Category: Minority Members

BUY-OUT RIGHTS OF MINORITY LLC MEMBERS

By , January 31, 2014 4:42 pm

The attached blawg post contains an excellent discussion of a very recent Delaware Supreme Court case concerning the buy-out rights of minority shareholders under Delaware corporate law, and it provides a link to the case.  I have no doubt the ruling in the case would apply to minority members of Delaware LLCs.  Furthermore, in states whose LLC acts contain no provisions prohibiting “oppression” of minority members, the case might well be persuasive against minority members of LLCs formed under those acts.

The lesson in the case is that if you are representing a minority member in an LLC formation in one of the above states, you need to seek reasonable buy-out terms for your client in the governing operating agreement, because otherwise you probably won’t get them.

The multi-member LLC operating agreements in my Wolters Kluwer LLC book provide for these terms, but your client may want yet better terms, and if you’re representing majority members, you will want to avoid these terms altogether.