NJ Appellate Division Decision Highlights Gaps in Existing LLC Law in New Jersey and Importance of Having an Operating Agreement

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In my prior blogs I’ve addressed the importance of having an operating agreement for any business owner operating as a limited liability company (“LLC”), and have also covered the recent legislative changes in New Jersey with the adoption of the Revised Uniform Limited Liability Company Act (the “Revised LLC Act”).

A new Appellate Division decision in New Jersey, styled All Saints University Of Medicine Aruba v. Chilana, App. Div. (per curiam) (Dec. 24, 2012), highlights the intricacies in the law for inter-member disputes and the importance of having a clear operating agreement, and that is particularly so with the adoption of the Revised LLC Act. All Saints provides guidance on the type of conduct that will cause a court to allow a forced dissociation with the business (there, failure to advance working capital and interruption with business operations), and also clarifies that a forced sale of the dissociated member’s shares is not permitted under the existing LLC Act.

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