PERILS OF A COURT APPOINTED RECEIVER DISSOLVING AN LLC

Handling LLC breakups is a key task for LLC lawyers.  Peter Mahler’s post in his excellent blawg entitled New York Business Divorce concerns a recent NY case in which a court’s appointment of a receiver in the dissolution of an LLC whose members could not work together was, to put it mildly, troublesome.

Here’s the link:

https://www.nybusinessdivorce.com/2019/07/articles/receivership/court-appoints-interim-receiver-for-llc-but-at-what-price/

“NULL AND VOID”

The new post under the link below discusses a Delaware Court of Chancery case that, in essence, upholds, despite traditional equitable considerations, LLC agreement terms providing that certain types of transfers of membership rights will be “null and void.”  The issue addressed in the case lurks in many LLC operating agreements not only under the Delaware Limited Liability Company Act but under many other LLC acts.

Here’s the link:

https://www.klgatesdelawaredocket.com/2019/07/chancery-court-finds-that-language-in-an-llc-agreement-that-states-an-assignment-is-null-and-void-trumps-the-common-law-and-renders-equitable-defenses-ineffective/

ENFORCEABILITY OF OPERATING AGREEMENTS UNDER THE DLLCA

The post under the link below discusses a recent Delaware Chancery Court decision holding, in essence, that members of Delaware multi-member LLCs will be fully bound by their operating agreements even if they lack the legal sophistication of other members of their LLCs.  This holding is clearly implicit in the Delaware Supreme Court’s landmark Elf Atochem case, but it strengthens the effect of that case and of DLLCA 18-1101(b), on which Elf Atochem was based.

Here’s the link:

https://www.klgatesdelawaredocket.com/2019/07/sophisticated-party-or-not-llc-agreement-still-governs/

INADVERTENT TERMINATION OF S CORP STATUS

A significant number of single-member and multi-member LLCs are S corporations, and many LLCs ought to be S corporations in order to maximize their IRC section 199A pass-through deductions.  The post under the link below provides a brief but useful discussion of what an entity that ought to be an S corporation can do if it inadvertently allows its S election to terminate.

Here’s the link:  http://taxblog.dickinson-wright.com/2019/07/remedying-the-inadvertent-termination-of-an-s-corporation-election/#page=1