Delaware Business Litigation Report

Supreme Court Affirms Creditors May Not Sue Derivatively In LLC

CML V LLC v. Bax,  C.A. 735, 2010 (September 2, 2011, corrected September 6, 2011)

This decision upholds the prior decision of the Court of Chancery that creditors of an insolvent LLC may not bring a derivative claim against its managers.  This follows because the Delaware LLC Act limits such claims to members.  This result is another example of the differences between LLCs and corporations.  For in the corporate context, a creditor may file a derivative claim when the entity is insolvent.

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