There are three paths to dissolution under California's Revised Uniform Limited Liability Company Act (RULLCA).  First, an event of dissolution set forth in a written operating agreement or the articles of organization may occur.  Cal. Corp. Code § 17707.01(a).  Second, ninety consecutive days may pass during which the limited liability company has no members.  Cal. Corp. Code § 17707.01(c).  Third, a majority of the members may vote to dissolve.  Cal. Corp. Code § 17707.01(b) (a written operating agreement or the articles of organization may specify a greater percentage of the voting interests).  Today's post focuses on this last event.

Read in isolation, California's statute suggests per capita voting - "the vote of a majority of the members".  However, a "majority of the members" is defined to mean "more than 50 percent of the membership interests of members in current profits of the limited liability company."  Cal. Corp. Code § 17701.02(m).  The net result of these statutes seems to be that what the articles of organization and operating agreement have to say about voting rights of members is irrelevant if the question is dissolution (other than possibly to specify a greater percentage of interests in current profits).  This may not be a problem if voting rights in the articles of organization or operating agreement are tied to a member's interest in current profits.  But what if they aren't?

Last week, Assembly Member Donald P. Wagner introduced a bill, AB 1722,  to change the required vote to dissolve to "the vote of 50 percent of the voting interests".  Clearly, something is missing from the bill. I suspect that the author intended "the vote of more than 50 percent" not "the vote of 50 percent".  The author's use of "voting interests" presents another problem.  The RULLCA does not define "voting interests", but does provide that voting by members may be on a per capita, number, financial interest, class, group, or any other basis.  Cal. Corp. Code § 17704.07(r).  If the articles of organization or operating agreement fail to provide for voting, then the default rule is that members vote in proportion to their interests in current profits.  Id.  Rather than introduce a new, undefined term, the amendment would be more clear if it simply referred to the "vote of more than 50% of the members."

AB 1722 makes the same errors with respect to the vote required to cancel a limited liability company in Section 17707.02.