LLC member Bankruptcy question

[jlogan21]

What is the name of your state (only U.S. law)? Florida
I originally posted this in another section, but have since found this one and thought it would be better suited here. Thanks and sorry for the double post.

Hello everyone! I am hoping that someone can help me out with this. We have a 4 member LLC, 3 members being individuals and 1 member being another FLorida Corporation.
The Fl. Corp. member is now in bankruptcy. They hold 34% of the LLC. We are just wondering what happens now. In our LLC agreement there is the outline for a purchase event, which this falls under, however, there are time frames stated for when things have to happen given this situation but no provision for what happens if nothing happens within that time frame. I have searched elsewhere and just have not been able to find any information.
The LLC is a brand new company and is currently not generating any revenue yet. We are still in development and beta stages.
So what I need to know is what can we expect to have to deal with in regard to bankruptcy lawyers and what will happen with their 34%.
Also, what provisions are there if things do not happen in the time frame as outlined in our LLC paperwork or FL Statute?
Thank you!

 

[latigo]

The bankruptcy of an LLC member poses some tough questions. As you are no doubt aware by Florida law the corporation’s membership in the LLC automatically terminated on the advent of the bankruptcy. (Florida Statutes Chapter 608 Limited Liability Companies Section 608.4237 (b), (c) and (d).

However, whatever property entitlements the corporation held in the LLC are now under the control of the trustee in bankruptcy.

My only suggestion is that the attorney for the LLC work with the trustee in bankruptcy to do what is necessary to come to a mutual agreement as to what those entitlements are and attempt to settle with the trustee with the of aim of his abandoning or releasing any further claim/interest in the company.

I serious doubt that the trustee would be bound by any provisions in the company’s operating agreement such as a buy out.

These are just my thoughts. Act on the advice of the attorney.

Frankly, these LLC laws disgust me. The states all jumped on the bandwagon to provide individual protection for business ventures and tried to simplify the process as an alternate to a business corporation.

But they were shortsighted and their attempt at trying to simplify them only made them more complicated.

 

[jlogan21]

Thank you for that information, it has been helpful. We are having issues with the bankruptcy attorneys for the other corporation. They keep setting up calls with us and then basically blowing us off and rescheduling. So at this point we have no idea where we stand or what is going on.
It is something we are still working on and any other information would be appreciated and again, thank you so much for that reply. It at least gives us an idea of what we need to be concentrating on.

 

[latigo]

I didn’t tell you anything you didn’t already know. I mainly jumped in to harp about these stupid Limited Liability Company statutes. Besides it was 5 above and my golf game suffers enough when it is 80 above.

Incidentally, tell me if you can make any sense out of paragraph (2) below:


Florida Statutes Section 608.4237 Membership termination upon events of bankruptcy.--A person ceases to be a member of a limited liability company upon the occurrence of any of the following:

(b) Files a voluntary petition in bankruptcy;

(c) Is adjudged a bankrupt or insolvent, or has entered against the member an order for relief, in any bankruptcy or insolvency proceeding;

(2) Unless otherwise provided in the articles of organization or operating agreement, or with the written consent of all members, 120 days after the commencement of any proceeding against the member seeking reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under any statute, law, or regulation, if the proceeding has not been dismissed, or if within 90 days after the appointment without the member's consent or acquiescence of a trustee, receiver, or liquidator of the member or of all or any substantial part of the member's properties, the appointment is not vacated or stayed, or within 90 days after the expiration of any such stay, the appointment is not vacated.

 

[jlogan21]

LOL your guess is as good as mine. That was part of the problem we were having when looking at our LLC paperwork and the statutes. ANd with all the time frames as well for when you are to be notified, etc. but there are not repercussions listed if those things do not take place.
It really is crazy and we are still trying to sort it all out.