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Course Details

Course Information
  • smart_display Format

    On-Demand

  • signal_cellular_alt Difficulty Level

    Intermediate

  • work Practice Area

    Real Property - Finance

Date & Time
  • event Date

    Tuesday, July 16, 2024

  • schedule Time

    1:00 p.m. ET./10:00 a.m. PT

  • timer Program Length

    90 minutes

Credit Information

  • This 90-minute webinar is eligible in most states for 1.5 CLE credits.

$347.00
CLE
ALL

This CLE course will provide real estate counsel with a framework for adopting deadlock-breaking mechanisms in LLC operating agreements and potential state law consequences when no such mechanisms are in place. The program will also discuss arbitration and mediation provisions as alternatives to litigation or judicial dissolution.

Faculty

Jennifer O. Schiffer
Shareholder
Bean Kinney & Korman, PC

Ms. Schiffer represents various businesses and their owners in matters relating to business counseling and entity formation, purchase and sale of company stock or assets, business contracts, shareholder or membership agreements, disclosure agreements, commercial real estate, commercial property, and leasing transactions. She is also well-versed in business succession planning, estate planning, and estate administration. Ms. Schiffer’s clients range from individuals to a wide array of business entities, including restaurants, medical practices, retailers, builders, limited liability companies, and professional service providers, such as accountants and financial planners.

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Louis T.M. Conti
Partner
Holland & Knight LLP

Mr. Conti's practice includes serving as outside counsel to businesses of all sizes, mergers and acquisitions, cash flow and asset-based financings, leveraged buy-outs, mezzanine and subordinated debt transactions, public and private equity placements, venture capital and private equity investments, company governance advice, sophisticated and complex cross-border transactions, and joint ventures and strategic alliances. He has served as a special master and arbitrator in LLC disputes, and as an expert witness in connection with Florida corporate and LLC law in cases around the state. He is the co-author of "Deadlock-Breaking Mechanisms in LLCs—Flipping a Coin Is Not Good Enough, but Is Better Than Dissolution" published in Business Law Today.

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Description

Deadlocks typically arise when LLC members or managers fail to reach an agreement or obtain the required voter approval for a particular course of action. The failure to provide deadlock-breaking mechanisms in the operating agreement can result in significant expense, loss of time, litigation, or even dissolution. Where the LLC's purpose is investing in and operating real estate, deadlocks can result in deterioration of the asset or a defaulted loan.

Counsel can employ various provisions in LLC agreements to break a deadlock, including buy-sell provisions, external or internal "tie-breakers," rotating or alternating voting procedures, put or call options, and where appropriate, provisions for partition or sale of the company or its assets. These provisions may be critical for the continued operation of the business.

Absent such provisions, LLC statutes will typically provide for judicial remedies, including placing operational control in a custodian or dissolution of the entity. Operating agreements that do not offer mechanisms for breaking deadlock may nevertheless provide alternate methods of resolving disputes, such as mediation and arbitration. Counsel should understand the pros and cons of these alternatives for the LLC's members.

Listen as our authoritative panel outlines and provides drafting tips concerning various deadlock-breaking mechanisms in operating agreements. Counsel will also discuss arbitration vs. mediation, and why either option is likely preferable to litigation or judicial dissolution of the entity.

Outline

  1. When deadlocks arise in LLC decision making
  2. Provisions designed to resolve deadlocks
    • Buy-sell
    • External or internal "tie-breakers"
    • "Rotating/alternating" or "casting" voting procedures
    • Put or call options
    • Partition or sale (is it a viable option with commercial property?)
  3. Provisions requiring alternative dispute resolution
    • Mediation
    • Arbitration
  4. Special issues with commercial real estate: managing and leasing the asset, avoiding mortgage loan defaults

Benefits

The panel will review these and other key issues:

  • What are the typical triggers of a deadlock between members or managers?
  • What are the key provisions that should be included in the LLC's operating agreement to resolve a deadlock?
  • When is a partition or sale appropriate to resolve a deadlock?
  • What are the advantages and disadvantages of arbitration and mediation, and what should the LLC provide?