Section 18-802 of the Delaware LLC Act provides that a member or manager may petition the Court of Chancery for dissolution of a Delaware LLC “whenever it is not reasonably practicable to carry on the business in conformity with a limited liability company agreement.” But does a nonmember assignee have a right to seek to dissolve an LLC despite being neither a member nor a manager? In a recent case, In re Carlisle Etcetera LLC, C.A. No. 10280-VCL (April 30, 2015), the Delaware Court of Chancery answered that question in the affirmative, declaring that “when equity demands,” the right to petition for dissolution may be extended to a nonmember assignee who lacks any dissolution right under an LLC agreement or the LLC Act.
Background
Two companies, Well Union Capital Ltd. and Tom James Co., formed Carlisle Etcetera LLC in 2012. Each member contributed approximately $11 million in capital to the LLC in exchange for a 50 percent membership interest, and the court determined that they intended the LLC to be a joint venture between equal members. The members executed a simple operating agreement, and committed to draft a more detailed replacement agreement. The LLC agreement created a four-member board to manage the company, with each member appointing two of the board members, and designated one of Tom James’ appointees as Carlisle’s CEO, giving Tom James effective control over the company in the event of a deadlock. Ultimately, business matters took priority over LLC formalities, and the replacement agreement was never finalized.
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