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Failure to Make Capital Contribution Does Not Necessarily Result in Reduction of Interest in LLC or LP

By Jason Jowers

This article addresses the appropriate remedy for the failure of a member of an LLC or partner of an LP to make a required capital contribution. A recent decision by the Delaware Court of Chancery makes clear that, at least in the case of an initial capital contribution, a member’s failure to make the full amount of the contribution does not result in dilution of that member’s interest unless the LLC’s operating agreement so provides. The logic of the Court’s opinion could extend to the appropriate remedy for subsequent capital calls from Delaware LLCs or LPs that go unanswered.

First published in Business Law Today, December 2014. Link to article.
Reprinted with permission.

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