2023 -- H 5664

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LC001774

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2023

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A N   A C T

RELATING TO CORPORATIONS, ASSOCIATIONS, AND PARTNERSHIPS -- THE RHODE

ISLAND LIMITED-LIABILITY COMPANY ACT

     Introduced By: Representatives Place, Rea, Chippendale, and Nardone

     Date Introduced: February 17, 2023

     Referred To: House Corporations

     It is enacted by the General Assembly as follows:

     SECTION 1. Chapter 7-16 of the General Laws entitled "The Rhode Island Limited-

Liability Company Act" is hereby amended by adding thereto the following section:

     7-16-40.1. Avoidance of dissolution by buyout.

     (a) Whenever a petition for dissolution of a LLC is filed by one or more members

(subsequently in this section referred to as the "petitioner") pursuant to § 7-16-40 or a right to

compel dissolution which is authorized under § 7-16-39 or is otherwise valid, one or more of its

other members may avoid the dissolution by filing with the court prior to the commencement of

the hearing, or, in the discretion of the court, at any time prior to a sale or other disposition of the

assets of the LLC, an election to purchase the membership interest owned by the petitioner at a

price equal to the membership interest's fair market value.

     (b) If the membership interest owned by the petitioner is to be purchased by another

member, notice shall be sent to all members of the LLC other than the petitioner, giving them an

opportunity to join in the election to purchase a pro rata share of the petitioner's membership

interest.

     (c) If the parties are unable to reach an agreement as to the fair market value of the

membership interest, the court shall, upon the posting of a bond or other security sufficient to assure

to the petitioner payment of the value of the membership interest, stay the proceeding and determine

the value of the membership interest, in accordance with the procedure set forth in § 7-1.2-1202,

as of the close of business on the day on which the petition for dissolution was filed. Upon

determining the fair market value of the membership interest, the court shall state in its order

directing that the membership interest be purchased, the purchase price and the time within which

the payment is to be made, and may decree any other terms and conditions of sale that it determines

to be appropriate and not objected to by the parties, including payment of the purchase price in

installments extending over a period of time, and, if the membership interest is to be purchased by

multiple members, the allocation of the membership interest among members electing to purchase

the interest, which, so far as practicable, unless otherwise agreed shall be pro rata to the membership

interest owned by each member at the time the petition was filed.

     (d) The petitioner is entitled to interest, at the rate on judgments in civil actions, on the

purchase price of the membership interest from the date of the filing of the election to purchase the

membership interest, and all other rights of the petitioner as owner of the membership interest

terminate on that date. The costs of the proceeding, which include reasonable compensation and

expenses of appraisers but not fees and expenses of counsel or of experts retained by a party, shall

be allocated between or among the parties as the court determines.

     (e) Upon full payment of the purchase price, under the terms and conditions specified by

the court, or at any other time that is ordered by the court, the petitioner shall transfer the

membership interest to the purchasers.

     SECTION 2. This act shall take effect upon passage.

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

RELATING TO CORPORATIONS, ASSOCIATIONS, AND PARTNERSHIPS -- THE RHODE

ISLAND LIMITED-LIABILITY COMPANY ACT

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     This act would permit 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.

     This act would take effect upon passage.

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LC001774

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