Category: Dissolution Issues

RIGHT TO LIFE INSURANCE NOT TERMINATED BY DISSOLUTION OF LLC

The first few lines of this tragic case:

“Four men formed a limited liability company to test a new business model for providing chiropractic services. Their enterprise was plagued by treachery and tragedy. One of the men committed fraud against the company and was forced out. A second declared personal bankruptcy, and then, with the third, allegedly created a competing business, looted the company, and then cancelled the company. The fourth man sued the second and third for those acts, but took his own life before that suit concluded.

The deceased member’s widow has sued the company, the second and third man, and their affiliated entities. She claims she is entitled to the proceeds from the life insurance policy the LLC had taken out on her husband under an agreement among the members. The enforceability of that agreement depends on, inter alia, whether the LLC had dissolved before her husband’s death. On the defendants’ motion to dismiss, I find that the dissolution provision of the company’s LLC agreement is susceptible to two reasonable interpretations. I therefore must construe the provision in favor of the plaintiff, and under that construction, her rights to the life insurance policy are not terminated by the company’s dissolution. I also conclude the plaintiff states a claim for a statutory receivership.”

You can read the case in its entirety here:

https://llc199a.com/wp-content/uploads/Coyne-v-Fusion-Fireworks.pdf

LLC DISSOLVED BECAUSE OF FAILURE BY MINORITY MEMBERS TO PURCHASE MAJORITY MEMBER’S INTEREST

Under the link below is a good new post about an LLC dissolution.  The caption of the post is:  “Court of Chancery Grants Summary Judgment For Dissolution of Limited Liability Company Where Two Minority Members Failed To Purchase The Majority Member’s Limited Liability Interest, As Required By The Operating Agreement.”

Here’s the link:

https://www.lexology.com/r.ashx?l=8FR9ZFF

THIRD ATTEMPT TO DISSOLVE LLC FAILS

Every LLC lawyer has to understand the law and tax governing LLC dissolutions and the often very messy dissolution process, since, sadly, this knowledge eventually will be all too relevant to some of his multi-member LLC clients.  In his latest post, Peter Mahler discusses the lengthy and painful litigation history of a particularly hard-fought dissolution.

Here’s the link to his post:  https://www.nybusinessdivorce.com/2019/04/articles/llcs/third-times-not-a-charm-in-llc-dissolution-case/

Dissolution Issues

Judicial Dissolution of Delaware LLC Founded on Fraud
The post under the link below discusses a recent Delaware Court of Chancery case in which, under Delaware Limited Liability Company Act § 18-802, the court dissolved an LLC that had been founded on false claims of patent ownership and thus whose business was not “reasonably practicable.”  I suspect that at least a small number of other LLCs are formed every year that could well fall prey to § 18-802 or similar provisions under other LLC acts for having been founded on fraud.

Here’s the link:
https://www.klgatesdelawaredocket.com/2019/01/patently-false-the-delaware-chancery-court-dissolves-limited-liability-company-founded-on-false-claims-of-patent-ownership/