BILL ANALYSIS Ó
SENATE JUDICIARY COMMITTEE
Senator Hannah-Beth Jackson, Chair
2015-2016 Regular Session
AB 506 (Maienschein)
Version: June 29, 2015
Hearing Date: July 7, 2015
Fiscal: No
Urgency: No
RD
SUBJECT
Limited liability companies: limited partnerships
DESCRIPTION
This bill seeks to make various changes to the California
Revised Uniform Limited Liability Company Act (RULLCA).
BACKGROUND
A California limited liability company (LLC) is a hybrid between
a corporation and a partnership. An LLC generally has the
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 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
(Beverly-Killea), which provided comprehensive provisions for
the organization, management, and dissolution of LLCs. (SB 469
(Beverly, Ch. 1200, Stats. 1994).) That same year, the National
Conference of Commissioners on Uniform State Laws (NCCUSL)
approved the use of a Uniform Limited Liability Company Act. In
2006, after reviewing the development of LLC laws in the United
States, NCCUSL adopted the Revised Uniform Limited Liability
Company Act (RULLCA), which has been enacted in five states
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(Idaho, Iowa, Nebraska, Utah, and Wyoming) and the District of
Colombia.
In 2012, SB 323 (Vargas, Ch. 419, Stats. 2012), sponsored by the
Partnerships and Limited Liability Companies Committee of the
Business Law Section of the State Bar of California, was enacted
to repeal Beverly-Killea and, taking into account California's
particular LLC protections, replace it with a modified version
of RULLCA.
This bill, also sponsored by the Partnerships and Limited
Liability Companies Committees of the Business Law Section of
the State Bar of California, would make various changes to the
RULLCA provisions.
CHANGES TO EXISTING LAW
1.Existing law , the California Revised Uniform Limited Liability
Company Act (RULLCA), governs all California limited liability
companies (LLCs). (Corp. Code Sec. 17701.01 et seq.)
This bill would specify that any operating agreements of LLCs
entered into prior to January 1, 2014 (when RULLCA took
effect, replacing the Beverly Killea LLC Act), remain governed
by the Beverly Killea LLC Act.
This bill would provide that specified provisions of the Labor
Code, relating to consideration for employment and employment
contracts, shall not apply to membership interests issued by
any LLC or foreign LLC to the following persons:
any employee of the LLC or foreign LLC or of any parent
or subsidiary of either, pursuant to a membership interest
purchase plan or agreement, or a membership interest option
plan or agreement; and
a person who is or is about to become an officer or
manager (as appointed or elected by the members) of the LLC
or foreign LLC or of any parent or subsidiary of either, in
any transaction in connection with securing employment.
This bill would replace references to a "holder of a
transferable interest in the limited liability company" with
"transferee," to reflect the correct terminology in RULLCA.
This bill would also correct references to the term "majority
in interest" which is not defined under RULLCA.
This bill would revise and correct cross-references throughout
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various provisions of RULLCA and would otherwise add missing
cross-references to conform potentially conflicting
provisions.
This bill would modify specified references to participation
in the management or conduct of activities of the LLC to
clarify that "participate" includes the right to vote.
This bill would make other technical, or clarifying changes.
1.Existing law defines various terms for purposes of RULLCA.
(Corp. Code Sec. 17701.02.)
Existing law defines "electronic transmission by the limited
liability company" to mean a communication delivered by
specified means, including means of electronic communication
to which both of the following apply:
the communication is delivered to a recipient who has
provided an unrevoked consent to the use of those means of
transmission; and
the communication creates a record that is capable of
retention, retrieval, and review, and that may thereafter
be rendered into clearly legible tangible form. However, an
electronic transmission by a limited liability company to
an individual member is not authorized unless, in addition
to satisfying the requirements of this section, the
transmission satisfies the requirements applicable to
consumer consent to electronic records as set forth in the
federal Electronic Signatures in Global and National
Commerce Act. (Corp. Code Sec. 17701.02(i)(1)(A)-(C).)
Existing law , in relevant part, defines "person" to mean an
individual, partnership, limited partnership, trust, estate,
association, corporation, limited liability company, or other
entity, whether domestic or foreign. (Corp. Code Sec.
17701.02(v).)
This bill would revise the definition of "electronic
transmission by the limited liability company" by removing the
requirement that the electronic transmission by an LLC to an
individual member also satisfy requirements set forth under
the federal Electronic Signatures in Global and National
Commerce Act.
This bill would expand to the definition of "person" to
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include a trustee of a trust, including, but not limited to, a
trust described under the Probate Code's Trust Law, as
specified.
1.Existing law prohibits an LLC operating agreement from doing
certain things, including, in relevant part:
eliminating the duty of loyalty, the duty of care, or
any other fiduciary duty, subject to other specified
provisions;
eliminating the contractual obligation of good faith and
fair dealing under specified provisions of Section
17704.09, subject to other provisions allowing for the
operating agreement to modify the fiduciary duties of a
member or manager, as specified;
unreasonably restricting the duties and rights stated
under Section 17704.10, which provides for the right to
inspect various LLC documents; the right to a specified
annual report for members in an LLC of more than 35
members, among other things; the right to a copy of the
articles of incorporation or operating agreement, as
specified;
varying the requirements of Sections 17707.04 to
17707.08, inclusive, relating to the dissolution of an LLC,
except as specified;
restricting 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;
varying any provision under Article 10, relating to
mergers and conversions;
varying any provision under Article 12, relating to
class provisions; or
eliminating the obligation of good faith and fair
dealing under specified provisions 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. (Corp.
Code Sec. 17701.10(c).)
Existing law provides that, except as provided in the
provisions above, and other specified laws, the provisions of
RULLCA may be varied as among the members or as between the
members and the LLC by the operating agreement, provided,
however, that the provisions of Sections 17701.13 (relating to
the designation of an agent for service of process and
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required records that must be maintained by the LLC), 17703.01
(providing that every member is an agent of an LLC unless the
articles of organization state that the LLC is manager-managed
at which point only the manager has agency power), 17704.07
(providing specified rules governing an LLC depending upon
whether the LLC is member- or manager-managed), and 17704.08
(requiring reimbursement of any payments and indemnification
of any debt, obligation, or other liability incurred by a
member or manager in the course of the member's or manager's
activities on behalf of the LLC, and authorizing the purchase
of insurance for indemnification purposes) can only be varied
by a written operating agreement. (Corp. Code Sec.
17701.10(d).)
Existing law specifies that, notwithstanding prior statements,
and in addition to the matters specified in the provisions
above, the operating agreement must not:
vary the definitions of RULLCA, as specified, except as
specified therein; or
vary a member's rights under specified law that provides
that every member is an agent of an LLC unless the articles
of organization state that the LLC is manager-managed at
which point only the manager has agency power; or other
specified law, which provides for the right to inspect
various LLC documents; the right to a specified annual
report for members in an LLC of more than 35 members, among
other things; the right to a copy of the articles of
incorporation or operating agreement, as specified. (Corp.
Code Sec. 17701.10(d).)
This bill would modify the provisions limiting what an
operating agreement can do. These modifications include:
adding or otherwise revising various cross references;
consolidating potentially duplicative language
prohibiting the elimination of the obligation of good faith
and fair dealing by instead providing that, subject to
specified law, the operating agreement shall not eliminate
the contractual obligation of good faith and fair dealing
under existing law, as specified, 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 as determined at
the time the standards are prescribed;
repealing the language prohibiting an operating
agreement from unreasonably restricting the duties and
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rights under specified law, which provides for the right to
inspect various LLC documents; the right to a specified
annual report for members in an LLC of more than 35
members, among other things; the right to a copy of the
articles of incorporation or operating agreement, as
specified;
expanding the general prohibition against varying the
requirements of Sections 17707.04 to 17707.08, inclusive,
relating to the dissolution of an LLC, to apply more
generally to the RULLCA article on dissolution and winding
up, as well as the RULLCA article on formation of an LLC;
and
prohibiting the variation of specified provisions
relating the application of RULLCA.
1.Existing law governs distributions made by an LLC before its
dissolution and winding up.
This bill would add a provision specifying that the profits
and losses of a limited liability company shall be allocated
among the members, and among classes of members, in the manner
provided in the operating agreement. If the operating
agreement does not otherwise provide, profits and losses must
be allocated in proportion to the value, as stated in the
required records, of the contributions the limited liability
company has received from each member.
2.Existing law provides that an LLC is a member-managed LLC
unless the articles of organization and the operating
agreement do either of the following:
expressly provide that the LLC is or will be
"manager-managed" or "managed by managers" or that
management of the LLC is or will be "vested in managers;"
or
include words of similar import. (Corp. Code Sec.
17704.07(a).)
Existing law specifies that in a member-managed LLC, certain
rules apply, including that a difference arising among members
as to a matter in the ordinary course of the activities of the
LLC shall be decided by a majority of the members of the LLC
which the difference among the members has arisen. (Corp.
Code Sec. 17704.07(b).)
Existing law specifies that in a manager-managed LLC, certain
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rules apply, including that the consent of all members of the
LLC is required to do any of the following:
sell, lease, exchange, or otherwise dispose of all, or
substantially all, of the LLC's property, as specified;
approve a merger or conversion under the RULLCA article
governing mergers and conversions;
undertake any other act outside of the ordinary course
of the LLC's activities; or
amend the operating agreement. (Corp. Code Sec.
17704.07(c)(4).)
Existing law further specifies that in a manager-managed LLC,
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 manager
that is not an individual, terminates. A manager may be
removed at any time by the consent of the majority of the
members without notice or cause. (Corp. Code Sec.
17704.07(c)(5).)
Existing law generally provides that members have the right to
vote on a dissolution of the LLC and on a merger of the LLC as
provided under specified law.
This bill would modify the above to provide, instead, that an
LLC is a member-managed LLC unless the articles of
organization contain a statement to the effect that the LLC is
to be manager-managed, as required under other specified law.
This bill would modify the above rule for member-managed LLCs
to instead provide that a difference arising among members as
to a matter in the ordinary course of the activities of the
LLC shall be decided by a majority of the members.
This bill would modify the above rule for member approvals
required for certain activities by a manager-managed LLC to
delete the requirement that an LLC obtain all members' consent
to amend the operating agreement and to approve a merger or
conversion under the RULLCA article on mergers and conversions
and would, instead, provide that consent of all the LLC
members is required to do the following:
sell, lease, exchange, or otherwise dispose of all, or
substantially all, of the LLC's property, as specified; or
except as otherwise provided in the RULLCA article on
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mergers or conversions, any other act outside of the
ordinary course of the LLC's activities.
This bill would modify the above rule for the removal of a
manager of a manager-managed LLC to repeal language giving the
LLC authority to remove a manager at any time, upon consent of
a majority of the members, without notice. The bill would
provide, instead, that the manager can be removed at any time
by the consent of a majority of members without cause, subject
to the rights, if any, of the manager under any service
contract with the LLC.
This bill would add that members also have the right to vote
on any conversion of the LLC to another business entity, under
specified law.
1.Existing law requires that an LLC reimburse for any payment
made and indemnify for any debt, obligation, or other
liability incurred by a member of a member-managed LLC or the
manager of a manager-managed LLC in the course of the member's
or manager's activities on behalf of the LLC, if, in making
the payment or incurring the debt, obligation, or other
liability, the member or manager complied with specified
statutory fiduciary duties, duties of loyalty, and duties of
care. (Corp. Code Sec. 17704.08(a).)
Existing law authorizes and LLC to purchase and maintain
insurance on behalf of a member or manager of the LLC against
liability asserted against or incurred by the member or
manager from that status, even if the operating agreement
could not eliminate or limit the person's liability to the LLC
for the conduct giving rise to the liability, under specified
law. (Corp. Code Sec. 17704.08(b).)
This bill would add that, except as provided under specified
law (allowing for an operating agreement to alter or eliminate
the indemnification for a member or manager provided in the
provision above, and to eliminate or limit a member or
manager's liability to the LLC and members for money damages,
except as specified), an LLC may reimburse any payment made
and indemnify any debt, obligation, or other liability
incurred by other persons, including, without limitation, any
officer, employee, or agent of the LLC, in the course of that
person's activities on behalf of the LLC.
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This bill would expand the above authorization for an LLC to
purchase and maintain liability insurance for "members" and
"managers" to instead authorize the purchase and maintenance
of insurance for any person.
This bill would require, without limiting the above
requirement to reimburse any payment and indemnify any debt,
obligation or other liability incurred by a member of a
member-managed LLC or manager of a manager-managed LLC, as
specified, that an LLC indemnify an agent of the LLC to the
extent that the agent has been successful on the merits in
defense or settlement of any claim, issue, or matter in any
proceeding in which the agent was or is a party or threatened
to be made a party by reason of his or her status as an agent
of the LLC, against expenses actually and reasonably incurred
by the agent, if the agent acted in good faith and in a manner
that the agent reasonably believed to be in the best interests
of the LLC and its members.
This bill would define the terms "agent," "expenses," and
"proceeding," for these purposes.
2.Existing law provides various rules for when a person
dissociates as a member of the LLC. (Corp. Code Sec.
17706.03.)
This bill would add a provision specifying that if a member
dies, or a guardian or conservator of the estate is appointed
for the member, or a member's interest is being administered
by an attorney in fact under a valid power of attorney, the
member's executor, administrator, guardian, conservator, or
other legal representative may exercise all of the member's
rights for the purpose of settling the member's estate or
administering the member's property, including any power the
member had under the articles of organization or an operating
agreement to give a transferee the right to become a member.
3.Existing law includes various provisions governing suits for
judicial dissolution. (Corp. Code Sec. 17707.03.)
This bill would specify that nothing in those provisions shall
be construed to limit the remedies otherwise available to a
court of competent jurisdiction over the dissolution.
4.Existing law requires that any certificate or statement of
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conversion be executed and acknowledged by all members, unless
a lesser number is provided in the articles of organization or
operating agreement and meets specified requirements. (Corp.
Code Sec. 17710.06(b).)
This bill would instead require that the certificate or
statement of conversion be executed and acknowledged by all
members of a member-managed LLC or all managers of a
manager-managed LLC, unless a lesser number is provided in the
articles of organization or operating agreement and meets
specified requirements.
5.Existing law provides that each membership interest of the
same class of any constituent LLC, other than a membership
interest in another constituent LLC that is being canceled and
that is held by a constituent LLC or its parent or an LLC of
which the constituent LLC is a parent must, unless all members
of the class consent, be treated equally with respect to any
distribution of cash, property, rights, interests, or
securities.
Existing law , commonly referred to as the 50/90 rule, provides
that notwithstanding the above, except in a merger of an LLC
with an LLC 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
LLC may be converted only into unredeemable interests or
securities of the surviving LLC or other business entity, or a
parent if a constituent LLC or a constituent other business
entity or its parent owns, directly or indirectly, prior to
the merger, membership interests of another constituent LLC 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 LLC or constituent other business entity or
more than 50 percent of the voting power, as defined under
existing law, of a constituent other business entity that is a
domestic corporation, unless all of the members of the class
consent.
This bill would allow for an LLC to modify the unanimous
approval standard above in its written operating agreement.
COMMENT
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1. Stated need for the bill
According to the author:
This bill would amend the Revised Uniform Limited Liability
Company Act ("RULLCA") which took effect January 1, 2014. It
will fix certain cross referencing and typographical errors
and inconsistencies in RULLCA that make it difficult to
understand and less attractive to business owners and
investors. It eliminates an inconsistency on what vote is
needed to accomplish a merger or conversion and creates
indemnification rights for agents similar to those afforded
agents of California corporations. It also clarifies RULLCA's
transition rules to avoid potential disputes as to whether
RULLCA or prior law, the Beverly-Killea Limited Liability
Company Act ("Beverly-Killea"), governs the limited liability
company ("LLC").
2. Bill seeks to not only correct ambiguities and
inconsistencies in the recently enacted RULLCA, but also
substantively improve various provisions of the act
As stated by the sponsor of this bill, the Partnership and
Limited Liability Companies Committee of the Business Law
Section of the State Bar of California (PLLC committee), this
bill is intended to address ambiguities and inconsistencies in
the California Revised Uniform Limited Liability Company Act
(RULLCA), and to make further improvements. The sponsor
explains that these inconsistencies largely exist because when
SB 323 (Vargas, Ch. 419, Stats. 2012) was enacted in 2012 to
implement RULLCA in this state, it did not replicate the
National Conference of Commissioners on Uniform State Laws'
(NCCUSL) model law, word-for-word. Instead, the Legislature
specifically sought to incorporate numerous provisions from the
state's preceding act, the Beverly Killea Limited Liability
Company Act (Cal. Corp Code [Secs.] 17000-17656), in order to
improve upon the NCCUSL version. As described by the PLLC
committee:
The carried-over provisions include[d:] (i) important topics
(e.g., meetings, officers, voting rights, and mergers and
conversions) that were not covered in the NCCUSL version; (ii)
particular requirements of the Business Programs Division of
the California Secretary of State (e.g., member information
rights and certain restrictions on operating agreement
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amendments; (iii) certain investor protections (e.g., the
requirement for filing biennial statements of information);
and (iv) other provisions (e.g., for limited liability company
("LLC") dissolutions that the Committee believed were more
comprehensive and substantially better than what was included
in the NCCUSL version of the same topic. In general, the
Committee believes that NCCUSL's version was overly slanted in
favor of LLC management, but that RULLCA as enacted in
California is a more balanced law that more effectively
protects the interests of LLC members.
Challenges were involved, however, in carrying over provisions
from Beverly Killea into SB 323 because the statutory
numbering convention was different, the organizational
structure was different, and various defined terms in Beverly
Killea differed from the corresponding terms in the NCCUSL
version of RULLCA. [ . . . ] In addition, since SB 323's
enactment, the Committee has engaged in robust discussions
with, and has received comments from, many experienced LLC law
practitioners in California. As a result of those
discussions, the Committee collected some further suggestions
for clarification and improvement of RULLCA. This bill would
correct the ambiguities and inconsistencies, and make some
further improvements for the benefit of California attorneys
and judges who must work with and interpret RULLCA in the
future, as well as for the benefit of all California business
enterprises that wish to conduct their business in the LLC
form.
The PLLC committee draws particular attention to one provision
of the bill that would amend RULLCA's transition rule in Section
17713.04 of the Corporations Code, which currently provides that
RULLCA generally applies only to the acts or transactions by an
LLC or by the members or managers of the LLC, or "contracts"
entered into by the LLC or by the members or managers of the
LLC, on or after January 1, 2014, and that the prior law (the
Beverly Killea LLC Act) governs all acts or transactions by an
LLC or by the members or managers of the LLC company occurring,
or contracts entered into by the LLC or by the members or
managers of the LLC, prior to that date. This bill, the sponsor
writes, seeks to clarify that the term "contracts" includes "LLC
operating agreements, such that "the operating agreements of
LLCs existing prior to January 1, 2014 are governed by Beverly
Killea and should not necessarily need to be amended after that
date. RULLCA applies to all LLCs and operating agreements
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entered into on or after January 1, 2014. Whether the operating
agreement of an existing LLC should be amended after January 1,
2014, e.g., to take advantage of RULLCA provisions, is an issue
for practitioners to decide in consultation with their clients
on a case-by-case basis."
Other notable changes proposed to the current RULLCA, include:
The addition of a provision not previously carried over by SB
323 from the Beverly Killea LLC Act (former Corp. Code Sec.
17110(d)), which provides that certain provisions of the Labor
Code relating to property pledged by an employee in connection
with an employment offer (Labor Code Sec. 406) and prohibiting
the conditioning of an employment offer or an investment in
the business by the prospective employee (Labor Code Sec.
407), do not apply to specified membership interests issued by
the LLC or foreign LLC.
The incorporation of a provision specifying a default rule for
how to allocate losses and profits among members, that is
substantially similar to the default rule provided under the
Beverly Killea LLC Act (former Corp. Code Sec. 17202) and the
default rule for partnerships under the California Revised
Uniform Partnership Act (Corp. Code Sec. 15905.035).
Specifically, the bill would provide that the allocation of
profits and losses among LLC members, and among classes of
members, in the manner provided in the operating agreement.
In the event that the operating agreement is silent, profits
and losses would be allocated in proportion to the value, as
stated in the required records, of the contributions the LLC
has received from each member.
The removal of authorization for a manager-managed LLC to
remove a manager at any time upon consent of a majority of the
members, without any notice. The bill would instead provide
that the manager can be removed at any time by the consent of
a majority of members without cause, subject to the rights, if
any, of the manager under any service contract with the LLC.
The addition of language confirming that members of an LLC
have, in addition to the right to vote on a dissolution or
merger of the LLC under specified law, the right to vote on
any conversion of the LLC to another business entity, under
specified law.
To carry over a provision specifying what happens if a member
dies, or a guardian or conservator of the estate is appointed
for the member, or a member's interest is being administered
by an attorney in fact under a valid power of attorney-namely,
the member's executor, administrator, guardian, conservator,
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or other legal representative would be authorized to exercise
all of the member's rights for the purpose of settling the
member's estate or administering the member's property,
including any power the member had under the articles of
organization or an operating agreement to give a transferee
the right to become a member.
3. Indemnification provisions
Existing law requires that an LLC reimburse any payment made and
indemnify any debt, obligation, or other liability incurred by a
member of a member-managed LLC or the manager of a
manager-managed LLC in the course of the member's or manager's
activities on behalf of the LLC, if, in making the payment or
incurring the debt, obligation, or other liability, the member
or manager complied with specified statutory fiduciary duties,
duties of loyalty, and duties of care.
This section further authorizes an LLC to purchase and maintain
insurance on behalf of a member or manager of the LLC against
liability asserted against or incurred by the member or manager
from that status, even if the operating agreement could not
eliminate or limit the person's liability to the LLC for the
conduct giving rise to the liability, under specified law.
This bill would now add that an LLC may reimburse any payment
made and indemnify any debt, obligation, or other liability
incurred by other persons, including, without limitation, any
officer, employee, or agent of the LLC, in the course of that
person's activities on behalf of the LLC, except as specified.
The bill would also expand the existing authorization for an LLC
to purchase and maintain liability insurance for "members" and
"managers" so as to authorize the purchase and maintenance of
liability insurance for any person.
Furthermore, the bill would require that an LLC indemnify an
agent of the LLC to the extent that the agent has been
successful on the merits in defense or settlement of any claim,
issue, or matter in any proceeding in which the agent was or is
a party or threatened to be made a party by reason of his or her
status as an agent of the LLC, against expenses actually and
reasonably incurred by the agent, if the agent acted in good
faith and in a manner that the agent reasonably believed to be
in the best interests of the LLC and its members. The bill
also, however, expressly states that this new requirement does
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not limit the LLC's broader indemnification obligation for
members and managers.
According to materials provided by the sponsor, the new
additions effectively provide for indemnification of agents that
is similar to the existing law indemnification for corporate
agents under Section 317 of the Corporations Code.
4. Bill would allow for LLCs to opt out of the 50/90 rule by
way of written operating agreements
Under existing law, in a merger of one LLC into another, unless
the LLC is merging with an LLC that controls at least 90 percent
of the membership interests entitled to vote for or against the
merger, the unredeemable membership interests of a constitute
LLC can be converted only into unredeemable interests or
securities of the surviving LLC or other business entity, or a
parent (i.e. the interests cannot be "cashed out"), if, prior to
the merger, the constituent LLC or its parent owns, directly or
indirectly, more than 50 percent of the membership interests of
other constituent entitled to vote with respect to the merger of
the other constituent LLC, unless all members of the class
consent. (See Corp. Code Sec. 17710.12(b)(2).)
In other words, in order to protect minority members from being
forced to cash out in a merger, existing law requires that
unanimous member approval be given for the merger to occur if
the acquiring party in a merger owns more than 50 percent but
less than 90 percent of all of the interests of the target LLC
that are entitled to vote, prior to the merger. Otherwise, any
unredeemable membership interests can only be converted into
unredeemable membership interests in the surviving LLC or
surviving business entity. This bill would now add language
authorizing the LLC to require something other than unanimous
approval in their written operating agreement.
In order to address concerns, the author has agreed to remove
this language, as follows:
Author's amendment :
On page 43, strike out line 3, in its entirety
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On page 43, line 4, strike "notwithstanding" and insert "(2)
Notwithstanding"
Support : Conference of California Bar Associations
Opposition : None Known
HISTORY
Source : Partnership and Limited Liability Companies Committee
of the Business Law Section of the California State Bar
Related Pending Legislation : None Known
Prior Legislation :
SB 323 (Vargas, Ch. 419, Stats. 2012), recast and reorganized
the Beverly-Killea Limited Liability Company Act into the
current California Revised Uniform Limited Liability Company Act
(RULLCA).
SB 1186 (Torres, 2014) would have, among other things, amended
the 50/90 rule for corporations to only require majority
approval instead of unanimous approval to force minority
shareholders to cash out in a merger covered by the 50/90 rule.
That bill was held in this Committee and ultimately died without
a hearing.
Prior Vote :
Assembly Floor (Ayes 76, Noes 0)
Assembly Banking and Finance Committee (Ayes 12, Noes 0)
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