SECTIONS 17540.1-17540.9 - California Statutes

CORPORATIONS CODE

SECTION 17540.1-17540.9

17540.1. For purposes of this chapter, the following definitions
shall apply:
(a) "Converted entity" means the other business entity or foreign
other business entity or foreign limited liability company that
results from a conversion of a domestic limited liability company
under this chapter.
(b) "Converted limited liability company" means a domestic limited
liability company that results from a conversion of an other
business entity or a foreign other business entity or a foreign
limited liability company pursuant to Section 17540.8.
(c) "Converting limited liability company" means a domestic
limited liability company that converts to an other business entity
or a foreign other business entity or a foreign limited liability
company pursuant to this chapter.
(d) "Converting entity" means an other business entity or a
foreign other business entity or a foreign limited liability company
that converts to a domestic limited liability company pursuant to the
terms of Section 17540.8.

17540.2. (a) A limited liability company may be converted into an
other business entity or a foreign other business entity or a foreign
limited liability company pursuant to this chapter if, (1) pursuant
to a conversion into a domestic or foreign general partnership or
limited partnership or into a foreign limited liability company, each
of the members of the converting limited liability company would
receive a percentage interest in profits and capital of the converted
entity equal to that member's percentage interest in profits and
capital of the converting limited liability company as of the
effective time of the conversion, and (2) pursuant to a conversion
into an other business entity or foreign other business entity not
specified in clause (1) above, both of the following occur: (A) each
of the membership interests of the same class is treated equally with
respect to any distribution of cash, property, rights, interests, or
securities of the converted entity, unless all members of the class
consent, and (B) the nonredeemable membership interests of the
converting limited liability company are converted only into
nonredeemable interests or securities of the converted entity, unless
all holders of the nonredeemable interests consent.
(b) Notwithstanding this section, the conversion of a limited
liability company to an other business entity or a foreign other
business entity or a foreign limited liability company may be
effected only if both of the following conditions are complied with:
(1) The law under which the converted entity will exist expressly
permits the formation of that entity pursuant to a conversion.
(2) The limited liability company complies with any and all other
requirements of any other law that applies to conversion to the
converted entity.

17540.3. (a) A limited liability company that desires to convert to
an other business entity or a foreign other business entity or a
foreign limited liability company shall approve a plan of conversion.
The plan of conversion shall state all of the following:
(1) The terms and conditions of the conversion.
(2) The place of the organization of the converted entity and of
the converting limited liability company and the name of the
converted entity after conversion.
(3) The manner of converting the membership interests of each of
the members into securities of, shares of, or interests in, the
converted entity.
(4) The provisions of the governing documents for the converted
entity, including the articles or certificate of incorporation if the
converted entity is a domestic or foreign corporation, the
partnership agreement, or the limited liability company articles of
organization and operating agreement, to which the holders of
interests in the converted entity are to be bound.
(5) Any other details or provisions that are required by the laws
under which the converted entity is organized, or that are desired by
the parties.
(b) The plan of conversion shall be approved by a vote of a
majority in interest of the members of the converting limited
liability company, or a greater percentage of the voting interests of
members as may be specified in the articles of organization or
written operating agreement of the converting limited liability
company. However, if the members of the limited liability company
would become personally liable for any obligations of the converted
entity as a result of the conversion, the plan of conversion shall be
approved by all of the members of the converting limited liability
company, unless the plan of conversion provides that all members will
have dissenters' rights as provided in Chapter 13 (commencing with
Section 17600).
(c) If the limited liability company is converting into a limited
partnership, then in addition to the approval of the members set
forth in subdivision (b), the plan of conversion shall be approved by
those members who will become general partners of the converted
limited partnership pursuant to the plan of conversion.
(d) Upon the effectiveness of the conversion, all members of the
converting limited liability company, except those that exercise
dissenters' rights as provided in Chapter 13 (commencing with Section
17600), shall be deemed parties to any governing documents for the
converted entity adopted as part of the plan of conversion,
irrespective of whether or not a member has executed the plan of
conversion or the governing documents for the converted entity. Any
adoption of governing documents made pursuant thereto shall be
effective at the effective time or date of the conversion.
(e) Notwithstanding its prior approval, a plan of conversion may
be amended before the conversion takes effect if the amendment is
approved by the members of the converting limited liability company
in the same manner as was required for approval of the original plan
of conversion.
(f) A plan of conversion may be abandoned by the members of a
converting limited liability company in the manner as required for
approval of the plan of conversion, subject to the contractual rights
of third parties, at any time before the conversion is effective.
(g) The converted entity shall keep the plan of conversion at the
principal place of business of the converted entity if the converted
entity is a domestic partnership or foreign other business entity, at
the principal executive office of or registrar or transfer agent of
the converted entity if the converted entity is a domestic
corporation, or at the office at which records are to be kept under
Section 15614 or 15901.14 if the converted entity is a domestic
limited partnership. Upon the request of a member of a converting
limited liability company, the authorized person on behalf of the
converted entity shall promptly deliver to the member or the holder
of interests, shares, or other securities, at the expense of the
converted entity, a copy of the plan of conversion. A waiver by a
member of the rights provided in this subdivision shall be
unenforceable.

17540.4. (a) A conversion into an other business entity or a
foreign other business entity or a foreign limited liability company
shall become effective upon the earliest date that all of the
following occur:
(1) The approval of the plan of conversion by the members of the
converting limited liability company as provided in Section 17540.3.
(2) The filing of all documents required by law to effect the
conversion and create the converted entity, which documents shall
also contain a statement of conversion, if required under Section
17540.6.
(3) The occurrence of the effective date, if set forth in the plan
of conversion.
(b) A copy of the statement of partnership authority or
certificate of limited partnership complying with Section 17540.6, if
applicable, duly certified by the Secretary of State, is conclusive
evidence of the conversion of the limited liability company.

17540.5. (a) The conversion of a limited liability company into a
foreign other business entity or a foreign limited liability company
shall be required in order to comply with Section 17540.2.
(b) If the limited liability company is converting into a foreign
other business entity or a foreign limited liability company, those
conversion proceedings shall be in accordance with the laws of the
state or place of organization of the foreign other business entity
or foreign limited liability company and the conversion shall become
effective in accordance with that law.
(c) (1) To enforce an obligation of a limited liability company
that has converted to a foreign limited liability company or foreign
other business entity, the Secretary of State shall only be the agent
for service of process in an action or proceeding against that
converted foreign entity, if the agent designated for the service of
process for the entity is a natural person and cannot be located with
due diligence or if the agent is a corporation and no person, to
whom delivery may be made, may be located with due diligence, or if
no agent has been designated and if no one of the officers, partners,
managers, members, or agents of that entity may be located after
diligent search, and it is so shown by affidavit to the satisfaction
of the court. The court then may make an order that service be made
by personal delivery to the Secretary of State or to an assistant or
deputy Secretary of State of two copies of the process together with
two copies of the order, and the order shall set forth an address to
which the process shall be sent by the Secretary of State. Service in
this manner is deemed complete on the 10th day after delivery of the
process to the Secretary of State.
(2) Upon receipt of the process and order and the fee set forth in
Section 12206 of the Government Code, the Secretary of State shall
give notice to such entity of the service of the process by
forwarding by certified mail, return receipt requested, a copy of the
process and order to the address specified in the order.
(3) The Secretary of State shall keep a record of all process
served upon the Secretary of State and shall record therein the time
of service and the Secretary of State's action with respect thereto.
The certificate of the Secretary of State, under the Secretary of
State's official seal, certifying to the receipt of process, the
giving of notice thereof to that entity, and the forwarding of the
process, shall be competent and prima facie evidence of the matters
stated therein.

17540.6. (a) Upon conversion of a limited liability company:
(1) If the limited liability company is converting into a domestic
limited partnership, a statement of conversion shall be completed on
the certificate of limited partnership for the converted entity.
(2) If the limited liability company is converting into a domestic
partnership, a statement of conversion shall be completed on the
statement of partnership authority for the converted entity, or if no
statement of partnership authority is filed then a certificate of
conversion shall be filed separately.
(3) If the limited liability company is converting to a domestic
corporation, a statement of conversion shall be completed on the
articles of incorporation for the converted entity.
(4) If the limited liability company is converting into a foreign
limited liability company or foreign other business entity, a
certificate of conversion shall be filed with the Secretary of State.
(b) Any certificate or statement of conversion shall be executed
and acknowledged by all of the managers, unless a lesser number is
provided in the articles of organization or the operating agreement
of the converting limited liability company, and shall set forth all
of the following:
(1) The name and the Secretary of State's file number of the
converting limited liability company.
(2) A statement that the principal terms of the plan of conversion
were approved by a vote of the members, which equaled or exceeded
the vote required under Section 17540.3, specifying each class
entitled to vote and the percentage vote required of each class.
(3) The form of organization of the converted entity.
(c) The filing with the Secretary of State of a certificate of
conversion or an organizational document containing a statement of
conversion as set forth in subdivision (a) shall have the effect of
the filing of a certificate of cancellation by the converting limited
liability company and no converting limited liability company that
has made the filing is required to file a certificate of dissolution
or a certificate of cancellation under Section 17356 as a result of
that conversion.

17540.7. (a) Whenever a limited liability company or other business
entity having any real property in this state converts into a
limited liability company or an other business entity pursuant to the
laws of this state or of the state or place in which the limited
liability company or other business entity was organized, and the
laws of the state or place of organization, including this state, of
the converting limited liability company or other converting entity
provide substantially that the conversion vests in the converted
limited liability company or other converted entity all the real
property of the converting limited liability company or other
converting entity, the filing for record in the office of the county
recorder of any county in this state in which any of the real
property of the converting limited liability company or other
converting entity is located of either (1) a certificate of
conversion, statement of partnership authority, certificate of
limited partnership, or articles of organization complying with
Section 17540.6, in the form prescribed and certified by the
Secretary of State, or (2) a copy of a certificate of conversion, or
a statement of partnership authority, certificate of limited
partnership, articles of organization, articles or certificate of
incorporation, or other certificate or document evidencing the
creation of a foreign other business entity or foreign limited
liability company by conversion, containing a statement of
conversion, certified by the Secretary of State or an authorized
public official of the state or place pursuant to the laws of which
the conversion is effected, shall evidence record ownership in the
converted limited liability company or other converted entity of all
interest of the converting limited liability company or other
converting entity in and to the real property located in that county.
(b) A filed and, if appropriate, recorded certificate of
conversion, or a statement of partnership authority, certificate of
limited partnership, articles of organization, articles or
certificate of incorporation, or other certificate evidencing the
formation of a foreign other business entity or a foreign limited
liability company filed pursuant to Section 17540.6 containing a
statement of conversion, stating the name of the converting limited
liability company or other converting entity in whose name property
was held before the conversion and the name of the converted entity
or converted limited liability company, but not containing all of the
other information required by Section 17540.6, operates with respect
to the converted entities named to the extent provided in
subdivision (a).
(c) Recording of a certificate of conversion or a statement of
partnership authority, certificate of limited partnership, articles
of organization, or articles or certificate of incorporation, or
other certificate evidencing the creation of an other business entity
or a limited liability company by conversion, containing a statement
of conversion, in accordance with subdivision (a), shall create, in
favor of bona fide purchasers or encumbrances for value, a conclusive
presumption that the conversion was validly completed.

17540.8. (a) An other business entity or a foreign other business
entity or a foreign limited liability company may be converted to a
domestic limited liability company pursuant to this chapter only if
the converting entity is authorized by the laws under which it is
organized to effect the conversion.
(b) An other business entity or a foreign other business entity or
a foreign limited liability company that desires to convert into a
domestic limited liability company shall approve a plan of conversion
or an other instrument as is required to be approved to effect the
conversion pursuant to the laws under which that entity is organized.
(c) The conversion of an other business entity or a foreign other
business entity or a foreign limited liability company into a
domestic limited liability company shall be approved by that number
or percentage of the partners, members, shareholders, or holders of
interest of the converting entity as is required by the laws under
which that entity is organized, or a greater or lesser percentage,
subject to applicable laws, as set forth in the converting entity's
partnership agreement, articles of organization, operating agreement,
articles or certificate of incorporation, or other governing
document.
(d) The conversion by an other business entity or a foreign other
business entity or a foreign limited liability company into a
domestic limited liability company shall be effective under this
chapter at the time the conversion is effective under the laws under
which the converting entity is organized as long as the articles of
organization containing a statement of conversion have been filed
with the Secretary of State. If the converting entity's governing law
is silent as to the effectiveness of the conversion, the conversion
shall be effective upon the completion of all acts required under
this title to form a limited liability company.
(e) The filing with the Secretary of State of a certificate of
conversion or articles of organization containing a statement of
conversion pursuant to subdivision (a) shall have the effect of the
filing of a certificate of cancellation by the converting foreign
limited liability company or foreign limited partnership, and no
converting foreign limited liability company or foreign limited
partnership that has made the filing is required to file a
certificate of cancellation under Section 15696, 15909.07, or 17455
as a result of that conversion. If a converting other business entity
is a foreign corporation qualified to transact business in this
state, the foreign corporation shall, by virtue of the filing,
automatically surrender its right to transact intrastate business.

17540.9. (a) An entity that converts into another entity pursuant
to this chapter is for all purposes the same entity that existed
before the conversion.
(b) Upon a conversion taking effect, all of the following apply:
(1) All the rights and property, whether real, personal, or mixed,
of the converting entity or converting limited liability company are
vested in the converted entity or converted limited liability
company.
(2) All debts, liabilities, and obligations of the converting
entity or converting limited liability company continue as debts,
liabilities, and obligations of the converted entity or converted
limited liability company.
(3) All rights of creditors and liens upon the property of the
converting entity or converting limited liability company shall be
preserved unimpaired and remain enforceable against the converted
entity or converted limited liability company to the same extent as
against the converting entity or converting limited liability company
as if the conversion had not occurred.
(4) Any action or proceeding pending by or against the converting
entity or converting limited liability company may be continued
against the converted entity or converted limited liability company
as if the conversion had not occurred.
(c) A member of a converting limited liability company is liable
for:
(1) All obligations of the converting limited liability company
for which the member was personally liable before the conversion.
(2) All obligations of the converted entity incurred after the
conversion takes effect, but those obligations may be satisfied only
out of property of the entity if that member is a limited partner, a
shareholder in a corporation, or unless expressly provided otherwise
in the articles of organization or other governing documents, a
member of a converted limited liability company or a holder of equity
securities in an other converted entity if the holders of equity
securities in such entity are not personally liable for the
obligations of such entity under the law under which that entity is
organized or its governing documents.
(d) A member of a converted limited liability company remains
liable for any and all obligations of the converting entity for which
the member was personally liable before the conversion, but only to
the extent that the member was personally liable for the obligations
of the converting entity prior to the conversion.
(e) If the other party to a transaction with the limited liability
company reasonably believes when entering the transaction that the
limited liability company member is a general partner, the limited
liability company member is liable for an obligation incurred by the
limited liability company within 90 days after the conversion takes
effect. The limited liability company member's liability for all
other obligations of the limited liability company incurred after the
conversion takes effect is that of a limited liability company
member.