New York’s LLC Law authorizes operating agreements to eliminate manager and member fiduciary duties, but does it really? Find out in this week’s New York Business Divorce.
Continue Reading Diving Into the Shallow Waters of New York Law Permitting Elimination of LLC Managers’ Liability for Breach of Fiduciary Duty
Is an LLC Bound by its Own Operating Agreement?
This week in New York Business Divorce, read how a New York LLC can successfully evade an arbitration provision in its own operating agreement.
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Appellate Division Construes LLC Law 608 as Giving Voting Rights to a Deceased Member’s Estate
In this week’s New York Business Divorce, read about last week’s important Appellate Division decision for the first time explicitly holding that LLC Law 608 gives member voting rights to the estate of a deceased member.
Continue Reading Appellate Division Construes LLC Law 608 as Giving Voting Rights to a Deceased Member’s Estate
Prudent Management or Financial Starvation: Can Minority Members Compel the Majority to Make Distributions?
A recent decision from New York County Justice Reed inspires a closer look at the circumstances under which a minority LLC owner can compel the majority to make distributions.
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Summer Shorts: An Unusual Application of LLC Law § 608 and Other Decisions of Interest
This week’s New York Business Divorce proudly presents the 14th annual edition of Summer Shorts featuring brief commentary on three recent decisions of interest in business divorce cases in the New York courts.
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Battle for Company Control Turns on Conflicting Copies of Operating Agreement Amid Accusations of “Old-Fashioned Forgery”
A federal lawsuit ostensibly about trademark infringement morphs into a contest over control of a Delaware LLC in which the two sides offer materially different copies of the same operating agreement, with each side accusing the other of forgery. Learn more in this week’s New York Business Divorce.
Continue Reading Battle for Company Control Turns on Conflicting Copies of Operating Agreement Amid Accusations of “Old-Fashioned Forgery”
Crossing the Hudson: Recent Business Divorce Decisions from Yonder States
On the menu for this week’s New York Business Divorce: five noteworthy business divorce cases from five different states.
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New York Appellate Court’s Split Decision Involving Delaware LLC Pits “Harsh” Contractarianism Against “Fundamental Fairness”
In a split 3-2 decision last week, the Appellate Division, First Department, affirmed an order dismissing a claim to enforce an oral buy-out agreement involving a Delaware LLC as barred by the merger clause in a subsequently amended operating agreement that the plaintiff never signed. Read about it in this week’s New York Business Divorce.
Continue Reading New York Appellate Court’s Split Decision Involving Delaware LLC Pits “Harsh” Contractarianism Against “Fundamental Fairness”
The Perils of Indeterminate LLC Membership Interests, Redux
This week’s New York Business Divorce revisits the issue of indeterminate LLC membership interests and the resulting disputes that can arise when not properly addressed in the operating agreement.
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Let’s Talk About Dilution
When a closely-held business is profitable, self-interested owners naturally want a bigger slice of the pie, especially where the personal relationships among the owners are frayed. Perhaps that’s why we often discuss the value of freeze-out mergers as a mechanism for those in control of a closely-held corporation or limited liability company to squeeze a minority owner out of the business’ future profits.
Equity dilution is another common method by which those in control of a corporation or LLC attempt to squeeze out a minority owner. For one, stock dilution impairs the minority owner’s ability to influence company action by voting his shares, and it lessens the owner’s right to participate pari passu in the distributions or dividends of the company. Perhaps more importantly, a minority owner can see his or her ownership interest diluted below certain critical thresholds—for instance, the 20% ownership required to petition for dissolution under BCL 1104-a.
Despite the potentially drastic consequences of stock dilution, many closely-held businesses we encounter fail to adequately address the issue of dilution in their governing documents. And New York caselaw on the issue leaves plenty to be desired. Let’s interpret those factors as an invitation to review the basics, key caselaw, and the current status of the improper dilution claim.Continue Reading Let’s Talk About Dilution