• Delaware Court of Chancery Holds that Creditors of Delaware LLCs Do Not Have Derivative Standing When LLC is Insolvent
  • November 15, 2010 | Authors: Joseph L. Christensen; Alan W. Kornberg; Stephen P. Lamb
  • Law Firm: Paul Weiss Rifkind Wharton Garrison LLP - New York Office
  • In CML V, LLC v. Bax, the Court of Chancery held that a creditor of JetDirect Aviation Holdings, LLC, a Delaware limited liability company (“JetDirect”), did not have derivative standing to assert breach of fiduciary duty claims against the board of managers of the insolvent JetDirect. The creditors would have had standing if JetDirect were a Delaware corporation, but the Court found that the Delaware LLC Act does not allow an LLC’s creditors to bring derivative claims when a Delaware LLC is insolvent (or at any other time).