Limited Liability Companies

It is well settled that creditors of an insolvent corporation can obtain derivative standing to pursue claims for breach of fiduciary duty against officers and directors.  The same principle, however, does not always apply for creditors of limited liability companies (LLCs) and limited partnerships (LPs).  The Delaware Bankruptcy Court in Gavin/Solmonese LLC v. Citadel Energy

The Delaware Supreme Court recently held that creditors lack standing to bring a derivative suit on behalf of an insolvent Delaware limited liability company (an “LLC”) under the Delaware Limited Liability Company Act (the “LLC Act”).  CML V, LLC v. Bax, No. 735, 2011 WL 3863132 (Del. Sept. 2, 2011