Delaware – Limited Liability Company Act – Members

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§ 18-301. | § 18-302. | § 18-303. | § 18-304. | § 18-305. | § 18-306.

Commerce and Trade

SUBTITLE II

Other Laws Relating to Commerce and Trade

CHAPTER 18. LIMITED LIABILITY COMPANY ACT

Subchapter III. Members

§ 18-301. Admission of members.

(a) In connection with the formation of a
limited liability company, a person is admitted as a member of the
limited liability company upon the later to occur of:

(1) The formation of the limited liability company; or

(2) The time provided in and upon
compliance with the limited liability company agreement or, if the
limited liability company agreement does not so provide, when the
person’s admission is reflected in the records of the limited liability
company.

(b) After the formation of a limited liability company, a person is admitted as a member of the limited liability company:

(1) In the case of a person who is not an
assignee of a limited liability company interest, including a person
acquiring a limited liability company interest directly from the
limited liability company and a person to be admitted as a member of
the limited liability company without acquiring a limited liability
company interest in the limited liability company at the time provided
in and upon compliance with the limited liability company agreement or,
if the limited liability company agreement does not so provide, upon
the consent of all members and when the person’s admission is reflected
in the records of the limited liability company;

(2) In the case of an assignee of a
limited liability company interest, as provided in § 18-704(a) of this
title and at the time provided in and upon compliance with the limited
liability company agreement or, if the limited liability company
agreement does not so provide, when any such person’s permitted
admission is reflected in the records of the limited liability company;
or

(3) In the case of a person being
admitted as a member of a surviving or resulting limited liability
company pursuant to a merger or consolidation approved in accordance
with § 18-209(b) of this title, as provided in the limited liability
company agreement of the surviving or resulting limited liability
company or in the agreement of merger or consolidation, and in the
event of any inconsistency, the terms of the agreement of merger or
consolidation shall control; and in the case of a person being admitted
as a member of a limited liability company pursuant to a merger or
consolidation in which such limited liability company is not the
surviving or resulting limited liability company in the merger or
consolidation, as provided in the limited liability company agreement
of such limited liability company.

(c) In connection with the domestication
of a non-United States entity (as defined in § 18-212 of this title) as
a limited liability company in the State of Delaware in accordance with
§ 18-212 of this title or the conversion of an other entity (as defined
in § 18-214 of this title) to a domestic limited liability company in
accordance with § 18-214 of this title, a person is admitted as a
member of the limited liability company as provided in the limited
liability company agreement.

(d) A person may be admitted to a limited
liability company as a member of the limited liability company and may
receive a limited liability company interest in the limited liability
company without making a contribution or being obligated to make a
contribution to the limited liability company. Unless otherwise
provided in a limited liability company agreement, a person may be
admitted to a limited liability company as a member of the limited
liability company without acquiring a limited liability company
interest in the limited liability company. Unless otherwise provided in
a limited liability company agreement, a person may be admitted as the
sole member of a limited liability company without making a
contribution or being obligated to make a contribution to the limited
liability company or without acquiring a limited liability company
interest in the limited liability company.

(e) Unless otherwise provided in a
limited liability company agreement or another agreement, a member
shall have no preemptive right to subscribe to any additional issue of
limited liability company interests or another interest in a limited
liability company. (68 Del. Laws, c. 434, § 1; 69 Del. Laws, c. 260, §§
16-21; 70 Del. Laws, c. 75, § 18; 71 Del. Laws, c. 77, §§ 24, 25; 73
Del. Laws, c. 295, § 7; 75 Del. Laws, c. 51, §§ 6, 7.)

§ 18-302. Classes and voting.

(a) A limited liability company agreement
may provide for classes or groups of members having such relative
rights, powers and duties as the limited liability company agreement
may provide, and may make provision for the future creation in the
manner provided in the limited liability company agreement of
additional classes or groups of members having such relative rights,
powers and duties as may from time to time be established, including
rights, powers and duties senior to existing classes and groups of
members. A limited liability company agreement may provide for the
taking of an action, including the amendment of the limited liability
company agreement, without the vote or approval of any member or class
or group of members, including an action to create under the provisions
of the limited liability company agreement a class or group of limited
liability company interests that was not previously outstanding. A
limited liability company agreement may provide that any member or
class or group of members shall have no voting rights.

(b) A limited liability company agreement
may grant to all or certain identified members or a specified class or
group of the members the right to vote separately or with all or any
class or group of the members or managers, on any matter. Voting by
members may be on a per capita, number, financial interest, class,
group or any other basis.

(c) A limited liability company agreement
may set forth provisions relating to notice of the time, place or
purpose of any meeting at which any matter is to be voted on by any
members, waiver of any such notice, action by consent without a
meeting, the establishment of a record date, quorum requirements,
voting in person or by proxy, or any other matter with respect to the
exercise of any such right to vote.

(d) Unless otherwise provided in a
limited liability company agreement, meetings of members may be held by
means of conference telephone or other communications equipment by
means of which all persons participating in the meeting can hear each
other, and participation in a meeting pursuant to this subsection shall
constitute presence in person at the meeting. Unless otherwise provided
in a limited liability company agreement, on any matter that is to be
voted on, consented to or approved by members, the members may take
such action without a meeting, without prior notice and without a vote
if a consent or consents in writing, setting forth the action so taken,
shall be signed by the members having not less than the minimum number
of votes that would be necessary to authorize or take such action at a
meeting at which all members entitled to vote thereon were present and
voted. Unless otherwise provided in a limited liability company
agreement, on any matter that is to be voted on by members, the members
may vote in person or by proxy, and such proxy may be granted in
writing, by means of electronic transmission or as otherwise permitted
by applicable law. Unless otherwise provided in a limited liability
company agreement, a consent transmitted by electronic transmission by
a member or by a person or persons authorized to act for a member shall
be deemed to be written and signed for purposes of this subsection. For
purposes of this subsection, the term “electronic transmission” means
any form of communication not directly involving the physical
transmission of paper that creates a record that may be retained,
retrieved and reviewed by a recipient thereof and that may be directly
reproduced in paper form by such a recipient through an automated
process.

(e) If a limited liability company
agreement provides for the manner in which it may be amended, including
by requiring the approval of a person who is not a party to the limited
liability company agreement or the satisfaction of conditions, it may
be amended only in that manner or as otherwise permitted by law
(provided that the approval of any person may be waived by such person
and that any such conditions may be waived by all persons for whose
benefit such conditions were intended). (68 Del. Laws, c. 434, § 1; 70
Del. Laws, c. 360, § 11; 71 Del. Laws, c. 77, § 26; 71 Del. Laws, c.
341, § 11; 72 Del. Laws, c. 129, § 10; 72 Del. Laws, c. 389, § 21; 73
Del. Laws, c. 83, § 14; 74 Del. Laws, c. 275, § 12; 75 Del. Laws, c.
317, § 33.)

§ 18-303. Liability to 3rd parties.

(a) Except as otherwise provided by this
chapter, the debts, obligations and liabilities of a limited liability
company, whether arising in contract, tort or otherwise, shall be
solely the debts, obligations and liabilities of the limited liability
company, and no member or manager of a limited liability company shall
be obligated personally for any such debt, obligation or liability of
the limited liability company solely by reason of being a member or
acting as a manager of the limited liability company.

(b) Notwithstanding the provisions of
subsection (a) of this section, under a limited liability company
agreement or under another agreement, a member or manager may agree to
be obligated personally for any or all of the debts, obligations and
liabilities of the limited liability company. (68 Del. Laws, c. 434, §
1; 69 Del. Laws, c. 260, § 22.)

§ 18-304. Events of bankruptcy.

A person ceases to be a member of a limited liability company upon the happening of any of the following events:

(1) Unless otherwise provided in a limited liability company agreement, or with the written consent of all members, a member:

a. Makes an assignment for the benefit of creditors;

b. Files a voluntary petition in bankruptcy;

c. Is adjudged a bankrupt or insolvent,
or has entered against the member an order for relief, in any
bankruptcy or insolvency proceeding;

d. Files a petition or answer seeking for
the member any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any statute, law or
regulation;

e. Files an answer or other pleading
admitting or failing to contest the material allegations of a petition
filed against the member in any proceeding of this nature;

f. Seeks, consents to or acquiesces in
the appointment of a trustee, receiver or liquidator of the member or
of all or any substantial part of the member’s properties; or

(2) Unless otherwise provided in a
limited liability company agreement, or with the written consent of all
members, 120 days after the commencement of any proceeding against the
member seeking reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any statute, law or
regulation, if the proceeding has not been dismissed, or if within 90
days after the appointment without the member’s consent or acquiescence
of a trustee, receiver or liquidator of the member or of all or any
substantial part of the member’s properties, the appointment is not
vacated or stayed, or within 90 days after the expiration of any such
stay, the appointment is not vacated. (68 Del. Laws, c. 434, § 1; 70
Del. Laws, c. 186, § 1.)

§ 18-305. Access to and confidentiality of information; records.

(a) Each member of a limited liability
company has the right, subject to such reasonable standards (including
standards governing what information and documents are to be furnished
at what time and location and at whose expense) as may be set forth in
a limited liability company agreement or otherwise established by the
manager or, if there is no manager, then by the members, to obtain from
the limited liability company from time to time upon reasonable demand
for any purpose reasonably related to the member’s interest as a member
of the limited liability company:

(1) True and full information regarding the status of the business and financial condition of the limited liability company;

(2) Promptly after becoming available, a
copy of the limited liability company’s federal, state and local income
tax returns for each year;

(3) A current list of the name and last known business, residence or mailing address of each member and manager;

(4) A copy of any written limited
liability company agreement and certificate of formation and all
amendments thereto, together with executed copies of any written powers
of attorney pursuant to which the limited liability company agreement
and any certificate and all amendments thereto have been executed;

(5) True and full information regarding
the amount of cash and a description and statement of the agreed value
of any other property or services contributed by each member and which
each member has agreed to contribute in the future, and the date on
which each became a member; and

(6) Other information regarding the affairs of the limited liability company as is just and reasonable.

(b) Each manager shall have the right to
examine all of the information described in subsection (a) of this
section for a purpose reasonably related to the position of manager.

(c) The manager of a limited liability
company shall have the right to keep confidential from the members, for
such period of time as the manager deems reasonable, any information
which the manager reasonably believes to be in the nature of trade
secrets or other information the disclosure of which the manager in
good faith believes is not in the best interest of the limited
liability company or could damage the limited liability company or its
business or which the limited liability company is required by law or
by agreement with a 3rd party to keep confidential.

(d) A limited liability company may
maintain its records in other than a written form if such form is
capable of conversion into written form within a reasonable time.

(e) Any demand by a member under this section shall be in writing and shall state the purpose of such demand.

(f) Any action to enforce any right
arising under this section shall be brought in the Court of Chancery.
If the limited liability company refuses to permit a member to obtain
or a manager to examine the information described in subsection (a)(3)
of this section or does not reply to the demand that has been made
within 5 days after the demand has been made, the demanding
member or manager may apply to the Court of Chancery for an order to
compel such disclosure. The Court of Chancery is hereby vested with
exclusive jurisdiction to determine whether or not the person seeking
such information is entitled to the information sought. The Court of
Chancery may summarily order the limited liability company to permit
the demanding member to obtain or manager to examine the information
described in subsection (a)(3) of this section and to make copies or
abstracts therefrom, or the Court of Chancery may summarily order the
limited liability company to furnish to the demanding member or manager
the information described in subsection (a)(3) of this section on the
condition that the demanding member or manager first pay to the limited
liability company the reasonable cost of obtaining and furnishing such
information and on such other conditions as the Court of Chancery deems
appropriate. When a demanding member seeks to obtain or a manager seeks
to examine the information described in subsection (a)(3) of this
section, the demanding member or manager shall first establish (1) that
the demanding member or manager has complied with the provisions of
this section respecting the form and manner of making demand for
obtaining or examining of such information, and (2) that the
information the demanding member or manager seeks is reasonably related
to the member’s interest as a member or the manager’s position as a
manager, as the case may be. The Court of Chancery may, in its
discretion, prescribe any limitations or conditions with reference to
the obtaining or examining of information, or award such other or
further relief as the Court of Chancery may deem just and proper. The
Court of Chancery may order books, documents and records, pertinent
extracts therefrom, or duly authenticated copies thereof, to be brought
within the State of Delaware and kept in the State of Delaware upon
such terms and conditions as the order may prescribe.

(g) The rights of a member or manager to
obtain information as provided in this section may be restricted in an
original limited liability company agreement or in any subsequent
amendment approved or adopted by all of the members and in compliance
with any applicable requirements of the limited liability company
agreement. The provisions of this subsection shall not be construed to
limit the ability to impose restrictions on the rights of a member or
manager to obtain information by any other means permitted under this
section. (68 Del. Laws, c. 434, § 1; 70 Del. Laws, c. 186, § 1; 70 Del.
Laws, c. 360, § 12; 73 Del. Laws, c. 83, § 15.)

§ 18-306. Remedies for breach of limited liability company agreement by member.

A limited liability company agreement may provide that:

(1) A member who fails to perform in
accordance with, or to comply with the terms and conditions of, the
limited liability company agreement shall be subject to specified
penalties or specified consequences; and

(2) At the time or upon the happening of
events specified in the limited liability company agreement, a member
shall be subject to specified penalties or specified consequences.

Such specified penalties or specified
consequences may include and take the form of any penalty or
consequence set forth in § 18-502(c) of this title. (68 Del. Laws, c.
434, § 1; 73 Del. Laws, c. 83, § 16.)

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