The general rule is that a court should not apply discounts for marketability or lack of control (the later known as the minority discount) unless there is some unfairness or wrongdoing among the parties. Still, in the world of oppressed minority shareholder litigation, there is always some allegation of wrongdoing,…
We counsel many owners of limited liability companies that the filing of a Certificate of Formation does note automatically protect the owners from person liabilities. There are a number of business practices, often referred to as the “corporate formalities” that should be followed. A case from Iowa’s Court of Appeals…
It may take a unanimous action of the members of a limited liability company to dissolve the entity or to change the date on which the company will dissolve according to the terms of its operating agreement. But unless the Operating Agreement specifically requires the members to act unanimous to…
Good faith and fair dealing are obligations implied in every contract, including contracts among owners of closely held businesses, and cannot be waived by the language in an operating agreement voiding fiduciary duties. The duties of good faith and fair dealing require disclosure of conflicts of interest involving controlling LLC members…
Litigating with a former employee for violation of a restrictive covenant agreement becomes more complicated when the former employee was terminated without good cause. And because we are an at-will employment economy, this becomes an issue more frequently than one might imagine. As one author notes, it typically is not…
The potential liability of a director for attorney’s fees is what determines whether recoverable litigation expenses are due under the indemnification provisions of Delaware law, the Chancery Court holds. The expenses at issue were incurred in litigation that wound its way through state and federal courts in Illinois for nearly a…
A claim that one of the members has misappropriated assets of a limited liability company and ousted the other member from management is a “quintessential breach” of the fiduciary duties that may exist in a closely held business. It is not, however, grounds for the appointment of a receiver. This…
An Illinois appellate court affirmed a finding of breach of fiduciary duty and the expulsion of a limited liability company member under a version of the Uniform Limited Liability Company Act. The case is of interest for the way it construes the model partnership and limited liability company acts. Explusion…
The parties to a transaction, including a transaction that concludes a business divorce, will often include a provision that states that neither side is relying on verbal representations of the other. Most often, this provision refers to the due diligence that precedes a transaction, but it can also refer to…
A business divorce case came into the office a couple of years ago, one of the second-generation owners was looking to force one of the first generation owners — who never came to work anymore — into retiring and selling his interests. We reviewed the shareholder ledger and the by-laws…