California’s new Limited Liability Company laws replaced important governing provisions of the operating agreements created prior to January 1, 2014 – mostly, the impact of default provisions. This blog focuses on Management of the LLC.
Under California’s new LLC laws, there is a new set of default rules where the operating agreement is silent, including the area of Management decision-making. This is particularly troublesome – and ripe for dispute – where managers/members entered into the operating agreement with the understanding of who has the authority to make decisions on behalf of the LLC.
Prior to Jan. 1, 2014, the default rule of management responsibility was placed on the members, i.e. member managed, unless stated otherwise in the operating agreement. Now, the default to member-managed occurs only if the operating agreement and the articles of organization state such. As a result, a manager-managed LLC that relies only on its articles of organization for support must now amend its articles to state its manager-member preference or by subject to member-managed by default.
The impact of the new default provisions on pre-existing LLC’s may lead to significant legal disputes; therefore, it would be extremely prudent for managers/members to review their operating agreements or, to amend impacted provisions