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  1. #1

    Default Change of Voting Rights in an LLC

    I am an interest holder in an LLC. Some members want to change the voting rights from the traditional one-unit, one-vote to a one-person, one-vote scheme (no person can have more than one vote).

    What are the potential remedies for the members who are losing voting rights? This seems like an "illegal taking" or conversion.

    This also seems like it would destroy the company's ability to attract investors. Concerned mostly the reputation risk, entity type questions aside (bad treatment of existing members).

    (I understand that investors want to invest in corporations, not LLCs, but for the sake of this discussion, letís ignore that for the moment)

    This is a California LLC, but I would be interested in the general considerations for any other states also.

  2. #2

    Default Re: Change of Voting Rights in an LLC

    Regarding voting rights and changes to voting rights: there are 2 things that you'll need to read carefully.
    1) the terms of the existing operating agreement, including the section(s) on voting and the section(s) dealing with amendments to the operating agreement
    2) the California Revised Limited Liability Company law -- and in particular the section dealing with operating agreements (and voting rights and amendments) -- section 17704.07

    That statute can be found, among other places, at this link:
    https leginfo DOT legislature DOT ca DOTgov/faces/codes_displaySection.xhtml?lawCode=CORP&sectionNum =17704.07.

    These should give you some direction on whether and the extent to which the voting rights in your LLC can be changed, how they could be changed, and how you can seek to protect your interests.

  3. #3
    Join Date
    Jul 2018

    Default Re: Change of Voting Rights in an LLC

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