Richards Layton & Finger
 

Think Carefully Before Amending LLC and Partnership Agreements: Understanding NextMedia

July 27, 2011

Under the Delaware Limited Liability Company Act and the Delaware Revised Uniform Limited Partnership Act, if a limited liability company agreement or a limited partnership agreement "provides for the manner in which it may be amended ... it may be amended only in that manner or as otherwise permitted by law."

In interpreting amendment provisions contained in LLC agreements and partnership agreements, Delaware courts have historically ruled in favor of protecting nonmanaging investors. Despite this history, managers and controlling members of limited liability companies and general partners of limited partnerships frequently take advantage of amendment provisions contained in their LLC agreements and partnership agreements that grant authority to amend such agreements unilaterally or with the consent of less than all members or partners, so long as such an amendment does not have an "adverse effect" or "material adverse effect" on a member or limited partner. Before doing so, however, such managers, controlling members and general partners should carefully consider the Delaware Court of Chancery's decision in In re NextMedia Investors LLC.