Recent Delaware Chancery Court Opinion Clarifies Default Fiduciary Duties Owed By Managers of Limited Liability Companies

Much confusion has arisen surrounding the scope of fiduciary duties owed by managers of Delaware limited liability companies (LLCs) to other members of the LLC.  Hedge fund managers must understand the scope of such fiduciary duties because they frequently organize LLCs both as hedge funds that they manage as well as the management entities which provide advisory and administrative services to their hedge funds.  As a result, hedge fund managers may owe fiduciary duties not only to hedge fund investors, but also to the other members of their management entities organized as LLCs.  This article describes a recent Delaware Chancery Court opinion that clarifies the default fiduciary duties owed by managers of Delaware LLCs, as well as the scope of the ability of managers to limit or eliminate such duties by contract.

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