Who represents company A " an LLC " to a shareholders meeting of another LLC (company B) where it is a shareholder?

Asked almost 3 years ago - San Francisco, CA

Company A owns 90% of company B. Both are LIMITED LIABILITY COMPANIES. Company A has 2 shareholders (one 25% the other 75%). The 2 shareholders of company A are in dispute and do not agree on anything. company A has a General Manager.

Company B is 90% owned by company A. Company B has a General Manager who resigned. The Article of company B allows 75% to change or appoint a GM. Company A wants to call and hold an EGM of Company B to do so. The 10% shareholder of Company B is also the 25% shareholder of company A. Who has the power to represent company A and call for the EGM if the 10% owner refuses and wants the business to shut down instead?

Attorney answers (3)

  1. Michael Charles Doland

    Contributor Level 20

    7

    Lawyers agree

    Answered . Either the President or any Manager of A could represent A at B's Special Meeting.
    The term "General Manager" is not a legal term and that person in A may or may not be a Manager. Where there is a dispute betweeen the two Members (not called shareholders) of A, both should consider attending.
    More imporantly, both Members of A should consider hiring attorneys who are experienced in mediation and immediately begin a mediation process (seeking a win win instead of a win lose, also known as litigation) It appears that the entities and their owners are headed for litigation unless a mutually agreeable solution can be found.
    More detailed analysis is not possible without review of each LLCs Operating Agreement.

    The above is general legal and business analysis. It is not "legal advise" but analysis, and different lawyers may... more
  2. Keith Edward Ganey

    Contributor Level 3

    5

    Lawyers agree

    Answered . It all depends on the operating agreements of the two companies. The operating agreement of Company A determines how decisions are made by Company A. The powers of the manager of Company A are set forth in the operating agreement. The operating agreement of Company B determines how meetings are called.

    In the absence of any provision in the operating agreement, the members of a LLC govern the LLC in proportion to their capital account balances. NRS 86.291.

    Unfortunately, LLCs are easy to form and difficult to manage once disagreements start.

  3. Kenneth Allyn Sprang

    Contributor Level 15

    6

    Lawyers agree

    Answered . First, there are no shareholders in an LLC--only members. I know that probably sounds like legal nitpicking, but the distinction is a very important one in many circumstances.

    The Operating Agreement and the Articles or Certificate of Organization will control. Absent directives from those documents, here is a general answer to your question.

    First, with regard to Company A, does the Operating Agreement give the General Manager absolute authority, i.e., is he truly the manager of the company, or is he just an employee hired to run the day to day affairs of teh company. If the former, the General Manager may have authority to represent Company A at a members meeting of Company B. If not, Company A must designate someone to represent it.

    Depending again on your operating agreement, Company A may be at a stalemate if each member has one vote, but the members holding 75% will control the vote if members vote according to their membership interest.

    In sum, Company A's representative as a member of Company B is either determined by the existing Articles of Organization and Operating Agreement or by designation by Company A through a member vote or otherwise.

    As to the calling of a meeting of Company B to resolve the managerial issue, again the documents control. Can any member call a meeting or is there another mechanism for a meeting? If any member can call a meeting, then the question reverts back to Company A and how it designates its representative.

    If the documents do not address your concerns, you may have to resort to a dissolution or reorganization. Typically operating agreements address these issues.

    At the end of the day, absent agreements, the statute controls. If your agreements do not address voting, then:

    If no voting provision is contained in the articles of organization or written operating agreement:

    "(1) The members of a limited liability company shall vote in proportion to their interests in current profits of the limited liability company or, in the case of a member who has assigned his or her or its entire economic interest in the limited liability company to a person who has not been admitted as a member, in proportion to the interest in current profits that the assigning member would have, had the assignment not been made." Cal. Bus. & Prof. Code sec. 17103.

    There are provisions for dissolution as well.


    Best regards,

    Ken

Can't find what you're looking for? Ask a Lawyer

Get free answers from experienced attorneys.

 

Ask now

25,489 answers this week

3,218 attorneys answering

Ask a Lawyer

Get answers from top-rated lawyers.

  • It's FREE
  • It's easy
  • It's anonymous

25,489 answers this week

3,218 attorneys answering