Section 17201.

(a) (1) Subject to the terms of the articles of organization or the operating agreement, a member is not excused from an obligation to the limited liability company to perform any promise to contribute cash or property or to perform services because of death, disability, dissolution, or any other reason.

(2) If a member does not make the required contribution of property or services, that member is obligated, at the option of the limited liability company, to contribute cash equal to that portion of the fair market value (or agreed value if stated in writing and signed by the limited liability company and the member) of the contribution that has not been made. The foregoing option shall be in addition to, and not in lieu of, any other rights, including the right to specific performance, that the limited liability company may have against the member under the articles of organization, operating agreement, or applicable law.

(3) An operating agreement may provide that the interest of a member who fails to make any contribution or other payment that the member is required to make will be subject to specific remedies for, or specific consequences of, the failure. A provision shall be enforceable in accordance with its terms unless the member seeking to invalidate the provision establishes that the provision was unreasonable under the circumstances existing at the time the agreement was made. The specific remedies or consequences may include loss of voting, approval, or other rights, loss of the member's ability to actively participate in the management and operations of the limited liability company, liquidated damages, or a reduction of the defaulting member's economic rights. The reduction of the defaulting member's economic rights may include one or more of the following provisions:

(A) Diluting, reducing, or eliminating the defaulting member's proportionate interest in the limited liability company.

(B) Subordinating the defaulting member's interest in the limited liability company to that of nondefaulting members.

(C) Permitting a forced sale of the membership interest.

(D) Permitting the lending or contribution by other members of the amount necessary to meet the defaulting member's commitment.

(E) Adjusting the interest rates or other rates of return, preferred, priority, or otherwise, with respect to contributions by or capital accounts of the other members.

(F) Fixing the value of the defaulting member's interest in the limited liability company by appraisal, formula and redemption, or sale of the defaulting member's interest in the limited liability company at a percentage of that value.

(b) (1) Unless otherwise provided in the articles of organization or the operating agreement, the obligation of a member to make a contribution or return money or property paid or distributed in violation of this section may be compromised only by the unanimous vote of the members.

(2) Notwithstanding the compromise of an obligation referred to in paragraph (1), a person whose claim against a limited liability company arises before the receipt of notice of the compromise may enforce the original obligation of a member to make a contribution to the limited liability company or to return a distribution if the person had knowledge of the original obligation prior to the time the claim arose and if the compromise occurred after the time the claim arose. Any other person with a claim against a limited liability company may enforce only the existing obligation of a member to make a contribution to the limited liability company or to return to the limited liability company money or other property paid or distributed.

(c) A person with a claim against a limited liability company may not enforce a conditional obligation of a member unless the conditions have been satisfied or waived. Conditional obligations include, without limitation, a capital contribution payable upon a discretionary call of the limited liability company prior to the time the call occurs.

(d) Nothing in this section shall be construed to affect the rights of third-party creditors of the limited liability company to seek equitable remedies nor any rights existing under the Uniform Fraudulent Transfer Act (Chapter 1 (commencing with Section 3439) of Title 2 of Part 2 of Division 4 of the Civil Code).

(Amended by Stats. 1996, Ch. 57, Sec. 15. Effective June 6, 1996. Repealed as of January 1, 2014, pursuant to Section 17657. Thereafter, see Title 2.6, commencing with Section 17701.01.)