One feature commonly seen in commercial lending transactions is a waiver of the borrower’s authority to file for bankruptcy without the consent of the lender. While such “blocking”.
In
Farro v. Schochet, the Second Department recently held that §1002 of the NY LLC Law restricted a dissenting member’s remedy to an appraisal for the fair value of his interest in the business after a freeze-out merger.[1] Thus, the Court reduced the legal remedies for a minority LLC member that lacked protections in the operating agreement against the merger.
Background on Freeze-out Mergers and Appraisal Remedy
A freeze-out merger typically involves controlling member(s) forcing minority member(s) out of a business by (1) creating a new business where the minority member(s) do not have a stake and then (2) using their controlling stake in the original business to merge it into the new business to freeze-out the minority member(s).