BILL ANALYSIS �
SB 323
Page 1
SENATE THIRD READING
SB 323 (Vargas)
As Amended August 23, 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 |
|-----+--------------------------+-----+--------------------------|
| | | | |
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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 of
courts in another state and California or the exclusive
jurisdiction of California courts. Allows a member to consent
SB 323
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to arbitration, as specified.
5)Specifies when a member may be dissociated from an LLC and the
effects of dissociation on the member.
6)Deletes the provision that an "employee" does not include any
member of a limited liability company that is treated as a
partnership for federal income tax purposes.
7)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.
8)Provides that the CRULLCA applies to all foreign LLCs registered
with the Secretary of State whose registrations have not been
cancelled as of the January 1, 2014, to all domestic LLCs
existing on and after January 1, 2014, and to all actions taken
by the managers or members of such LLCs on and after that date.
9)Provides that except as otherwise expressly provided, any vote
or consent by the managers or members of an LLC prior to January
1, 2014, in accordance with the prior law shall be effective in
accordance with the prior law and if any certificate or document
is required to be filed in any public office of this state
relating to such action, it may be filed after January 1, 2014,
in accordance with the prior law.
10)Provides that the CRULLCA does not cancel or otherwise affect
the status of, or create a new filing requirement with the
Secretary of State or any other agency, board, commission, or
department for, an LLC in existence on December 31, 2013, or a
foreign LLC registered to transact intrastate business in this
state prior to January 1, 2014.
11)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
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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 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)
319-2334FN: 0005414