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Court Of Chancery Explains Special Committee Standard Of Care

Posted In LLC Agreements

Gerber v. EPE Holdings LLC, C.A. 3543-VCN (January 18, 2013)

It is now common for LLC and LLP agreements to have provisions permitting a "special committee" to approve  transactions with a controller.  What the limits are of that form of protection is the subject of this interesting opinion.  As the Court points out, surely not every committee approval, no matter how onerous, can immunize the transaction from judicial review.  Here, even when the transaction did not get an independent adviser's review and was at a price reflecting a startling run up in value for the underlying assets, the complaint failed to allege facts sufficient to state a claim that the approval was in bad faith.  More was required.

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