The new California Revised Uniform Limited Liability Company Act contains some weird inversions of time and logical order. For example, it allows for the formation of an operating agreement even before an LLC is formed. In defining “operating agreement”, the CRULLCA provides that the term “may include, without more, an agreement of all members to organize a limited liability company . . .”. Cal. Corp. Code § 17701.02(s). This seems clear enough until you start to think about it.
First, members don’t organize the LLC, the organizer does and the organizer need not be a member. Cal. Corp. Code §§ 17702.01 & 17704.01. Second, there can’t be members until the LLC is formed. (Section 17701.02(p) defines a member as “a person that has become a member of a limited liability company . . .”. and “limited liability company” is defined in Section 17701.02(k) as an entity formed under the CRULLCA).
I’m shocked, shocked to find that . . .
In a recent paper, Professors Steven M. Davidoff, Jill E. Fisch, and Sean J. Griffith report on their study of 453 large company mergers that occurred between 2005 and 2012. Although it should come as a surprise to no one, their conclusion is important nonetheless:
In short, we find no relationship at all between supplemental disclosures and shareholder voting behavior. Disclosure-only settlements appear to have no effect on shareholder voting.
You can obtain a copy of their paper here. They recommend that disclosure only settlements should be rejected as a basis for awarding attorneys’ fees. I don’t have a study but I did have my own modest proposal to address the problem.