Capital Call Cancelled: A Fairness Defense to the Majority’s Mandatory Capital Call
There is perhaps no provision in an LLC operating agreement more susceptible to abuse than one allowing those in control of the LLC to make mandatory capital calls. For one, that authority often comes with very few restrictions on the grounds for, frequency, and amount of capital calls. Moreover, the members with the power to make the mandatory capital calls often are better funded, have better access to information concerning the LLC, and—most importantly—have the ultimate authority to deploy the capital as they see fit. For minority members in an LLC subject to a mandatory capital call requirement, the risks of dilution and financial pressure can hardly be overstated.