H 7339Business & Labor

Corporations, Associations, and Partnerships - The Rhode Island Limited-Liability Company Act

Allows LLC members to buy out a partner who wants to dissolve the company, preventing the business from being shut down.

Held for study

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Introduced Jan 28, 2026Committee House Corporations

Plain-English Summary

This legislation amends the Rhode Island Limited-Liability Company Act to provide a mechanism for avoiding the dissolution of a Limited Liability Company (LLC). If a member files a petition to dissolve the company, the other members are granted the right to buy out the petitioner's ownership interest at fair market value. If the parties cannot agree on a price, the court is authorized to determine the value and set the terms of the purchase. This allows the business to continue operating instead of being forced to shut down due to a dispute.

For younger readers

Imagine a group of friends builds a club together. If one friend wants to break up the club and take their share of the clubhouse back, this new rule says the other friends can pay that person for their share instead of destroying the clubhouse. This way, the friend who wants to leave gets their money, but the club can stay open for the friends who want to keep playing there. A judge helps decide exactly how much money the leaving friend gets if they cannot agree on the amount.

Who & Where It Applies

Impacted groups

LLC MembersSmall Business OwnersCorporate AttorneysBusiness InvestorsRhode Island Courts

Impacted communities

All

Constitutional & Fiscal Check

None Likely

Estimated cost

None

Estimated revenue

None

Bill Analysis

Both viewpoints

For Progressives

Protects workers and employees by preventing viable businesses from being forced to close and liquidate solely due to a dispute among owners, thereby preserving local jobs.
Promotes economic stability within communities by ensuring that established local services and businesses can continue to operate and serve the public despite internal management conflicts.
Reduces the strain on judicial resources by providing a structured, fair pathway to resolve business divorces without the complex and destructive process of full liquidation.
Could potentially disadvantage a minority owner with fewer financial resources who wishes to dissolve the company, effectively forcing them to sell their interest rather than seeing the assets liquidated.
Might allow wealthier majority members to consolidate power and ownership by buying out dissenting members, potentially reducing diversity of ownership within the entity.
Lacks specific language protecting the interests of other stakeholders, such as employees or creditors, during the period of uncertainty while the court determines the buyout value.

For Conservatives

Protects private enterprise and capital by preventing the destruction of a profitable business entity due to the grievance of a single member, ensuring business continuity.
Upholds property rights by ensuring that members who wish to maintain their investment and business operations are not forced to liquidate against their will.
Encourages the stability of the business environment in Rhode Island, making the state a more attractive place to form LLCs by reducing the risk of hostile dissolutions.
Expands the power of the courts to intervene in private business matters by allowing judges to dictate the "fair market value" and payment terms of a private transaction.
Infringes on the freedom of contract and property rights of the petitioner, who may have specifically sought dissolution and liquidation but is forced into a buyout arrangement instead.
Imposes a financial burden on the remaining members by mandating the payment of interest from the date of filing, which could be punitive if the court process is prolonged.

Votes

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Full Bill Text

Changes to existing Rhode Island law · 34 additions

SECTION 1. Chapter 7-16 of the General Laws entitled "The Rhode Island Limited- Liability Company Act" is hereby amended by adding thereto the following section: 7-16-40.1. Avoidance of dissolution by buyout.

(a) Whenever a petition for dissolution of a LLC is filed by one or more members as a petitioner, pursuant to § 7-16-40 or a right to compel dissolution, which is authorized under § 7- 16-39 or is otherwise valid, one or more of its other members may avoid the dissolution by filing with the court, prior to the commencement of the hearing, or, in the discretion of the court, at any time prior to a sale or other disposition of the assets of the LLC, an election to purchase the membership interest owned by the petitioner at a price equal to the membership interest's fair market value.

(b) If the membership interest owned by the petitioner is to be purchased by another member, notice shall be sent to all members of the LLC other than the petitioner, providing any or all other members, other than the petitioner, with an opportunity to join in the election to purchase a pro rata share of the petitioner's membership interest.

(c) If the parties are unable to reach an agreement as to the fair market value of the membership interest, the court shall, upon the posting of a bond or other security sufficient to assure to the petitioner payment of the value of the membership interest, stay the proceeding and determine the value of the membership interest, in accordance with the procedure set forth in § 7-1.2-1202, as of the close of business on the day on which the petition for dissolution was filed. Upon determining the fair market value of the membership interest, the court shall state in its order directing that the membership interest be purchased, the purchase price and the time within which the payment is to be made, and may decree any other terms and conditions of sale that it determines to be appropriate and not objected to by the parties, including payment of the purchase price in installments extending over a period of time, and, if the membership interest is to be purchased by multiple members, the allocation of the membership interest among members electing to purchase the interest, which, so far as practicable, unless otherwise agreed, shall be pro rata to the membership interest owned by each member at the time the petition was filed.

(d) The petitioner is entitled to interest, at the rate on judgments in civil actions, on the purchase price of the membership interest from the date of the filing of the election to purchase the membership interest, and all other rights of the petitioner as owner of the membership interest terminate on that date. The costs of the proceeding, which include reasonable compensation and expenses of appraisers, but not fees and expenses of counsel or of experts retained by a party, shall be allocated between or among the parties as the court determines.

(e) Upon full payment of the purchase price, under the terms and conditions specified by the court, or at any other time that is ordered by the court, the petitioner shall transfer the membership interest to the purchasers.

SECTION 2. This act shall take effect upon passage.