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Percontino v. Camporeale

2005 WL 730234 (N.J. Super. Ch. Div. 2005) (Unpublished)

LIMITED LIABILITY COMPANIES—A court may look to the case law dealing with dissolving partnerships and corporations when addressing possible judicial dissolution of a limited liability company.

In a dispute between the two members of a limited liability company, one of the members sought to have the limited liability company dissolved. He claimed that the other member mismanaged the business, retained its cash, and was abusive by treating him as an employee rather than a co-owner. The complaining member sought removal of the other as managing member of the company, requested appointment of a receiver, and demanded an accounting. The members blamed each other for the business’s demise. Under the New Jersey Limited Liability Company Act, a limited liability company can be dissolved under circumstances provided for in the operating agreement or by judicial decree. To dissolve by decree, a court must determine that it is not reasonably practical to carry on the business as provided in the operating agreement. The Court noted that there were no cases addressing the judicial dissolution of a limited liability company. Therefore, it looked to the factors involved in dissolving partnerships and corporations. A partnership can be dissolved where the business partnership cannot be profitable, thus frustrating the purpose of the partnership to generate profits. A partnership can also be dissolved if the partners have no confidence in each other, so that it is impossible for them to be in business together. A corporation can be dissolved if the majority member acts fraudulently or oppresses the minority shareholder. With respect to the appointment of a receiver, the Court noted that it had the authority to appoint a receiver. However, since there was a dispute as to who was at fault, it decided not to appoint a receiver until further discovery was complete. It did, however, award the complaining member unlimited access to the company’s financial records and prohibited the other member from transferring the company’s assets while the case was proceeding.


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