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Make Sure To Read the Limited Partnership Agreement Before You Sign: Limited Partnership and Fiduciary Duties Under Delaware Law (Part III)

September 1, 2016

In Dieckman v. Regency GP LP,[1] the court noted that limited partnerships are governed by their partnership agreements and by Delaware’s limited partnership law.  As the court emphasized, the explicit policy of the law is “to give maximum effect to the principle of freedom of contract and to the enforceability of partnership agreements.”  In other words, in Delaware, as in many other states, courts would generally respect what the partners agree to in a limited partnership agreement, including expansion or restriction of fiduciary duties under the partnership agreement.  … Read the rest

Make Sure To Read the Limited Partnership Agreement Before You Sign: Limited Partnership and Fiduciary Duties Under Delaware Law (Part II)

August 25, 2016

Dieckman v. Regency GP LP[1] involved the acquisition of Regency Energy Partners LP (“Regency”) by an affiliated entity in a merger.  Dieckman was a former unitholder of Regency.  Dieckman claimed that Regency’s general partner (“GP”) favored the interests of its affiliates in agreeing to an unfair merger price and, by doing so, breached the limited partnership agreement (“LP agreement”).  Specifically, the LP agreement, which governs GP’s relationship with Regency’s limited partners, provided that whenever GP takes action in its capacity as GP, it must do so in good faith, meaning it “must believe that the determination or other action is in the best interests of the Partnership.”  Interestingly, the LP agreement also contained several “safe harbors” designed to shield GP from claims based on a breach of the LP agreement “or of any duty stated or implied by law or equity” due to conflicts of interest in the following situations:

(i) approval by a majority of the members of the conflicts committee; or

(ii) approval by the vote of a majority of the common units (excluding common units owned by GP and its affiliates).… Read the rest

Make Sure To Read the Limited Partnership Agreement Before You Sign: Limited Partnership and Fiduciary Duties Under Delaware Law (Part I)

August 18, 2016

In our previous blog series on Comparison of LLC Statutes, we talked about fiduciary duties in the context of a limited liability company (LLC).  Fiduciary duty is a legal duty to act solely in another person’s interests.  It generally encompasses the duty of care (duty to act in good faith and exercise reasonable care in carrying out obligations to the company) and the duty of loyalty (duty to put the best interests of your company above any personal advantages).  We mentioned that some states, including Delaware, Texas, and New York, allow an LLC agreement to expand, restrict, or even eliminate a manager’s or a member’s fiduciary duty within limits.  … Read the rest

Shareholders’ Right To Inspect Corporate Books and Records (Part 5)

October 20, 2015

Texas: An Issue for the Jury.

In Texas, a holder of shares of a corporation for at least six (6) months, or a holder of at least 5% of all of the outstanding shares of a corporation, is entitled to examine and copy the corporation’s relevant books, records of account, minutes, and share transfer records at a reasonable time, in person or through an agent, subject to the governing documents and on written demand stating a proper purpose.[1]  If the corporation raises a fact issue on the shareholder’s proper purpose, the issue will go to a jury trial.… Read the rest

Shareholders’ Right To Inspect Corporate Books and Records (Part 4)

October 15, 2015

New York: Proper Purposes.

 The New York statute provides that a shareholder has the right to examine corporate books and records upon at least five (5) days’ written demand for any purpose reasonably related to such person’s interest as a shareholder.[1]  Inspection, however, may be denied if the shareholder refuses to furnish an affidavit to the corporation that such inspection is not desired for a purpose which is in the interest of a business or object other than the business of the corporation and that he has not within five (5) years sold or offered for sale any list of shareholders of any corporation of any type or kind.… Read the rest

Shareholders’ Right To Inspect Corporate Books and Records (Part 3)

October 10, 2015

Delaware: Reasonable Restrictions.

In Delaware, any stockholder is entitled to inspect the corporation’s books and records upon written demand, for any proper purpose.[1]  The statute defines a proper purpose as a purpose reasonably related to such person’s interest as a stockholder.[2]  Additionally, the statute grants the Court of Chancery the authority to “prescribe any limitations or conditions with reference to the inspection . . . as the court may deem just and proper.”[3]

In United Techs. Corp. v.Read the rest

Shareholders’ Right To Inspect Corporate Books and Records (Part 2)

October 8, 2015

Maryland: Hogans v. Hogans Agency, Inc.

In Hogans v. Hogans Agency, Inc., Hogans was a 37.5% stockholder of Hogans Agency, Inc., an insurance and real estate brokerage company, and an owner of a competing business.[1] In December 2013, Hogans sent a letter to the corporation requesting inspection of corporate records; the corporation responded by providing copies of the bylaws, minutes of the proceedings of stockholders, an annual statement of affairs for the most recent tax year available, and the name, address, and shares of each stockholder.… Read the rest

Shareholders’ Right To Inspect Corporate Books and Records (Part 1)

October 6, 2015

We have covered several aspects of shareholder rights in our blogs, including the rights of minority shareholders in the context of oppression by the majority (available here and here) and, more recently, the right to bring a derivative action on behalf of a wholly owned subsidiary (available here). The fundamental principle underlying all these claims is that shareholders own the corporation. Thus, it is important for shareholders to have access to information regarding the business and management of the corporation in order to protect their interests as shareholders.… Read the rest

All postings are intended to be planning tools to familiarize readers with some of the high-level issues discussed therein. No posting is intended to be a comprehensive discussion and additional details should be discussed with your transaction planners including attorneys, accountants, consultants, bankers and other business planners who can provide advice for your circumstances. This article should not be treated as legal advice to any person or entity.