Category: Operating agreements

NON-UNANIMOUS AMENDMENTS OF OPERATING AGREEMENTS

By , November 5, 2018 12:44 pm

This post by Peter Mahler in his great weekly blawg entitled “Business Divorce” addresses the issue—which arises all too often—of non-unanimous amendments of LLC operating agreements vs. the fiduciary duties of those signing the amendments towards those not signing them.

Here’s the link to Peter’s post:  https://www.nybusinessdivorce.com/2018/10/articles/operating-agreement/decision-put-brakes-non-unanimous-amendments-operating-agreements/

EXPELLING LLC MEMBERS

By , October 4, 2018 1:16 pm

If your state’s LLC act provides members with the right to expel other members (as, for example, New Hampshire’s does under RSA 304-C:104), you can skip the post by Peter Mahler under the link below.  But if it doesn’t, you’d better read his post!

Here’s the link:

https://www.nybusinessdivorce.com/2018/09/articles/expulsion-and-removal/repeat-may-not-expel-member-new-york-llc-unless-operating-agreement-says/

MASSACHUSETTS NON-COMPETES

By , September 25, 2018 10:17 am

Operating agreements for multi-member LLCs often contain non-competition provisions.  Massachusetts lawyers who draft these agreements or who draft non-Massachusetts operating agreements intended to be effective in Massachusetts should be aware of Massachusetts’ new and stringent statutory restrictions on non-competition agreements.  These restrictions undoubtedly apply to non-competition provisions in operating agreement.  For an excellent overview of the new Massachusetts statute, click here:

https://www.ebglaw.com/news/massachusetts-passes-new-law-governing-non-competition-agreements/

ARTICLE ABOUT UNWRITTEN OPERATING AGREEMENTS

By , February 6, 2018 7:42 am

The article cited below about the above topic is by a leading LLC scholar.  It merits careful study.

Here’s the cite:

Business Law Today
September, 2017
Department
Daniel S. Kleinberger
Copyright © 2017 by the American Bar Association; Daniel S. Kleinberger

FROM THE UNIFORM LAW COMMISSION: LIKE GREAT BRITAIN, A LIMITED LIABILITY COMPANY MAY HAVE AN UNWRITTEN CONSTITUTION

Under Elf Atochem N. Am., Inc. v. Jaffari, 727 A.2d 286, 291 (Del. 1999), the operating agreement is indubitably the “cornerstone” of a limited liability company. This column examines the problems arising when that cornerstone is unwritten.

WHEN IS A PERSON A “MEMBER” OF AN LLC?

By , January 18, 2018 8:35 am

Peter Mahler’s post, under the link below, discusses a recent New York trial court case addressing under the Delaware Limited Liability Company Act an issue about whether a particular interest holder in the Delaware LLC in question was a member of the LLC for purposes of statutory access to the LLC’s books and records.

For lawyers who draft LLC operating agreements, the lesson of the case and the post is this:  Make sure that operating agreements that you draft have no ambiguities as to who is and who is not a member.

Here’s the post:

http://www.nybusinessdivorce.com/2017/10/articles/access-to-books-and-records/member-name-may-access-llc-books-records/

“BARE NAKED ASSIGNEES”

By , January 12, 2018 7:51 am

The post by Peter Mahler under the link below is the best brief discussion I’ve seen anywhere about the rights of “mere” (or “bare naked”) assignees of LLC membership rights.  The key notion is:  If an assignee has any legal rights whatsoever as an assignee, he or she must also have legal remedies by which to protect those rights.

But a well-drafted operating agreement will ensure those remedies as a contractual matter.

Here’s the link:

https://www.nybusinessdivorce.com/2017/11/articles/access-to-books-and-records/can-bare-naked-assignee-demand-access-llc-records/

SIGNING DOCUMENTS TOO SOON

By , November 9, 2017 11:14 am

The excellent Peter Mahler post under the link below discusses a recent Delaware case in which the parties signed deal documents before final approval by their lawyers.  The result was disastrous.  This issue comes up often in LLC formation practice.  I generally try to persuade my clients to not even file articles of organization, much less launch their business, before they agree with what I propose as the final version of their operating agreement and sign it.

Here’s the link:  http://www.nybusinessdivorce.com/2017/09/articles/delaware/dont-let-deal-get-ahead-documents/

PURPOSE CLAUSES IN LLC OPERATING AGREEMENTS

By , October 13, 2017 3:13 pm

As Peter Mahler has written in his post under the link below, countless thousands of LLC operating agreements provide that the purpose of the LLC is “any lawful purpose.”  This language can be a problem when a member seeks statutory dissolution of an LLC on the ground that the LLC cannot achieve its lawful purpose.  In the August 16, 2017 New York appellate decision discussed in Peter’s post, the court held that a member may introduce extrinsic evidence as to the actual purpose of the LLC.  For LLC lawyers, Peter’s post raises the difficult question whether they should include the above standard purpose in operating agreements they draft for their LLC formation clients.

Here’s the link:  http://www.nybusinessdivorce.com/2017/08/articles/llcs/llc-agreement-purposeless-purpose-clause/

TEXAS SHOOT-OUT PROVISIONS

By , July 5, 2017 12:00 pm

Texas shoot-out provisions, also known as “shotgun” provisions, are very common in the operating agreements of multi-member LLCs, but they are often inappropriate.  Under the link below, in a post by Peter Mahler, is the best short discussion of these provisions I’ve ever read.

Aim Carefully Before Pulling Trigger on Shotgun Buy-Sell Agreement

AMENDING LLC OPERATING AGREEMENTS

By , June 1, 2017 9:26 am

Under the link below is another fine post by Peter Mahler about an issue that, in one form or another, often arises in LLC practice—namely, an issue about the terms governing the amendment of an operating agreement.

Here’s the link:

http://www.nybusinessdivorce.com/2017/05/articles/llcs/delaware-ruling-highlights-difference-new-york-amending-llc-agreements/