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A Key Difference Between Corporate And LLC Buyout Rights That You May Have Missed

Both the California General Corporation Law and the California Revised Uniform Limited Liability Company Act include provisions granting shareholders/members the right to avoid a dissolution of the corporation/LLC under certain circumstances.  While these provisions are facially similar, the buy out rights are not the same, as was noted in this recent opinion by the Court of Appeal:

But the law applicable to corporations is different from the law applicable to LLC's.  Section 2000 . . .  provides a buyout procedure for corporations that applies in both a suit for involuntary dissolution and in a proceeding for voluntary dissolution.  Under section 2000, if shareholders representing only 50 percent of the voting power of the corporation vote to dissolve, holders of the other 50 percent have the right to avoid dissolution by buying them out. (§ 2000, subd. (a).)  That is not the case under the law governing LLCs: When 50 percent vote to dissolve under section 17707.01, the LLC is dissolved, and the other 50 percent have no buyout right.  In short, the Legislature intended to treat the dissolution of corporations differently than the dissolution of LLC's.

Friend of Camden, Inc. v. Brandt, 2022 WL 3037454, at *5 (Cal. Ct. App. Aug. 2, 2022), as modified (Aug. 3, 2022).

© 2010-2022 Allen Matkins Leck Gamble Mallory & Natsis LLP National Law Review, Volume XII, Number 221
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About this Author

Keith Paul Bishop, Corporate Transactions Lawyer, finance securities attorney, Allen Matkins Law Firm
Partner

Keith Bishop works with privately held and publicly traded companies on federal and state corporate and securities transactions, compliance, and governance matters. He is highly-regarded for his in-depth knowledge of the distinctive corporate and regulatory requirements faced by corporations in the state of California.

While many law firms have a great deal of expertise in federal or Delaware corporate law, Keith’s specific focus on California corporate and securities law is uncommon. A former California state regulator of securities and financial institutions, Keith has decades of...

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