BILL ANALYSIS �
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|SENATE RULES COMMITTEE | SB 323|
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UNFINISHED BUSINESS
Bill No: SB 323
Author: Vargas (D)
Amended: 8/29/12
Vote: 21
SENATE JUDICIARY COMMITTEE : 5-0, 1/10/12
AYES: Evans, Harman, Blakeslee, Corbett, Leno
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
SENATE FLOOR : 37-0, 1/26/12
AYES: Alquist, Anderson, Berryhill, Blakeslee, Calderon,
Cannella, Corbett, Correa, De Le�n, DeSaulnier, Dutton,
Emmerson, Evans, Fuller, Gaines, Harman, Hernandez, Huff,
Kehoe, La Malfa, Leno, Lieu, Liu, Lowenthal, Negrete
McLeod, Padilla, Pavley, Price, Rubio, Simitian,
Steinberg, Strickland, Vargas, Walters, Wolk, Wright, Yee
NO VOTE RECORDED: Hancock, Runner, Wyland
ASSEMBLY FLOOR : Not available
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 enacts the California Revised Uniform
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Limited Liability Company Act (CRULLC) which recasts and
reorganizes the existing Beverly-Killea Limited Liability
Company Act.
Assembly Amendments make numerous technical and clarifying
changes, provides for an operative date of January 1, 2014.
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 (LLC), 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.
Existing law also:
1.Establishes requirements and procedures for membership
interests in an LLC, 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.
2.Provides that the Secretary of State may issue a
certificate of status with respect to a limited liability
company.
3.Does not specifically provide for jurisdiction of courts
in matters regarding a limited liability company.
4.Does not specifically provide for a member to dissociate
from a limited liability company.
5.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 an LLC. Existing law requires the registration of
foreign LLCs, as defined, with the Secretary of State,
and prohibits the transaction of business in this state
by an unregistered foreign LLC, subject to specified
penalties. Existing law also regulates the merger of an
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LLC with one or more LLCs or other business entities, as
specified, including requiring an agreement of merger and
protection of the rights and liabilities of an LLC,
creditors, and dissenting members.
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 LLCs.
2. Distinguishes between a manager-managed LLCs and a
member-managed LLCs 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
LLCs. 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.
5. Allows a member to consent to arbitration, as
specified.
6. Specifies when a member may be dissociated from an
LLC and the effects of dissociation on the member.
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
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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 mangers 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 the 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.
Background
A California 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, 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
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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 LLC 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 8/29/12)
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, 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
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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:n 8/30/12 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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