Real Estate Journal — Owners, Developers & Managers — June 27 - July 10, 2014 — 11B
1 -( % 80%28-'
C ONTRACTORS /S UBCONTRACTORS
continued from page 10B Is newer always better?: Important changes in the New Jersey limited liability company act...
clude seeking dissolution of the company, appointment of a custodian, or requiring the LLC or other members to purchase the interest of the aggrieved member. This is a critical change in how dis- putes among members may be resolved, and it will take time for the courts to develop a body of case law related to the oppressed minority mem- ber provisions. However, the Courts will likely look to the case law developed under the Corporation Act. The bottom line is that key changes have been made by RULLCA that impact the formation and governance of New Jersey LLCs as well as the relationships between the LLC members. If it was not the case before, it is certainly
now critically important for members of LLCs in New Jer- sey who have not already done so to negotiate and execute a comprehensive operating agreement. Further, existing operating agreements should be reviewed with an eye to the changes brought by RULLCA. Marian Kornilowicz is the chair of the business practice group of Cohen Seglias Pallas Greenhall & Furman PC. He represents clients in various busi- ness transactions and real estate matters, including the acquisition, sale, and leasing of real estate, rep- resenting title companies, underwriters and insureds in title matters, preparing condominium documents, and counseling condomin-
will, it did adopt a statu- tory scheme, similar to that found in the New Jersey Business Corporation Act, whereby oppressed minor- ity equity owners can seek redress. It also expressly imposed a standard of good faith and fair dealing on the members (which may not be eliminated). So while a with- drawing member is no longer automatically entitled to the value of his, her or its inter- est upon withdraw from the company, a member under RULLCA has remedies if the managers or members in control are acting in a man- ner to oppress the aggrieved member, and taking actions that were, are or will be harm- ful the aggrieved member’s interest. The remedies in-
ium associations. You can reach him at 215.564.1700 or mkorn i l owi c z@co - henseglias.com. Alexander Barth is an associate in the Business Transactions Group at Co- hen Seglias Pallas Green- hall & Furman PC. He focuses his practice on commercial litigation, and represents businesses and individuals in complex commercial disputes in- volving real estate title matters. Alex represents residential and commer- cial real estate develop- ers in land use and zon- ing matters throughout Pennsylvania and New Jersey. He can be reached at 215.564.1700 and at ab- firstname.lastname@example.org.
into an NJ LLC.
The Relationships between Members As for the changes con- cerning the relationships be- tween the members of LLC, there are five that can dras- tically affect how members interact under the new law: (1) Distributions. Unless the operating agreement states otherwise, distribu- tions shall be made on a per capita basis with each member entitled to an equal share of the profits or losses. If an LLC’s current operat- ing agreement is silent on this issue, or there is no written agreement, and the members have not been tak- ing distributions on a per capita basis (but based on percentage of ownership interest, for example), the distributions will have to be specifically addressed or the intent of the parties may no longer be protected by the statute. (2) Voting. Similarly, RUL- LCA prov ides that each member shall have an equal vote, regardless of percent- age of ownership. It requires that ordinary business mat- ters be decided by a majority vote of the members, with each member having one equal vote, and that matters outside the ordinary course (e.g., mergers, sale of all as- sets, or amendment of the operating agreement) be de- cided by a unanimous vote. Alternate voting schemes must be expressly addressed in the operating agreement. (3) Fiduciary Duties of Loyalty and Care: Unlike the prior law, RULLCA imposes a duty of loyalty (which may be modified in the operating agreement) and a duty of care (which may not be) on persons (whether members, or not) managing the LLC. (4) Di sassoc iat i on of a member. Previously, if a member elected to withdraw from the LLC, the LLC was obligated to distribute, in a reasonable time after with- drawal, the monetary value of that member’s interest. With the adoption of RUL- LCA, a member does not have an automatic right to ‘cash-out’ his interest in the LLC but rather, upon with- drawal or disassociation, becomes an economic inter- est holder with an equity interest but no voting rights. (5) Redress for Oppressed Minority Equity Owners. While RULLCA eliminated the right for a member to withdraw from an LLC at
Made with FlippingBook - professional solution for displaying marketing and sales documents online