Effective as of January 1, 2014, California has enacted a new statute that contains a few key provisions that should be of concern to managers of, and investors in, California LLCs. This article briefly summarizes these key concerns and suggests further actions for shareholders of and investors in LLCs.

1. Why LLC Managers and Investors Should
Care About California's New LLC Law
By Francesco R. Barbera, Esq.
Founder, Barbera Corporate Law
This article is directed to owners and investors in California limited liability companies.
Effective as of January 1, 2014, California has enacted a new statute governing California LLCs -dubbed the “California Revised Uniform Limited Liability Company Act” -- that contains a few key
provisions that we think should be of concern to managers of, and investors in, California LLCs.
The most important of the Act's provisions concerns voting rights and the authority of managers
and/or officers running the LLC. The Act expands the default voting rights of LLC members to
require member consent to a range of corporate actions, including all actions “outside of the ordinary
course of business,” unless the LLC’s operating agreement explicitly modifies or limits those voting
rights.
Member voting rights are typically among the most heavily negotiated provisions in an LLC's
Operating Agreement. Voting rights determine how the Company is managed and operated and can
seriously impact the ability and discretion of company management to execute on strategic
transactions in a timely and flexible way. This is especially the case when there is a divergence of
views and personalities among the ownership base.
Depending on the current language in an Operating Agreement, LLC managers or officers who
previously may have operated with broad (or full) discretion may now be required to obtain the
consent of investors/members before engaging in certain transactions. The phrase “outside the
ordinary course of business,” while common in business agreements, nevertheless invites further
uncertainty over the scope of the Act's new voting requirements.
The new law also expands upon the impact of member "disassociation" (or withdrawal) events, the
occurrence of which may result in a member losing membership rights and instead holding only the
Barbera Corporate Law |310.896.8392 | francesco@barberalawfirm.com | www.barberacorporatelaw.com

2. limited economic rights of an assignee. Dissociation events include the death, insolvency or
incompetence of individual members. These new provisions are likely to impact both voting and
corporate governance matters within the LLC, as well as members’ estate and succession planning
matters.
Other provisions in the new law impact, among other things, the scope of fiduciary duties of
members and managers, an LLC’s obligations to indemnify members and managers, and the rights
of transferees of LLC interests (i.e., people who purchase LLC interests from existing shareholders).
Bottom Line: Managers and investors in California LLCs (and those considering such investments)
should have legal counsel review the current LLC Operating Agreements to determine the impact of
the Act on corporate governance matters and the economic and non-economic rights of LLC
members.
Barbera Corporate Law helps visionaries build thriving companies. We provides specialized
corporate transactional legal counsel, with predictable flat-fee rate structures, to emerging
technology and online businesses throughout California.
Barbera Corporate Law |310.896.8392 | francesco@barberalawfirm.com | www.barberacorporatelaw.com