Waivers and their Consequences: An Analysis of the Limitations of Fiduciary Duties in Delaware LLC Bankruptcies

Many bankruptcy professionals may not be aware that a limited liability company (“LLC”) formed under Delaware law has the flexibility to eliminate all fiduciary duties owed by its management and members in its operating agreement. Recognizing this flexibility, the Delaware Supreme Court has held that well-established corporate fiduciary law may not always apply to LLCs. This article provides an overview of the structure of these business entities and the fiduciary duties owed in both contexts. From there, the article discusses in detail whether creditor claims for breach of those fiduciary duties may be pursued in bankruptcy cases.

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Potter Anderson & Corroon LLP is one of the largest and most highly regarded Delaware law firms, providing legal services to regional, national, and international clients. With more than 100 attorneys, the firm’s practice is centered on corporate law, corporate litigation, intellectual property, commercial litigation, bankruptcy, labor and employment, and real estate.