Vote To Dissolve LLC Defeats Buy-Out Option

Published date05 August 2022
Subject MatterCorporate/Commercial Law, Employment and HR, Corporate and Company Law, Securities, Whistleblowing
Law FirmAllen Matkins Leck Gamble Mallory & Natsis LLP
AuthorMr Keith P. Bishop

The California Revised Uniform Limited Liability Company Act provides procedures for both voluntary and judicial dissolution. When a member or members of a California limited liability company files an action for its judicial dissolution, the other members may avoid the dissolution by buying the moving members out for cash. Cal. Corp. Code ' 17707.03(c). What happens to this buy-out right if the members subsequently elect to dissolve voluntarily?

In Friend of Camden, Inc. v. Brandt, 2022 WL 3037454, the plaintiff, a holder of a 1% interest in an LLC, filed an action seeking judicial dissolution pursuant to Section 17707.03. other members of the LLC responded to this action by filing a motion to avoid dissolution by purchasing the plaintiff's 1% interest in the LLC. Not wanting to be bought out, the plaintiff, joined with the holders of 49% of the LLC's interests, voted to dissolve the LLC voluntarily. The Court of Appeal concluded:

Section 17707.01 expressly permits a vote to dissolve, and such a vote effectively moots a judicial dissolution proceeding and any ensuing...

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