Highlights of the New CA LLC Act (RULLC)

The California Revised Uniform Limited Liability Company Act (RULLC) has been in place since January 2015. These rules are intended to bring CA LLC regulations in line with other states so that state to state or multi-state businesses run in agreement.

Provisions of the RULLC provide that the original law will still govern all LLC contracts established prior to January 1, 2014. However, those entered after January 1, 2014 must adhere to the new regulations. We shall briefly discuss the highlights of the new RULLC in the following article.

Indemnification

Under the new law, the LLC must indemnify managers and managing members as long as they are in compliance with their statutory duties. If they do not wish to be indemnified, they must amend their operating agreement to override the original rule.

Capital Contributions

The previous law stated that capital contributions were accepted in the form of property, capital, a promissory note, or services rendered. However, the new law allows that “any benefit” provided to the LLC is applicable.

Member Voting

All matters must be approved by every member of the LLC. An exception to this is if the matter is “outside the ordinary course of business.” However, this term is not outlined so this can lead to management disputes.

Managerial Issues

The new law provides that both the article in question and operating agreement must be manager managed. The exception to this is included in the sale of assets, a merger, any amendment to the operation agreement and any act outside of the ordinary course of business.

Operating Agreements

In accordance with the new RULLC, if a record or article that is filed with the Secretary of State conflicts with the set terms of the original print agreement,  the operating agent will rule.

Tax Allocations

Under the new law, tax allocations of profits and losses are to be determined by the operating agreement.

Disassociation

According to the new law, disassociated members cannot conduct business with the LLC or have access to any company information. Disassociation occurs upon the death of a member of the LLC, if a member is ruled by jury as incapacitated, or if they have become bankrupt.

Fiduciary Duties

The new RULLC specifies that the members or managers who possess control of the LLC owe a “duty of care/duty of loyalty” to those non-conforming members when it comes to fiduciary duties. The duty of loyalty is limited to enumerated activities. Duty of care is thereby limited to refrain from reckless conduct, gross negligence, and intentional misconduct.

If you have any questions regarding the changes in the new RULLC, please contact us at (714) 827-9955. A member of our staff will gladly answer all concerns, and clear up any areas of confusion.