Taking up an issue it has never addressed head-on, the Court of Chancery ruled that the creditors of insolvent limited liability companies, or LLCs, do not have standing to pursue derivative suits.
In CML V LLC v. Bax, decided Nov. 3, Vice Chancellor Travis J. Laster found that the plain meaning of Section 18-1002 of the Delaware Limited Liability Company Act precludes such standing, despite a widespread belief to the contrary. He therefore dismissed the counts of the complaint alleging breach of fiduciary duty against certain officers and the board of managers of an LLC.
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