When faced with an unauthorized or defective action, I expect that many practitioners will seek fix the problem by obtaining a ratification of the action. But will a ratification cure the problem?

In Camden Systems, LLC v. 409 N. Camden, LLC, 2024 WL 3506697 (Cal. Ct. App. July 23, 2024), it was acknowledged that some of the actions taken by the members of a limited liability company at an annual meeting were invalid in light of defective notice of the meeting. The defendants, however, contended that those defective actions were cured when a majority of the LLC members ratified the prior actions at a subsequent annual meeting. The plaintiff countered that the ratification cure was ineffective because members of LLCs, unlike corporations, may not ratify prior actions taken on behalf of company.

Both the trial court and the Court of Appeal found in favor of the cure:

However, the California Revised Uniform Limited Liability Company Act (Corp. Code, § 17701.01 et seq.; the Act) which governs the management and operation of limited liability companies, provides that a limited liability company generally “shall have all the powers of a natural person in carrying out its business activities.” (§ 17701.05.) Because a natural person has the power to ratify acts taken on the person's behalf, limited liability companies likewise may, through their members, ratify actions previously taken on behalf of the company. (footnote omitted)

The Court of Appeal rejected the plaintiff's reliance upon the recent enactment of California Corporations Code Section 119:

However, section 119 did not grant the right of ratification to corporations; it merely established a procedure by which such ratifications could occur. (emphasis in original)