ARTICLE 11. Dissenters’ Rights [17711.01. - 17711.14.]

Cal. Corporations Code - CORP 11.

in effect

Cal. Corporations Code - CORP § 17711.01. Section 17711.01.

(a) For purposes of this article, “reorganization” refers to any of the following: (1) A conversion pursuant to Article 10 (commencing with Section 17710.01). (2) A merger pursuant to Article 10 (commencing with Section 17710.01). (3) The acquisition by one limited liability company in exchange, in whole or in part, for its membership interests, or the membership interests or equity securities of a limited liability company or other business entity that is in control of the acquiring limited liability company, of membership interests or equity securities of another limited liability company or other business entity if, immediately after the acquisition, the acquiring limited liability company has control of the other limited liability company or other business entity. (4) The acquisition by one limited liability company in exchange, in whole or in part, for its membership interests, or the membership interests or equity securities of a limited liability company or other business entity which is in control of the acquiring limited liability company, or for its debt securities, or debt securities of a limited liability company or other business entity which is in control of the acquiring limited liability company, that are not adequately secured and that have a maturity date in excess of five years after the consummation of the acquisition, or both, of all or substantially all of the assets of another limited liability company or other business entity. (b) For purposes of this article, “control” means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a limited liability company or other business entity.

Cal. Corporations Code - CORP § 17711.02. Section 17711.02.

(a) If the approval of outstanding membership interests is required for a limited liability company to participate in a reorganization, pursuant to the limited liability company agreement, or otherwise, then each member of the limited liability company holding those interests may, by complying with this article, require the limited liability company to purchase for cash, at its fair market value, the interest owned by the member in the limited liability company, if the interest is a dissenting interest as defined in subdivision (b). The fair market value shall be determined as of the day before the first announcement of the terms of the proposed reorganization, excluding any appreciation or depreciation in consequence of the proposed reorganization. (b) As used in this article, “dissenting interest” means the interest of a member that satisfies all of the following conditions: (1) Either: (A) Was not, immediately prior to the reorganization, either (i) listed on any national securities exchange certified by the Commissioner of Financial Protection and Innovation under subdivision (o) of Section 25100, or (ii) listed on the list of OTC margin stocks issued by the Board of Governors of the Federal Reserve System, provided that in either instance the limited liability company whose outstanding interests are so listed provides, in its notice to members requesting their approval of the proposed reorganization, a summary of the provisions of this section and Sections 17711.03, 17711.04, 17711.05, and 17711.06. (B) If the interest is of a class of interests listed as described in clause (i) or (ii) of subparagraph (A), demands for payment are filed with respect to 5 percent or more of the outstanding interests of that class. (2) Was outstanding on the date for the determination of members entitled to vote on the reorganization. (3) Either: (A) Was not voted in favor of the reorganization. (B) If the interest is described in clause (i) or (ii) of subparagraph (A) of paragraph (1), was voted against the reorganization; provided, however, that subparagraph (A) rather than this subparagraph applies in any event where the approval for the proposed reorganization is sought by written consent rather than at a meeting. (4) The member has demanded that the interest be purchased by the limited liability company at its fair market value in accordance with Section 17711.03. (5) The member has submitted the interest for endorsement, if applicable, in accordance with Section 17711.04. (c) As used in this article, “dissenting member” means the recordholder of a dissenting interest, and includes an assignee of record of that interest.

Cal. Corporations Code - CORP § 17711.03. Section 17711.03.

(a) If members have a right under Section 17711.02, subject to compliance with paragraphs (4) and (5) of subdivision (b) of Section 17711.02, to require the limited liability company to purchase their membership interests for cash, the limited liability company shall mail to each member a notice of the approval of the reorganization by the requisite vote or consent of the members, within 10 days after the date of the approval, accompanied by a copy of this section and Sections 17711.01, 17711.02, 17711.04, and 17711.05, a statement of the price determined by the limited liability company to represent the fair market value of its outstanding interests, and a brief description of the procedure to be followed if the member desires to exercise the member’s rights under those sections. The statement of price constitutes an offer by the limited liability company to purchase at the price stated any dissenting interests as defined in subdivision (b) of Section 17711.02, unless they lose their status as dissenting interests under Section 17711.11. (b) Any member who has a right to require the limited liability company to purchase the member’s interest for cash under Section 17711.02, subject to compliance with paragraphs (4) and (5) of subdivision (b) of Section 17711.02, and who desires the limited liability company to purchase that interest, shall make written demand upon the limited liability company for the purchase of that interest and the payment to the member in cash of its fair market value. The demand is not effective for any purpose unless it is received by the limited liability company or any transfer agent thereof (1) in the case of interests described in clause (i) or (ii) of subparagraph (A) of paragraph (1) of subdivision (b) of Section 17711.02, not later than the date of the members’ meeting to vote upon the reorganization, or (2) in any other case, within 30 days after the date on which notice of the approval of the reorganization by the requisite vote or consent of the members is mailed by the limited liability company to the members. (c) The demand shall state the number or amount of the member’s interest in the limited liability company and shall contain a statement of what the member claims to be the fair market value of that interest on the day before the announcement of the proposed reorganization. The statement of fair market value constitutes an offer by the member to sell the interest at such price.

Cal. Corporations Code - CORP § 17711.04. Section 17711.04.

Within 30 days after the date on which notice of the approval of the outstanding interests of the limited liability company is mailed to the member pursuant to subdivision (a) of Section 17711.03, the member shall submit to the limited liability company at its principal office or at the office of any transfer agent thereof, if the interest is evidenced by a certificate, the member’s certificate representing the interest which the member demands that the limited liability company purchase, to be stamped or endorsed with a statement that the interest is a dissenting interest or to be exchanged for certificates of appropriate denominations so stamped or endorsed, or if the interest is not evidenced by a certificate, written notice of the number or amount of interest which the member demands that the limited liability company purchase. Upon subsequent transfers of the dissenting interest on the books of the limited liability company, the new certificates or other written statement issued therefor shall bear a like statement, together with the name of the original holder of the dissenting interest.

Cal. Corporations Code - CORP § 17711.05. Section 17711.05.

(a) If the limited liability company and the dissenting member agree that the member’s interest is a dissenting interest and agree upon the price to be paid for the dissenting interest, the dissenting member is entitled to the agreed price with interest thereon at the legal rate on judgments from the date of consummation of the reorganization. All agreements fixing the fair market value of any dissenting member’s interest as between the limited liability company and that member shall be in writing and filed in the records of the limited liability company. (b) Subject to the provisions of Section 17711.08, payment of the fair market value for a dissenting interest shall be made within 30 days after the amount has been agreed to or within 30 days after any statutory or contractual conditions to the reorganization are satisfied, whichever is later, and in the case of dissenting interests evidenced by certificates of interest, subject to surrender of such certificates of interest, unless provided otherwise by agreement.

Cal. Corporations Code - CORP § 17711.06. Section 17711.06.

(a) If the limited liability company denies that a membership interest is a dissenting interest, or the limited liability company and a dissenting member fail to agree upon the fair market value of a dissenting interest, then the member or any interested limited liability company, within six months after the date when notice of the approval of the reorganization by the requisite vote or consent of the members was mailed to the member, but not later, may file a complaint in the superior court of the proper county praying the court to determine whether the interest is a dissenting interest, or the fair market value of the dissenting interest, or both, or may intervene in any action pending on such a complaint. (b) Two or more dissenting members may join as plaintiffs or be joined as defendants in any of those actions and two or more of those actions may be consolidated. (c) On the trial of the action, the court shall determine the issues. If the status of the membership interest as a dissenting interest is in issue, the court shall first determine that issue. If the fair market value of the dissenting interest is in issue, the court shall determine, or shall appoint one or more impartial appraisers to determine, the fair market value of the dissenting interest.

Cal. Corporations Code - CORP § 17711.07. Section 17711.07.

(a) If the court appoints an appraiser or appraisers, they shall proceed forthwith to determine the fair market value per interest of the outstanding membership interests of the limited liability company, by class if necessary. Within the time fixed by the court, the appraisers, or a majority of them, shall make and file a report in the office of the clerk of the court. Thereupon, on the motion of any party, the report shall be submitted to the court and considered on such additional evidence as the court considers relevant. If the court finds the report reasonable, the court may confirm it. (b) If a majority of the appraisers appointed fails to make and file a report within 30 days from the date of their appointment, or within a further time as may be allowed by the court, or the report is not confirmed by the court, the court shall determine the fair market value per interest of the outstanding membership interests of the limited liability company, by class if necessary. (c) Subject to Section 17711.08, judgment shall be rendered against the limited liability company for payment of an amount equal to the fair market value, as determined by the court, of each dissenting interest that any dissenting member who is a party, or has intervened, is entitled to require the limited liability company to purchase, with interest thereon at the legal rate on judgments from the date of consummation of the reorganization. (d) Any of those judgments shall be payable forthwith, provided, however, that with respect to membership interests evidenced by transferable certificates of interest, only upon the endorsement and delivery to the limited liability company of those certificates representing the interests described in the judgment. Any party may appeal from the judgment. (e) The costs of the action, including reasonable compensation for the appraisers, to be fixed by the court, shall be assessed or apportioned as the court considers equitable, but, if the appraisal exceeds the price offered by the limited liability company, the limited liability company shall pay the costs, including, in the discretion of the court, if the value awarded by the court for the dissenting interest is more than 125 percent of the price offered by the limited liability company under subdivision (a) of Section 17711.02, attorney’s fees and fees of expert witnesses.

Cal. Corporations Code - CORP § 17711.08. Section 17711.08.

To the extent that the payment to dissenting members of the fair market value of their dissenting interests would require the dissenting members to return payment or a portion of the payment by reason of Section 17711.09 or the Uniform Voidable Transactions Act (Chapter 1 (commencing with Section 3439) of Title 2 of Part 2 of Division 4 of the Civil Code), then that payment or portion thereof shall not be made and the dissenting members shall become creditors of the limited liability company for the amount not paid, together with interest thereon at the legal rate on judgments until the date of payment, but subordinate to all other creditors in any proceeding relating to the winding up and dissolution of the limited liability company, such debt to be payable when permissible.

Cal. Corporations Code - CORP § 17711.09. Section 17711.09.

Any cash distributions made by a limited liability company to a dissenting member after the date of consummation of the reorganization, but prior to any payment by the limited liability company for that dissenting member’s interest, shall be credited against the total amount to be paid by the limited liability company for such dissenting interest.

Cal. Corporations Code - CORP § 17711.10. Section 17711.10.

Except as expressly limited by this article, dissenting members shall continue to have all the rights and privileges incident to their interests immediately prior to the reorganization, including limited liability, until payment by the limited liability company for their dissenting interests. A dissenting member may not withdraw a demand for payment unless the limited liability company consents thereto.

Cal. Corporations Code - CORP § 17711.11. Section 17711.11.

A dissenting interest loses its status as a dissenting interest and the holder thereof ceases to be a dissenting member and ceases to be entitled to require the limited liability company to purchase the interest upon the happening of any of the following: (a) The limited liability company abandons the reorganization. Upon abandonment of the reorganization, the limited liability company shall pay, on demand, to any dissenting member who has initiated proceeding in good faith under this article, all reasonable expenses incurred in such proceedings and reasonable attorney’s fees. (b) The interest is transferred prior to its submission for endorsement in accordance with Section 17711.04. (c) The dissenting member and the limited liability company do not agree upon the status of the interest as a dissenting interest or upon the purchase price of the dissenting interest, and neither files a complaint nor intervenes in a pending action, as provided in Section 17711.06, within six months after the date upon which notice of the approval of the reorganization by the requisite vote or consent of members was mailed to the member. (d) The dissenting member, with the consent of the limited liability company, withdraws the member’s demand for purchase of the dissenting interest.

Cal. Corporations Code - CORP § 17711.12. Section 17711.12.

If litigation is instituted to test the sufficiency or regularity of the vote or consent of the members in authorizing a reorganization, any proceedings under Sections 17711.06 and 17711.07 shall be suspended until final determination of that litigation.

Cal. Corporations Code - CORP § 17711.13. Section 17711.13.

(a) This article applies to the following: (1) A domestic limited liability company formed on or after January 1, 2014. (2) A foreign limited liability company if the foreign limited liability company was formed on or after January 1, 2014, or filed an application to qualify to do business on or after January 1, 2014, and members holding more than 50 percent of the voting power held by all members of the foreign limited liability company reside in this state. (3) A limited liability company if the operating agreement so provides or if all managers and a majority of the members, if it is a manager-managed limited liability company, or a majority, if it is a member-managed limited liability company, determine that this article shall apply. (b) This article does not apply to membership interests governed by operating agreements whose terms and provisions specifically set forth the amount to be paid in respect of those interests in the event of a reorganization of the limited liability company, or to any limited liability company with 35 or fewer members if all the members have waived the application of this article in writing, whether in an operating agreement or otherwise, provided that if, at the time of the reorganization, the limited liability company had more than 35 members, any waiver shall be ineffective as to that reorganization.

Cal. Corporations Code - CORP § 17711.14. Section 17711.14.

(a) No member of a limited liability company who has a right under this article to demand payment of cash for the interest owned by a member in a limited liability company shall have any right at law or in equity to attack the validity of the reorganization, or to have the reorganization set aside or rescinded, except in an action to test whether the vote or consent of members required to authorize or approve the reorganization has been obtained in accordance with the procedures established therefor by the operating agreement of the limited liability company. (b) If one of the parties to a reorganization is directly or indirectly controlled by, or under common control with, another party to the reorganization, subdivision (a) shall not apply to any member of the controlled party who has not demanded payment of cash for the member’s interest pursuant to this article; but if the member institutes any action to attack the validity of the reorganization or to have the reorganization set aside or rescinded, the member shall not thereafter have any right to demand payment of cash for the member’s interest pursuant to this article. (c) If one of the parties to a reorganization is directly or indirectly controlled by, or under common control with, another party to the reorganization, then, in any action to attack the validity of the reorganization or to have the reorganization set aside or rescinded, both of the following apply: (1) A party to a reorganization that controls another party to a reorganization shall have the burden of proving that the transaction is just and reasonable as to the members of the controlled party. (2) A person that controls two or more parties to a reorganization shall have the burden of proving that the transaction is just and reasonable as to the members of any party so controlled. (d) Subdivisions (b) and (c) shall not apply if a majority of the members other than members who are directly or indirectly controlled by, or under common control with, another party to the reorganization approve or consent to the reorganization. (e) This section shall not prevent a member of a limited liability company that is a party to a reorganization from bringing an action against a manager of the limited liability company, the limited liability company, or any person controlling a manager at law or in equity as to any matters, including, without limitation, an action for breach of fiduciary obligation or fraud, other than to attack the validity of the reorganization or to have the reorganization set aside or rescinded.

Source: CA Legislative Counsel Bulk DataURL: https://downloads.leginfo.legislature.ca.gov/pubinfo_2025.zipFetched: 6/27/2026