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Volume XIII, Number 34

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Why This CLA Sponsored Bill Obfuscates Rather Than Clarifies LLC Filings

In 2020, the legislature enacted AB 3075 (Gonzalez) which, among other things, requires a corporation or an LLC to disclose in its statement of information filed with the Secretary of State whether any director of the corporation or member or manager of the LLC has an outstanding final judgment issued by Department of Labor Standards Enforcement or a court of law for violation of a wage order or other violation of the Labor Code.  See California Governor Signs "Wacky" Successor Liability Bill Into Law and A "New Fine Question" For This Proxy Season.

In the case of LLCs, the current statute (Corporations Code § 17702.09(a)(8)) requires disclosure as to "any member or any manager".  This is obviously more burdensome that the analogous requirement for corporations (Sections 1502(a)(10) 7 2117(a)(8)) which requires disclosure only as to officers and directors.  In an attempt to achieve greater parity, the California Lawyers Association has sponsored AB 2431, which was introduced as a committee bill.  

While AB 2431 would improve matters for LLCs, it introduces an entirely new, and undefined, term to the Revised Uniform Limited Liability Company Act.  As introduced (and presumably recommended by the CLA), the bill would require disclosure as to managers in a manager-managed limited liability company.  In the case of a member-managed limited liability company, disclosure would be required as to any "managing member".  The problem, of course, is that the RULLCA currently neither defines nor uses the term "managing member".

Section 17703.01 provides that unless the articles of organization indicate that the LLC is a manager-managed limited liability company, every member is an agent of the LLC for the purpose of its business or affairs.  This statute would seem to make all members "managing members".  If that is the case, AB 2431 will do little to narrow the scope of persons covered.  While this provision may be varied in a written operating agreement pursuant to Section 17701.10(d), it still begs the question of what makes a member a "managing member"? 

© 2010-2023 Allen Matkins Leck Gamble Mallory & Natsis LLP National Law Review, Volume XII, Number 108
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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...

949-851-5428
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