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Breach of LLC Operating agreement - before CH 7 OR by filing CH 7 -
According to an LLC operating agreement, a member resigning is a breach of
the agreement, but so is filing BK. Is there any difference in liability
for the debtor if one breaches by resigning prepetition as opposed to
breaching by filing BK? I understand there may be nondischargeable claims
of breach of fiduciary duty, however in this particular case that is
unlikely. I am wondering if there are any non-obvious traps regarding
TIMING here since the other member would like debtor to go ahead and sign a
resignation prior to filing the BK.
According to the operating agreement, a breach does trigger a requirement
to return all "units" of interest for mandatory redemption (valued at
zero). I don't think a chapter 7 trustee would find any value in the debtor
member's interest.
Holly Roark
Certified Bankruptcy Specialist*
*and Sports Lawyer*
holly@roarklawoffices.com **primary email address**
www.roarklawoffices.com
*Central District of California & District of Idaho* - Consumer Bankruptcy
Attorney
1875 Century Park East, Suite 600 Los Angeles, CA 90067
T (310) 553-2600; F (310) 553-2601
*By State Bar of California Board of Legal Specialization
According to an LLC operating agreement, a member
resigning is a breach of the agreement, but so is filing BK. Is there any difference in
liability for the debtor if one breaches by resigning prepetition as opposed to breaching by
filing BK? I understand there may be nondischargeable claims of breach of
fiduciary duty, however in this particular case that is unlikely. I am
wondering if there are any non-obvious traps regarding TIMING here since the
other member would like debtor to go ahead and sign a resignation prior to
filing the BK.
According to the operating agreement, a breach does trigger a requirement to return all
"units" of interest for mandatory redemption (valued at zero). I
don't think a chapter 7 trustee would find any value in the debtor member's
interest.
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