Investor Rights in Non-Listed LLCs

In an earlier blog post, I argued that a combination of contractual rights and non-legal factors balances the interests of the controlling insiders and outside investors in publicly-traded limited liability companies (LLCs). Since most of these non-legal factors—the firm’s ownership structure, dividend policies, board composition and board practices, market forces, and the standardization of the governance structures—are specific for listed LLCs, the situation is different in non-listed LLCs. The members of private LLCs have only legal rights and, perhaps, a promise of continued cooperation to rely upon. At the same time, given the default nature of almost all provisions … Read more

The Governance of Publicly Traded LLCs

The limited liability company (LLC) is not only a widespread business form for non-listed firms but also is used by listed companies. There were twenty publicly traded US LLCs in September 2013—all formed in Delaware. Two more Delaware LLCs have joined their ranks since then (the number of IPOs by limited partnerships, another “uncorporate” business form, is greater—26 Delaware LPs went public during the last two years). Since Delaware rules on LLCs, with very few exceptions, are cast as defaults, the LLC operating agreement is the primary source of governance. This is in stark contrast to listed corporations that have … Read more