Rhode Island House Bill H5566

Rhode Island 2025 Regular Session

• Introduced: 2/26/25
• Refer: 2/26/25

Caption

Permits a member or members of a limited-liability company to avoid dissolution by buying the membership interest owned by the other member or members seeking dissolution.

Impact

With the passage of H5566, the legal framework surrounding LLCs in Rhode Island will become more accommodating, particularly for members looking to retain ownership and control. By allowing members to buy out those seeking dissolution, the bill encourages stability in business partnerships and prevents abrupt interruptions of operations that could arise from a single member's desire to exit the company. This is particularly beneficial for small businesses reliant on close-knit partnerships to operate effectively.

Summary

House Bill H5566 seeks to amend the Rhode Island Limited-Liability Company Act by introducing provisions that allow members of a limited liability company (LLC) to prevent dissolution of the entity. Specifically, if a member petitions for dissolution, other members will have the right to buy out that member's interest at fair market value. This adjustment aims to provide a mechanism to maintain the continuity of LLCs, which play a significant role in local economies.

Conclusion

Overall, H5566 reflects an effort to enhance the operational flexibility of LLCs by reducing the likelihood of forced dissolutions due to disagreements among members. As it stands, the proposed amendment will have implications for the governance and financial arrangements within LLCs, ensuring that business continuity can potentially be preserved amid internal disputes.

Contention

There may be potential points of contention among LLC members regarding the determination of fair market value for membership interests. The bill proposes that if an agreement on value cannot be reached voluntarily, the court will intervene to establish the fair market price, which might lead to disputes regarding valuation methods and differing assessments of a member's contributions to the business. Moreover, concerns may arise regarding the financial capacity of remaining members to buy out their peers, which could reshape the dynamics of LLC partnerships.