Key Takeaways New Jersey law does not allow unilateral expulsion of an LLC member unless the operating agreement specifically provides a mechanism for removal. The operating agreement controls the process, including whether members can be removed, under what conditions, and by what voting procedure. Court intervention may be required... read more
Key Takeaways There is no statutory right to receive a distribution of profits from a limited liability company before it dissolves and winds up its affairs. Distributions before then are discretionary. Profit distributions are in the discretion of the majority members or commonly in the discretion of the managers of... read more
A ‘passive’ member with no rights or responsibilities in the management of a limited liability company cannot be held liable for refusing to participate in a PPP loan application. Dissociated LLC members with no management rights can withhold their voluntary consent to proposed actions. The waiver of fiduciary duties... read more
Well-drafted business governance documents include buy-sell agreements to address deadlock among the owners. A shotgun buy-sell is an offer that sets only the price. It can be accepted as either an offer to buy out the other side or to sell to the other side at the price in... read more
The removal of a member from a limited liability company, known as involuntary dissociation, is permitted by statute in most states and may also be permitted in an operating agreement. Removal is permitted when a member has engaged in wrongful conduct that has or will materially affect the company... read more
Limited liability company statutes often require the unanimous approval of the members before actions may be taken outside the ordinary course of business or for any amendment of the Operating Agreement. The requirement for unanimous action creates a minority veto – any member can veto the actions of the... read more
An email from the sole owner of a limited liability company announcing that employees had become partners with a profit interest was not sufficient to constitute admission as a member of the LLC. The fact that the party claiming an equity interest in an LLC had refused to execute... read more
Managers of a limited liability company owe to the company fiduciary duties of loyalty and care, must act in good faith, and refrain from reckless or unlawful conduct. A member who seeks information about a manager-managed limited liability company must state the purpose for the request under the Uniform... read more
An agreement to arbitrate that is contained in the governance documents of a business, e.g, an operating agreement or shareholder agreement, may result in multiple proceedings when the dispute ripens into litigation. A party may seek to stay a pending federal court action based on a collateral arbitration proceeding... read more
Law firms should recognize that lawyer resignations and the loss of clients are inevitable in the modern law practice due to prohibitions on agreements that restrict competition. Law firms can protect the interests of clients and the firm by adopting best practices that govern lawyer resignations. Law firms should... read more
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