Court Rules Houston Astros Cannot Strike Out Fiduciary Duties in Bankruptcy

March 05, 2014

One of the incentives that Delaware law offers founders of business entities is the ability to tinker with the fiduciary duties that the managers of the business owe. While the duties owed by corporate directors cannot be waived, the same is not true for partners of limited partnerships (“LPs”) or managers or managing members of limited liability companies (“LLCs”). While it has not previously been clear whether such disclaimers remain effective when the LP or LLC enters bankruptcy, a bankruptcy judge in Texas has just held that a disclaimer of fiduciary duties, valid under state law, ceases to be effective when the limited partner becomes a Chapter 11 debtor in possession.

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