Out Voting Minority LLC Members
How do you out-vote or overrule a minority LLC Member? It is fairly easy, thanks to the LLC laws in effect in New York. This is assuming, of course, that your LLC operating agreement doesn’t provide something else. But since so many LLC’s go without operating agreements (against my advice), let’s look at the requirements under the New York LLC laws (Section 407 of the LLC law).
You can out vote a minority LLC member without a formal meeting, without even notice to the minority LLC member, by simply doing the following:
You need a writing that sets forth the decision(s) of the majority LLC members.
The writing has to be signed by all of the members constituting together the majority in interest of the LLC members.
Each member’s signature on the consent has to include the date of such signature.
Within 60 days of the earliest signature date on the written consent, the consent has to be delivered to the office of the limited liability company, its principal place of business or a manager, employee or agent of the LLC having custody of the records of the LLC. Delivery has to be made by hand or by certified or registered mail, return receipt requested. If I were involved, I would recommend the certified mail route, so that there is evidence that it was actually sent.
Finally, prompt notice has to be given of the consent to the minority LLC member. I am not aware of any case law on this, but it is safe to assume that you should send the notice immediately after delivery of the consent as described above. And make it a certified mail letter with delivery acknowledgement.
The picture is an example of a written consent overruling a minority LLC member.
Now, one question I didn’t address is how to determine the majority members. All too often, when no operating agreement exists or the situation is otherwise murky, parties fight endlessly over who was actually entitled to make certain decisions or not. In those cases everything hinges on the question of who has what “ownership percentage interest” in the LLC. I will explore that in the next post.