Articles Posted in Fiduciary Duties

Limited liability companies are creatures of contract, and the Operating Agreement is the Magna Carta of the business.  Because it is a contract, however, all of the members must consent to any changes to the Operating Agreement, which means that the holdout member has a veto.  In short, the minority rules on major changes.

The Minority Rule Problem

All of the members, save one, may agree that a change to an operating agreement is in the best interests of the business.  Yet that one holdout, for whatever reason, can veto the change because a contract cannot be changed unless all of the parties’ to the original agreement consent.