DISSOLVING AND WINDING DOWN THE KENTUCKY …

DISSOLVING AND WINDING DOWN THE KENTUCKY BUSINESS ENTITY

Sponsor: Business Law Section CLE Credit: 1.0

Wednesday, June 21, 2017 10:40 a.m. - 11:40 a.m. East Ballroom A-B

Owensboro Convention Center Owensboro, Kentucky

A NOTE CONCERNING THE PROGRAM MATERIALS

The materials included in this Kentucky Bar Association Continuing Legal Education handbook are intended to provide current and accurate information about the subject matter covered. No representation or warranty is made concerning the application of the legal or other principles discussed by the instructors to any specific fact situation, nor is any prediction made concerning how any particular judge or jury will interpret or apply such principles. The proper interpretation or application of the principles discussed is a matter for the considered judgment of the individual legal practitioner. The faculty and staff of this Kentucky Bar Association CLE program disclaim liability therefore. Attorneys using these materials, or information otherwise conveyed during the program, in dealing with a specific legal matter have a duty to research original and current sources of authority.

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TABLE OF CONTENTS

The Presenters................................................................................................................. i

Dissolution of a Limited Liability Company ......................................................................1 Introduction .......................................................................................................... 1 The Effect of Dissolution upon the LLC................................................................7 Articles of Dissolution ..........................................................................................9 Winding Up........................................................................................................10 The Effect of Reinstatement after Administrative Dissolution ............................. 13

THE PRESENTERS

Vincent F. Heuser, Jr. Hirsh and Heuser

3600 Goldsmith Lane Louisville, Kentucky 40220

(502) 458-5879 vince@

VINCENT F. HEUSER, JR. is the managing partner of Hirsh and Heuser in Louisville where he focuses his practice in the areas of business law, estate planning and litigation, including asset protection and security. He received his J.D. from the Louis D. Brandeis School of Law at the University of Louisville. Mr. Heuser is admitted to practice before the United States District Court, the United States Court of Appeals for the Sixth Circuit and the United States Tax Court.

R. Douglas Martin Doug Martin Law Office 1031 Wellington Way, Suite 135 Lexington, Kentucky 40513 (859) 224-0101 dmartin@

R. DOUGLAS MARTIN maintains a private practice in Lexington. Prior to opening his practice, Mr. Martin worked with Greenebaum Doll & McDonald and Stoll Keenon & Park. He also served as general counsel to the Kentucky Cabinet for Economic Development, as well as the 10th District representative to the Lexington-Fayette Urban County Council. Mr. Martin received his B.A. from the University of Kentucky and his J.D. from the University of Kentucky College of Law, where he was a member of the Kentucky Law Journal. He is a member of the Fayette County and Kentucky Bar Associations. Mr. Martin has twice served as chair of the Kentucky Bar Association Business Law Section and is a frequent speaker and author on business law, commercial real estate and government financial incentives. Since 2008, he has chaired the University of Kentucky's Biennial Real Estate Law Institute, and serves on the planning committees for the University of Kentucky Biennial Business Associations Law Institute, the Kentucky Bar Association Securities Law Conference, and the Kentucky Commercial Real Estate Conference. In addition, he is the author of the Kentucky Small Business Law Blog.

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Joshua M. O'Bryan Frost Brown Todd, LLC 400 West Main Street, 32nd Floor Louisville, Kentucky 40202

(502) 568-0218 jobryan@

JOSHUA M. O'BRYAN is a member of Frost Brown Todd, LLC in Louisville and practices in the area of corporate law. He received his BS/BBA from the University of Kentucky and his J.D., cum laude, and M.B.A., with distinction, from the University of Louisville. Mr. O'Bryan is a member of the Louisville, Kentucky and American Bar Associations. He is a board member and president of Personal Counseling Service, Inc. and founding member of Focus Forward. In addition, he is a volunteer with Legal Aid, Junior Achievement and the Jefferson County Public Schools.

Thomas E. Rutledge Stoll Keenon Ogden, PLLC 500 West Jefferson Street 2000 PNC Plaza Louisville, Kentucky 40202 (502) 333-6000 Thomas.rutledge@

THOMAS E. RUTLEDGE is a member in the Louisville office of Stoll Keenon Ogden, PLLC and is a member of its Business Service practice and its Banking Litigation practice. He received his B.A., cum laude, from Saint Louis University, his J.D. from the University of Kentucky College of Law and is a University of Notre Dame Graduate Fellow. Mr. Rutledge was a member of the committee that drafted the Kentucky Limited Liability Company Act and the 1994 Limited Liability Partnership amendments to the Kentucky Partnership Act. He was the principal drafter of the Kentucky Revised Uniform Partnership Act (2006), the Kentucky Uniform Limited Partnership Act (2006), the Kentucky Business Entity Filing Act, the Kentucky Uniform Statutory Trust Act (2012), the Kentucky Uniform Limited Cooperative Association Act and various statutory amendments adopted in 2007, 2010, 2011, 2012, 2013 and 2015. Mr. Rutledge is the immediate past chair of the Committee on LLCs, Partnerships and Unincorporated Entities, Section of Business Law of the American Bar Association, an ABA advisor to the Series Drafting Committee, and is one of twenty-six members nationwide on the Committee on Corporate Laws. He is a member of the Louisville, Kentucky and American Bar Associations and the American Law Institute. Mr. Rutledge has authored numerous published articles and serves as the editor of the American Bar Association's LLC & Partnership Reporter. He has served as an adjunct professor at the University of Kentucky College of Law and is a Fellow at the University of Louisville Louis D. Brandeis School of Law.

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LIMITED LIABILITY COMPANIES IN KENTUCKY (UKCLE 2011) 2017-1 AMENDMENT & RESTATEMENT OF CHAPTER 9 DISSOLUTION OF A LIMITED LIABILITY COMPANY Thomas E. Rutledge ? The Author May 31, 2017

This Cumulative Supplement may be downloaded free of charge from

CONTENTS 9.1 Introduction 9.2 The Effect of Dissolution Upon the LLC 9.3 Articles of Dissolution 9.4 Winding Up

[9.1] Introduction Dissolution of a limited liability company may come about by any of six reasons,

namely: ? upon having reached a definite date of dissolution set forth in the articles of organization;1 ? as otherwise dictated by a written operating agreement;2 ? by agreement of the members;3 ? for the failure to have a member;4 ? pursuant to judicial order;5 or ? by administrative dissolution by the Secretary of State.6

1 Ky. Rev. Stat. Ann. ?275.285(1). 2 Ky. Rev. Stat. Ann. ?275.285(2). 3 Ky. Rev. Stat. Ann. ?275.285(3). 4 Ky. Rev. Stat. Ann. ?275.285(4). 5 Ky. Rev. Stat. Ann. ?275.285(5). 6 Ky. Rev. Stat. Ann. ?275.285(6).

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This chapter will begin by reviewing seriatum the various events that will trigger an LLC; dissolution, proceeding then to discuss the effect of dissolution on the LLC and its members/managers. Last, it will review the process of winding up.

[9.1.1] Dissolution upon Having Reached a Definite Date of Dissolution

While such is in no manner required, an LLC may set forth in its articles of organization a definite date upon which it will dissolve.7 Having reached the end of its term as defined in its articles of organization, the LLC is dissolved,8 but with a limited opportunity for retroactive cure. That cure is accomplished by, within the 60 days after the date of dissolution, the LLC amending its articles to either delete the term provision or extend it to a future date. In either instance, that amendment will relate back and be effective as of the previously provided-for date of termination, and the existence of the entity will not be interrupted.9 Conversely, after that 60 day period has run, amendment of the organic filing is no longer permitted, and the organization must proceed to wind up and terminate.10

The Secretary of State, with respect to a business entity with a limited period of duration, may issue a certificate of dissolution during the 60 day period during which the business entity may still cure its dissolution for having reached the end of its term.11 During that 60 day cure period, the Secretary of State's office will not be able to issue, with respect to that business entity, a certificate of existence12 unless and until the articles of organization have been amended to extend or delete the termination date.

[9.1.2] Dissolution as is Otherwise Required by the Operating Agreement

The operating agreement (or the articles of organization) may define events upon which the LLC will dissolve.13 For example, it could be provided that upon the death or resignation of a particular member or upon the sale of substantially all company assets that the LLC will dissolve.

That the LLC will be dissolved upon an event set forth in an operating agreement is entirely a matter of contract, and the LLC will need to file articles of dissolution in order to make that fact of public record.14 The operating agreement should specify both who

7 Ky. Rev. Stat. Ann. ?275.025(2).

8 Ky. Rev. Stat. Ann. ?275.285(1).

9 Ky. Rev. Stat. Ann. ?14A.8-010(1); see also Rutledge, The 2007 Amendments to the Kentucky Business Entity Statutes, 97 Ky. L.J. 229 at 247-48 (2008-09).

10 Ky. Rev. Stat. Ann. ?14A.8-010(2).

11 Ky. Rev. Stat. Ann. ?14A.8-010(3).

12 Ky. Rev. Stat. Ann. ?14A.2-130.

13 Ky. Rev. Stat. Ann. ?275.285(2).

14 Ky. Rev. Stat. Ann. ?275.315.

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