Waiver of Fiduciary Duties for Delaware LLCs

By Jed Weiner

Fund investors should be aware that waivers of fiduciary duties in limited liability are enforceable under Delaware law. In Miller v. HCP (2018), the Delaware Court of Chancery dismissed company (LLC) operating agreement claims made against directors for breach of fiduciary duties citing the facts that the LLC operating agreement provided for a waiver of the board of director’s (“Board”) fiduciary duties and that the Board was given sole discretion to approve a company sale, the transaction central to the dispute. In contrast, under Delaware corporate law, corporate stockholders cannot waive Board fiduciary duties, which have been established in common law.

A takeaway for controlling investors in Delaware LLCs is that a fiduciary duty waiver may decrease the risk of frivolous claims by minority investors and minority investors' leverage generally.

A takeaway for minority investors in Delaware LLCs is that they should look for fiduciary duty waivers, which can be easily overlooked, in LLC governing documents. By being diligent, minority investors can better advocate for their interests and make more informed investment decisions.