Articles Tagged with operating agreements

  • Any action that the managers of a Limited Liability Company might take at a meeting can also be taken by executing a written consent.

  • An action by written consent may, in some circumstances, avoid the need to assemble a quorum of the managers.

  • The managers of an LLC many be contractually obligated to effect management changes by an operating agreement, but those obligations are not self-executing.

Limited Liability Company LawyersA venture capital company and the independent manager of a limited liability company were permitted to correct a questionable vote and use a written consent to terminate one of the founders as manager of a group of holding companies.

The fired manager had challenged the vote as lacking a quorum, with only two of the four members present.  The managers simply acted by written consent, permitted under Delaware Law, and the court held that the action had the necessary “disinterested” votes under the LLC’s operating agreement to remove the manager.

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A contract means what it says, even if the two parties who came to the agreement may have understood something different.  This can be a trap for the business that is not careful to ensure that the contract that it signs at the end of negotiations accurately reflects exactly what it thinks it has agreed to.

It is not particularly unusual that, at the end of a period of negotiations, the contract that is finally written up does not exactly fit the terms the parties thought they had negotiated or that it does not contain all of the terms that the parties thought were relevant.  A court, however, is unlikely to read those terms into the agreement, or even permit one of the parties to argue that they should have been there – at least not when the meaning of the agreement is plain from its terms.


Court Review

The New Jersey Appellate Division opinion in MicroBilt Corp. v. L2C, LLC demonstrates just how difficult it can be to get a court to consider that there were important terms missing from the final document that should have been included. 

MicroBilt signed a contract with L2C under which L2C would perform credit evaluations of MicroBilt’s potential customers and provide customer credit scores to MicroBilt.  MicroBilt later claimed that L2C was also required to supply the underlying data used to calculate the credit score, which L2C obtained from a third party vendor.  L2C claimed it could not provide the underlying data because its contract with its vendor prohibited the release.

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