Recurring Issues for VC and PE Funds: Guidance from Recent Delaware Cases
A periodic "heads-up" of legal developments in Delaware relevant to venture and private equity funds
- Director conflicts of interest: Courts skeptical that a fund’s board designee is conflicted due solely to the position of the fund (e.g., winding down, or interested in participating in future deals) ... but specific allegations that fund has materially different interest than stockholders as a whole may establish conflict.
- “Aiding and abetting” liability for advisors and major stockholders: Trend of liability risk for conflicted or negligent financial advisors … also possibility of aiding and abetting claims against major stockholder if it instigated a flawed sale process.
- Information sharing between directors and their fund: No per se rule against sharing confidential information … but risky to both directors (breach of fiduciary duty) and their funds (aiding and abetting) given the “context-dependent inquiry” a court may apply.
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