Section 273 of the Delaware General Corporation Law (the “DGCL”) provides a basis for the dissolution of a deadlocked “joint venture” corporation, in which two equal shareholders cannot agree on whether to discontinue the corporation. However, the Delaware Limited Liability Act (“LLC Act”) does not have a provision similar to 8 Del. C. § 273 providing for the dissolution of a deadlocked LLC. Nor does the Delaware Revised Uniform Limited Partnership Act.
Notably, when a 50/50 member of a Delaware limited liability company moves for dissolution, the Delaware Court of Chancery has analogized the situation to an application made under Section 273 of the DGCL for a judicial dissolution of a joint venture corporation. See Achaian, Inc. v. Leemon Family LLC, 25 A.3d 800, 812 (Del. Ch. 2011). There, the Delaware Court of Chancery denied a motion to dismiss in which petitioning member adequately alleged the elements under Section 273 of the DGCL, even though the underlying entity was a limited liability company, not a corporation.
Therefore, a petitioning member of a Delaware limited liability company must satisfy the following three prerequisites in order to adequately state a claim for dissolution of such an alternative entity with two deadlocked members of equal ownership:
- The limited liability company only has two members, each owning 50% of the company.
- The members cannot reach an agreement on whether to continue the limited liability company.
- A member petitions the Court stating that it desires to discontinue the limited liability company and dispose of its assets in a plan to be agreed upon by both stockholders, or, if no plan can be agreed upon, then to dissolve the limited liability company.
Of course, dissolution is an equitable remedy that is exercised at the discretion of the court, and the petition may be subject to appropriate equitable defenses raised by the opposing party.