SECTIONS 17200-17202 - California Statutes

CORPORATIONS CODE

SECTION 17200-17202

17200. (a) The articles of organization or the operating agreement
may provide for capital contributions of members. The contribution of
a person may be in money, property, or services, or other obligation
to contribute money or property or to render services.
(b) Unless the articles of organization or operating agreement
provide otherwise, no member shall be required to make any additional
contribution to the limited liability company.

17201. (a) (1) Subject to the terms of the articles of organization
or the operating agreement, a member is not excused from an
obligation to the limited liability company to perform any promise to
contribute cash or property or to perform services because of death,
disability, dissolution, or any other reason.
(2) If a member does not make the required contribution of
property or services, that member is obligated, at the option of the
limited liability company, to contribute cash equal to that portion
of the fair market value (or agreed value if stated in writing and
signed by the limited liability company and the member) of the
contribution that has not been made. The foregoing option shall be in
addition to, and not in lieu of, any other rights, including the
right to specific performance, that the limited liability company may
have against the member under the articles of organization,
operating agreement, or applicable law.
(3) An operating agreement may provide that the interest of a
member who fails to make any contribution or other payment that the
member is required to make will be subject to specific remedies for,
or specific consequences of, the failure. A provision shall be
enforceable in accordance with its terms unless the member seeking to
invalidate the provision establishes that the provision was
unreasonable under the circumstances existing at the time the
agreement was made. The specific remedies or consequences may include
loss of voting, approval, or other rights, loss of the member's
ability to actively participate in the management and operations of
the limited liability company, liquidated damages, or a reduction of
the defaulting member's economic rights. The reduction of the
defaulting member's economic rights may include one or more of the
following provisions:
(A) Diluting, reducing, or eliminating the defaulting member's
proportionate interest in the limited liability company.
(B) Subordinating the defaulting member's interest in the limited
liability company to that of nondefaulting members.
(C) Permitting a forced sale of the membership interest.
(D) Permitting the lending or contribution by other members of the
amount necessary to meet the defaulting member's commitment.
(E) Adjusting the interest rates or other rates of return,
preferred, priority, or otherwise, with respect to contributions by
or capital accounts of the other members.
(F) Fixing the value of the defaulting member's interest in the
limited liability company by appraisal, formula and redemption, or
sale of the defaulting member's interest in the limited liability
company at a percentage of that value.
(b) (1) Unless otherwise provided in the articles of organization
or the operating agreement, the obligation of a member to make a
contribution or return money or property paid or distributed in
violation of this section may be compromised only by the unanimous
vote of the members.
(2) Notwithstanding the compromise of an obligation referred to in
paragraph (1), a person whose claim against a limited liability
company arises before the receipt of notice of the compromise may
enforce the original obligation of a member to make a contribution to
the limited liability company or to return a distribution if the
person had knowledge of the original obligation prior to the time the
claim arose and if the compromise occurred after the time the claim
arose. Any other person with a claim against a limited liability
company may enforce only the existing obligation of a member to make
a contribution to the limited liability company or to return to the
limited liability company money or other property paid or
distributed.
(c) A person with a claim against a limited liability company may
not enforce a conditional obligation of a member unless the
conditions have been satisfied or waived. Conditional obligations
include, without limitation, a capital contribution payable upon a
discretionary call of the limited liability company prior to the time
the call occurs.
(d) Nothing in this section shall be construed to affect the
rights of third-party creditors of the limited liability company to
seek equitable remedies nor any rights existing under the Uniform
Fraudulent Transfer Act (Chapter 1 (commencing with Section 3439) of
Title 2 of Part 2 of Division 4 of the Civil Code).

17202. The profits and losses of a limited liability company shall
be allocated among the members, and among classes of members, in the
manner provided in the operating agreement. If the operating
agreement does not otherwise provide, profits and losses shall be
allocated in proportion to the contributions of each member.