Effective January 1, 2017, California Assembly Bill 1722 will amend California’s Revised Uniform Limited Liability Company Act to provide potential relief to members of limited liability companies (“LLC”).
The Act previously provided that a LLC is dissolved, and its activities are required to be wound up, if, among other things, a majority of the members of the LLC vote to dissolve. For an LLC with two members who each own a 50% membership interest, both members would have to agree to dissolve the Company since a “majority” would require 51% or more. If the two members can’t agree to dissolve the LLC, the member who wants to dissolve would need to go to court and seek judicial dissolution which can be costly and time consuming. Assembly Bill 1722 now requires the vote of 50% or more of the voting interests of the members of the LLC to dissolve. The bill is designed to help small, two member LLCs locked in a voting dissolution deadlock to avoid unnecessary litigation and expense.
The amendment does, however, allow for the members to require a higher voting percentage approval to initiate dissolution in the LLC’s articles of organization or the operating agreement. Thus, in the case where it doesn’t make business sense for one member to be able to decide the dissolution issue, the members of the LLC can agree to revert back to a simple majority rule on such decisions.
You can read the bill and the amended law in its entirety here.
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