A recent Chancery decision addressed whether an LLC failed “to pay or make reasonable provision to pay” a judgment in violation of Section 18-804 of the Delaware LLC Act when the LLC was dissolved. In Epie v. Herakles Farms, LLC, C.A. No. 2020-0999-BWD (Del. Ch. July 21, 2025), the Court determined that the foreign judgment sought to be collected was not “entered against the LLC”; thus, there was no basis to nullify the LLC’s Certificate of Cancellation, and likewise the plaintiff lacked standing to seek the appointment of a receiver.

A recent Chancery decision addressing similar issues was highlighted on these pages.

Brief Background Facts

The Certificate of Cancellation for the LLC was filed on April 2017. At that time, the LLC had no assets to distribute or set aside in reserve to pay claims. In October 2017, the plaintiff attempted to collect a judgment against the LLC, but a New York Court determined that the judgment could not be entered against the LLC because it had been cancelled.

Procedural History

In November 2020, the plaintiff initiated this action. In November 2021, a motion to dismiss by the LLC was denied.

Highlights

The Court reviewed the provisions of Section 18-804 of the Delaware LLC Act which states that a limited liability company which has been dissolved shall pay or make reasonable provisions to pay all claims and obligations known to the limited liability company. See Section 18-804(b)(1).

Section 18-804(b)(3) requires a limited liability company in the course of winding up to make such provision as will be reasonably likely to be sufficient to provide compensation for claims that have not been made known to the limited liability company but based on known facts are likely to arise or become known to the limited liability company within ten years after the date of dissolution. Slip op. at 12.

The Court observed that: “if an LLC is not wound up in accordance with the LLC Act, this Court may nullify the Certificate of Cancellation, which effectively revives the LLC and allows claims to be brought by and against it.” Slip op. at 13.

This decision might have limited applicability because it turned on whether or not the foreign judgment was entered against the LLC. The Court determined that it was not, and therefore, reasoned that the plaintiff could not demonstrate that the LLC improperly failed to set aside assets to satisfy the judgment and could not establish a violation of Section 18-804(b)–and likewise did not have standing under Section 18-805 as a creditor to seek the appointment of a receiver.