consideration.
(4) Any other details or provisions that are required by the laws
under which any constituent other business entity is organized,
including, if a domestic corporation is a party to the merger,
subdivision (b) of Section 17711.13.
(5) Any other details or provisions that are desired, including,
without limitation, a provision for the treatment of fractional
membership interests.
(b) (1) Each membership interest of the same class of any
constituent limited liability company, other than a membership
interest in another constituent limited liability company that is
being canceled and that is held by a constituent limited liability
company or its parent or a limited liability company of which the
constituent limited liability company is a parent shall, unless all
members of the class consent, be treated equally with respect to any
distribution of cash, property, rights, interests, or securities.
(2) Notwithstanding paragraph (1), except in a merger of a limited
liability company with a limited liability company that controls at
least 90 percent of the membership interests entitled to vote with
respect to the merger, the unredeemable membership interests of a
constituent limited liability company may be converted only into
unredeemable interests or securities of the surviving limited
liability company or other business entity, or a parent if a
constituent limited liability company or a constituent other business
entity or its parent owns, directly or indirectly, prior to the
merger, membership interests of another constituent limited liability
company or interests or securities of a constituent other business
entity representing more than 50 percent of the interests or
securities entitled to vote with respect to the merger of the other
constituent limited liability company or constituent other business
entity or more than 50 percent of the voting power, as defined in
Section 194.5, of a constituent other business entity that is a
domestic corporation, unless all of the members of the class consent.
(3) This subdivision shall apply only to constituent limited
liability companies with over 35 members.
(c) Notwithstanding its prior approval, an agreement of merger may
be amended prior to the filing of the certificate of merger or the
agreement of merger, as provided in Section 17710.14, if the
amendment is approved by the managers and members of each constituent
limited liability company in the same manner as required for
approval of the original agreement of merger and, if the amendment
changes any of the principal terms of the agreement of merger, the
amendment is approved by the managers and members of each constituent
limited liability company in the same manner and to the same extent
as required for the approval of the original agreement of merger, and
by each of the constituent other business entities.
(d) The managers and members of a constituent limited liability
company may, in their discretion, abandon a merger, subject to the
contractual rights, if any, of third parties, including other
constituent limited liability companies and constituent other
business entities, without further approval by the membership
interests, at any time before the merger is effective.
(e) An agreement of merger approved in accordance with subdivision
(a) may do the following:
(1) Effect any amendment to the operating agreement of any
constituent limited liability company.
(2) Effect the adoption of a new operating agreement for a
constituent limited liability company if it is the surviving limited
liability company in the merger. Any amendment to an operating
agreement or adoption of a new operating agreement made pursuant to
the foregoing sentence shall be effective at the effective time or
date of the merger. Notwithstanding the above provisions of this
subdivision, if a greater number of members is required to approve an
amendment to the operating agreement of a constituent limited
liability company than is required to approve the agreement of merger
pursuant to subdivision (a), and the number of members that approve
the agreement of merger is less than the number of members required
to approve an amendment to the operating agreement of the constituent
limited liability company, any amendment to the operating agreement
or adoption of a new operating agreement of that constituent limited
liability company made pursuant to the first sentence of this
subdivision shall be effective only if the agreement of merger
provides that all of the members shall have the dissenters' rights
provided in Article 11 (commencing with Section 17711.01).
(f) The surviving limited liability company or surviving other
business entity shall keep the agreement of merger at its designated
office or at the business address specified in paragraph (5) of
subdivision (a) of Section 17710.14, as applicable, and, upon the
request of a member of a constituent limited liability company or a
holder of shares, interests, or other securities of a constituent
other business entity, the managers or members of the surviving
limited liability company or the authorized person of the surviving
other business entity shall promptly deliver to the member or the
holder of shares, interests, or other securities, at the expense of
the surviving limited liability company or surviving other business
entity, a copy of the agreement of merger. A waiver by a member or
holder of shares, interests, or other securities of the rights
provided in this subdivision shall be unenforceable.
17710.13. Subdivision (b) of Section 17710.12 shall not apply to
any transaction if the commissioner has approved the terms and
conditions of the transaction and the fairness of such terms and
conditions pursuant to Section 25142.
17710.14. (a) If the surviving entity is a limited liability
company or an other business entity, other than a corporation in a
merger in which a domestic corporation is a constituent party, after
approval of a merger by the constituent limited liability companies
and any constituent other business entities, the constituent limited
liability companies and constituent other business entities shall
file a certificate of merger in the office of, and on a form
prescribed by, the Secretary
of State. The certificate of merger shall be executed and
acknowledged by each domestic constituent limited liability company
by all managers, or if none, all members unless a lesser number is
provided in the certificate of organization or operating agreement of
the domestic constituent limited liability company and by each
foreign constituent limited liability company by one or more
managers, or if none, members, and by each constituent other business
entity by those persons required to execute the certificate of
merger by the laws under which the constituent other business entity
is organized. The certificate of merger shall set forth all of the
following:
(1) The names and the Secretary of State's file numbers, if any,
of each of the constituent limited liability companies and
constituent other business entities, separately identifying the
disappearing limited liability companies and disappearing other
business entities and the surviving limited liability company or
surviving other business entity.
(2) If a vote of the members was required pursuant to Section
17710.12, a statement setting forth the total number of outstanding
interests of each class entitled to vote on the merger and that the
principal terms of the agreement of merger were approved by a vote of
the number of interests of each class that equaled or exceeded the
vote required, specifying each class entitled to vote and the
percentage vote required of each class.
(3) If the surviving entity is a limited liability company and not
an other business entity, any change required to the information set
forth in the certificate of organization of the surviving limited
liability company resulting from the merger, including any change in
the name of the surviving limited liability company resulting from
the merger. The filing of a certificate of merger setting forth any
such changes to the certificate of organization of the surviving
limited liability company shall have the effect of the filing of a
certificate of amendment by the surviving limited liability company,
and the surviving limited liability company need not file a
certificate of amendment under Section 17702.02 to reflect those
changes.
(4) The future effective date, that shall be a date certain not
more than 90 days subsequent to the date of filing of the merger, if
the merger is not to be effective upon the filing of the certificate
of merger with the office of the Secretary of State.
(5) If the surviving entity is an other business entity or a
foreign limited liability company, the full name of the entity, type
of entity, legal jurisdiction where the entity was organized and by
whose laws its internal affairs are governed, and the address of the
principal place of business of the entity.
(6) Any other information required to be stated in the certificate
of merger by the laws where each constituent other business entity
is organized, including, if a domestic corporation is a party to the
merger, paragraph (2) of subdivision (g) of Section 17711.13. If the
surviving entity is a foreign limited liability company in a merger
where a domestic corporation is a disappearing other business entity,
a copy of the agreement of merger and attachments as required under
paragraph (1) of subdivision (g) of Section 17711.13 shall be filed
at the same time as the filing of the certificate of merger.
(b) If the surviving entity is a domestic corporation or a foreign
corporation in a merger that a domestic corporation is a constituent
party, after approval of the merger by the constituent limited
liability companies and constituent other business entities, the
surviving corporation shall file in the office of the Secretary of
State a copy of the agreement of merger and attachments required
under paragraph (1) of subdivision (g) of Section 17711.13. The
certificate of merger shall be executed and acknowledged by each
domestic constituent limited liability company by all general
members, unless a lesser number is provided in the certificate of
limited liability company of the domestic constituent limited
liability company.
(c) A certificate of merger or the agreement of merger, as is
applicable under subdivisions (a) and (b), shall have the effect of
the filing of a certificate of cancellation for each disappearing
limited liability company, and no disappearing limited liability
company need take any action under Article 7 (commencing with Section
17707.01) concerning dissolution as a result of the merger.
(d) If the organization disappearing into the other business
entity is a foreign corporation qualified to transact intrastate
business in this state, a certificate of satisfaction of the
Franchise Tax Board as required by Section 23334 of the Revenue and
Taxation Code shall be filed with the certificate of merger or
agreement of merger, as is applicable under subdivisions (a) and (b).
By the filing of the certificate of merger or agreement of merger,
as is applicable, the foreign corporation shall automatically
surrender its right to transact intrastate business.
17710.15. (a) Unless a future effective date is provided in a
certificate of merger or the agreement of merger, if an agreement of
merger is required to be filed under Section 17710.14, in which event
the merger shall be effective at that future effective date, a
merger shall be effective upon the filing of the certificate of
merger or the agreement of merger, as is applicable, in the office of
the Secretary of State.
(b) (1) For all purposes, a copy of the certificate of merger duly
certified by the Secretary of State is conclusive evidence of the
merger of the constituent limited liability companies, either by
themselves or together with constituent other business entities, into
the surviving other business entity, or the constituent limited
liability companies or the constituent other business entities, or
both, into the surviving limited liability company.
(2) In a merger in which the surviving entity is a corporation in
a merger in which a domestic corporation and a domestic limited
liability company are parties to the merger, a copy of an agreement
of merger certified on or after the effective date by an official
having custody thereof has the same force in evidence as the original
and, except as against the state, is conclusive evidence of the
performance of all conditions precedent to the merger, the existence
on the effective date of the surviving corporation, and the
performance of the conditions necessary to the adoption of any
amendment to the articles of incorporation of the surviving
corporation, if applicable, contained in the agreement of merger.
17710.16. (a) Upon a merger of limited liability companies or
limited liability companies and other business entities pursuant to
this chapter, the separate existence of the disappearing limited
liability companies and disappearing other business entities ceases
and the surviving limited liability company or surviving other
business entity shall succeed, without other transfer, act or deed,
to all the rights and property, whether real, personal, or mixed, of
each of the disappearing limited liability companies and disappearing
other business entities, and shall be subject to all the debts and
liabilities of each in the same manner as if the surviving limited
liability company or surviving other business entity had itself
incurred them.
(b) All rights of creditors and all liens upon the property of
each of the constituent limited liability companies and constituent
other business entities shall be preserved unimpaired and may be
enforced against the surviving limited liability company or the
surviving other business entity to the same extent as if the debt,
liability, or duty which gave rise to that lien had been incurred or
contracted by the surviving limited liability company or the
surviving other business entity, provided that such liens upon the
property of a disappearing limited liability company or disappearing
other business entity shall be limited to the property affected
thereby immediately prior to the time the merger is effective.
(c) Any action or proceeding pending by or against any
disappearing limited liability company or disappearing other business
entity may be prosecuted to judgment, which shall bind the surviving
limited liability company or surviving other business entity, or the
surviving limited liability company or surviving other business
entity may be proceeded against or be substituted in the place of the
disappearing limited liability company or disappearing other
business entity.
(d) Nothing in this article is intended to affect the liability a
member of a disappearing limited liability company may have in
connection with the debts and liabilities of the disappearing limited
liability company existing prior to the time the merger is
effective.
17710.17. (a) The merger of any number of domestic limited
liability companies with any number of foreign limited liability
companies or foreign other business entities shall be required to
comply with Section 17710.10.
(b) If the surviving entity is a domestic limited liability
company or a domestic other business entity, the merger proceedings
with respect to that limited liability company or other business
entity and any domestic disappearing limited liability company shall
conform to the provisions of this chapter governing the merger of
domestic limited liability companies, but if the surviving entity is
a foreign limited liability company or a foreign other business
entity, then, subject to the requirements of subdivision (d) and
Article 11 (commencing with Section 17711.01) and, with respect to
any domestic constituent corporation, Section 17711.13, and Chapter
12 (commencing with Section 17712.00) and Chapter 13 (commencing with
Section 17713.00) of Division 1 of Title 1, the merger proceedings
may be in accordance with the laws of the state or place of
organization of the surviving limited liability company or surviving
other business entity.
(c) If the surviving entity is a domestic limited liability
company or domestic other business entity, other than a domestic
corporation, the certificate of merger shall be filed as provided in
subdivision (a) of Section 17710.14, and thereupon, subject to
subdivision (a) of Section 17710.15, the merger shall be effective as
to each domestic constituent limited liability company and domestic
constituent other business entity. If the surviving entity is a
domestic corporation, the agreement of merger with attachments shall
be filed pursuant to in subdivision (b) of Section 17710.14, and
thereupon, subject to subdivision (a) of Section 17710.15, the merger
shall be effective as to each domestic constituent limited liability
company and domestic constituent other business entity unless
another effective date is provided pursuant to Article 11 (commencing
with Section 17711.01) of Division 1 of Title 1, with respect to any
constituent corporation or constituent limited liability company.
(d) If the surviving entity is a foreign limited liability company
or foreign other business entity, the merger shall become effective
in accordance with the law of the jurisdiction where the surviving
limited liability company or surviving other business entity is
organized, but shall be effective as to any domestic disappearing
limited liability company as of the time of effectiveness in the
foreign jurisdiction upon the filing in this state of a certificate
of merger or agreement of merger pursuant to Section 17710.14.
(e) If a merger described in subdivision (c) or (d) also includes
a foreign disappearing limited liability company previously
registered for the transaction of intrastate business in this state
pursuant to Section 17708.02, the filing of the certificate of merger
or agreement of merger, as is applicable under Section 17710.14,
automatically has the effect of a cancellation of registration for
that foreign limited liability company pursuant to Section 17708.07
without the necessity of the filing of a certificate of cancellation.
(f) The provisions of subdivision (b) of Section 17710.12 and
Article 11 (commencing with Section 17711.01) apply to the rights of
the limited members of any of the constituent limited liability
companies that are domestic limited liability companies and of any
domestic limited liability company that is a parent of any foreign
constituent limited liability company.
17710.18. Whenever a domestic or foreign limited liability
company or other business entity having any real property in this
state merges with another limited liability company or other business
entity pursuant to the laws of this state or of the state or place
where any constituent limited liability company or constituent other
business entity was organized, and the laws of the state or place of
organization, including this state of any disappearing limited
liability company or disappearing other business entity provide
substantially that the making and filing of the agreement of merger
or certificate of merger vests in the surviving limited liability
company or surviving other business entity all the real property of
any disappearing limited liability company and disappearing other
business entity, the filing for record in the office of the county
recorder of any county in this state where any of the real property
of the disappearing limited liability company or disappearing other
business entity is located of either of the following shall evidence
record ownership in the surviving limited liability company or
surviving other business entity of all interest of the disappearing
limited liability company or disappearing other business entity in
and to the real property located in that county in which both of the
following occur:
(a) A certificate of merger certified by the Secretary of State,
or other certificate prescribed by the Secretary of State.
(b) A copy of the agreement of merger or certificate of merger,
certified by the Secretary of State or an authorized public official
of the state or place pursuant to the laws of which the merger is
effected.
17710.19. Recording of the certificate of merger in accordance
with Section 17710.18 shall create, in favor of bona fide purchasers
or encumbrancers for value, a conclusive presumption that the merger
was validly completed.
Article 11. Dissenters' Rights
17711.01. (a) For purposes of this article, "reorganization"
refers to any of the following:
(1) A conversion pursuant to Article 10 (commencing with Section
17710.01).
(2) A merger pursuant to Article 10 (commencing with Section
17710.01).
(3) The acquisition by one limited liability company in exchange,
in whole or in part, for its membership interests, or the membership
interests or equity securities of a limited liability company or
other business entity that is in control of the acquiring limited
liability company, of membership interests or equity securities of
another limited liability company or other business entity if,
immediately after the acquisition, the acquiring limited liability
company has control of the other limited liability company or other
business entity.
(4) The acquisition by one limited liability company in exchange
in whole or in part for its membership interests, or the membership
interests or equity securities of a limited liability company or
other business entity which is in control of the acquiring limited
liability company, or for its debts securities, or debt securities of
a limited liability company or other business entity which is in
control of the acquiring limited liability company, that are not
adequately secured and that have a maturity date in excess of five
years after the consummation of the acquisition, or both, of all or
substantially all of the assets of another limited liability company
or other business entity.
(b) For purposes of this article, "control" means the possession,
direct or indirect, of the power to direct or cause the direction of
the management and policies of a limited liability company or other
business entity.
17711.02. (a) If the approval of outstanding membership interests
is required for a limited liability company to participate in a
reorganization, pursuant to the limited liability company agreement,
or otherwise, then each member of the limited liability company
holding those interests may, by complying with this article, require
the limited liability company to purchase for cash, at its fair
market value, the interest owned by the member in the limited
liability company, if the interest is a dissenting interest as
defined in subdivision (b). The fair market value shall be determined
as of the day before the first announcement of the terms of the
proposed reorganization, excluding any appreciation or depreciation
in consequence of the proposed reorganization.
(b) As used in this article, "dissenting interest" means the
interest of a member that satisfies all of the following conditions:
(1) Either:
(A) Was not, immediately prior to the reorganization, either (i)
listed on any national securities exchange certified by the
Commissioner of Corporations under subdivision (o) of Section 25100,
or (ii) listed on the list of OTC margin stocks issued by the Board
of Governors of the Federal Reserve System, provided that in either
instance the limited liability company whose outstanding interests
are so listed provides, in its notice to members requesting their
approval of the proposed reorganization, a summary of the provisions
of this section and Sections 17711.03, 17711.04, 17711.05 and
17711.06.
(B) If the interest is of a class of interests listed as described
in clause (i) or (ii) of subparagraph (A), demands for payment are
filed with respect to 5 percent or more of the outstanding interests
of that class.
(2) Was outstanding on the date for the determination of members
entitled to vote on the reorganization.
(3) Either:
(A) Was not voted in favor of the reorganization.
(B) If the interest is described in clause (i) or (ii) of
subparagraph (A) of paragraph (1), was voted against the
reorganization; provided, however, that subparagraph (A) rather than
subparagraph (B) of this paragraph applies in any event where the
approval for the proposed reorganization is sought by written consent
rather than at a meeting.
(4) The member has demanded that it be purchased by the limited
liability company at its fair market value in accordance with Section
17711.03.
(5) The member has submitted it for endorsement, if applicable, in
accordance with Section 17711.04.
(c) As used in this article, "dissenting member" means the
recordholder of a dissenting interest, and includes an assignee of
record of that interest.
17711.03. (a) If members have a right under Section 17711.02,
subject to compliance with paragraphs (4) and (5) of subdivision (b)
of Section 17711.02, to require the limited liability company to
purchase their membership interests for cash, such limited liability
company shall mail to each member a notice of the approval of the
reorganization by the requisite vote or consent of the members,
within 10 days after the date of the approval, accompanied by a copy
of this section and Sections 17711.01, 17711.02, 17711.04, and
17711.05, a statement of the price determined by the limited
liability company to represent the fair market value of its
outstanding interests, and a brief description of the procedure to be
followed if the member desires to exercise the member's rights under
those sections. The statement of price constitutes an offer by the
limited liability company to purchase at the price stated any
dissenting interests as defined in subdivision (b) of Section
17711.02, unless they lose their status as dissenting interests under
Section 17711.11.
(b) Any member who has a right to require the limited liability
company to purchase the member's interest for cash under Section
17711.02, subject to compliance with paragraphs (4) and (5) of
subdivision (b) of Section 17711.02, and who desires the limited
liability company to purchase that interest, shall make written
demand upon the limited liability company for the purchase of that
interest and the payment to the member in cash of its fair market
value. The demand is not effective for any purpose unless it is
received by the limited liability company or any transfer agent
thereof (1) in the case of interests described in clause (i) or (ii)
of subparagraph (A) of paragraph (1) of subdivision (b) of Section
17711.02, not later than the date of the members' meeting to vote
upon the reorganization, or (2) in any other case, within 30 days
after the date on which notice of the approval of the reorganization
by the requisite vote or consent of the members is mailed by the
limited liability company to the members.
(c) The demand shall state the number or amount of the member's
interest in the limited liability company and shall contain a
statement of what the member claims to be the fair market value of
that interest on the day before the announcement of the proposed
reorganization. The statement of fair market value constitutes an
offer by the member to sell the interest at such price.
17710.04. Within 30 days after the date on which notice of the
approval of the outstanding interests of the limited liability
company is mailed to the member pursuant to subdivision of Section
17711.03, the member shall submit to the limited liability company at
its principal office or at the office of any transfer agent thereof,
if the interest is evidenced by a certificate, the member's
certificate representing the interest which the member demands that
the limited liability company purchase, to be stamped or endorsed
with a statement that the interest is a dissenting interest or to be
exchanged for certificates of appropriate denominations so stamped or
endorsed, or if the interest is not evidenced by a certificate,
written notice of the number or amount of interest which the member
demands that the limited liability company purchase. Upon subsequent
transfers of the dissenting interest on the books of the limited
liability company, the new certificates or other written statement
issued therefor shall bear a like statement, together with the name
of the original holder of the dissenting interest.
17711.05. (a) If the limited liability company and the dissenting
member agree that the member's interest is a dissenting interest and
agree upon the price to be paid for the dissenting interest, the
dissenting member is entitled to the agreed price with interest
thereon at the legal rate on judgments from the date of consummation
of the reorganization. All agreements fixing the fair market value of
any dissenting member's interest as between the limited liability
company and that member shall be in writing and filed in the records
of the limited liability company.
(b) Subject to the provisions of Section 17711.08, payment of the
fair market value for a dissenting interest shall be made within 30
days after the amount has been agreed to or within 30 days after any
statutory or contractual conditions to the reorganization are
satisfied, whichever is later, and in the case of dissenting
interests evidenced by certificates of interest, subject to surrender
of such certificates of interest, unless provided otherwise by
agreement.
17711.06. (a) If the limited liability company denies that a
membership interest is a dissenting interest, or the limited
liability company and a dissenting member fail to agree upon the fair
market value of a dissenting interest, then the member or any
interested limited liability company, within six months after the
date when notice of the approval of the reorganization by the
requisite vote or consent of the members was mailed to the member,
but not later, may file a complaint in the superior court of the
proper county praying the court to determine whether the interest is
a dissenting interest, or the fair market value of the dissenting
interest, or both, or may intervene in any action pending on such a
complaint.
(b) Two or more dissenting members may join as plaintiffs or be
joined as defendants in any of those actions and two or more of those
actions may be consolidated.
(c) On the trial of the action, the court shall determine the
issues. If the status of the membership interest as a dissenting
interest is in issue, the court shall first determine that issue. If
the fair market value of the dissenting interest is in issue, the
court shall determine, or shall appoint one or more impartial
appraisers to determine, the fair market value of the dissenting
interest.
17711.07. (a) If the court appoints an appraiser or appraisers,
they shall proceed forthwith to determine the fair market value per
interest of the outstanding membership interests of the limited
liability company, by class if necessary. Within the time fixed by
the court, the appraisers, or a majority of them, shall make and file
a report in the office of the clerk of the court. Thereupon, on the
motion of any party, the report shall be submitted to the court and
considered on such additional evidence as the court considers
relevant. If the court finds the report reasonable, the court may
confirm it.
(b) If a majority of the appraisers appointed fails to make and
file a report within 30 days from the date of their appointment, or
within a further time as may be allowed by the court, or the report
is not confirmed by the court, the court shall determine the fair
market value per interest of the outstanding membership interests of
the limited liability company, by class if necessary.
(c) Subject to Section 17711.08, judgment shall be rendered
against the limited liability company for payment of an amount equal
to the fair market value, as determined by the court, of each
dissenting interest that any dissenting member who is a party, or has
intervened, is entitled to require the limited liability company to
purchase, with interest thereon at the legal rate on judgments from
the date of consummation of the reorganization.
(d) Any of those judgments shall be payable forthwith, provided,
however, that with respect to membership interests evidenced by
transferable certificates of interest, only upon the endorsement and
delivery to the limited liability company of those certificates
representing the interests described in the judgment. Any party may
appeal from the judgment.
(e) The costs of the action, including reasonable compensation for
the appraisers, to be fixed by the court, shall be assessed or
apportioned as the court considers equitable, but, if the appraisal
exceeds the price offered by the limited liability company, the
limited liability
company shall pay the costs, including, in the discretion of the
court, if the value awarded by the court for the dissenting interest
is more than 125 percent of the price offered by the limited
liability company under subdivision (a) of Section 17711.02, attorney'
s fees and fees of expert witnesses.
17711.08. To the extent that the payment to dissenting members of
the fair market value of their dissenting interests would require
the dissenting members to return payment or a portion of the payment
by reason of Section 17711.09 or the Uniform Fraudulent Transfer Act
(Chapter 1 (commencing with Section 3439) of Title 2 of Part 2 of
Division 4 of the Civil Code), then that payment or portion thereof
shall not be made and the dissenting members shall become creditors
of the limited liability company for the amount not paid, together
with interest thereon at the legal rate on judgments until the date
of payment, but subordinate to all other creditors in any proceeding
relating to the winding up and dissolution of the limited liability
company, such debt to be payable when permissible.
17711.09. Any cash distributions made by a limited liability
company to a dissenting member after the date of consummation of the
reorganization, but prior to any payment by the limited liability
company for that dissenting member's interest, shall be credited
against the total amount to be paid by the limited liability company
for such dissenting interest.
17711.10. Except as expressly limited by this article, dissenting
members shall continue to have all the rights and privileges
incident to their interests immediately prior to the reorganization,
including limited liability, until payment by the limited liability
company for their dissenting interests. A dissenting member may not
withdraw a demand for payment unless the limited liability company
consents thereto.
17711.11. A dissenting interest loses its status as a dissenting
interest and the holder thereof ceases to be a dissenting member and
ceases to be entitled to require the limited liability company to
purchase the interest upon the happening of any of the following:
(a) The limited liability company abandons the reorganization.
Upon abandonment of the reorganization, the limited liability company
shall pay, on demand, to any dissenting member who has initiated
proceeding in good faith under this article, all reasonable expenses
incurred in such proceedings and reasonable attorney's fees.
(b) The interest is transferred prior to its submission for
endorsement in accordance with Section 17711.04.
(c) The dissenting member and the limited liability company do not
agree upon the status of the interest as a dissenting interest or
upon the purchase price of the dissenting interest, and neither files
a complaint nor intervenes in a pending action, as provided in
Section 17711.06, within six months after the date upon which notice
of the approval of the reorganization by the requisite vote or
consent of members was mailed to the member.
(d) The dissenting member, with the consent of the limited
liability company, withdraws the member's demand for purchase of the
dissenting interest.
17711.12. If litigation is instituted to test the sufficiency or
regularity of the vote or consent of the members in authorizing a
reorganization, any proceedings under Sections 17711.06 and 17711.07
shall be suspended until final determination of that litigation.
17711.13. (a) This article applies to the following:
(1) A domestic limited liability company formed on or after
January 1, ______.
(2) A foreign limited liability company if the foreign limited
liability company was formed on or after January 1, ______ or filed
an application to qualify to do business on or after January 1,
______, and members holding more than 50 percent of the voting power
held by all members of the foreign limited liability company reside
in this state.
(3) A limited liability company if the operating agreement so
provides or if all managers and a majority of the members, if it is a
manager-managed limited liability company, or a majority, if it is a
member-managed liability company, determine that this article shall
apply.
(b) This article does not apply to membership interests governed
by operating agreements whose terms and provisions specifically set
forth the amount to be paid in respect of those interests in the
event of a reorganization of the limited liability company, or to
limited liability companies with 35 or fewer members, unless the
operating agreement provides that this article shall apply or unless
all managers and a majority of the members of a manager-managed
limited liability company or a majority of the member of a
member-managed limited liability company agree that this article
shall apply.
17711.14. (a) No member of a limited liability company who has a
right under this article to demand payment of cash for the interest
owned by a member in a limited liability company shall have any right
at law or in equity to attack the validity of the reorganization, or
to have the reorganization set aside or rescinded, except in an
action to test whether the vote or consent of members required to
authorize or approve the reorganization has been obtained in
accordance with the procedures established therefor by the operating
agreement of the limited liability company.
(b) If one of the parties to a reorganization is directly or
indirectly controlled by, or under common control with, another party
to the reorganization, subdivision (a) shall not apply to any member
of the controlled party who has not demanded payment of cash for the
member's interest pursuant to this article; but if the member
institutes any action to attack the validity of the reorganization or
to have the reorganization set aside or rescinded, the member shall
not thereafter have any right to demand payment of cash for the
member's interest pursuant to this article.
(c) If one of the parties to a reorganization is directly or
indirectly controlled by, or under common control with, another party
to the reorganization, then, in any action to attack the validity of
the reorganization or to have the reorganization set aside or
rescinded, both of the following apply:
(1) A party to a reorganization that controls another party to a
reorganization shall have the burden of proving that the transaction
is just and reasonable as to the members of the controlled part.
(2) A person that controls two or more parties to a reorganization
shall have the burden of proving that the transaction is just and
reasonable as to the members of any party so controlled.
(d) Subdivisions (b) and (c) shall not apply if a majority of the
members other than members who are directly or indirectly controlled
by, or under common control with, another party to the reorganization
approve or consent to the reorganization.
(e) This section shall not prevent a partner of a limited
liability company that is a party to a reorganization from bringing
an action against a manager of the limited liability company, the
limited liability company, or any person controlling a manager at law
or in equity as to any matters, including, without limitation, an
action for breach of fiduciary obligation or fraud, other than to
attack the validity of the reorganization or to have the
reorganization set aside or rescinded.
Article 12. Series Provisions
17712.01. (a) If a limited liability company complies with
Section 17712.02, an operating agreement may establish or provide for
the establishment of one or more designated series of assets that
provides either of the following:
(1) Separate rights, powers, or duties with respect to specified
property or obligations of the limited liability company or profits
and losses of specified property or obligations.
(2) A separate purpose or investment objective.
(b) A series established in accordance with subdivision (a) may
carry on any activity, whether or not for profit.
17712.02. (a) Subject to subdivision (b) the following apply:
(1) The debts, liabilities, obligations, and expenses incurred,
contracted for, or otherwise existing with respect to a series shall
be enforceable against the assets of that series only, and shall not
be enforceable against the assets of the limited liability company
generally or any other series of the limited liability company.
(2) None of the debts, liabilities, obligations, and expenses
incurred, contracted for, or otherwise existing with respect to the
limited liability company generally or any other series shall be
enforceable against the assets of a series.
(b) Subdivision (a) applies only if all of the following apply:
(1) The records maintained for that series account for the assets
of that series separately from the other assets of the limited
liability company or any other series.
(2) The operating agreement contains a statement regarding the
effect of the limitations provided in subdivision (a).
(3) The limited liability company's certificate of organization
contains a statement that the limited liability company may have one
or more series of assets subject to the limitations provided in
subdivision (a).
17712.03. (a) Assets of a series may be held directly or
indirectly, including being held in the name of the series, in the
name of the limited liability company, through a nominee, or
otherwise.
(b) If the records of a series are maintained in a manner so that
the assets of the series can be reasonably identified by specific
listing, category, type, quantity, or computational or Çallocational
formula or procedure, including a percentage or share of any assets,
or by any other method in which the identity of the assets can be
objectively determined, the records are considered to satisfy the
requirements of Section 17712.02.
17712.04. The statement of limitation on liabilities of a series
required by Section 17712.02 is sufficient even if neither of the
following apply at the time the statement is made:
(a) The limited liability company has established any series under
this title when the statement of limitations is contained in the
certificate of organization.
(b) The statement of limitations makes reference to a specific
series of the limited liability company.
17712.05. (a) Except as to the extent the operating agreement
specifically provides otherwise, a member or manager associated with
a series or a member or manager of the limited liability company is
not liable for a debt, obligation, or liability of a series,
including a debt, obligation, or liability under a judgment, decree,
or court order.
(b) The operating agreement may expand or restrict any duties,
including fiduciary duties, and related liabilities that a member,
manager, officer, or other person of a series has with respect to any
of the following:
(1) The series or the limited liability company.
(2) A member or manager of the series.
(3) A member or manager of the limited liability company.
17712.06. (a) An event that under this article or the operating
agreement causes a manager to cease to be a manager with respect to a
series does not, in and of itself, cause the manager to cease to be
a manager of the limited liability company or with respect to any
other series of the limited liability company.
(b) An event that under this article or the operating agreement
causes a member to dissociate as a member of a series does not, in
and of itself, cause the member to cease to be a member of any other
series or terminate the continued membership of a member in the
limited liability company or require the winding up of the series,
regardless of whether the member was the last remaining member of the
series.
17712.07. (a) A person has the power to dissociate as a member of
a series at any time, rightfully or wrongfully, by withdrawing as a
member of a series by express will under Section 17712.08.
(b) A person's dissociation from a series is wrongful only if
subdivision (a) of at least one of the following applies:
(1) The dissociation is in breach of an express provision of the
operating agreement.
(2) The dissociation occurs before the termination of the series
and at least one of the following applies:
(A) The person withdraws as a member of a series by express will.
(B) The person is expelled as a member of the series by judicial
determination under Section 17712.04.
(C) The person is dissociated as a member of a series under
subdivision (h) of Section 17712.08 by being a debtor in bankruptcy.
(D) In the case of a person that is not a trust other than a
business trust, an estate or an individual, the person is expelled or
otherwise dissociated as a member because it dissolved or
terminated.
(c) A person that wrongfully dissociates as a member of a series
is liable to the series and, subject to Section 17706.01, to the
other members of that series for damages caused by the dissociation.
The liability is in addition to any other debt, obligation, or
liability of the member of a series to the series or the other
members of that series.
17712.08. A person is dissociated as a member of a series when
any of the following occur:
(a) The series has notice of the person's express will to
dissociate from the series, except if the person specifies a
dissociation date later than the date the series had notice, the
person is dissociated from the series on that later date.
(b) An event stated in the operating agreement as causing the
person's dissociation from the series occurs.
(c) The person is dissociated as a member of the limited liability
company pursuant to Section 17706.02.
(d) The person is expelled as a member of that series pursuant to
the operating agreement.
(e) The person is expelled as a member of the series by the
unanimous consent of the other members of that series if any of the
following applies:
(1) It is unlawful to carry on the series' activities with the
person as a member of that series.
(2) There has been a transfer of all of the person's transferrable
interest other than a transfer for security purposes, or a charging
order in effect under Section 17705.03 that has not been foreclosed.
(3) The person is a corporation and, within 90 days after the
series notifies the person that it will be expelled as a member of
that series because the person has filed a certificate of dissolution
or the equivalent, or its right to conduct activities has been
suspended by its jurisdiction of formation, the certificate of
dissolution or the equivalent has not been revoked or its right to
conduct activities has not been reinstated.
(4) The person is a limited liability company or partnership that
has been dissolved and its business is being wound up.
(f) On application by the series, the person is expelled as a
member of that series by judicial order because the person has done
any of the following:
(1) Has engaged in, or is engaging in, wrongful conduct that has
adversely and materially affected, or will adversely and materially
affect, that series' activities.
(2) Has willfully or persistently committed, or is willfully and
persistently committing, a material breach of the operating agreement
or the person's duty or obligation under this title or other
applicable law.
(3) Has engaged in, or is engaging in, conduct relating to that
series' activities that makes it not reasonably practicable to carry
on the activities with the person as a member of that series.
(g) In the case of a person who is an individual, one of the
following applies:
(A) The person dies.
(B) In a member-managed limited liability company either a
guardian or general conservator is appointed, or there is a judicial
order that the person has otherwise become incapable of performing
the person's duties as a member of a series under this title or the
operating agreement.
(h) The person becomes a debtor in bankruptcy.
(i) In the case of a person that is a trust or is acting as a
member by virtue of being a trustee of a trust, the trust's entire
transferrable interest is distributed, but not solely by reason of
the substitution of a successor trustee.
(j) In the case of a person that is an estate or is acting as a
member by virtue of being a personal representative of an estate, the
estate's entire transferrable interest, but not solely by reason of
the substitution of a successor personal representative.
(k) In the case of a member of a series that is not an individual,
the legal existence of the member otherwise terminates.
(l) The series terminates.
17712.09. (a) A person who has dissociated as a member of a
series shall have no right to participate in the activities and
affairs of that series and is entitled only to receive the
distributions to which that member would have been entitled if the
member had not dissociated from that series.
(b) A person's dissociation as a member of a series does not of
itself discharge the person from any debt, obligation, or liability
to that series, the limited liability company or the other members
that the person incurred while a member of that series.
(c) A member's dissociation from a series does not, in itself,
cause the member to dissociate from any other series or require the
winding up of the series unless the dissociated member was the last
remaining member of the series.
(d) A member's dissociation from a series does not, in itself,
cause the member to dissociate from the limited liability company.
17712.10. Except to the extent otherwise provided in the
operating agreement, a series and its business and affairs may be
wound up and terminated without causing the winding up of the limited
liability company.
17712.11. (a) Except as otherwise provided, the series terminates
on the completion of the winding up of the business and affairs of
the series in accordance with Sections 17707.03, 17707.04, 17707.05,
and 17707.08.
(b) The limited liability company shall provide notice of the
termination of a series in the manner provided in the operating
agreement for notice of termination, if any.
(c) The termination of the series does not affect the limitation
on liabilities of the series provided by Section 17712.06.
17712.12. (a) To the extent not inconsistent with this article,
this article applies to a series and its associated members and
managers.
(b) For purposes of the application of any other provision of this
title to a provision of this article, and as the context requires:
(1) A reference to a "limited liability company" or a "company"
means the series.
(2) A reference to "member" means member of a series.
(3) A reference to "manager" means manager of a series.
17713.01. In applying and construing this uniform act,
consideration shall be given to the need to promote uniformity of the
law with respect to its subject matter among states that enact it.
17713.02. This title modifies, limits, and supersedes the federal
Electronic Signatures in Global and National Commerce Act (15 U.S.C.
Sec. 7001 et seq.), but does not modify, limit, or supersede Section
101(c) of that act (15 U.S.C. Sec. 7001(c)), or authorize electronic
delivery of any of the notices described in Section 103(b) of that
act (15 U.S.C. Sec. 7003(b)).
17713.03. This title does not affect an action commenced,
proceeding brought, or right accrued before this title takes effect.
17713.04. (a) Before January 1, 2015, this title governs only the
following:
(1) A limited liability company formed on or after January 1,
2013.
(2) Except as otherwise provided in subdivision (c), a limited
liability company formed before January 1, 2013, that elects, in the
manner provided in its operating agreement or bylaw for amending the
operating agreement, to be subject to this title.
(b) Except as otherwise provided in subdivision (c), on and after
January 1, 2015, this title governs all limited liability companies.
(c) For the purposes of applying this title to a limited liability
company formed before January 1, 2013, all of the following apply:
(1) The limited liability company's certificate of organization is
deemed to be the limited liability company's certificate of
organization.
(2) For the purposes of applying subdivision (n) of Section
17701.02 and subject to subdivision (d) of Section 17701.12, language
in the limited liability company's certificate of organization
designating the limited liability company's management structure
operates as if that language were in the operating agreement.
17713.05. This title shall become operative on January 1, 2013.
SEC. 3. No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of the
Government Code, or changes the definition of a crime within the
meaning of Section 6 of Article XIII B of the California
Constitution.