Member Resolutions of Seller
(Sale of Membership Interests) (CA LLC)

Summary

This member resolution template is intended for use by the members of a California limited liability company (LLC) to authorize the sale of membership interests in the LLC. This template includes practical guidance, drafting notes, and an optional clause. Membership interest is defined as a member's rights in the LLC, including the member's transferable interest. Cal. Corp. Code § 17701.02(r). Under California law, the LLC operating agreement governs the relations among the members as members and between the members and the LLC itself. Cal. Corp. Code § 17701.10(a)(1). The California Revised Uniform Limited Liability Company Act (Act) provides default terms of formation, operation, dissolution, and other governance matters for California LLCs; however, the Act allows many of these terms to be altered by the terms of the LLC's operating agreement and/or the articles of organization. See Cal. Corp. Code § 17701.07. It is important for counsel to review the terms of the operating agreement and other governing documents of the company to confirm any necessary internal approvals for this sale. Note that in California, an LLC is presumed to be member-managed unless the company's articles of organization state that the LLC is managed by one or more managers. Cal. Corp. Code § 17704.07(a). Generally, the members of a member-managed LLC can act by a majority vote. Cal. Corp. Code § 17704.07(b). However, acts outside of the ordinary course of the activities of the LLC require the approval of all members. Cal. Corp. Code § 17704.07(b). This template can be used when member approval is required by law or by the LLC's operating agreement, and can be tailored to suit the needs of an individual transaction. In drafting resolutions to authorize certain actions in a sale of LLC interests, counsel should briefly describe the underlying reason for the resolutions and establish the legal basis for the authorized action (e.g., the members have determined that the actions are in the best interests of the company). If the resolutions include the authorization by the company to enter into any agreements in connection with the transaction, the resolutions should approve both the transaction documents and, if the company has officers or managers, authorize any actions the target's officers or managers need to take to effectuate the transactions contemplated thereby. This template assumes that the company will be a party to the membership interest purchase agreement as well as certain ancillary agreements related to the transaction. For more information on California LLCs, see Management and Indemnification (CA LLC) and Ownership Interests (CA LLC). For a membership interest purchase agreement to append as an exhibit to these resolutions, see Membership Interest Purchase Agreement (CA LLC). For a manager resolution template, see Manager Resolutions of Seller (Sale of Membership Interests) (CA LLC). For other California LLC resources, see Limited Liability Company Resource Kit (CA).