RULLCA – New California LLC Law Coming in 2014

On January 1, 2014, the California Revised Uniform Limited Liability Company Act (“RULLCA”) goes into effect, and will automatically apply to all California LLCs.  RULLCA will replace the Beverly-Killea Limited Liability Company Act, the current California LLC law.    

Generally, it will be unnecessary to reference Beverly-Killea when once this year ends.  Beverly-Killea will, however, remain relevant when considering acts or transactions by an LLC or its members or managers before January 1, 2014.  In addition, contracts dated prior to January 1, 2014 will also be governed under Beverly-Killea.  

Although RULLCA will not require existing LLCs to file any new documents with the Secretary of State or necessarily amend their operating agreements, it may be prudent to seek the advice of an attorney.  Particularly, older operating agreements that specifically reference Beverly-Killea should be amended to instead cite RULLCA.

While RULLCA is not a significant departure from Beverly-Killea, it has some notable differences.  For example, if there is a conflict between a provision in the operating agreement and a provision in the articles of organization, under RULLCA the operating agreement will prevail, except for third parties who reasonably rely on the articles of organization.  Under Beverly-Killea, conflicts were resolved in favor of the LLC’s articles of organization. 

Another change under RULLCA is that an LLC member will be bound to the operating agreement even if that member does not sign it.  

These are simply a few examples of what to expect.  For the most part, RULLCA represents an improvement to the default rules and was intended to align California closer to the LLC laws of other states.  It is expected the Act will be “tweaked” further before its January 1, 2014 effective date.  Significant changes will be noted in future blog posts.  

If you have an existing LLC and operating agreement, I would be pleased to review these matters with you to determine what changes, if any, are appropriate to ensure that your company will be compliant with the new Act.