“SHOTGUN” PROVISIONS

The use in LLC operating agreements of provisions called, among other names, “shotgun provisions” or “Texas shootout provisions” to resolve deadlocks between members of a multi-member LLC can sometimes result in a disaster for one of the deadlocked members, as discussed by Peter Mahler, author of the excellent FarrellFritz blawg “New York Business Divorce,” in his latest post.  The link is below:

https://www.nybusinessdivorce.com/2020/11/articles/deadlock/llc-member-pays-the-price-for-not-sticking-to-deadlock-breaking-script/

NAKED EXPULSION PROVISIONS

The post from Peter Mahler under the link below is about a recent NY LLC case upholding the validity of a bare-bones expulsion clause in the operating agreement of a NY multi-member LLC.  The decision is well-reasoned, but in my view, because expulsions are major LLC actions, they should be addressed in detail in operating agreements.

Here’s the link:

https://www.nybusinessdivorce.com/2020/10/articles/expulsion-and-removal/court-enforces-llc-agreements-naked-expulsion-clause/

WHEN EXERCISING A PUT RIGHT WILL MAKE THE LLC INSOLVENT

Under the link below is a post in Peter Mahler’s Business Divorce column about an issue that all LLC lawyers should be aware of.  The author summarizes the subject of the column as follows:

Can an LLC member with a put option–the right to sell his interest back to the LLC–exercise that option when doing so will render the LLC insolvent? This week’s New York Business Divorce post highlights a recent decision by Justice Masley of the New York County Commercial Division considering this issue.

Here’s the link:

https://www.nybusinessdivorce.com/2020/08/articles/uncategorized/departing-llc-members-exercise-your-put-option-before-insolvency-approaches/