Legal Question in Business Law in California

The CEO of an LLC I'm a member of has amassed large credit debt with several vendors by not paying their bills after services were rendered, and they are threatening legal action. Additionally, it's been discreetly discovered that he's been embezzling as well. I don't want myself or any of the other Members to be in a position where we could be named in a suit and have to spend money defending ourselves, even though we had nothing to do with the debts he created or his funds "misappropriations". Could I get the CEO to agree to convert our equity into notes/loans by agreeing to value the units at $X each, and get all of the shareholders out of harm's way by turning us into Creditors instead of owners/members?
And, if this is possible, in addition to mitigating liability, would this then also allow us, as creditors, to collectively push the company into involuntary bankruptcy at our option later on (since only 3 creditors are needed to band together for such an action), if the CEO must be stopped from amassing debt and stealing as he is? He's litigation-proof, as he spends every penny and doesn't respond to legal actions or even tax claims by government agencies, doesn't own assets, and even if we obtained a judgement, he wouldn't pay (he's already ignored legal notices and had a judgement filed against the company, but swept funds out of the company accounts before it could be taken). We as innocent members should not be subject to legal action due to this criminal. We must get out of harm's way.

Asked on 12/04/16, 9:22 pm

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0 attorneys agreed

This is not something you can do yourself. You need to go see a lawyer IMMEDIATELY.

Answered on 12/05/16, 12:07 pm

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