/>iA recent Delaware Court of Chancery decision provided a nuanced analysis to explain its reasoning for not appointing a receiver for a cancelled LLC. In PXP Producing Co. LLC v. MitEnergy Upstream LLC, C.A. No. 2024-0668-MTZ (Del. Ch. June 26, 2025), the complaint also sought nullification of the cancellation on the grounds that the company violated Section 18-804 of the Delaware LLC Act by dissolving without making any provision for specified obligations which, the petitioner argued, made the cancellation unlawful under Section 18-203. The Court discussed whether the claims were time barred under 10 Del. C. Section 8106, and also denied a motion to intervene.
Note a recent Chancery decision addressing similar issues that was highlighted today on these pages.
Highlights
- The Court explained the basis for appointing a receiver under Section 18-805 to settle “unfinished business of a limited liability company” and to “safeguard the collection and administration of still existing property interests of a dissolved LLC.” Slip op. at 17.
- The statute authorizes the receiver to take custody “of the limited liability company’s property and to collect the debt and property due and belonging to the limited liability company . . . with the goal of ‘settling unfinished business of the limited liability company.’” Slip op. at 17-18.
- The Court emphasized that under Section 18-805, in order to warrant the appointment of a receiver a petitioner “must show good cause therefor.” Petitioner attempted to satisfy this requirement by alleging a violation under Section 18-804(b) in connection with the cancellation of the LLC.
- The petitioner was required to allege sufficient grounds for the Court to conclude that it was reasonably likely that the company “held assets at the time of dissolution but failed to reserve for claims as Section 18-804(b) requires.” Slip op. at 18.
- The Court observed that the petitioner did not assert that the distributions occurred after the dissolution or during its winding up—which timing is critical to allege a violation of Section 18-804(b). Id. at 22.
- The opinion also provides an extensive discussion of a veil-piercing claim, which was not sufficiently alleged. See Slip op. at 23-32.
This decision provides helpful guidance on the requirements for the appointment of a receiver of a cancelled LLC.
