Keith Paul Bishop, Corporate Transactions Lawyer, finance securities attorney, Allen Matkins Law Firm " width="150" height="200" />
Professor Stephen Bainbridge recently wrote on whether operating agreements of limited liability companies are subject to the Statute of Frauds. He notes "In a majority of states, the operating agreement may be written or oral, although some states require a written agreement."
In this case, California sides with the majority. Corporations Code Section 17701.02(s) defines an "operating agreement" as "an agreement . . . whether oral, in a record, implied, or in any combination thereof". Under the statute, a "record" is "information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form". Cal. Corp. Code § 17701.02(x).
The original Statute of Frauds was enacted in 1677 during the reign of King Charles II of England. The Statute's passage through Parliament was not easy and Lord Nottingham was reputed to have quipped "every line was worth a subsidy". The concept that the reduction of agreements to writing would reduce frauds and perjuries has endured even as the concept of "writing" has changed from pen and paper to tappings on a keyboard.
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