Cantor Fitzgerald, L.P. v. Ainslie: Delaware Supreme Court Upholds Validity of Forfeiture-for-Competition Provisions in Limited Partnership Agreement Based on Freedom of Contract Principles
In Cantor Fitzgerald, L.P. v. Ainslie, C.A. No. 9436 (Del. Jan. 29, 2024), the Delaware Supreme Court reversed a prior ruling by the Delaware Court of Chancery and found that provisions of a limited partnership agreement authorizing a partnership to withhold distributions otherwise owed to former partners who compete with the partnership (forfeiture-for-competition provisions) are enforceable. …
Whitestone v. Pillarstone: Delaware Court of Chancery Holds Adoption of Poison Pill Breaches Implied Covenant of Good Faith and Fair Dealing
In Whitestone REIT Operating Partnership, L.P. v. Pillarstone Capital REIT, C.A. 2022-0607-LWW (Del. Ch. Jan. 25. 2024), the Delaware Court of Chancery held that the general partner of a limited partnership breached the implied covenant of good faith and fair dealing when it adopted a shareholder rights plan (the “Rights Plan”) that effectively thwarted a limited…
Department of Labor Announces Final Rule on Employee or Independent Contractor Classification Under the FLSA
On January 10, 2024, the U.S. Department of Labor (“DOL”) published a final rule, effective March 11, 2024, that revises the DOL’s guidance on how to analyze whether an individual providing services is an employee or independent contractor under the Fair Labor Standards Act (“FLSA”). Under the new rule, the ultimate inquiry is whether the worker…
Delaware Laws & Programs Affecting Business – 2024 Edition
Delaware Laws & Programs Affecting Business presents an introduction to Delaware and an overview of the laws and programs relating to doing business in the state. Our economy is diverse, and our legal framework is intentionally crafted to foster robust business activity. Our widely copied business laws lead the nation in clarity and predictability. Government…
Court of Chancery Enforces Certain Advance Notice Bylaws, While Invalidating Others, in Upholding Board’s Rejection of Dissidents’ Nominees
In Kellner v. AIM ImmunoTech Inc., C.A. 2023-0879-LWW (Del. Ch. Dec. 28, 2023), the Delaware Court of Chancery upheld an incumbent board’s rejection of a group of dissidents’ nominees for a corporation’s 2023 annual meeting, finding that the dissidents failed to comply with the requirements of the corporation’s advance notice bylaws. Despite upholding the rejection of…
Corporate Transparency Act to Take Effect on January 1, 2024
On January 1, 2024, the Corporate Transparency Act (the “Rule”) is set to go into effect. The Rule will require entities formed by the filing of a document with a secretary of state (such as limited liability companies, corporations, statutory trusts, and certain other entity types) (collectively, “Reporting Companies”) to submit beneficial ownership information directly to…
The Nature of Fiduciary Duties Owed to Limited-Life Corporations
The fiduciary duties of directors of a Delaware corporation are frequently summarized as follows: “[T]he fiduciary relationship requires that the directors act prudently, loyally, and in good faith to maximize the value of the corporation over the long-term.” Embedded within that formulation is a temporal element: the duty is tied to the deliberately amorphous “long term”…
The Corporate Transparency Act – An Overview
Beginning on January 1, 2024, the Corporate Transparency Act (the “CTA’’) will impose filing and reporting obligations on certain entities, such as Delaware limited liability companies and Delaware limited partnerships, with civil and criminal penalties possible for noncompliance. For individuals utilizing Delaware entities within their estate planning or in connection with their personal investing or business…
Court of Chancery Clarifies the Scope of Disclosure Liability in Novel Contexts
Under Delaware law, corporate fiduciaries owe an affirmative duty of disclosure when seeking stockholder action—including, for example, presenting a matter for stockholder approval or proposing a transaction that otherwise requires stockholders to make an investment decision, such as whether to seek appraisal or participate in a corporation’s self-tender. In these circumstances, directors owe an affirmative duty…
Court of Chancery Addresses Enforceability of “ConEd Provisions” Under Delaware Law
In what may be the last opinion from the Delaware Court of Chancery relating to Elon Musk’s acquisition of the company formerly known as Twitter, Crispo v. Musk, C.A. No. 2022- 0666-KSJM (Del. Ch. Oct. 31, 2023), the Court rejected a mootness fee petition brought by a former Twitter stockholder. The former stockholder, who brought suit…
