Tuesday, July 14, 2020

No Backing Out of Election to Purchase Under Buy-Sell Agreement

No Backing Out of Election to Purchase Under Buy-Sell Agreement

      Peter J. Sluka, writing on Peter Mahler’s blog New York Business Divorce, has published a posting titled Consider Whether Your Buy-Sell Provision is a Call Option Before Pulling the Trigger; HERE IS A LINK to that posting. Therein, Peter reviewed the decision rendered in Walsh v. White House Post Productions, LLC, CA. No. 2019-0419-KSJM, 2020 WL 1492543 (Del. Ch. March 25, 2020).

      Briefly, the employer LLC elected to exercise a call right against the membership interest of two employees/members, Walsh and Devlin, and in accordance with the operating agreement proceeded to acquire the first valuation. Again in accordance with the operating agreement, Walsh and Devlin then acquired their own appraisal of the LLC interest, it coming in significantly higher than had the first. At that point, the LLC sought to stop the process, i.e., forgo the call option. This decision focused upon whether, having started the process, the LLC could then terminate it short of closing. In this instance, the court held that they could not do so, and that the initial exercise of the option and commencing the valuation process was irrevocable.

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