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CALIFORNIA CORPORATE & SECURITIES LAW

Inside And Outside Reverse Veil Piercing

UCLA Professor Stephen Bainbridge has published several posts commenting on my post discussing Curci Invs. v. Baldwin, 2017 Cal. App. LEXIS 698.  The issue in Curci was whether reverse veil piercing of a limited liability company is possible in light of Postal Instant Press, Inc. v. Kaswa Corp., 162 Cal.App.4th 1510 (2008).  The Court distinguished Postal…

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California Court Green Lights Reverse Veil Piercing Of Delaware LLC

Courts historically have applied the alter ego doctrine to “pierce the corporate veil” so that a shareholder may be held liable for the debts or conduct of the corporation.  California has extended the possibility of alter ego liability to members of California limited liability companies: A member of a limited liability company shall be subject to…

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Nevada Supreme Court Holds That Member-Managers Were Not Proper Parties To Negligence Claim Against An LLC

In an opinion issued yesterday, the Nevada Supreme Court addressed the extent to which a member of a limited liability company is protected in a negligence based tort action against the LLC.  Gardner v. Henderson Water Park, LLC, 133 Nev. Adv. Op. 54 (2017).  The plaintiffs in the case are the parents of a boy who…

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Court Of Appeal Holds LLC’s Former Counsel May Represent Insider Defendants In Derivative Suit

Derivative actions can be somewhat confusing.  Although the entity is essentially the plaintiff, it is named as a defendant.  Initially, one might question why must the corporation be named as a party?  I can think of at least two reasons.  First, the litigation involves the rights of the entity directly.  Second, including the entity as a party…

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Court Declines To Impose Alter Ego Liability On LLC’s President

In general, the debts, obligations, or other liabilities of a California limited liability company do not become the debts, obligations, or other liabilities of a member or manager solely by reason of the member acting as a member or manager acting as a manager for the LLC.  Cal. Corp. Code § 17703.04(a).  An important exception to this…

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The Limited Liability Company Agreement That Has No Name

Practitioners under California’s Revised Uniform Limited Liability Company Act will be familiar with the concept of an “operating agreement” (Cal. Corp. Code § 17701.02(s)).  Indeed, I expect that nearly every LLC formed under the CARULLCA has, or will have, some form of operating agreement.  Practitioners, however, may be unaware that the CARULLCA also contemplates the existence of…

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Alter Ego and the Nevada LLC

California’s version of the Revised Uniform Limited Liability Company Act expressly subjects members to potential alter ego liability:  A member of a limited liability company shall be subject to liability under the common law governing alter ego liability, and shall also be personally liable under a judgment of a court or for any debt, obligation,…

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LLC Bound By Agreement Signed By Manager’s Manager

Justice Kenneth R. Yegan clearly and concisely frames the question in Western Surety Co. v. La Cumbre Office Partners, LLC, 2017 Cal. App. LEXIS 77 (2017): ” natural person is the managing member of a limited liability company (LLC 1) that is the sole manager of another limited liability company (LLC 2). The person signs an…

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O Frabjous Day! Court Holds Passive Member Is Not “Doing Business”

The State of California imposes its franchise tax on every corporation (other than a bank, financial corporation or exempt corporation) that is “doing business” in California.  Cal. Rev. & Tax Code § 23151.  This tax is imposed without regard to whether the corporation is incorporated in California.  This makes the name of the tax somewhat misleading…

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When Partnership “Members” Are Employees

Last week, I wrote about how AB 2883 changes the definition of “employee” vis-a-vis corporate directors.  See Is A Corporate Director An Employee Subject To Workers’ Compensation?  AB 2883 also rewrites the definition of “employee” for purposes of partnerships and limited liability companies.  Effective January 1, 2017, an “employee” for purposes of California’s workers’ compensation law…

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