Published: 2015-07-08
Key Benefits:
(a) A person has the power to dissociate as a member at any time, rightfully or wrongfully, by withdrawing as a member by express will pursuant to subdivision (a) of Section 17706.02.
(b) A person’s dissociation from a limited liability company is wrongful only if either of the following apply to the dissociation:
(1) The dissociation is in breach of an express provision of the operating agreement.
(2) The dissociation occurs before the termination of the limited liability company and any of the following:
(A) The person withdraws as a member by express will.
(B) The person is expelled as a member by judicial order under subdivision (e) of Section 17706.02.
(C) The person is dissociated under subdivision (g) of Section 17706.02 by becoming a debtor in bankruptcy.
(D) In the case of a person that is not a trust other than a business trust, an estate, or an individual, the person is expelled or otherwise dissociated as a member because it dissolved or terminated.
(c) A person that wrongfully dissociates as a member is liable to the limited liability company and to the other members for any damages caused by the dissociation. The liability is in addition to any other debt, obligation, or other liability of the member to the limited liability company or the other members.
(Added by Stats. 2012, Ch. 419, Sec. 20. Effective January 1, 2013. Operative January 1, 2014, by Sec. 32 of Ch. 419.)
A person is dissociated as a member from a limited liability company when any of the following occur:
(a) The limited liability company has notice of the person’s express will to withdraw as a member, but, if the person specified a withdrawal date later than the date the limited liability company had notice, on that later date.
(b) An event stated in the operating agreement as causing the person’s dissociation to occur.
(c) The person is expelled as a member pursuant to the operating agreement.
(d) The person is expelled as a member by the unanimous consent of the other members because any of the following applies:
(1) It is unlawful to carry on the limited liability company’s activities with the person as a member.
(2) There has been a transfer of all of the person’s transferable interest in the limited liability company, other than either of the following:
(A) A transfer for security purposes.
(B) A charging order in effect under Section 17705.03 that has not been foreclosed.
(3) The person is a corporation and, within 90 days after the limited liability company notifies the person that it will be expelled as a member because the person has filed a certificate of dissolution or the equivalent, its charter has been revoked, or its right to conduct business has been suspended by the jurisdiction of its incorporation and the certificate of dissolution has not been revoked or its charter or right to conduct business has not been reinstated.
(4) The person is a limited liability company or partnership that has been dissolved and whose business is being wound up.
(e) On application by the limited liability company, the person is expelled as a member by judicial order because the person has done any of the following:
(1) Engaged, or is engaging, in wrongful conduct that has adversely and materially affected, or will adversely and materially affect, the limited liability company’s activities.
(2) Willfully or persistently committed, or is willfully and persistently committing, a material breach of the operating agreement or the person’s duties or obligations under Section 17704.09.
(3) Engaged, or is engaging, in conduct relating to the limited liability company’s activities that makes it not reasonably practicable to carry on the activities with the person as a member.
(f) In the case of a person who is an individual, if either of the following applies:
(1) The person dies.
(2) In a member-managed limited liability company if either of the following applies:
(A) A guardian or general conservator for the person is appointed.
(B) There is a judicial order that the person has otherwise become incapable of performing the person’s duties as a member under this title or the operating agreement.
(g) In a member-managed limited liability company, the person becomes a debtor in bankruptcy.
(h) In the case of a person that is a trust or is acting as a member by virtue of being a trustee of a trust, the trust’s entire transferable interest in the limited liability company is distributed but not solely by reason of a substitution of a successor trustee.
(i) In the case of a person that is an estate or is acting as a member by virtue of being a personal representative of an estate, the estate’s entire transferable interest in the limited liability company is distributed but not solely by reason of a substitution of a successor personal representative.
(j) In the case of a member that is not an individual, partnership, limited liability company, corporation, trust, or estate, the termination of the member.
(k) The limited liability company participates in a merger under Article 10 (commencing with Section 17710.01), and either of the following applies:
(1) The limited liability company is not the surviving entity.
(2) Otherwise as a result of the merger, the person ceases to be a member.
(l) The limited liability company terminates.
(Added by Stats. 2012, Ch. 419, Sec. 20. Effective January 1, 2013. Operative January 1, 2014, by Sec. 32 of Ch. 419.)
(a) When a person is dissociated as a member of a limited liability company all of the following apply:
(1) The person’s right to participate as a member in the management and conduct of the limited liability company’s activities terminates.
(2) If the limited liability company is member-managed, the person’ s fiduciary duties as a member end with regard to matters arising and events occurring after the person’s dissociation.
(3) Subject to Section 17705.04 and Article 10 (commencing with Section 17710.01), any transferable interest owned by the person immediately before dissociation in the person’s capacity as a member is owned by the person solely as a transferee.
(b) A person’s dissociation as a member of a limited liability company does not of itself discharge the person from any debt, obligation, or other liability to the limited liability company or the other members that the person incurred while a member.
(Added by Stats. 2012, Ch. 419, Sec. 20. Effective January 1, 2013. Operative January 1, 2014, by Sec. 32 of Ch. 419.)
