Ultimately, the extent to which a self-managing debtor, liquidator or, in the event of an assignment of the debtor`s interests, a third party assumes the rights of the debtor`s limited liability company (LLC) prior to bankruptcy depends on several factors: (1) whether the operating contract is enforceable, (2) the applicable legal and/or contractual language that defines, regulate the consequences of the bankruptcy of a member of the LLC and (3) where the operating contract is enforceable, the nature of the debtor`s relationship with the other partners of the limited liability company. This article focuses on the first part of the investigation into whether the agreement on which LLC`s interests are based is an enforceable agreement. Debtor, Inc. (debtor) opens proceedings under Chapter 11 of the U.S. Bankruptcy Code (the Code) and among the debtor`s assets is an interest in ABA, LLC (business). The company`s company agreement identifies different events that would cause a « dissociation » of a member. An event is the opening of bankruptcy proceedings involving a member. Another event, in the case of Debtor, is Joe Smith, who ceases to control the debtor`s affairs on a daily basis. The debtor continues to act as a self-managing debtor, and Smith continues to manage the debtor`s day-to-day affairs. The facts in In re Daugherty Construction, 188 B.R.
607 (Bankr. D. Neb. 1995), made the provision simple. The Tribunal found that the applicable LLC agreements were implementing contracts, given that there were significant and persistent obligations on the part of the members of the companies to participate in management, to provide capital in the event of a tax loss and to provide general business and development services. (a) immediately where a member (i) voluntarily files with a bankruptcy court an application for a recourse order under federal bankruptcy laws, (ii) requests, accepts or does not contest the appointment of a receiver, custodian or trustee for himself or for all or a substantial part of his property. The court found that the company agreement in question at In re McSwain, 2011 Bankr. LEXIS 3921 (Bankr.
W.D. Wash. 2011) is enforceable by invoking « multiple and reciprocal obligations » of the parties and the debtor`s ongoing management obligations, its obligation to vote on important decisions and other specified matters, and its obligation to vote on mandatory additional contributions. and its subjecting to various restrictions regarding the authorized transfer of members` participation, competition against the company and the disclosure of confidential information. . . .