California Member Rights To Inspect Delaware LLC Records

A Delaware limited liability company might reasonably expect that Section 18-305 of Title 6 of the Delaware Code governs the inspection rights of its members.  However, members of a foreign LLC, including an LLC organized under Delaware law, may have inspection rights under California's Revised Uniform Limited Liability Company Act.  Section 17708.o8 of the California Corporations Code provides that if the members of a foreign LLC residing in California represent 25% or more of the voting interests of the members of the foreign LLC, those members are entitled to "all information and inspection rights provided in Section 17704.10".

"Terence, this is stupid stuff"

It is unclear how this would actually work.  The Delaware's statute explicitly states that the right to inspect may be "subject to such reasonable standards (including standards governing what information and documents are to be furnished at what time and location and at whose expense)" as may be set forth in the LLC agreement or otherwise established by the manager, or if there is no manager, by the members.  The California inspection statute does not include similar language and even provides that any waiver of the rights provided by the statute is unenforceable.  Cal. Corp. Code § 17704.10(h).  This anti-waiver provision was tempered somewhat by Section 17701.10(c)(6) which had provided that an operating agreement may not "unreasonably restrict the rights and duties set forth in Section 17704.10".  However, effective January 1, 2016, Section 17701.10(d) provides that the operating agreement shall not vary a member's rights under Section 17704.10.

Unlike the Post Office, LLCs may not know where their members live

California's statute also presents a practical problem for foreign LLCs who may not know the where their members are "residing", a term not defined in the California LLC Act.  Compare Section 2115 of the Corporations Code which refers to the "addresses in this state appearing on the books of the corporation".   A member's address for notice and other purposes may, or may not be, a residence address.

Note to readers:  I've updated this post to reflect the amendment of Section 17701.10 by AB 506.  Thanks to a reader for spotting this update!