95-11

December 12, 1995

Re: _______ — Limited Liability Companies as
Transmitter Licensees (Financial Code Section 1802(b))

Dear Ms. _______:

This is in response to your letter of November 9, 1995.

Your letter requests that we construe Financial Code Section 1802(b), which provides that only corporations may be licensed to engage in the business of receiving money for the purpose of transmitting it to foreign countries, to allow the licensing of limited liability companies (“LLCs”) as well as corporations. In essence, you argue that because of certain similarities between corporations and LLCs as forms of business organization, we should view them as equivalents for purposes of Section 1802(b).

We do not agree.

The interpretation you would have us adopt is contrary to well established rules of statutory construction.

“The rules governing statutory construction are well settled. We begin with the fundamental premise that the objective of statutory interpretation is to ascertain and effectuate legislative intent [Citation.] ‘In determining intent, we look first to the language of the statute, giving effect to its plain meaning.’ [Citation.] Although we may properly rely on extrinsic aids, we should first turn to the words of the statute to determine the intent of the Legislature. [Citation.] Where the words of the statute are clear, we may not add to or alter them to accomplish a purpose that does not appear on the face of the statute or from its legislative history.” Burden v. Snowden, 2 Cal. 4th 556, 562 (1992).

It is clear that in creating LLCs through enactment of the Beverly-Killea Limited Liability Corporation Act (Stats 1994, Ch 1200) (the “LLC Act”), the Legislature did not intend LLCs to be viewed as corporations. This may be inferred from the fact that the LLC Act sets forth rules governing LLCs in a title of the Corporations Code which is separate and distinct from the provisions governing corporations. (Compare Corp. Code Title 2.5 (commencing with Section 17000) with Corp. Code Division 1 (commencing with Section 100), Title 1). The conclusion is confirmed by provisions of the LLC Act that affect definitional sections of the Corporations Code. These provisions expressly distinguish an LLC from a corporation. (Compare Corp. Code Section 162 with Section 174.5 and Corp. Code Section 17001(t)) with Section 1700.1(ac)).

Accordingly, the plain meaning of the language of the statutes creating corporations and LLCs makes it clear that they are not intended to be construed as legal equivalents.

It is no answer that the statute relied upon is the Corporations Code rather than the Financial Code, because the Corporations Code is the only source of statutory definition for the terms “corporation” and “LLC”. A statute must be construed in the context of the entire statutory system even if the statutes at issue are in separate codes. Unzueta v. Ocean View School Dist. 6 Cal.App.4th 1689, 1695 (1992).

In our telephone conversation, you asked us to consider the fact that Financial Code Section 1802(b) was enacted prior to the LLC Act. You suggested that had LLCs been in existence as a form of business organization at the time Section 1802 was enacted, the Legislature would have included LLCs as an acceptable form of business for a transmitter licensee. However, “[t]he Legislature is presumed to know the existing law and have in mind its previous enactments when legislating on a particular subject [Citation.]” Unzueta v. Ocean View School Dist. 6 Cal.App.4th, supra. at 1697. Accordingly, had the Legislature wanted to allow LLCs to be licensed as transmitters it would presumably have so provided in the LLC Act or in some subsequent enactment. “An intent that finds no expression in the words of the statute cannot be found to exists. The courts may not speculate that the Legislature meant something other than what it said. Nor may they rewrite a statute to make it express an intention not expressed therein. [Citation.]” Unzueta v. Ocean View School Dist. 6 Cal.App.4th, supra. at 1697.

Even in the case where statutory language is ambiguous and where construction is therefore required, the various parts of a statutory enactment must be harmonized by considering a particular clause or section in the context of the statutory framework as a whole. See Fontana United School District v. Burman, 45 Cal. 3d. 208, 218 (1988). Construing the term corporation to include LLCs would create conflict within Chapter 14 (commencing with Section 1800), Division 1 of the Financial Code (the “Transmitters Law”), the statute which governs not only licensing but also other aspects of the operation of companies that transmit money to foreign countries.

For example, provisions of the Transmitters Law governing licensing (Financial Code Section 1802.2) and acquisition of control (Financial Code Section 1804) require the Superintendent to make certain findings regarding the “officers and directors” of a licensee. LLCs do not have directors or officers. Pursuant to Section 17151 of the Corporations Code, the activities of an LLC are directed by “managers” whose responsibilities are defined by an operating agreement among the LLCs “members.” In addition, Section 1814 of the Transmitters Law requires a transmitter to maintain a minimum level of shareholders equity. An LLC has “members” rather than shareholders. Corporations Code Section 17001(x). Therefore, it would seem that an LLC has no shareholders equity.

Finally, we disagree that LLCs and corporations are functional equivalents.

The primary point of similarity between an LLC and a corporation is that the members of an LLC, like the shareholders of a corporation, are not personally responsible for the liabilities of the company. See Corporations Code Section 17101. In other respects, the governance, relationship of owners to the company, and relationships among owners are vastly different in an LLC than in a corporation. For example, distributions to shareholders, the right of shareholders to elect directors and to vote on certain matters and the instruments and contents of instruments specifying the governance of a corporation are well defined in the General Corporation Law (Division 1 (commencing with Section 100), Title 1 of the Corporations Code). The LLC Act, on the other hand, makes these subjects almost entirely a matter of agreement among the members of an LLC. (See Corporations Code Section 17005). In these respects, an LLC is far more similar to a partnership than it is to a corporation.

For the reasons discussed above, we conclude that Section 1802(b) of the Financial Code should not be construed to permit a limited liability company to be licensed as a transmitter.

Very truly yours,

CONRAD W. HEWITT
Superintendent of Banks

By

THOMAS M. LOUGHRAN
Senior Counsel

TML:arc

bcc: James F. Carrig