Added by Stats. 2012, Ch. 419, Sec. 20. (SB 323) Effective January 1, 2013. Operative January 1, 2014, by Sec. 32 of Ch. 419.
A transferable interest is personal property.
Article 5 - Transferable Interests and Rights of Transferees and Creditors
California Corporations Code — §§ 17705.01-17705.04
Sections (4)
Amended by Stats. 2015, Ch. 775, Sec. 11. (AB 506) Effective January 1, 2016.
(a)With respect to a transfer, in whole or in part, of a transferable interest, all of the following apply:
(1)A transfer is permissible.
(2)A transfer does not by itself cause a member’s dissociation or a dissolution and winding up of the activities of a limited liability company.
(3)Subject to Section 17705.04, a transfer does not entitle the transferee to do any of the following:
(A)Vote or otherwise participate in the management or conduct of the activities of a limited liability company.
(B)Except as otherwise provided in subdivision (c) and Section 17704.10, have access to records or other information concerning the activities of a limited liability company.
(b)A transferee has the right to receive, in accordance with the transfer, distributions to which the transferor would otherwise be entitled; provided, however, that the pledge or granting of a security interest, lien, or other encumbrance in or against any or all of the transferable interest of a transferor shall not cause the transferor to cease to be a member or grant to the transferee or to anyone else the power to exercise any rights or powers of a member, including, without limitation, the right to receive distributions to which the member is entitled.
(c)In a dissolution and winding up of a limited liability company, a transferee is
entitled to an account of the limited liability company’s transactions only from the date of dissolution.
(d)A transferable interest may be evidenced by a certificate of the interest issued by the limited liability company in a record, and, subject to this article, the interest represented by the certificate may be transferred by a transfer of the certificate.
(e)A limited liability company need not give effect to a transferee’s rights under this section until the limited liability company has notice of the transfer.
(f)A transfer of a transferable interest in violation of a restriction on transfer contained in the operating agreement is ineffective as to a person having notice of the restriction at the time of transfer.
(g)Except as otherwise
provided in subdivision (b) of this section and paragraph (2) of subdivision (d) of Section 17706.02, when a member transfers a transferable interest, the transferor retains the rights of a member, other than the interest in distributions transferred, and retains all duties and obligations of a member.
(h)When a member transfers a transferable interest to a person that becomes a member with respect to the transferred interest, the transferee is liable for the member’s obligations under Section 17704.03 and subdivision (c) of Section 17704.06 known to the transferee when the transferee becomes a member.
Added by Stats. 2012, Ch. 419, Sec. 20. (SB 323) Effective January 1, 2013. Operative January 1, 2014, by Sec. 32 of Ch. 419.
(a)On application by a judgment creditor of a member or transferee, a court may enter a charging order against the transferable interest of the judgment debtor for the unsatisfied amount of the judgment. A charging order constitutes a lien on a judgment debtor’s transferable interest and requires the limited liability company to pay over to the person to which the charging order was issued any distribution that would otherwise be paid to the judgment debtor.
(b)To the extent necessary to effectuate the collection of distributions pursuant to a charging order in effect under subdivision (a), the court may do any of the following:
(1)Appoint a receiver of the distributions subject to the charging order, with the power to make all inquiries the judgment debtor might have made.
(2)Make all other orders necessary to give effect to the charging order.
(3)Upon a showing that distributions under a charging order will not pay the judgment debt within a reasonable time, foreclose the lien and order the sale of the transferable interest. The purchaser at the foreclosure sale obtains only the transferable interest, does not thereby become a member, and is subject to Section 17705.02.
(c)At any time before foreclosure under paragraph (3) of subdivision (b), the member or transferee whose
transferable interest is subject to a charging order under subdivision (a) may extinguish the charging order by satisfying the judgment and filing a certified copy of the satisfaction with the court that issued the charging order.
(d)At any time before foreclosure under paragraph (3) of subdivision (b), a limited liability company or one or more members whose transferable interests are not subject to the charging order may pay to the judgment creditor the full amount due under the judgment and thereby succeed to the rights of the judgment creditor, including the charging order.
(e)This title does not deprive any member or transferee of the benefit of any exemption laws applicable to the member’s or transferee’s transferable interest.
(f)This section provides the exclusive remedy by which a person seeking to enforce a judgment against a member or transferee may, in the capacity of judgment creditor, satisfy the judgment from the judgment debtor’s transferable interest.
Added by Stats. 2012, Ch. 419, Sec. 20. (SB 323) Effective January 1, 2013. Operative January 1, 2014, by Sec. 32 of Ch. 419.
If a member dies, the deceased member’s personal representative or other legal representative may exercise the rights of a transferee provided in subdivision (c) of Section 17705.02 and, for the purposes of settling the estate, the rights of a current member under Section 17704.10.