PROTECTING MINORITY LLC MEMBERS
By D. Joe Rockett
A common feature of every state’s business corporation law is the right of a shareholder to require an appraisal of his or her shares in the event of a proposed merger of the corporation, to which the shareholder objects. A minority shareholder, generally, will not be able to block the merger. If the shareholder is opposed to the merger, he or she may dissent and go to District Court to have his or her shares appraised at their fair value. The corporation will then be required to buy the shares at the appraised fair value. In this way, shareholders of corporations are protected against being forced to participate in a merger to which they object.
Such is not the case with respect to minority holders (members) in a limited liability company organized under Oklahoma law. Only a few states have adopted appraisal rights for members of limited liability companies; they include California, Florida, New York, and Washington. Thanks to the efforts of Oklahoma City attorney, Gary Derrick, a bill has now been drafted and submitted to the Oklahoma legislature (Senate Bill 994, authored by Senator Ron Sharp) that will give LLC members appraisal rights in certain circumstances. If adopted, the new law will give members of a limited liability company the same protection against an unwanted merger, or certain other extraordinary transactions, that are enjoyed by shareholders of a corporation.
Limited liability companies are a highly popular and widely used alternative to corporations for a number of reasons, including their flexible structure, absence of certain corporate formalities, and favorable tax treatment, among others. Therefore, it is important to assure that LLC members will have the same or comparable protections as shareholders in a corporation against unwanted mergers and certain other transactions. I hope the bill receives favorable treatment in the legislature.
For more information, please contact Joe Rockett at 272-9241 or firstname.lastname@example.org.
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Posted on Mon, February 8, 2016
by Andrews Davis filed under