Voting, Consents, Meetings and Information Rights

Scope of the chapter. This chapter examines the machinery by which the members and managers of an LLC make decisions and obtain the information they need to make them. It covers the default allocation of voting power under the Delaware act and the uniform act, classes and voting bases, meetings, action by written consent, proxies and voting agreements, the resolution of contested votes, and the information rights of members and managers. The allocation of management authority between members and managers is examined supra ch. 17, and the authority of members, managers and officers to bind the LLC to third parties supra ch. 18 and infra ch. 19. Litigation to enforce information rights is examined infra ch. 36, and the limits on an operating agreement's power to restrict information rights supra ¶¶ 320.04 and 360.05.

Why the machinery matters. Most LLC disputes about governance turn on process. A member challenges an amendment on the ground that the required vote was not obtained; a manager disputes the validity of a written consent removing it; a minority member argues that it was asked to approve a transaction without the information it needed; a former member demands records to value an interest that has been redeemed. The answer to each question lies first in the operating agreement and then in a statute that, in Delaware, says comparatively little. The Delaware act authorizes the agreement to regulate nearly every aspect of voting and supplies few defaults. The uniform act supplies more defaults, including information rights that operate without demand. In both systems the quality of the agreement's drafting determines how much is left to litigation.

Organization. The chapter proceeds in nine parts:

1. the default allocation of voting power (¶ 2010);
2. classes, groups and voting bases (¶ 2020);
3. meetings (¶ 2030);
4. action by written consent (¶ 2040);
5. proxies, voting agreements and delegation (¶ 2050);
6. contested votes and elections (¶ 2060);
7. information rights under the Delaware act (¶ 2070);
8. information rights under the uniform act (¶ 2080); and
9. electronic records and drafting (¶ 2090).