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Nathaniel Stuhlmiller, Richards, Layton & Finger

In two opinions decided in February 2018, CompoSecure v. CardUX, (Del. Ch. Feb. 1, 2018, revised Feb. 12, 2018), and In re Oxbow Carbon Unitholder Litigation, (Del. Ch. Feb. 12, 2018), the Delaware Court of Chancery held that certain actions were not ultra vires under the limited liability company agreements at issue and were thus capable of ratification under Delaware common law. On appeal, the Delaware Supreme Court subsequently reversed the lower court decision in CompoSecure and cited the lower court’s ratification decision in Oxbow approvingly. The decisions in CompoSecure and Oxbow seemingly turned on a narrow issue: whether or not the limited liability company agreement expressly provided that an action not taken in compliance with its terms was “void.” When read together, these decisions highlight the powerful effect, and potentially unintended consequences, of using a “void” provision in the governing documents of Delaware alternative entities.

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