BILL ANALYSIS �
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|SENATE RULES COMMITTEE | SB 323|
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THIRD READING
Bill No: SB 323
Author: Vargas (D)
Amended: 1/13/12
Vote: 21
SENATE JUDICIARY COMMITTEE : 5-0, 1/10/12
AYES: Evans, Harman, Blakeslee, Corbett, Leno
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
SUBJECT : California Revised Uniform Limited Liability
Company Act
SOURCE : Business Law Section Partnerships and Limited
Liability
Companies Committee of the State Bar of
California
DIGEST : This bill repeals the Beverly-Killea Limited
Liability Company Act and enacts the California Revised
Uniform Limited Liability Company Act, which recasts
provisions governing the formation and operations of
limited liability companies.
ANALYSIS : 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
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execute and file articles of organization with the
Secretary of State.
This bill repeals that Act and enacts the California
Revised Uniform Limited Liability Company Act which would
recast provisions governing the formation and operation of
limited liability companies. This bill also authorizes an
operating agreement to be in a record or implied, in
addition to being in writing or oral, and authorizes a
combination of those forms.
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.
This bill 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 imposing fiduciary duties only on persons in
control of a limited liability company.
This bill authorizes the establishment of classes of
members.
Existing law provides that the Secretary of State may issue
a certificate of status with respect to a limited liability
company.
This bill also authorizes the Secretary of State to issue a
certificate of registration with respect to a foreign
limited liability company.
This bill provides for the filing of specified records and
would further provide that an individual who signs such a
record affirms under penalty of perjury that the
information in the record is accurate.
Existing law does not specifically provide for jurisdiction
of courts in matters regarding a limited liability company.
This bill allows a limited liability company to be subject
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to the nonexclusive jurisdiction of courts in another state
or the exclusive jurisdiction of California courts. The
bill also allows a member to consent to arbitration, as
specified.
Existing law does not specifically provide for a member to
dissociate from a limited liability company.
This bill specifies when a member would be dissociated from
a limited liability company and the effects of dissociation
on the member.
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 revises and recasts those provisions.
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.
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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 a Uniform Limited Liability Company
Act. In 2006, after reviewing the development of LLC laws
in the United States, the National Conference of
Commissioners on Uniform State Laws adopted the Revised
Uniform Limited Liability Company Act, which has been
enacted in five states (Idaho, Iowa, Nebraska, Utah, and
Wyoming) and the District of Colombia.
This bill, sponsored by the Business Law Section
Partnerships and Limited Liability Companies Committee of
the State Bar of California, would repeal Beverly-Killea
and, taking into account California's particular LLC
protections, replace it with a modified version of the
Revised Uniform Limited Liability Company.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
SUPPORT : (Verified 1/18/12)
Business Law Section Partnerships and Limited Liability
Companies
Committee of the State Bar of California (source)
Commission on Uniform State Laws
ARGUMENTS IN SUPPORT : According to the author's office:
The primary problem with current California law is
that it is not uniform with other states' LLC acts and
is not uniform with RULLCA �the Revised Uniform
Limited Liability Company Act]. SB 323 remedies this
problem by adopting the substantive provisions of
RULLCA while leaving certain provisions unique to
California law, such as dissenters rights, and a
prohibition on professional LLCs.
The Business Law Section Partnerships and Limited Liability
Companies Committee of the State Bar of California (PLLC),
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the sponsor of this bill, writes:
SB 323 clarifies many issues that existed under
Beverly-Killea and includes a more robust set of
default rules on many topics, which apply if the LLC
operating agreement is silent. SB 323 will bring
California LLC law more in line with the LLC laws of
other states, making it easier for multi-state
businesses to operate both in and outside California.
RJG:nl 1/18/12 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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