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November 3, 2023
First Department Finds the Sale of 100 percent of Membership Interest in an LLC is Not a “Dissolution” Under the Operating Agreement
In an Opinion, dated September 21, 2023, in Southern Advanced Materials, LLC v. Robert S. Abrams, et al., No. 2022-04949 (1st Dep’t), the First Department found that a corporate transaction involving the sale by a limited liability company of a company it owned, structured as a sale of 100 percent of the LLC’s membership interests in the target company, did not constitute a “dissolution” under the LLC’s operating agreement and Delaware law. The dispute arose when a former stakeholder in the LLC and company sought to recover a preferred return that it was entitled to upon “dissolution” of the LLC. Under the terms of the LLC’s operating agreement, a dissolution would occur upon “the disposition by the [LLC] of substantially all of its assets.” The shareholder therefore argued that the sale met this definition because the acquisition resulted in the disposition of the LLC’s assets (i.e., the target company). Read More
