Kerrin Klein Publishes Article in Law360 on a NY Case That Shows How LLC Agreements Can Be Amended
Olshan litigation partner Kerrin Klein published an article in Law360 (subscription required) entitled “NY Case Shows How LLC Agreements Can Be Amended.” In the article, Kerrin examines the importance of scrutinizing limited liability company (LLC) agreements, especially after the recent New York Court of Appeals decision in Behler v. Tao. In Behler, the court held that under Delaware law, an investor is bound by a company’s LLC terms, whether or not the member executes the LLC agreement. “Investors should therefore carefully review LLC agreements prior to each investment, and condition their investment upon a clear delineation of their rights,” Kerrin writes. “Prospective LLC investors should also examine other provisions of LLC agreements prior to their investment, including provisions relating to the managing member’s duties; obligations; removal and replacement; distributions; reserves; capital contributions; and members’ rights to participate in major decisions relating to the LLC and its business.” The Behler case provides a cautionary tale for investors, stressing the need to critically understand the implications of LLC agreement terms on potential amendments, which can significantly impact investors’ rights. “Enhancing investor understanding of amendment provisions in LLC agreements is critical where investors’ rights often hinge on nuanced contractual language,” Kerrin explains. “Investors should ensure that amendment mechanisms are both clearly communicated and strategically drafted to protect interests, mitigate litigation risks, and support enforceability.”
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