New York Business Lawyers

If Your NY LLC Operating Agreement Is Short on Words you May be Short on Options—NY Appellate Division Rules One Partner Can’t Expel Another without Member Expulsion Language

by / Saturday, 20 March 2010 / Published in Featured, Headline, Startup & Corporate

LLC Operating Agreement and Member Expulsion ClausesThe Court in Man Choi Chiu v Chiu recently ruled that that a member of an LLC looking to expel another member for alleged misconduct is simply out of luck, if the operating agreement is silent on the issue. In other words, such a party could not petition the court to impose that remedy. Moreover, the Court reasoned that the LLC Act reference to expulsion in section 701 is merely a suggestion that an operating agreement could provide for expulsion.

This is a powerful reminder to all NY partners that “get it in writing” is an essential element to any operating agreement not just in general terms, but for specifics such as expulsion.

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