Member Approval to Sell Assets of an Illinois LLC
August 11, 2021 - News
Recently, our firm served as seller’s counsel in a transaction involving the sale of all membership interests in a limited liability company. One of the sellers was a Manager-managed (as opposed to a Member-managed) limited liability company formed in the State of Illinois, and the question arose as to whether the consent of all the Members was required to enter into this transaction.
In Illinois, pursuant to Section 15-1(d)(10) of the Illinois Limited Liability Company Act (“Act”), the consent of all Members of an LLC is required for “the sale, lease, exchange, or other disposal of all, or substantially all, of the company’s property with or without goodwill.” However, the Act also provides that Members of a Manager-managed LLC may enter into an Operating Agreement that modifies certain statutory rights of the Members, other than those rights specifically enumerated in Section 15-5(b)-(e) of the Act. Fortunately for LLC Managers and (usually) majority owners of an LLC, the approval of all Members to sell all the assets of an LLC is not one of those specifically-enumerated rights which cannot be modified by the Operating Agreement.
Thus, when preparing an Operating Agreement for an LLC, the parties (especially the Manager and majority owners) should consider inclusion of a provision that a merger or sale of assets only requires the approval of the Manager or the approval of the Manager and the Members holding a majority of the membership interests, and not the approval of all the Members. Requiring unanimity to approve a sale of assets provides, in essence, blocker rights to even a small interest holder. Particularly in LLCs that have non-active owners, the less approvals that are required to authorize the sale of a business, the easier it will be to proceed with a streamlined closing and avoid delays in obtaining consents of all Members.