CORPORATE LAW: LLCS, CLOSE CORPORATIONS, PARTNERSHIPS,
& OTHER PRIVATE ENTERPRISES eJOURNAL

"An Amendment Too Far?: Limits on the Ability of Less Than All Members to Amend the Operating Agreement" Free Download
FSU Business Review, Volume 16, June 1, 2017

THOMAS E. RUTLEDGE, Stoll Keenon Ogden PLLC
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KATHARINE SAGAN, Stoll Keenon Ogden PLLC
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Just as persons have the capacity to enter into contracts and to have those agreements enforced, they likewise have the capacity to amend those agreements into which they have already entered. In the case of the typical bilateral agreement, amendment will require the consent of both parties thereto. In a business venture in which there may be many owners, there is still sometimes seen the requirement that all of the participants therein approve any amendment to the operative agreement. While obtaining unanimous consent may at times be difficult, unanimous consent most clearly eliminates possible disputes as to the efficacy of the amendment and its effectiveness to bind non-consenting parties.

Partnership law consistently provides a default rule that amendment of the partnership agreement requires the unanimous consent of the partners; but the partnership agreement may alter this threshold to the effect that unanimous approval is not required. Under the law of limited partnerships, the default rule is again all of the partners (general and limited) must approve an amendment, but that threshold may be altered in the partnership agreement. The law of LLCs is not so consistent. While there is a significant number of jurisdictions that provide a default rule of unanimous approval of the members to amend the operating agreement, another set of jurisdictions allow for amendment by a mere majority or some other threshold of the members. Alternatively, by permitting a merger to proceed with the approval of less than all members, it is possible to bind persons to an operating agreement to which they have not consented.

If less than a majority of the parties to the contract, be it a partnership or operating agreement, is there (i) a limit to the extent such amendments may be effective to alter the fundamental contract of the parties, or (ii) a limit to the extent to which such amendments may be binding on those who do not consent?

This article will begin with a largely chronological review of cases that have assessed the enforceability of non-unanimous amendments. From there it will address the development of dissenters’ rights in corporations and the limited development of the same mechanism in LLCs, considering the viability of either as a means of militating the effect of non-unanimous amendments. The third and last component of this article will consider and largely reject various theories including fiduciary obligations and the implied covenant of good faith and fair dealing as limitations on the scope of amendments that may be adopted by less than all participants in the venture.

"Private Investment Fund Regulation - Theory and Empirical Evidence from 1998 to 2016" Free Download

WULF A. KAAL, University of St. Thomas, Minnesota - School of Law
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Private investment fund regulation in the United States evolved substantially in the last two decades. Tracing the main regulatory developments, this article summarizes the author’s theoretical and empirical findings on the effects of changes in private investment fund regulation from 2006 to 2016, assessing the regulatory implications of the failure of Long-Term Capital Management L.P. in 1998 and the Dodd-Frank Act in 2010. More recent trends include the emerging confluence of private investment funds and mutual funds as well as private investment funds’ use of blockchain technology and smart contracts.

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About this eJournal

This eJournal distributes working and accepted paper abstracts related to LLCs, close corporations, partnerships, and other private enterprises. This includes the law, economics, history and policy of closely-held corporations and non-corporate firms, including partnerships, limited liability companies, limited partnerships, limited liability partnerships, joint ventures, and similar entities both in the US and around the world. Specific topics include private law matters such as governance, fiduciary duties, formation, litigation, arbitration, choice of law, exit, dissolution, transfer, creditors' rights, and limited liability. They also include public law matters such as bankruptcy, employment discrimination, securities regulation, competition law, and professional regulation. Articles may also focus on types of businesses or other relationships that commonly organize as limited liability companies, close corporations, partnerships or other unincorporated business entities, including venture capital, professional services, real estate, finance, family firms, domestic relationships and public-private enterprises.

Editor: Jeffrey M. Lipshaw, Suffolk University

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Directors

CORPORATE, SECURITIES & FINANCE LAW EJOURNALS

BERNARD S. BLACK
Northwestern University - Pritzker School of Law, Northwestern University - Kellogg School of Management, European Corporate Governance Institute (ECGI)
Email: bblack@northwestern.edu

RONALD J. GILSON
Stanford Law School, Columbia Law School, European Corporate Governance Institute (ECGI)
Email: rgilson@leland.stanford.edu

Please contact us at the above addresses with your comments, questions or suggestions for LSN-Sub.

Advisory Board

Corporate Law: LLCs, Close Corporations, Partnerships, & Other Private Enterprises eJournal

BARRY E. ADLER
Professor of Law, New York University School of Law

STEPHEN MARK BAINBRIDGE
William D. Warren Professor of Law, University of California, Los Angeles (UCLA) - School of Law

HENRY HANSMANN
Augustus E. Lines Professor of Law, Yale Law School, Fellow, European Corporate Governance Institute (ECGI)

ROBERT WILLIAM HILLMAN
Fair Business Practices Professor of Law, University of California, Davis - School of Law

KIMBERLY D. KRAWIEC
Professor of Law, Duke University School of Law

SAUL LEVMORE
William B. Graham Professor of Law, University of Chicago Law School

ROBERT H. SITKOFF
John L. Gray Professor of Law, Harvard Law School

D. GORDON SMITH
Glen L. Farr Professor of Law, Brigham Young University - J. Reuben Clark Law School

LYNN A. STOUT
Distinguished Professor of Corporate and Business Law Jack G. Clarke Business Law, Cornell Law School - Jack G. Clarke Business Law Institute

THOMAS S. ULEN
Swanlund Chair, Director, Illinois Program in Law and Economics, University of Illinois College of Law