Ability To Restrict Dissolution Filings Upheld Under Delaware LLC Act

The court's decision in R&R Capital LLC indicates that sponsors of limited liability companies that feature in securitization transactions may wish to include restrictions on the ability to put such companies into bankruptcy.

In a case of first impression under Delaware law, the Delaware Court of Chancery recently affirmed restrictions on the ability to dissolve limited liability companies. In R&R Capital, LLC v. Buck & Doe Run Valley Farms, LLC, CA No. 3803-CC (Del. Ch. Aug. 19, 2008), the court enforced a provision in multiple limited liability company (LLC) agreements, which waived each member's right to seek judicial dissolution of the limited liability company. Such waivers, although often included in limited liability company agreements, have heretofore gone untested under Delaware law. In light of this decision, special purpose entities may continue to include such waivers in their organizational documents and restrictions on bankruptcy filings, more confident