Effective January 1, 2014, the existing limited liability company (LLC) statute in California (the “Old Act”) will be replaced by the California Revised Uniform Limited Liability Company Act (RULLCA). Actions taken by managers and members prior to January 1, 2014, will remain governed by the Old Act but RULLCA will apply to all LLC actions commencing as of that date. Many of the default and mandatory rules of the Old Act will be replaced by different default and mandatory rules of RULLCA. These changes may significantly alter the rights and expectations of members and managers in a way that conflicts with or overrides their written operating agreements. Some key changes to California LLC law and the practical implications of those changes for members and managers are discussed below.
- Management Authority. RULLCA creates new rules for forming manager-managed LLCs. The new law requires a written statement designating the LLC a managermanaged LLC in the LLC’s articles of organization and written operating agreement. Under the Old Act, establishing a manager-managed LLC could be accomplished by a statement to that effect in the articles of organization only. Under RULLCA, if members intend their LLC to be manager-managed, they should ensure that the intention is expressed in both of the LLC’s formation documents. If members intend their LLC to be manager-managed, and the LLC’s articles of organization do not include a statement to that effect, an amendment to the LLC’s articles of organization will be required. Otherwise, RULLCA will treat the LLC as a member-managed LLC subject to its rules for member-managed LLCs, notwithstanding the members’ intentions.
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