## Facts

- Two brothers formed a Kansas limited liability company to hold and manage family real estate under an amended operating agreement, appointing family members as managers.
- The company’s primary asset was a long-held 104-acre commercial tract in Johnson County, Kansas.
- The operating agreement provided that if a member withdrew, the remaining members had to unanimously agree to continue the company; otherwise, dissolution would occur and the company would wind up and liquidate.
- Family disagreements over the property’s future use led one family faction (through affiliated trusts and a limited partnership) to withdraw in 1996 intending to trigger dissolution under the operating agreement.
- The remaining family faction asserted that, after withdrawal, only current members could vote to continue the company and manage any winding up.
- The withdrawing faction sought declaratory and related relief that the company was dissolved and that winding up and liquidation should proceed accordingly.
- The district court declared the company dissolved but ruled the withdrawing faction was no longer members and therefore did not control winding up.
- The withdrawing faction appealed to the Kansas Supreme Court.

## Issues

1. Whether members who withdraw under an LLC operating agreement remain “members” for purposes of the dissolution and winding-up provisions.
2. How to construe an operating agreement’s definition of “members” (including temporal language such as “from time to time”) when applying withdrawal and continuation provisions.
3. Who has authority to manage and control the company’s winding up after dissolution triggered by member withdrawal.

## Decision

- The Kansas Supreme Court held the company was dissolved under the operating agreement because the required unanimous consent to continue was not obtained.
- The Court held that the withdrawing faction ceased to be members upon withdrawal and therefore did not retain member status for post-withdrawal governance of winding up.
- The effect of the decision left winding-up authority with those who remained members after the withdrawals, subject to the operating agreement and applicable law.

## Legal Principles

- An LLC operating agreement is enforceable as a contract and governs member rights and company governance, including continuation and dissolution triggers, except where limited by statute.
- A member’s withdrawal under the operating agreement can terminate that person’s member status, even if the withdrawal simultaneously triggers dissolution.
- Dissolution triggered by withdrawal is distinct from post-dissolution governance; authority to wind up follows the operating agreement’s allocation of rights among remaining members (and managers, if applicable).
- In winding up, authorized persons may take steps necessary to close the business, liquidate property, address liabilities, and distribute remaining assets consistent with the operating agreement and governing law.

## Conclusion

The Kansas Supreme Court enforced the LLC operating agreement to recognize dissolution after member withdrawal and concluded that withdrawing participants no longer held member status for purposes of managing or controlling the subsequent winding up of the company.


Investcorp, L.P. v. Simpson Inv. Co., L.C., 267 Kan. 840, 983 P.2d 265 (Kan. 1999)