Why This Decision is Noteworthy: By comparison to some of the other corporate and commercial litigation issues addressed by the Court of Chancery, there remains a relatively modest number of court decisions that address whether an LLC should be dissolved based on the statutory standard that it is “not reasonably practicable” to carry on the LLC. In Decco U.S. Post-Harvest, Inc. v. Mirtech, Inc., C.A. No. 2018-0100-JTL (Del. Ch. Nov. 28, 2018), the court, in a comparatively short opinion, interprets Section 18-802 of the Delaware LLC Act to order a dissolution of the LLC involved in this matter.
Takeaways: The key takeaways from this case begin with the provisions of Section 18-802 of Title 6 of the Delaware Code, which provides in pertinent part that the Court of Chancery may decree a dissolution of a limited liability company: “Whenever it is not reasonably practicable to carry on the business in conformity with a limited liability company agreement.” A party may obtain dissolution by showing that: “the defined purpose of the entity has become impossible to fulfill.” See footnote 64 and accompanying text.
Although the court looks at the purpose-clause in the operating agreement of the LLC to determine the purpose for which it was formed, “other evidence of purpose may be helpful as long as the court is not asked to engage in speculation.” See footnote 66.
Holding: the court found that the purpose for which the LLC was formed in this case was to engage in the commercialization of a product that the LLC did not own the intellectual property rights for, and therefore, it was relatively straightforward for the court to conclude after its analysis, that because it was impossible to pursue the purpose for which the LLC was formed, the statutory standard for dissolution was satisfied. That is, it was no longer reasonably practicable to continue the LLC in conformity with the purpose for which it was formed.