Vice Chancellor Laster’s recent opinion in In re Dynamk Fund Advisors LLC, No. 2026-0002-JTL, 2026 WL 1416650 (Del. Ch. May 20, 2026), offers several practical insights into the law governing judicial dissolution of LLCs. The decision provides guidance for both transactional lawyers drafting LLC agreements and litigators confronting dissolution disputes:
- LLCs are not purely contractual. Although LLCs are often described as creatures of contract, the Court reiterated that the chartering state retains ultimate authority over dissolution. See id. at *2 n.8.
- Contractual limits on dissolution can create untenable outcomes. The Court cautioned that provisions preventing dissolution in a deadlocked LLC can lead to dysfunctional results, comparing such an arrangement to an inescapable stalemate. Id.
- The Court of Chancery’s deadlock analysis focuses on the LLC’s governance structure. Before finding a deadlock, the Court examines how authority is allocated under the LLC agreement, even in a two-manager structure.
- Managerial authority provisions in an LLC agreement are critical. The specific allocation of decision-making power among managers can be determinative in assessing whether a true deadlock exists.
- Any LLC member may seek judicial dissolution where it is no longer “reasonably practicable” for the business to continue.
