Can an LLC vote to pass a resolution and then apply it retroactively?

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Can an LLC vote to pass a resolution and then apply it retroactively?

I own a share in a very small (5 member) LLC that owns property. Part of the benefits of ownership are residence privileges on the property. Each member is responsible for an annual dues payment. Due to a dispute, I paid my dues payment 6 months late, on July 2, when it had been due on January 1. Now the members want to pass a resolution that if members don’t pay their dues by July 1, they lose residence privileges for 1 year. My concern is that they will try to retroactively apply this to me, and claim that I have lost my residence privileges for the coming year, even though that resolution wasn’t passed until after I had paid my dues on July 2.

Asked on July 3, 2013 under Business Law, Hawaii

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 8 years ago | Contributor

No, it cannot be applied retroactively: this is essentially a contract law question, even though it arises in the context of LLC ownership, since it goes to the agreement(s) governing membership and the rights or benefits thereof. Contracts or agreements cannot be made retroactive in this way; people cannot be held to additional obligations or face additional penalties that did not exist at the time of their actions. If they try to apply it retractively, you would seem to have good grounds to sue them to overturn that action. Going forward, of course, the change is completely legal.


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