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Court Of Chancery Explains Amendment-By-Merger Doctrine

Posted In LLC Agreements

In re Kinder Morgan Inc. Corporate Reorganization Litigation, C.A. 10093-VCL (November 5, 2014)

This decision explains the Amendment-By-Merger Exception that is found in alternative entity agreements. The purpose of the Exception is to be sure that a merger agreement that has the affect of amending the operating agreement gets the same vote, including class votes, that an equivalent amendment to the operating agreement would require under the terms of the operating agreement.  Such clauses try to prevent a merger agreement from being used, as is done for corporations, to amend the basic deal set out in the parties' agreement.

The decision also has an interesting discussion of what constitutes an amendment to an operating agreement, a point that is not always clear.