LLC Member Dissociation, Withdrawal, and Expulsion Requirements in Hawaii
At a glance
| Governing law, member status exit, and scope | Hawaii Uniform LLC Act, HRS chapter 428; ordinary domestic at-will or specified-term LLC. Covers notice, agreement, full distributional-interest transfer, expulsion, insolvency, death/incapacity, trust/estate distribution, entity termination, and catchall membership termination (§§ 428-101, 428-502, 428-601 to -603) |
|---|---|
| Operating agreement, articles, and status-exit limits | OA controls agreement events, expulsion, valuation/terms, and many consequences, but cannot vary § 428-601(5) judicial expulsion, unreasonably restrict information, eliminate/tightly reduce listed duties, vary specified wind-up rules, or impair protected outsiders. Express-will power is unqualified (§§ 428-103, 428-602, 428-701(c)) |
| Voluntary withdrawal: power, right, notice, and effective date | Member may dissociate at any time, rightfully or wrongfully, by express will. LLC notice ends status on notice date or member's stated later date. No universal writing, signature, advance period, acceptance, or consent condition (§§ 428-601(1), 428-602(a)) |
| Wrongful dissociation, damages, and other liability | Wrongful for OA breach or, before specified term expires, express withdrawal, judicial expulsion, bankruptcy, or specified nontrust/nonestate/nonindividual willful dissolution/termination. Caused damages run to LLC and members, add to other obligations, and offset later distributions/purchase price (§§ 428-602(b)-(d), 428-701(f)) |
| Agreement-based and unanimous-consent expulsion | OA event or OA expulsion causes exit. Other members may unanimously expel for illegality; substantially-all distributional-interest transfer excluding security/unforeclosed charge; uncured corporate dissolution/registration/right-to-do-business problem after 90 days; or dissolved, winding-up partnership/LLC. Entire economic transfer independently ends membership (§§ 428-502, 428-601(2)-(4)) |
| Judicial expulsion: applicant, procedure, and grounds | LLC or another member may apply. Court may expel for wrongful conduct with adverse material effect; willful/persistent material OA or § 428-409 duty breach; or company-business conduct making continuation with member not reasonably practicable. OA cannot vary this right (§§ 428-103(b)(5), 428-601(5)) |
| Death, incapacity, insolvency, entity, and transaction events | Bankruptcy, creditor assignment, consensual fiduciary appointment, or uncured nonconsensual appointment after stated 90-day periods; individual death, guardian/general-conservator appointment, or incapacity order; trust/estate full-rights distribution; qualifying entity termination; and catchall end of continued membership. No transaction-specific merger/conversion/domestication list (§ 428-601(6)-(11)) |
| Management, voting, authority, and post-exit duties | Member status, management, and member-status agency end; former member becomes transferee. Noncompetition loyalty ends; other loyalty/care continue only for preexit matters unless person winds up. Act states no automatic end to separately held nonmember-capable manager office (§§ 428-301, 428-409, 428-603(b)) |
| Transferable interest, distributions, buyout, and economics | At-will LLC buys at dissociation-date fair value; term LLC generally buys at term expiration using then-value. Offer due within 30 days; no agreement within 120 days opens another 120-day enforcement window. Court considers going concern/agreement/appraisal/legal constraints and may order installments, subordination, security, restrictions, modification, and offsets (§§ 428-603(a), 428-701 to -702) |
| Prior liability, information, records, filings, and dissolution | Transfer/dissociation does not release existing obligations; wrongfulness and amounts owing may offset buyout. Former member keeps proper-purpose access to membership-period records. Exit has no immediate filing, but annual report lists every member or manager as of reporting date. Dissociation alone is not a § 428-801 dissolution event (§§ 428-210, 428-408, 428-503(c), 428-801) |
Requirements one by one
Notice ends membership even when withdrawal is wrongful
Under HRS § 428-602(a), a member has power to dissociate at any time, rightfully or wrongfully, by express will. § 428-601(1) makes the exit effective when the LLC has notice, on the notice date or a later date the member states. Chapter 428 sets no universal writing, signature, advance period, acceptance, or company-consent requirement.
The § 428-101 definitions separate at-will companies from specified-term companies whose members agreed to remain through an articles-stated term. Section 428-103 lets the operating agreement govern most internal terms but preserves the listed information, duty, judicial-expulsion, winding-up, and third-party floors.
Wrongfulness turns on agreement breach and the term
Section 428-602(b) makes an exit wrongful for breach of an express operating- agreement term. Before a specified term expires, express withdrawal, judicial expulsion, bankruptcy, and specified willful entity dissolution or termination are also wrongful.
The wrongfully dissociating member owes the LLC and other members damages caused, in addition to other obligations. If the LLC continues, company damages offset later distributions. § 428-701(f) also offsets those damages and all other amounts the former member owes against the purchase price.
Full transfer and expulsion use different triggers
Section 428-502 makes transfer of the entire distributional interest an automatic status-ending event, except for a security transfer or an unforeclosed charging order. Separately, the other members may unanimously expel after a transfer of substantially all of the interest under § 428-601(4).
The other unanimous grounds are illegality; an uncured corporate dissolution, registration, or right-to-do-business problem after 90 days; and a dissolved, winding-up partnership or LLC. An operating-agreement event or agreement-based expulsion also causes dissociation.
Under § 428-503, a former member treated as a transferee receives distributions but no member management rights. The transferor is not released from liabilities to the LLC.
The company or another member may seek judicial expulsion
Under § 428-601(5), the LLC or another member may apply. The grounds are adverse and material wrongful conduct; a willful or persistent material agreement or § 428-409 duty breach; or company-business conduct making continuation with the member not reasonably practicable.
Section 428-103(b)(5) makes this judicial-expulsion right nonwaivable. The statute states no separate valuation or damages procedure within the expulsion subsection.
Insolvency and personal or entity status can end membership
Section 428-601(6)-(10) covers bankruptcy, creditor assignment, a consensual trustee/receiver/liquidator appointment, and a nonconsensual appointment not vacated or stayed within the stated 90-day and post-stay periods. It also covers individual death, guardian or general-conservator appointment, adjudicated incapacity, trust or estate distribution of all distribution rights, and a qualifying entity member's termination.
Subsection (11) adds a catchall for termination of continued membership for any other reason. Chapter 428 does not separately list merger, conversion, domestication, or interest exchange within the dissociation section.
Governance ends but proper-purpose records access survives
Under § 428-603(b), the person ceases membership, loses member management, and is treated as a transferee. The noncompetition component of loyalty ends; other loyalty and care duties continue only for preexit matters unless the former member participates in winding up.
Chapter 428's member-status agency rule appears in § 428-301, and duties appear in § 428-409. Member agency ends with membership, but the Act does not expressly say dissociation ends a separately held manager office that a nonmember may hold.
Unlike ordinary transferee status, § 428-408 preserves former-member access for proper purposes to records from the membership period, including inspection and copying during ordinary business hours.
A detailed fair-value purchase follows
Under §§ 428-603 and 428-701, an at-will LLC must buy the former member's company interest at fair value measured on the dissociation date. For a term company that does not wind up by term expiration, the purchase occurs at expiration and uses value on that date.
The LLC must make a supported offer within 30 days. If no agreement is made within 120 days, the former member has another 120 days to file an enforcement proceeding. § 428-702 directs the court to consider going-concern value, member valuation agreements, appraiser recommendations, and legal purchase constraints; it may order installments, creditor subordination, security, noncompetition or another restriction, assignment on payment or first installment, and later modification for changed ability to complete.
Public reporting and dissolution remain separate
Under § 428-210, the annual report lists every member of a member-managed LLC or every manager and the member count of a manager-managed LLC, measured as of the reporting date. Chapter 428 states no immediate filing caused solely by dissociation, but the next current report must reflect the changed roster.
Section 428-801 does not list ordinary member dissociation as an automatic dissolution event. It separately covers agreement events or consent, uncured illegality, judicial grounds including buyout failure, and transferee equitable winding up. Status exit, purchase, and entity winding up therefore must not be collapsed into one step.
What trips people up
- A full transfer automatically ends status. The separate unanimous route uses the lower “substantially all” trigger.
- Term-company payment may wait until term expiration. The value date and purchase date ordinarily move together to that future point.
- Former-member records access survives. It is limited to proper purposes and the period during which the person was a member.
- Dissociation does not automatically dissolve the LLC. Buyout failure may support a later judicial dissolution, but it is a separate event.
Common questions
Is an at-will withdrawal wrongful by default?
No. If the exit does not breach an express operating-agreement term, § 428-602's specified-term branch does not apply.
May another member seek judicial expulsion?
Yes. Section 428-601(5) names the company or another member as applicant.
Does every dissociation cause an immediate fair-value payment?
No. A specified-term company's purchase ordinarily waits until the term expires, and winding up can send rights to Part VIII instead.
Must the annual report list a former member?
The report must reflect the roster as of its statutory reporting date. A person already dissociated by that date is no longer a member.
Statutes and sources
- HRS §§ 428-101, 428-103, 428-210, 428-301, and 428-408 to 428-409 — company types, agreement control, reporting, agency, records, and duties. Official § 428-103 and § 428-408 (accessed August 30, 2026).
- HRS §§ 428-502 to 428-503 and 428-601 to 428-603 — full-transfer exit, transferee status, events, power, wrongfulness, damages, and consequences. Official § 428-601, § 428-602, and § 428-603 (accessed August 30, 2026).
- HRS §§ 428-701 to 428-702 — fair-value purchase, timing, offer, enforcement, valuation, payment terms, security, modification, assignment, and offsets. Official § 428-701 and § 428-702 (accessed August 30, 2026).
- HRS § 428-801 — dissolution, buyout-failure relief, and transferee winding up. Official current text (accessed August 30, 2026).
Source links
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