Showing 38 posts in LP Agreements.
It matters whether a claim may be characterized as a direct claim belonging to the owners of an entity or as a derivative claim that may only be brought in the name of the entity. This decision explains which is which in the context of a limited partnership.Share
Agreements for limited partnerships, in particular for publicly-traded master limited partnerships, are notoriously complicated and often hard to understand, so much so that two of the state’s judges co-wrote a detailed article calling for more standardization in this area. One consequence is that general partners in the MLP context may expose themselves to potential liability for decisions they thought protected by the partnership agreement’s terms, which often purport to eliminate common law fiduciary duties, replace them with a contractual duty to act in “good faith,” and provide safe harbors for conflict transactions. This is another case where that may happen. More ›Share
The case involves the issuance of certain convertible units offered to some, but not all, the limited partnership unitholders, and whether that offering and subsequent issuance violated provisions of the partnership agreement concerning distributions. While the Court of Chancery was unable to resolve the parties’ competing theories on summary judgment, the decision offers insight into how the Court will examine contractual distribution related claims in the alternative entity context.Share
This is an interesting decision in the master limited partnership context because it shows how far a limited liability agreement may go to limit member rights to disclosures even in a conflicted deal. If the partnership agreement waives fiduciary duties and also states what disclosures are due to members asked to vote on a deal, then the specified disclosures are what they get, nothing more. Here the agreement stated that the members were to receive just the merger agreement. Of course, the members still had the right to object to the merger and that at least gave them some say over the transaction.Share
What is the status of a general partner in a Delaware limited partnership after that GP is removed? As this decision points out, the answer is not clear and it may be just a holder of an economic interest, but not a limited partner. That question can be resolved by a provision in the partnership agreement and that is the better course as it will then help to determine the former GP's buy out rights.Share
The Court of Chancery once again has affirmed that the proper use of a conflicts committee may immunize a transaction from attack. This is now a common feature of LLP and LLC agreements but each agreement's terms are critical to its impact and its implementation.Share
This decision affirms the consensus that a limited partnership agreement may set the standards for resolving a conflicted transaction and thereby absolve the controllers from any liability.Share
While not having anything new, this decision is an excellent summary of the law on LLP agreements, such as their exculpation provisions.Share
Delaware limited partnership agreements frequently have provisions governing how to deal with conflict of interests between the GP, the limited partners and the owners of the GP. This decision sets out the language needed to protect the GP and its owners from attacks in conflict transactions when the deal is approved by a conflicts committee. If the committee acts in the subjective good faith belief the transaction is in the best interests of its constituency, an attack alleging objective unfairness will be dismissed.
This then may be the definitive guide to drafting limited partnership agreements. And while the Court recognizes that the decision offers little protection for limited partners, it points out that is part of the risk they bear when they invest in such LPs.
This decision was affirmed on July 22, 2013.Share
While this issue continues to come up, it is still not clear when limited partners may terminate a manager when their limited partnership agreement only says they must act in "good faith." Absent some more definitive standard, this decision holds the termination must be done honestly in fact and observe reasonable commercial standards. Now is that clear enough? In any case, if the manager fails to meet the deadline for submitting an annual financial statement, you may "in good faith" fire her.
Affirmed, Del Supr. August 26, 2013Share
This is an interesting decision because it explains the limits of drag along rights. While some old case law and some new contract language try to spell out when a stockholder, creditor or other interested party may have their rights affected by a corporate transaction taken without their consent, this makes it clear that there needs to be very explicit authority to do so, particularly when we are talking about drag along rights that are contractually based.Share
This is another example of how an LP agreement may limit the review of a transaction by a court at the request of a dissatisfied partner. The partnership agreement provided that the GP only needed to act in good faith in approving a sale and defined good faith, in part, as established by reliance on an expert's advice. Since that was present, the court dismissed the complaint.Share
This decision upholds transfer restrictions in a limited partnership agreement.Share
This is a significant decision for 2 reasons. First, it confirms the widely-held belief that the Tooley test to determine if a complaint is direct or derivative applies to limited partnerships.
Second, it interprets language in the LLP agreement permitting the general partner to rely on the advice of an investment banker as constituting proof of "good faith" in deciding to do a deal with an affiliate of that general partner. This is important because while Delaware law permits LLP agreements to waive many duties owed by a GP, the duty to act in "good faith" cannot be waived. Hence, the ability to effectively define in the LLP agreement what will constitute good faith is another way to limit claims against the GP even for self-dealing.
This decision was affirmed on MAy 28, 2013.Share