Dissolution Defined: The First Department's Recent Guidance On Interpreting Operating Agreements

The owners' agreement is the backbone of the closely-held business. In intracompany LLC disputes, few things are more important than what the operating agreement has to say on the subject. As a consequence, the pages of this blog are packed with cases pitting clashing interpretations of an operating agreement against each other (see this post, and this one, for starters).

The prospective nature of an operating agreement often makes its interpretation complicated. Operating agreements are drafted at the start of the business, then they lie dormant for years until a dispute arises. By that time, the nature of the business or the context of the provisions may have fundamentally changed. And even the provisions that seemed most straightforward years ago can become murky.