Article XII – Dissolution & Liquidation

Deep Dive: Article XII – Dissolution & Liquidation

Section 12.01 – Events of Dissolution

Plain-English:
The Company ends and winds up if:

1. Members holding a Majority in Interest vote to dissolve;
2. All or substantially all assets (i.e., the Property) are sold or otherwise disposed; or
3. A Delaware court orders its dissolution.

Pros ✅

• Gives you control: with your 75.6% interest, you can trigger dissolution when needed.
• Sale-induced dissolution aligns with the 75.6% sale veto in governance.

Cons ⚠️

• “Majority in Interest” (90%)—not your 75.6%—is required for a voluntary dissolution vote, effectively giving PV Legacy veto power.
• No automatic dissolution if PV Legacy defaults on funding beyond the narrow sale-trigger.

Structural Risks

• PV Legacy can block voluntary dissolution indefinitely with its 24.4% stake.
• No dissolution right tied to repeated funding defaults, so you can’t force wind-up when PV Legacy fails its obligations.

Section 12.02 – Effectiveness of Dissolution

Plain-English:
Dissolution takes effect when one of the events in 12.01 occurs but the Company remains alive until its assets are liquidated and distributed.

Pros ✅

• Ensures an orderly wind-up rather than an immediate termination that could strand assets.

Cons ⚠️

• No timeline to complete liquidation; wind-up could drag on, delaying final distributions.

Section 12.03 – Liquidation

Plain-English:
A “Liquidator” (initially the Managers or someone they select) sells the assets and:

1. Pays creditors (including reimbursement obligations) and liquidation costs;
2. Sets aside reserves for unforeseen liabilities;
3. Distributes the remainder to Members in line with their positive Capital Accounts.

Pros ✅

• Recognizes the priority of creditor and expense claims before Member distributions.
• Reserves protect against unknown claims or tax adjustments.

Cons ⚠️

• “Reasonably necessary” reserves are at the Liquidator’s discretion—risk of over-reserving to stall or reduce Member distributions.
• Liquidator is a Manager-appointable position; PV Legacy could appoint itself or an affiliate, compromising impartiality.

Structural Risks

• No requirement for an independent or neutral Liquidator when a default occurs.
• No timeline or interest penalty for delayed liquidation or distributions.

Section 12.04 – Certificate Cancellation

Plain-English:
After assets are distributed, the Liquidator files to cancel the LLC in Delaware and withdraw foreign registrations.

Pros ✅

• Properly terminates the entity, avoiding future filings or liabilities.

Cons ⚠️

• No requirement to confirm cancellation notices to Members—Members might not know when the LLC officially ends.

Section 12.05 – Survival of Rights

Plain-English:
Claims arising before dissolution survive the wind-up.

Pros ✅

• Preserves Members’ and the Company’s rights to pursue breaches or indemnification claims after dissolution.

Cons ⚠️

• Covered Persons’ exculpation and indemnification provisions also survive, continuing any immunity shields indefinitely.

Section 12.06 – Recourse for Claims

Plain-English:
Members can only look to Company assets—not to each other—for distributions or indemnity.

Pros ✅

• Shields individual Members from personal liability to make up shortfalls in Member distributions.

Cons ⚠️

• Company assets may be insufficient; no personal guarantee by PV Legacy for distribution shortfalls.
• No mechanism for Members to claw back mistaken overpayments or distributions.