Category: Operating agreements

DELEGATIONS OF MANAGER DUTIES TO NON-MANAGERS

By , August 5, 2016 11:15 am

The post under the link below discusses the Obeid v. Hogan decision by the Delaware Court of Chancery, which I’ve already briefly summarized in a post to this listserv a couple of weeks ago.  However, the post below discusses in substantial detail the specific issue of manager delegations of their duties to non-managers as addressed in that decision—an important LLC operating agreement drafting issue that I did not address in my post.  I urge you to read the post below if either (i) you draft LLC agreements under the Delaware Limited Liability Company Act or (ii) you do or may at some point draft management delegation provisions under non-Delaware LLC acts.

Here is the link:

http://www.mnat.com/files/ClientAlerts/MorrisNicholsAlert_RecentCaseAddressesLLCManagersAuthoritytoDelegate_July2016.pdf

NEW BLOG POST BY PETER MAHLER

By , June 1, 2016 10:24 am

The post under the link below is yet a further post by Peter emphasizing (i) the value of clearly drafted LLC operating agreements and (ii) the disasters that can arise if an LLC has no operating agreement.  The first of the three cases addressed in Peter’s post also provides a good summary of Delaware rules of contract interpretation applicable to operating agreements.  These rules may well be influential in non-Delaware jurisdictions for this purpose.

Here’s the link:  http://www.nybusinessdivorce.com/2016/05/articles/access-to-books-and-records/llc-case-notes-member-expulsion-withdrawal-llc-purpose/#

NEW BLOG POST BY PETER MAHLER

By , February 26, 2016 11:01 am

The excellent new blawg post under the link below demonstrates (i) the absolute need that a two-member LLC, even when the members are brothers, have a comprehensive written operating agreement; (ii) that under that agreement, the less active brother in the LLC have the right to monitor all that happens in the LLC; and (iii) that he exercise that right on a regular basis.

Here’s the link:

http://www.nybusinessdivorce.com/2016/01/articles/grounds-for-dissolution/court-dissolves-llc-due-to-managing-members-self-dealing-and-dishonest-conduct/

NEW BLOG POST ABOUT ALL PURPOSE CLAUSES IN LLC OPERATING AGREEMENTS

By , February 11, 2016 7:49 am

The following link is to an excellent new post by Peter Mahler of Farrell Fritz about the operating agreement clauses noted above:

http://www.nybusinessdivorce.com/2015/12/articles/grounds-for-dissolution/llc-agreements-all-purpose-purpose-clause-defeats-dissolution-petition/

OPERATING AGREEMENTS GONE WRONG-NBI SEMINAR

By , January 6, 2016 2:39 pm

Some of you may find interest in this forthcoming NBI seminar.

GUIDELINES FOR DRAFTING DEFINITIONAL PROVISIONS IN LLC OPERATING AGREEMENTS

By , October 9, 2015 11:31 am

Here are five basic guidelines for drafting definitional provisions in LLC operating agreements:

  1. In your operating agreements, draft a definitional provision for every term in the agreement that any client or other reader may not otherwise readily understand.  This includes, for example, the terms “contribution,” “allocation,” “distribution,” “cross-purchase,” and “fiduciary.”
  2. If a definition you draft in an operating agreement, even if it is well drafted, is insufficient to explain the meaning of the defined term to non-lawyer readers, illustrate the meaning of the term in an exhibit to the agreement.
  3. Many lawyers put all of the definitions of terms in their operating agreements in an initial comprehensive section of definitions at the beginning of the agreement.  These comprehensive definitional sections often include numerous inscrutable tax definitions based on esoteric citations of federal tax regulations.  DON’T EVER DO THIS!  If you do, you will demonstrate your grave insensitivity to the needs of clients of yours who want to read and understand the agreement, and your insensitivity and obtuseness will make your clients angry and will deter them from studying the rest of the agreement.
  4. Instead, place each definitional provision immediately before or after the term in the agreement that it defines.  This way, readers will have a concrete context for understanding the term and its definition.
  5. However, in a lengthy agreement that contains numerous definitions, consider repeating all of these definitions in a single, comprehensive exhibit attached to the agreement.

ENFORCEABILITY OF LLC AGREEMENT AGAINST MEMBER WHO DIDN’T SIGN IT

By , September 30, 2015 10:37 am

The new (and excellent) blog post by Peter Mahler of the Ferrell Fritz law firm under the link below addresses the issue of whether an LLC operating agreement can be enforced against a member who didn’t sign it.  This is an issue that arises all too often in LLC practice.

Here’s the link:  http://www.nybusinessdivorce.com/2015/09/articles/llcs/can-llc-agreement-be-enforced-against-member-who-doesnt-sign-it/#more-14624.

MEMBER AND MANAGER INDEMNIFICATION

By , August 25, 2015 11:41 am

Click on link below for new post with brief but good discussion about above topic:

http://www.lexology.com/library/detail.aspx?g=5eeb4345-cf5a-4d4f-bad6-2a1fbb662e06&utm_source=Lexology+Daily+Newsfeed&utm_medium=HTML+email+-+Body+-+General+section&utm_campaign=Lexology+subscriber+daily+feed&utm_content=Lexology+Daily+Newsfeed+2015-08-12&utm_term=

LETTERS OF INTENT

By , August 12, 2015 9:12 am

Often when you form an LLC, you want to first propose operating agreement to the prospective members in the form of a non-binding letter of intent (“LOI”).  Here is a good new post with basic LOI advice:

http://www.lexology.com/library/detail.aspx?g=2dc42fa9-f745-4c6e-b606-474dc0785c45&utm_source=Lexology+Daily+Newsfeed&utm_medium=HTML+email+-+Body+-+General+section&utm_campaign=Lexology+subscriber+daily+feed&utm_content=Lexology+Daily+Newsfeed+2015-08-07&utm_term=

WHAT IS AN OPERATING AGREEMENT?

By , July 28, 2015 8:29 am

The attached recent post by a leading Kentucky law firm in an excellent legal blog called Lexology seeks to answer the above question.  The link is:

http://www.lexology.com/library/detail.aspx?g=40cd7098-38d7-4938-8136-4a1bd4e78200&utm_source=Lexology+Daily+Newsfeed&utm_medium=HTML+email+-+Body+-+General+section&utm_campaign=Lexology+subscriber+daily+feed&utm_content=Lexology+Daily+Newsfeed+2015-07-24&utm_term=