In January, 2014, California’s current limited liability company act, the Beverly-Killea Limited Liability Company Act (“Beverly-Killea”), will be replaced by the California Revised Uniform Limited Liability Company Act (“RULLCA”). RULLCA is based on the Revised Uniform Limited Liability Company Act, which was drafted and approved by the National Conference of Commissioners on Uniform State Laws in 2006.
This article is intended to highlight some of the more notable differences between Beverly-Killea and RULLCA. This article has two parts. This is Part 2 of 2. For Part 1, click here – https://www.northerncaliforniabankruptcyattorneysblog.com/new-california-limited-liability-company-llc-regulations-coming-january-1-2014-the-basics-what-you/
Fiduciary Duties: Beverly-Killea does not specify the fiduciary duties owed by members or managers of an LLC, instead stating that the fiduciary duties of an LLC manager are the same as those of a general partner in a partnership (“[t]he fiduciary duties a manager owes to the limited liability company and to its members are those of a partner to a partnership and to the partners or the partnership”). RULLCA changes this by setting forth detailed provisions concerning fiduciary duties.
In addition, Beverly Killea provides that fiduciary duties may be modified but does not specify in extent or manner in which they can be modified (“[t]he fiduciary duties of a manager to the limited liability company and to the members of the limited liability company may only be modified in a written operating agreement with the informed consent of the members.”). By contrast, RULLCA provides that an operating agreement may not “unreasonably” reduce the duty of care and may not “eliminate” the duty of loyalty, but may with respect to the duty of loyalty “[i]dentify the specific types or categories of activities that do not violate the duty of loyalty, if not manifestly unreasonable” and “[s]pecify the number or percentage of members that may authorize or ratify, after full disclosure to all members of all material facts, a specific act or transaction that otherwise would violate the duty of loyalty.”
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