September 2013, NJSBA Business Law Section Newsletter Features John D. Cromie and Noel D. Humphrey's Article, “Successful Strategies Under New Jersey’s RULLCA’s Not Reasonably Practicable Standard”
When Dad died, his three adult children inherited a profitable real estate business through a limited liability company (LLC). Now, despite the profits, an atmosphere of vituperative non-cooperation, suspicion and distrust characterizes the inheritors’ ownership. Under New Jersey’s recently revised limited liability company statute, what would one of the offspring argue to demonstrate that she is entitled to judicial dissolution of the entity?
The old statute1 provided that a New Jersey court could decree dissolution “whenever it is not reasonably practicable to carry on the business in conformity with an operating agreement.” New Jersey’s new LLC statute,2 which became effective a few months ago, provides essentially the same standard for a court-ordered dissolution: “not reasonably practicable to carry on the company’s activities in conformity with one or both of the certificate of formation and the operating agreement.”
New Jersey’s new statute is modeled on the Revised Uniform Limited Liability Company Act (RULLCA), as adopted by the National Conference of Commissioners on Uniform State Laws. The RULLCA’s modern regulatory scheme has developed what the commissioners hope are the best features of the prior generation LLC statutes. Eight states3 and the District of Columbia have adopted the RULLCA. The nine RULLCA jurisdictions allow judicial dissolution of an LLC on the same grounds that New Jersey adopted.4 The jurisdictions also prevent an LLC’s operating agreement from waiving judicial dissolution as a remedy.
Click here for full article
