LLC Operating Agreements: Minimizing the Impact of a Member's Death, Divorce or Bankruptcy

Buy-Sell and Other Provisions to Prevent Disruption and Preserve Control for Remaining Members

Recording of a 90-minute CLE webinar with Q&A

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Conducted on Wednesday, December 13, 2017

Recorded event now available

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Course Materials

This CLE course will discuss critical features to include in an LLC operating agreement to mitigate the impact of a member’s death, divorce or bankruptcy. The panel will suggest buy-sell, management and non-dissolution provisions and explain the impact of the possible treatment of an LLC agreement as an executory contract.

Description

An LLC’s operations may be significantly disrupted when a member dies or a bankruptcy trustee or a spouse seeks to assume the powers of a bankrupt or divorced member. The LLC operating agreement must address the management and voting rights and duties of the members upon any of these events.

A buy-sell agreement provides the members with an option or right of first refusal to purchase a departing member’s interest, which may or may not be enforceable in a bankruptcy proceeding. Buy-sell provisions should clearly address the triggers and notice and other procedures to exercise the option, and the method used to calculate the value of a member’s interest.

If a member files bankruptcy, the best outcome for a non-debtor member is a court determination that the operating agreement is an executory contract. In addition, any ancillary documents, including capital-call or service agreements, should be integrated with the operating agreement, preventing the bankruptcy trustee from assuming only the most favorable contracts to non-debtor members’ detriment.

Listen as our authoritative panel discusses the ramifications of the death, divorce or bankruptcy of an LLC member, and offers drafting solutions which can prevent dissolution and preserve management and decision-making control for the remaining members.

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Outline

  1. Implications of death, divorce or bankruptcy of an LLC member
  2. Non-dissolution provisions
  3. Revision of member rights and obligations upon certain events
  4. Buy-sell agreements
  5. LLC agreement as an executory contract
  6. Integration of documents

Benefits

The panel will review these and other key issues:

  • What are some of the immediate concerns when a member dies or files for bankruptcy?
  • How should operating agreements address the divorce of a member?
  • What kinds of buy-sell provisions should be included in the LLC to address disruptive events?
  • What impact does the treatment of an LLC operating agreement in bankruptcy have on non-bankrupt members of the LLC?

Faculty

Mason, L. Katie
L. Katie Mason
Shareholder
Reinhart Boerner Van Deuren

Ms. Mason regularly counsels manufacturers, trade creditors, landlords, lending institutions and other parties in all...  |  Read More

Arina Shulga
Arina Shulga
Atty
Mitchell Silberberg & Knupp

Ms. Shulga focuses her practice on corporate and securities matters. She has significant experience in startup law,...  |  Read More

Park, Douglas
Douglas Park
Atty
Douglas Park Law Firm

Mr. Park has worked with large, international law firms and served as in-house legal counsel for an international...  |  Read More

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