Mergers and Conversions of LLCs

Title 2.6, Article 10 deals with mergers and conversions under California’s Revised Uniform Limited Liability Company Act.

Section 17710.01 defines the following terms: “converted entity,” “converted limited liability company, “converting limited liability company,” “converting entity,” “constituent corporation,” “constituent limited liability company,” “constituent other business entity,” “disappearing limited liability company,” “disappearing other business entity,” “foreign other business entity,” “other business entity,” “surviving limited liability company,” and “surviving other business entity.”

Section 17710.02 authorizes a limited liability company to be converted into an other business entity or a foreign other business entity or a foreign limited liability company pursuant to this article if both of the specified conditions apply. 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 specified conditions are satisfied.

Section 17710.03 provides that 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 must approve a plan of conversion. The plan of conversion is required to specify five items of information.

The plan of conversion must be approved by all managers and a majority of the members of each class of membership interest or if there are no managers, a majority of the members of each class of membership of the converting limited liability company, unless a greater approval is required by the operating agreement of the converting limited liability company.

Section 17710.04 requires a conversion into an other business entity or a foreign other business entity or a foreign limited liability company to become effective upon the earliest date that all three of the specified conditions occur.

Section 17710.05 states that, if the limited liability company is converting into a foreign limited liability company or foreign other business entity, those conversion proceedings must be in accordance with the laws of the state or place of organization of the foreign limited liability company or foreign other business entity and the conversion becomes effective in accordance with that law.

Section 17710.06 specifies that, upon conversion of a limited liability company, one of the four specified actions apply. Any certificate or statement of conversion must be executed and acknowledged by all members of a member-managed limited liability company or all managers of a manager-managed limited liability company, unless a lesser number is provided in the articles of organization or operating agreement, and must set both of the specified items. A certificate of conversion must set forth three specified items. The certificate of conversion must be on a form prescribed by the Secretary of State.

Section 17710.07 provides that, 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 where the limited liability company or other business entity was organized.

Section 17710.08 states that 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 article only if the converting entity is authorized by the laws pursuant to which it is organized to effect the conversion.

Section 17710.09 provides that an entity that converts into another entity pursuant to this article is the same entity that existed before the conversion and the conversion shall not be deemed a transfer of property. Upon a conversion taking effect, all of the six specified conditions apply. A member of a converting limited liability company is liable for two specified obligations.

Section 17710.11 allows specified entities to be merged pursuant to this article.

Section 17710.12 requires each limited liability company and other business entity that desires to merge to approve an agreement of merger. The agreement of merger must be approved by all managers and a majority of the members of each class of membership interests of each constituent limited liability company, unless a greater approval is required by the operating agreement of the constituent limited liability company. The agreement of merger is required to state six specified items of information.

Section 17710.14 states that, if the surviving entity is a limited liability company or an other business entity, other than a corporation in a merger in which a domestic corporation is a constituent party, after approval of a merger by the constituent limited liability companies and any constituent other business entities, the constituent limited liability companies and constituent other business entities are required to file a certificate of merger in the office of, and on a form prescribed by, the Secretary of State. The certificate of merger must set forth six specified items of information.

Section 17710.15 provides, unless a future effective date is provided in a certificate of merger or the agreement of merger, if an agreement of merger is required to be filed in which event the merger must be effective at that future effective date, a merger is to be effective upon the filing of the certificate of merger or the agreement of merger, as is applicable, in the office of the Secretary of State.

Section 17710.16 specifies that, upon a merger of limited liability companies or limited liability companies and other business entities pursuant to this article, the separate existence of the disappearing limited liability companies and disappearing other business entities ceases and the surviving limited liability company or surviving other business entity must succeed, without other transfer, act or deed, to all the rights and property of each of the disappearing limited liability companies and disappearing other business entities, and be subject to all the debts and liabilities of each in the same manner as if the surviving limited liability company or surviving other business entity had itself incurred them.

Section 17710.17 provides that, if the surviving entity is a domestic limited liability company or a domestic other business entity, the merger proceedings with respect to that limited liability company or other business entity and any domestic disappearing limited liability company are required to conform to the provisions of this article governing the merger of domestic limited liability companies, with specified exceptions.

Section 17710.18 states that, whenever a domestic or foreign limited liability company or other business entity having any real property in this state merges with another limited liability company or other business entity pursuant to the laws of this state, and the laws of the state or place of organization, the filing for record in the office of the county recorder of any county in this state where any of the real property of the disappearing limited liability company or disappearing other business entity is located is evidence record ownership in the surviving limited liability company or surviving other business entity of all interest of the disappearing limited liability company or disappearing other business entity in and to the real property located in that county in which both of the specified conditions occur.

Section 17710.19 provides that, upon a merger pursuant to this article, a surviving domestic or foreign limited liability company or other business entity is deemed to have assumed the liability of each disappearing domestic or foreign limited liability company or other business entity that is taxed under the law, including to file the informational tax items and pay any tax liability.