Small Business Reading Room

Thursday, January 13, 2005

Further Fine Tuning the Law

Last year the Delaware General Assembly passed several bills that fine tuned the Partnership, Limited Partnership and Limited Liability Company statutes.

The 2004 amendments to the Delaware Revised Uniform Partnership Act, Limited Liability Company Act and Revised Uniform Limited Partnership Act clarify several matters affecting the treatment of fiduciary and other duties. First, the statutes now make explicit that the governing agreement (partnership agreement, limited partnership agreement or limited liability company agreement) can eliminate, as well as expand or restrict, fiduciary or other duties. At the same time, the amendments make clear that the implied contractual covenant of good faith and fair dealing cannot be eliminated by agreement.

The 2004 amendments also clarify the effect of good faith reliance on the provisions of the governing agreement, specifying that such reliance, absent contrary provision in the agreement, precludes liability for breach of fiduciary duty.

Finally, the 2004 amendments confirm that the governing agreement may limit or eliminate any and all liabilities for breach of contract and breach of fiduciary duty, except for liability for an act or omission that constitutes a bad faith violation of the implied contractual covenant of good faith and fair dealing.

Rights of Persons Not Parties to a Governing Agreement

The 2004 amendments to the Delaware Revised Uniform Partnership Act, Limited Liability Company Act and Revised Uniform Limited Partnership Act clarify that the governing agreement of the business organization may confer enforceable rights upon persons who are not parties to the agreement, including rights to approve amendments to the agreement.

posted by Larry at 1:38 PM - permalink 1 comments

1 Comments:

Great information for anyone staying on top of the changes affecting DE entities.

You can view the text to all amendments made to the 2004 Delaware Corporate law through this link here:
http://www.state.de.us/corp/2004amend.shtml

By Unknown, at 10:38 AM