2022 Q&A on Current Issues with LLC/LP Interests as Collateral

10.17.2022
Article
Practical Law Finance

Morris Nichols alternative entities partner Tarik Haskins recently contributed insights on current issues with respect to the use of limited liability company interests and limited partnership interests as collateral to Practical Law Finance.

Tarik discusses secured parties exercising control rights, proxy/power of attorney, harmony between security agreements and governing documents, transfer restrictions, remedies, and covenants related to an “opt-in” to Article 8 of the UCC.

He points to the use of proxies/powers of attorney as one of the most important current issues with respect to the use of LLC/LP interests as collateral. “These enforcement mechanisms can be a powerful and quick way for a secured party to ‘step into the shoes of the pledger’ and preserve its collateral without the obligation of becoming the owner of the subject LLC or LP,” Tarik wrote. “During the COVID-19 pandemic, we saw secured parties use this tool to quickly step in and preserve their collateral when other more cumbersome enforcement remedies could not have been exercised in a timely manner.”

The Practical Law article, “Expert Q&A on Current Issues with LLC/LP Interests as Collateral,” authored by Tarik Haskins addresses the following questions:

  • What Trends Have You Seen Recently Relating to LLC/LP Interests as Collateral? What are the Reasons for These Trends?
  • What are the Current Drafting Issues in Operating Agreements and Security Agreements for LLC/LP Interests as Collateral Relating to UCC Collateral Classification?
  • What are the Current Drafting Issues in Operating Agreements and Security Agreements for LLC/LP Interests as Collateral Relating to Governing Law?
  • What are the Current Drafting Issues in Operating Agreements and Security Agreements for LLC/LP Interests as Collateral Relating to Transfer Restrictions?
  • What are the Current Drafting Issues in Operating Agreements and Security Agreements for LLC/LP Interests as Collateral relating to Distributions and Proceeds?
  • What are the Current Drafting Issues in Operating Agreements and Security Agreements for LLC/LP Interests as Collateral relating to Remedies?
  • What Other Issues Are You Seeing Relating to LLC/LP Interests as Collateral?
  • How has the Legal Landscape for LLC/LP Interests as Collateral Changed Recently, Including in Delaware?
  • What Do You Think Will be the Most Important Issues in the Future for LLC/LP Interests as Collateral?

Click here to read the full article.

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Tarik J. Haskins, “Expert Q&A on Current Issues with LLC/LP Interests as Collateral,” Practical Law Finance (October 2022)

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