Drafting Delaware LLC Agreements

Even though law schools are starting to put greater emphasis on practice skills, such as drafting transactional documents, most law professors have little occasion to draft organizational documents for business entities.  It came as a surprise when I was asked to note the relatively publication of Drafting Delaware LLC Agreements, by John M. Cunningham and Vernon R. Proctor (Aspen Law & Business 2009).  The focus of the book is on guiding lawyers drafting LLC Agreements.  According to Aspen,

On the basis of their ownership structure, management structure and federal tax structure, the book identifies 10 principal types of LLCs relevant in Delaware LLC formation practice, and in a compact disc, it provides a complete set of 29 forms specifically tailored for use in forming these LLCs.  These forms include six for single-member LLCs owned by individuals; three for single-member LLCs owned by entities; 19 for multi-member LLCs, including LLCs with general partnership, limited partnership and corporate management structures; and a special form for Delaware series LLCs.  The book also provides detailed guidelines for choosing among these forms for particular LLC formation clients.

The book seems comprehensive, with both checklists, and suggested signing memoranda–always good things.

Given the wide discretion in contracting with regard to fiduciary duties for Delaware LLCs, the May 2010 supplement will include a new chapter on fiduciary duties, and suggested drafting approaches and language.  It is here that I would disagree with the authors, who suggest silence, and reliance on common-law principles, as a drafting tactic. § 14A.01[D].  The authors do note in the following subsection that Chief Justice Myron T. Steele of the Delaware Supreme Court is of the view that the Delaware LLC Act abolishes common-law fiduciary duties.  In any event, the new chapter includes a broad discussion of, and forms for, key aspects of common-law fiduciary duties.

posted by Gary Rosin

Update:  Check out Peter A. Mahler’s interview of John Cunningham (01/25/2010) on the New York Business divorce blog.

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