Limited Liability Companies (“LLCs”) have become an increasingly popular form of business entity, combining desirable qualities of corporations with those of partnerships. In September 2012, New Jersey adopted a Revised Limited Liability Company Act (RLLCA), N.J.S.A. §§42:2C-1 et seq., similar to the model RLLCA adopted in other states, making changes to New Jersey’s original LLC statute (LLCA) that became effective in 1994. Since its enactment, the revised statute has been phased in gradually, becoming applicable to LLCs formed after adoption of the revised statute as of March 18, 2013, and applicable to all LLCs, no matter when formed, as of March 1, 2014. Although the revision has been on the books now for over three years, few judicial decisions have interpreted or applied it. Accordingly, it is noteworthy that our Supreme Court recently decided its first case providing guidance implementing New Jersey’s RLLCA.
In IE Test, LLC v. Carroll (decided on Aug. 2, 2016), the court unanimously reversed an Appellate Division decision that upheld the grant of summary judgment to an LLC, expelling one of its three members who disagreed about terms of a proposed operating agreement. Because the trial court decision was rendered in 2010, before the RLLCA became effective, the court’s decision applied the predecessor statute but discussed both statutes and said it would reach the same result under RLLCA because the relevant language of both was identical.
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