Delaware amends its LLC act: managers and controllers owe fiduciary duties unless LLC agreement provides otherwise - .PDF file.
By Bruce E Falby and John L Reed
Effective 1 August, 2013, the Delaware General Assembly has amended Section 18-1104 of the Delaware Limited Liability Company Act to provide that, unless the limited liability company agreement says otherwise, the managers and controlling members of a limited liability company owe fiduciary duties of care and loyalty to the limited liability company and its members.
The amendment was prompted by the Delaware Supreme Court’s decision last November in Gatz Properties, LLC v Auriga Capital Corp, which disregarded as ‘improvident and unnecessary’ dictum the Chancery Court’s ruling below that ‘the Delaware Limited Liability Company Act imposes “default” fiduciary duties upon LLC managers and controllers unless the parties to the LLC Agreement contract that such duties shall not apply.’
The Delaware Supreme Court in Auriga ‘decline[d] to express any view regarding whether default fiduciary duties apply as a matter of statutory construction’ and ‘suggest[ed] that the “organs of the Bar” (to use the trial court’s phrase) may be well advised to consider urging the General Assembly to resolve any statutory ambiguity on this issue.’…
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