How to dissolve a Delaware limited partnership

COURT OF CHANCERY SHEDS LIGHT ON THE APPROPRIATE AMOUNT OF RESERVES FOR CORPORATIONS IN DISSOLUTIONJul 21 2020Browse archives for July 21, 2020Posted inDissolution, Dissolution and

How to dissolve a Delaware limited partnership

COURT OF CHANCERY SHEDS LIGHT ON THE APPROPRIATE AMOUNT OF RESERVES FOR CORPORATIONS IN DISSOLUTIONJul 21 2020Browse archives for July 21, 2020Posted in

Dissolution, Dissolution and Winding-Up, UncategorizedTagged with Dissolution and Winding-UpShare

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).

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Delaware Court of Chancery Dismisses Petition for Equitable Dissolution of an LLC by a Non-MemberApr 15 2020Browse archives for April 15, 2020Posted in

Dissolution, Judicial DissolutionShare

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-managers 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.Read More

LIMITED PARTNERSHIP IS DISSOLVED BECAUSE IT CANNOT FULFILL ITS PURPOSESep 04 2019Browse archives for September 04, 2019Posted in

Breach of Fiduciary Duty, Breach of Limited Partnership Agreement, Dissolution, Judicial Dissolution, Receiver, ReceivershipShare

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.Read More

CHANCERY COURT IMPOSES COSTS OF RECEIVERSHIP ON STOCKHOLDERJul 10 2019Browse archives for July 10, 2019Posted in

DissolutionShare

By: Scott Waxman and Greyson Blue

In Longoria v. Somersand 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 Courts 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 corporations obligations.Read More

Purported Assignment of Limited Liability Company Interest Impacts Jurisdiction Under Conspiracy Theory of JurisdictionMar 12 2019Browse archives for March 12, 2019Posted in

Admission, Assignment, Conversion, Dissolution, LLC Agreement, Membership, Personal Jurisdiction, Transfers, WithdrawalShare

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.Read More

CHANCERY COURT GRANTS MOTION TO DISMISS RELATING TO ALLEGED BREACH OF FIDUCIARY DUTIES BY DIRECTORS OF A DISSOLVED CORPORATIONAug 27 2018Browse archives for August 27, 2018Posted in

Breach of Fiduciary Duty, Chancery Court Rule 12(b)(6), Dissolution, Laches, Motion for ReargumentShare

By: Scott E. Waxman and Joseph Phelps

In Akrout v. Jarkoy, No.2017-0473-JRS (Del. Ch. July10, 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 ISSIs dissolution and financial condition. Akrout also alleged that the dissolution deprived him of accrued salary and dividends.

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CHANCERY COURT NULLIFIES DISSOLUTION OF LIMITED LIABILITY COMPANIES FOR FAILURE TO SET ASIDE A RESERVE TO SATISFY KNOWN CLAIMSMay 02 2018Browse archives for May 02, 2018Posted in

Breach of Contract, Dissolution, ValuationShare

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.

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Too Many Cooks in the Kitchen  Deadlocked Management Leads to LLC DissolutionSep 26 2017Browse archives for September 26, 2017Posted in

Deadlock, Dissolution, Dissolution and Winding-Up, LLC AgreementTagged with 18-802, Deadlock, LLC AgreementShare

By Scott E. Waxmanand 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 Agreements 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 Siebels claims that dissolution was not equitable, granted the same.

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Testimony Regarding Timeliness of Election to Continue an LLC Found to be Untrustworthy, Resulting in LLC DissolutionJul 06 2017Browse archives for July 06, 2017Posted in

Dissolution, Dissolution and Winding-UpShare

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 GroundsMay 05 2015Browse archives for May 05, 2015Posted in

Dissolution, Judicial Dissolution, LLC Agreement, MembershipShare

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.

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Its a Family Affair but Not Any More, as Chancery Court Grants Motion to Dissolve General Partners Under Section 273 of the DGCLFeb 10 2015Browse archives for February 10, 2015Posted in

Dissolution, Dissolution and Winding-Up, Joint VentureShare

By Annette Becker and Lauren Garraux

The Chancery Court granted a petition in accordance with Section 273 of the Delaware General Corporation Law to dissolve two Delaware corporations, the general partners of two Massachusetts limited partnerships, initially formed by the patriarchs of the Grossman and Cohen families to own three real estate properties for the benefit of their respective family members, after the families reached an impasse as to how to dispose of the assets of the business.

In 1992, the patriarchs of the Grossman and Cohen families formed two Massachusetts limited partnerships (the Partnerships) to own three real estate properties for the benefit of their family members (at the time of this dispute, 25 Grossmans and 6 Cohens), who are limited partners in the Partnerships. The general partners of the Partnerships (the General Partners) are two Delaware corporations, each of which is a joint venture corporation with two 50% stockholders, at the time of the dispute, the petitioner, Louis Grossman (Louis), and the respondent, Claire Cohen (Claire).

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Lake Treasure Holdings, Ltd., et al v. Foundry Hill GP, LLC, et al and Foundry Hill Holdings, LP and CP-1 LLC, C.A. No. 6546-VCL (October 10, 2014) (Laster, V.C.)Oct 15 2014Browse archives for October 15, 2014Posted in

Aiding and Abetting, Breach of Fiduciary Duty, Breach of Limited Partnership Agreement, Damages, Dissolution, Entire Fairness, Fraudulent Conveyance, Limited Partnership, Trade SecretsShare

By Eric Feldman and Porter Sesnon

InLake Treasure Holdings, Ltd., the plaintiffs, investors in a now-defunct start-up, Foundry Hill Holdings LP (the Partnership), sued the Partnership, one of its founders (Ulric Taylor (Taylor)),one of Taylors subsequent business partners (Christopher Klee (Klee)), and various other Partnership-related entities and operating subsidiaries for breach of fiduciary duty and aiding and abetting the breach of fiduciary duty, as well as under the Delaware Uniform Fraudulent Transfer Act (DUFTA) and Delaware Uniform Trade Secrets Act (DUTSA), in connection with a series of transactions whereby all of the assets of the Partnership were ultimately transferred to entities owned and/or controlled by Taylor and Klee.

Taylor controlled the Partnership through his control of the Partnerships general partner.As a result, the Court initially found that Taylor owed fiduciary duties, including the duty of loyalty, to the Partnership and its limited partners.In analyzing the transactions at issue, the Court further found that Taylor stood on both sides of such transactions and that therefore the entire fairness standard applied in analyzing such transactions.In applying the entire fairness test, the Court held that Taylor had breached his duty of loyalty when he granted a security interest in all of the assets of the Partnership, including its primary asset, high frequency trading software, to Klee in exchange for a $28,000 loan from Klee to the Partnership.Prior to the $28,000 loan by Klee, Taylor and Klee had previously contemplated Klee purchasing the software for $500,000 with an enterprise valuation of $3 million. 3 months following the granting of the security interest, as foreseen by Taylor and Klee at the time the loan was made, the Partnership defaulted on the loan, Klee foreclosed on the security interest, and Taylor amicably surrendered all of the assets of the Partnership, including all interest in the software, to an entity controlled by Klee.The Court determined that Taylor and Klee acted in concert to move the Partnerships high frequency trading software out of the Partnership and into an entity where Taylor and Klee could enjoy its benefits.Upon finding the fiduciary duty breach by Taylor, the Court then also found that Klee had aided and abetted such breach of fiduciary duty.

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