BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  SB 323
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          SENATE THIRD READING
          SB 323 (Vargas)
          As Amended August 14, 2012
          Majority vote 

           SENATE VOTE  :37-0  
           
           JUDICIARY           10-0        APPROPRIATIONS      17-0        
           
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          |Ayes:|Feuer, Wagner, Atkins,    |Ayes:|Fuentes, Harkey,          |
          |     |Dickinson, Gorell, Huber, |     |Blumenfield, Bradford,    |
          |     |Jones, Monning,           |     |Charles Calderon, Campos, |
          |     |Wieckowski, Bonnie        |     |Davis, Donnelly, Gatto,   |
          |     |Lowenthal                 |     |Hall, Hill, Lara,         |
          |     |                          |     |Mitchell, Nielsen, Norby, |
          |     |                          |     |Solorio, Wagner           |
          |-----+--------------------------+-----+--------------------------|
          |     |                          |     |                          |
           ----------------------------------------------------------------- 
           SUMMARY  :  Enacts, as of January 1, 2014, the California Revised 
          Uniform Limited Liability Company Act (CRULLCA) in place of the 
          Beverly-Killea Limited Liability Company Act.  Specifically, 
           this bill  :

          1)Repeals, as of January 1, 2014, the Beverly-Killea Limited 
            Liability Company Act and enacts the CRULLCA which recasts 
            provisions governing the formation and operation of limited 
            liability companies (LLCs).  

          2)Distinguishes between a manager-managed limited liability 
            company and a member-managed limited liability company for 
            purposes of defining the scope of a member's agency and 
            limiting fiduciary duties of members who are not in control of 
            an LLC.

          3)Authorizes the Secretary of State to issue a certificate of 
            registration with respect to a foreign limited liability 
            company.  Provides for the filing of specified records and 
            provides that an individual who signs such a record affirms 
            under penalty of perjury that the information in the record is 
            accurate.

          4)Allows an LLC to be subject to the nonexclusive jurisdiction 








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            of courts in another state and California or the exclusive 
            jurisdiction of California courts.  Allows a member to consent 
            to arbitration, as specified.

          5)Specifies when a member may be dissociated from an LLC and the 
            effects of dissociation on the member.

          6)Revises and recasts provisions relating to 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 LLCs.  

          7)Provides that the CRULLCA applies to acts and transactions by 
            an LLC occurring on or after January 1, 2014.  Provides that 
            the Beverly-Killea Limited Liability Company Act applies to 
            acts or transactions occurring before that date.

          8)Provides that the CRULLCA may, at any time, be amended or 
            repealed.

           EXISTING LAW  authorizes, under the Beverly-Killea Limited 
          Liability Company Act, the creation of, and governs the 
          activities of, LLCs having one or more members.  

           FISCAL EFFECT  :  According to the Assembly Appropriations, the 
          Secretary of State will incur one-time special fund costs of 
          around $90,000 to revise forms and materials on its Web site and 
          for staff training regarding the revised provisions governing 
          LLCs (Business Fees Fund).
           
          COMMENTS  :  This bill, sponsored by the Partnerships and Limited 
          Liability Companies Committee of the Business Law Section of the 
          State Bar, repeals the Beverly-Killea Limited Liability Company 
          Act and, taking into account California's particular LLC 
          protections, replaces it with a modified version of the Revised 
          Uniform Limited Liability Company, which recasts provisions 
          governing the formation and operations of LLCs.

          An LLC is a hybrid between a corporation and a partnership.  An 
          LLC generally has the beneficial characteristics of a 
          partnership for operational and taxation purposes, but its 
          members enjoy the immunity provided by a corporation to its 
          shareholders for contract debts or tort liability.  The interest 








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          of a member in an LLC is an economic interest, in the same 
          manner that a partnership interest or a corporate share is an 
          economic interest, that may be transferred under terms and 
          conditions provided by the LLC agreement, the partnership 
          agreement, or the corporate structure.

          California first recognized LLCs in 1994 with the enactment of 
          the Beverly-Killea Limited Liability Company Act, which provided 
          comprehensive provisions for the organization, management, and 
          dissolution of LLCs.  (SB 469 (Beverly), Chapter 1200, Statutes 
          of 1994.)  That same year, the National Conference of 
          Commissioners on Uniform State Laws approved the use of the 
          Uniform Limited Liability Company Act.  In 2006, after reviewing 
          the development of LLC laws across the states, the National 
          Conference of Commissioners on Uniform State Laws adopted the 
          Revised Uniform Limited Liability Company Act, which has since 
          been enacted in five states (Idaho, Iowa, Nebraska, Utah, and 
          Wyoming) and the District of Colombia.  This bill enacts a 
          modified Revised Uniform Limited Liability Company Act, taking 
          in account particular provisions and protections already 
          existing in California law.

           
          Analysis Prepared by  :    Leora Gershenzon / JUD. / (916) 
          319-2334


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