09 September 2018

US Corporate Law News: Delaware Court of Chancery rules expelled LLC member has right to payout

Gregory Pun
Associate | US

On August 13, 2019 the Delaware Court of Chancery decided that LLC members who are forced to withdraw are entitled to receive fair value for their membership interest as of the date which they are forced to withdraw. In the case of Domain Associates LLC v. Shah, Domain Associates, LLC contended that a former member was merely entitled to the value of his capital account, whereas the member believed he was entitled to the full amount of his membership interest. The Court ruled in favor of the former member under a breach of contract theory. The Court found that Section 18-604 of the LLC Act, which deals with voluntary withdrawals, was inapplicable and that no other provision in the LLC Act was pertinent. Therefore, the Court held that when considering an LLC membership agreement, any ambiguities in the drafting must be held against the drafter. For more information see https://courts.delaware.gov/Opinions/Download.aspx?id=277140.

This article was written with contributions from Tim Piscatelli.

Gregory Pun Associate | Greenwich