Pursuant to 6 Del. C. § 18-802, if a member or manager of a Delaware LLC petitions for a decree of dissolution, the Delaware Court of Chancery may dissolve the LLC “whenever it is not reasonably practicable to carry on the business in conformity with a limited liability company agreement.” (Emphasis added). Judicial dissolution of an LLC is a discretionary remedy that the court grants sparingly. It is well settled in Delaware that the court may judicially dissolve an LLC in the event of a deadlock among the members. See, e.g., In re Silver Leaf, L.L.C., 2005 WL 2045641, at *11 (Del. Ch. Aug. 18, 2005) (ordering dissolution where “[t] he vote of the members is deadlocked”); Haley v. Talcott, 864 A.2d 86, 89 (Del. Ch. 2004) (ordering dissolution where there was “indisputable deadlock between the two 50% members of the LLC”). Although it occurs less often than dissolutions based on deadlock, the court may also dissolve an LLC “where the defined purpose of the entity was fulfilled or impossible to carry out.” In re Seneca Invs. LLC, 970 A.2d 259, 263 (Del. Ch. 2008). This second basis for judicial dissolution begs the question: how is the “purpose” of the entity defined?
originally published in the American Bar Association Business Law Section's "Business Law Today" in December 2015.
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