Imagine your client is considering a strategic bankruptcy filing in order to restructure indebtedness, and one of the debtor’s key assets is its membership interest in a limited liability company (LLC) entitling the debtor to designate management. The LLC operating agreement identifies various events as causing a member’s “dissociation,” including the commencement of a bankruptcy case involving a member.
Your concern is what happens to the debtor’s rights with respect to the LLC interest? Can the debtor’s LLC membership interest, including the value enhancing control rights, be assigned to a third party in an asset sale?
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