In our previous blog series on Comparison of LLC Statutes, we talked about fiduciary duties in the context of a limited liability company (LLC). Fiduciary duty is a legal duty to act solely in another person’s interests. It generally encompasses the duty of care (duty to act in good faith and exercise reasonable care in carrying out obligations to the company) and the duty of loyalty (duty to put the best interests of your company above any personal advantages). We mentioned that some states, including Delaware, Texas, and New York, allow an LLC agreement to expand, restrict, or even eliminate a manager’s or a member’s fiduciary duty within limits. For example, in Delaware, elimination of fiduciary duties does not eliminate the implied covenant of good faith and fair dealing; in New York, an operating agreement may not eliminate or limit an LLC manager’s liability in situations involving bad faith, intentional misconduct or a knowing violation of law, or personal gain or other advantage to which he or she is not legally entitled.
So that basically sums up fiduciary duty in the context of LLCs. But what about other business entities like a limited partnership?
In Dieckman v. Regency GP LP,[1] the Delaware Court of Chancery (Delaware’s specialized business court) addressed whether a limited partnership agreement can limit or eliminate a general partner’s fiduciary duties and how such limitation or elimination works in the context of affiliated transactions.
This post was the first part of a multi-part series on limited partnership and fiduciary duties. You can find the other posts by searching our blogs at www.mcbrideattorneys.com. In our next post, we will discuss the details of Dieckman v. Regency GP LP.
This posting is intended to be a planning tool to familiarize readers with some of the high-level issues discussed herein. This is not meant to be a comprehensive discussion and additional details should be discussed with your transaction planners including attorneys, accountants, consultants, bankers, and other business planners who can provide advice for your circumstances. This article should not be treated as legal advice to any person or entity.
Steps have been taken to verify the contents of this article prior to publication. However, readers should not, and may not, rely on this article. Please consult with counsel to verify all contents and do not rely solely on this article in planning your legal transactions.
[1] Dieckman v. Regency GP LP, C.A. No. 11130-CB (Del. Ct. Chan. Mar. 29, 2016).