Operating Agreements

News & Analysis as of

Managers of insolvent Missouri LLCs have no fiduciary duty to creditors

Two recent federal court decisions establish that managers of financially troubled Missouri limited liability companies do not owe a fiduciary duty to creditors of their troubled enterprises. Imperial Zinc Corp. v. Engineered...more

Business Litigation Alert: "To Protect Yourself from a Business Divorce - Agree to a Prenup"

When a business breaks up, it can often be very similar to the dissolution of a marriage. One prime example of this is the case of TransPerfect Global, Inc. (TransPerfect), a very successful language translation company...more

Entity Selection Series | Part One: The Benefits of a Limited Liability Company

So, you developed the next great start-up idea and you are looking to organize your company… Initially, the entrepreneur will have to decide what type of entity to use and under what state to form the company. Various legal...more

Delaware Supreme Court Explains Setoff And Recoupment

This decision explains the difference between a defendant’s right of setoff and recoupment. The key difference is that the right of setoff arises out of an independent transaction, while recoupment must be based on the same...more

Why Do You Need a Buy-Sell Agreement for Your Closely Held Company?

Why do you need a Buy-Sell Agreement for your closely held company? In a nutshell, your business partner might die, become disagreeable, or just simply lose his or her mind, and you need a set of rules to resolve the matter....more

Could your Oil and Gas Interest Cause You to Be Responsible for Multiemployer Plan Withdrawal Liability?

I noticed an interesting case from the Tenth Circuit which found that a two to three percent working interest in an oil and gas venture could generate self-employment income for the owner of that interest. The individual in...more

FRANCHISOR 101: Original Content Needed to Protect Ops Manuals

An important part of the franchise system is the confidential operating manual. Many franchisors claim protection of operating manuals under the law of trade secrets and copyright. Keeping the contents confidential is...more

New Management Contract Rules Hot Topic At NABL Conference

Over a thousand US public finance attorneys converged on the City of Chicago last week for the annual National Association of Bond Lawyers Bond Attorneys Workshop. The conference, the oldest and largest of its kind, featured...more

Consider Indemnification and Advancement Obligations When Drafting Limited Liability Company Operating Agreements

When parties are negotiating over the terms of a Delaware limited liability company operating agreement, the most heavily negotiated provisions typically involve things like capital contributions, allocations and...more

What Are Fiduciary Duties Between Members In An Arizona LLC?

A few years I wrote an article named Are There Fiduciary Duties between Members in an Arizona LLC? At the time, there were no published decisions in Arizona on this issue. However, a bankruptcy judge had dismissed my...more

Advancement Rights of Present and Future Officers Under LLC Agreement

Advancement and indemnification rights are vital in attracting the best and brightest individuals to serve as managers of Delaware entities. Those rights are meant to provide managers of Delaware entities comfort when...more

The Tennessee Business Court Further Defines LLC Law

The Tennessee Business Court continued its prolific promulgation of rulings affecting the resolution of internecine disputes between LLC members. In Terrell K. Raley, et al. v. Cees Brinkman, et al., Case No. 16-0196-BC, the...more

This Case Caused Me To Take Stock

I recently came across Fukuda v. Nethercott, 2016 U.S. Dist. LEXIS 92462 (D. Utah, July 15, 2016). The case involved claims by the plaintiff that the defendants had sold him securities in violation of the registration...more

Keeping Your Team Motivated: A Profits Interest as an Equity-Based Incentive

Say you own one-half of an LLC that is taxed as a partnership. You and your partner invested the initial capital that was necessary to get the business up and running, and you both built the business with the help of a few...more

Arbitrator to Decide Arbitrability of Breach of Fiduciary Duty Claim

In Angus v. Ajio, C.A. No. 11895-VCG (Del. Ch. May 13, 2016), the plaintiffs sought to enjoin an arbitration initiated against them as officers of MoGo Sport. In the arbitration, certain members of the company (who were...more

Unitization: Specific Considerations for LNG Export Projects

Unitized Gas to LNG Export - A number of global LNG export projects – existing, under construction and planned – process (or will process) natural gas produced from unitized gas fields. Gas produced from unitized gas...more

A Quirky Exemption: “Internal” Business Disputes

A recent decision by the North Carolina Business Court highlights an important—and counterintuitive—limit on the scope of N.C. Gen. Stat. § 75-1.1. Section 75-1.1 says expressly that it applies to practices “in or...more

Bankruptcy Courts Closing In – Will An Agreement Requiring Unanimous Consent To File For Bankruptcy Be Effective?

We’ve all seen it. The business opportunity looks enticing but is laced with risk about a potential bankruptcy filing down the road. As bankruptcy lawyers we are often asked how deals can be structured to prevent a...more

Global Private Equity Newsletter - Summer 2016 Edition: Recent Developments in Acquisition Finance

Private equity sponsors should be aware of two recent court decisions. One involves fiduciary duties under state law that may be owing to a limited liability company borrower by its managers, in the context of receivables...more

Lenders Cannot Prevent Borrowers From Filing Bankruptcy By Owning Minority Equity With Veto Power Over Borrower’s Decision To File...

In a recent decision, the U.S. Bankruptcy Court for the District of Delaware refused to enforce a provision in the debtor’s LLC operating agreement requiring a unanimous vote of the debtor’s members to authorize the debtor to...more

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

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