Operating Agreements

News & Analysis as of

Insights Newsletter - June 2016

TO SUFFER OR PERMIT: How The Broad Scope Of The Fair Labor Standards Act Is Increasing The Risk Of Doing Business - 2016 is shaping up to be a troubling one for employers subject to the provisions of the Fair Labor...more

Delaware Bankruptcy Court: provision granting creditor veto over debtor’s decision to file bankruptcy violates federal public...

In a case of first impression, DLA Piper argued before the US Bankruptcy Court for the District of Delaware that a consent provision in a Delaware LLC operating agreement effectively granting a creditor a veto right over a...more

Delaware Bankruptcy Court Invalidates on Public Policy Grounds a “Golden Share” Provision in LLC Agreement Designed to Limit LLC’s...

In a June 3, 2016 decision, the United States Bankruptcy Court for the District of Delaware (“the Bankruptcy Court”) invalidated, on federal public policy grounds, a provision in the debtor-LLC’s operating agreement that it...more

The Model Form JOA in Hard Times (and Farewell, Rally Possum)

Good morning class. Welcome to an advanced course on what can go wrong with the Model Form just when you need it. FIRST CASE - Do you know where to file your UCC financing statement?...more

Intervention Energy: The Case Where the Golden Share Lost its Shine

In connection with out-of-court restructurings, workouts and forbearance agreements, creditors often seek to include provisions that purport to limit the ability of a debtor to file for bankruptcy relief. However, bankruptcy...more

Buy-Sell Agreements in a Divorce (Part 2)

My last article discussed a typical provision found in shareholders agreements (for corporations) or operating agreements (for limited liability companies) giving the other owners a right to step in and buy any shares or...more

Amendments to the Minnesota Revised Uniform Limited Liability Company Act

On May 22, 2016 several amendments to the Minnesota Revised Uniform Limited Liability Company Act, Chapter 322C of the Minnesota statutes, were passed into law. While most of the changes are immaterial or administrative in...more

The Tennessee Business Court Tackles Privilege Claims

The Tennessee Business Court has provided additional guidance to commercial litigators concerning internecine legal battles between members of limited liability companies. The Court has determined the fiduciary duties of...more

Court Of Chancery Explains When To Not Enjoin Arbitration

This is another in a line of decisions that explains when the issue of arbitrability should be sent to the arbitrator to decide. ...more

Partnership Audit Changes and Their Effect on Operating Agreements

On November 2, 2015, President Obama signed into law the Bipartisan Budget Act of 2015. The Bipartisan Budget Act of 2015 contained several significant changes to the procedural rules for federal income tax audits and the...more

Buy-Sell Agreements in a Divorce (Part 1)

My prior articles have discussed how to monetize one spouse’s equity interest in a privately held company that has no other owners. However, many businesses are started by two or three partners contributing their ideas,...more

Changes to IRS Partnership and LLC Audit Rules

Recent history has seen a proliferation of health care organizations—including tax-exempt organizations, for-profit companies, and physician practice groups—that have joined together to take advantage of different synergies...more

Dieckman v. Regency GP LP, et al., C.A. No. 11130-CB (Del. Ch. Mar. 29, 2016) (Bouchard, C.)

In this opinion, the Delaware Court of Chancery reaffirmed that default fiduciary duties, including a duty of disclosure, may be modified or wholly eliminated when such modification or elimination is clearly set forth in a...more

Lease Accounting Changes Are Around the Corner: How Will This Affect Borrowers Under Credit Facilities?

Off-balance sheet operating leases are an important part of many companies’ financing strategies. A key attraction of operating leases is that neither leased assets nor lease payments are recorded on a company’s balance...more

Court Of Chancery Explains Advancement Rights Of Seller Representative

This is an interesting advancement case as it applies the usual test of whether the former directors have been sued “by reason of the fact” they were directors in the context of suit against former owners’ representative for...more

Contractual Stipulations of Irreparable Harm: Helpful But Not Determinative

Business contracts frequently contain remedy clauses whereby the parties agree that a breach constitutes irreparable harm entitling the nonbreaching party to specific performance or injunctive relief to enforce the agreement....more

Is It Better To Be A LLC Member In The Minority Than A Minority Corporate Shareholder?

It is pretty common to think that limited liability company members have similar rights as shareholders in a corporation. But they don't, (although in some respects the rights afforded to LLC members may be better). The...more

Maryland Appellate Court Says “No De Facto Series LLC”

In Kurz, et al. v. AMCP-1, LLC, et al., an unpublished opinion filed on February 10, 2016, the Maryland Court of Special Appeals refused to accept the plaintiff’s argument that the trial court, in disregard of Maryland law,...more

Navigating the New Partnership Audit Rules: Sea Change or Same Course?

The recently enacted Bipartisan Budget Act of 2015 amended existing Internal Revenue Code of 1986, as amended (the “Code”) rules governing tax audits of partnerships in the U.S. These new rules primarily impact partnerships...more

Comprehensive Partnership Audit Reform Requires Amendments To Partnership (and LLC Operating) Agreements

Congress has recently scrapped the existing procedures for IRS audits of partnerships. The new rules (the “BBA Audit Rules”1) are effective for partnership taxable years beginning on or after January 1, 2018. A partnership...more

New Audit Rules Require Changes to Partnership and LLC Operating Agreements

The Bipartisan Budget Act of 2015 (P.L. 114-74) includes a complete overhaul of the procedures that apply to Internal Revenue Service (IRS) audits of partnerships, including limited liability companies (LLCs) taxed as...more

California Amends LLC Law, Eases Lender Obligations

Why it matters - Earlier this month, California Governor Jerry Brown signed into law Assembly Bill 506, a measure that amended the state's Revised Uniform Limited Partnership Act, making it easier for lenders to make...more

2009 Caiola Family Trust v. PWA, LLC, C.A. No. 8028-VCP (Del. Ch. Oct. 14, 2015) (Parsons, V.C.)

In this 91-page post-trial opinion addressing a dispute between members of a Delaware limited liability company formed to own and operate a residential apartment complex in Kansas, the Court of Chancery held that the...more

Court Of Chancery Declines Stay In LLC Advancement Case

Tulum Management USA LLC v. Casten, C.A. 11321-VCN (November 9, 2015) - A Delaware court will not stay its hand in favor of litigation elsewhere in an advancement or indemnification case absent “exceptional...more

Washington's Amended LLC Statute—Should You Amend Your LLC Agreement?

Washington state approved significant amendments to its Limited Liability Company Act earlier this year that will become effective on January 1, 2016. For many existing LLCs, the amendments will not have a meaningful impact...more

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