Dissolution – Delaware Docket

COURT OF CHANCERY SHEDS LIGHT ON THE APPROPRIATE AMOUNT OF RESERVES FOR CORPORATIONS IN DISSOLUTION

Jul 21 2020

By Scott E. Waxman and Caitlin M. Velasco

In In re Swisher Hygiene, Inc., 2020 WL 3125415 (Del. Ch. June 12, 2020), the Delaware Court of Chancery granted Swisher Hygiene, Inc.’s (“Swisher”) Motion for Interim Distribution and rejected Honeycrest Holdings, Ltd.’s (“Honeycrest”) opposition, holding that the proposed amount of funds to be held in a reserve for a pending lawsuit between the two parties (the “Honeycrest Litigation”) was sufficient security pursuant to Section §280(c)(1) of the Delaware General Corporation Law (the “DGCL”).

Delaware Court of Chancery Dismisses Petition for Equitable Dissolution of an LLC by a Non-Member

Apr 15 2020

By Scott E. Waxman and Jessica A. Pingleton

In SolarReserve CSP Holdings v. Tonopah Solar Energy, LLC, C.A. No. 2019-0791-JRS (Del. Ch. Mar. 18, 2020), the Delaware Court of Chancery (the “Court”) dismissed a non-member/non-manager’s petition for equitable dissolution of a limited liability company where there was no statutory basis for dissolution and insufficient evidence of wrongdoing by the members or managers of the limited liability company to warrant such an extreme remedy.

LIMITED PARTNERSHIP IS DISSOLVED BECAUSE IT CANNOT FULFILL ITS PURPOSE

Sep 04 2019

By Scott E. Waxman and Annamarie C. Larson

In GMF ELCM Fund L.P. et al v. ELCM HCRE GP LLC et al, C.A. No. 2018-0840-SG (Del. Ch. August 7, 2019), the Delaware Court of Chancery granted a petition for dissolution of a Delaware limited partnership, ELCM Healthcare Real Estate Fund LP (the “Fund”), because the principal of the general partner, Andrew White, was unwilling or unable to conduct the business of the Fund to fulfill the purpose set forth in its limited partnership agreement.

CHANCERY COURT IMPOSES COSTS OF RECEIVERSHIP ON STOCKHOLDER

Jul 10 2019

By: Scott Waxman and Greyson Blue

In Longoria v. Somers and LC Therapeutics, Inc., C.A. No. 2018-0190-JTL (Del. Ch. May 28, 2019), the Delaware Court of Chancery examined its authority to tax the costs of receivership against the stockholder of an insolvent corporation. The Court’s decision highlights an exception to the general principle that stockholders of a properly maintained corporation are not responsible for costs incurred by the corporation and illustrates a scenario where stockholders may be held liable for a corporation’s obligations.

Purported Assignment of Limited Liability Company Interest Impacts Jurisdiction Under Conspiracy Theory of Jurisdiction

Mar 12 2019

By: Scott Waxman and Zack Sager

In Perry v. Neupert, the Delaware Court of Chancery found that it could exercise personal jurisdiction over a Liechtenstein entity under the conspiracy theory of jurisdiction. In reaching this conclusion, the Court analyzed the effects of an assignment by a sole member of a Delaware limited liability company of its entire limited liability company interest to a single assignee under the Delaware Limited Liability Company Act currently in effect and in effect prior to the 2016 amendments thereto.

CHANCERY COURT GRANTS MOTION TO DISMISS RELATING TO ALLEGED BREACH OF FIDUCIARY DUTIES BY DIRECTORS OF A DISSOLVED CORPORATION

Aug 27 2018

By: Scott E. Waxman and Joseph Phelps

In Akrout v. Jarkoy, No. 2017-0473-JRS (Del. Ch. July 10, 2018), the plaintiff Nabil Akrout sought a declaration that the dissolution of Intelligent Security Systems International, Inc., Delaware corporation (“ISSI”), was void, and alleged that three individual director-defendants had breached their fiduciary duties to him by failing to apprise him of ISSI’s dissolution and financial condition. Akrout also alleged that the dissolution deprived him of accrued salary and dividends.

CHANCERY COURT NULLIFIES DISSOLUTION OF LIMITED LIABILITY COMPANIES FOR FAILURE TO SET ASIDE A RESERVE TO SATISFY KNOWN CLAIMS

May 02 2018

By: Scott E. Waxman and Calvin D. Kennedy

In Kevin Capone and Steven Scheinman v. LDH Management Holdings LLC, et al., C.A. No. 11687-VCG (Del. Ch. April 25, 2018), the plaintiffs, Kevin Capone (“Capone”) and Steven Scheinman (“Scheinman”), and the defendants, LDH Management Holdings LLC (“Management Holdings”), LDHMH MM, LLC (together with Management Holdings, the “LLCs”), Castleton Commodities International LLC (f/k/a Louis Dreyfus Highbridge Energy LLC (“LDH”)) and certain members of the Board of Directors of LDH, each moved for summary judgment regarding the plaintiffs’ claim that the defendants violated Delaware law by cancelling the LLCs without setting aside a reserve for the plaintiffs’ breach of contract claims. The court granted the plaintiffs’ motion for summary judgment and held that the defendants were aware of the plaintiffs’ non-frivolous claims for breach of contract against the LLCs and, therefore, the defendants acted in violation of Delaware law when they failed to create a reserve to cover the plaintiffs’ claims when the LLCs were dissolved.

Too Many Cooks in the Kitchen – Deadlocked Management Leads to LLC Dissolution

Sep 26 2017

By Scott E. Waxman and Reese Brammell

In In re GR BURGR, LLC, C.A. No. 12825-VCS (Aug. 25, 2017), the Delaware Court of Chancery exercised its power under Section 18-802 of the Delaware Limited Liability Company Act to effect the judicial dissolution of GR BURGR, LLC (“GRB”). GRB was a Delaware limited liability company formed by an entity affiliated with celebrity chef Gordon Ramsay (“GRUS”) and Rowan Siebel, each owning a 50% membership interest. This structure, along with the LLC Agreement’s lack of a tiebreaker, effectively turned any action requiring a majority vote of the managers into a unanimous vote. The relationship between the members eventually deteriorated, and the company, formed for the purpose of developing and operating burger restaurants, became locked in a stalemate regarding its future operations. GRUS petitioned for dissolution Section 18-802. The Court found that the undisputed facts entitled GRUS to such relief and, rejecting Siebel’s claims that dissolution was not equitable, granted the same.

Testimony Regarding Timeliness of Election to Continue an LLC Found to be Untrustworthy, Resulting in LLC Dissolution

Jul 06 2017

By: Scott Waxman and Ernest Simons

In Delaware Acceptance Corporation, CACV of Colorado, LLC and 202 Investments, Inc., v. Estate of Frank C. Metzner, the Court of Chancery removed the executrix of an estate for breaching her fiduciary duty to a creditor of the estate. The case hinged on the authenticity of several documents, which if found to be forged would lead to the dissolution of an LLC and a distribution of its assets. The Court of Chancery found that the executrix was not a credible witness, and, therefore, it could not trust the authenticity of documents that she presented in support of the continued existence of the LLC. Read More

The Court of Chancery Orders Dissolution of a Limited Liability Company Solely on Equitable Grounds

May 05 2015

By Eric Feldman and B. Ashby Hardesty, Jr.

The Delaware Chancery Court held that the assignor of a limited liability company interest and its assignee, neither of which was a member or manager of the limited liability company, both lacked standing to petition for judicial dissolution of the limited liability company under Section 18-802 of the Delaware Limited Liability Company Act (the “LLC Act”). However, the Court went on to further hold that the assignee nonetheless had standing to seek judicial dissolution of the limited liability company in equity. Subsequent to such decision, the Court later issued an order granting the petitioners’ motion for summary judgment seeking judicial dissolution, representing the first time that a Delaware court has dissolved a limited liability company entirely on equitable grounds.

In In re Carlisle Etcetera, Well Union Capital Limited (“WU Parent”) and Tom James Company (“Tom James”) formed a two member Delaware limited liability company (the “LLC”), adopting a very basic operating agreement, with the intent to later amend and restate the operating agreement. The LLC was managed by a four member board, with each member entitled to appoint two of the board managers, and the entire board designated as the “manager” of the LLC. Additionally, a Tom James executive was appointed by the board as the CEO of the LLC. After formation, WU Parent transferred all of its limited liability company interest in the LLC to its wholly-owned subsidiary (“WU Sub”), of which Tom James was aware, and to which it did not object. The parties later began to negotiate an amended and restated operating agreement, which reflected Tom James and WU Sub as the members of the LLC.

Catagory:Dissolution