1. Massachusetts Continuing Legal Education, Inc.
Governance of Corporations & LLCs in Massachusetts & Delaware: The Ins & Outs of Fiduciary Duty
May 25, 2017
Stanley Keller, Esq., Locke Lord LLP, Boston, Chair
Stephen O. Meredith, Esq., Choate Hall & Stewart LLP, Boston
James A. Smith, Esq., Foley Hoag LLP, Boston
Patricia O. Vella, Esq., Morris, Nichols, Arsht & Tunnell LLP, Wilmington

2. Extent to Which These Ground Rules Can be Varied
Overview of the Governance Ground Rules for Corporations and LLCs in Massachusetts and Delaware
General Duties
Duty of Care
Duty of Loyalty
Extent to Which These Ground Rules Can be Varied
Distinguishing Duties from Standards of Review
Remedial Measures

3. What are the Basic Ground Rules for Corporations
Comparing Massachusetts to Delaware
Duty of Directors
What Are the Duties
To Whom Are Duties Owed
Duty of Stockholders
Duties of Controlling Stockholder
Who is a Controlling Stockholder
Duties in Close Corporations

4. What are the Basic Ground Rules for Corporations (cont’d.)
To What Extent Can These Ground Rules be Varied in a Corporation
Exculpation
Indemnification
Negation of Corporate Opportunity
Stockholder Agreements
Charter and Bylaw Provisions
Standards of Review (Overview)
Business Judgment
Enhanced Scrutiny
Entire Fairness

5. What are the Basic Default Ground Rules LLCs
Comparing Massachusetts to Delaware
Default Duties of Managers
Default Duties of Members
To What Extent Can Default Ground Rules be Varied in an LLC
Duty of Good Faith and Fair Dealing
Scope of Limitation
Ability to Define Scope

6. Remedial Actions (Delaware v. Massachusetts)
Derivative Claims
Demands Required or Excused
Role of Special Committees and Shareholders
When is a Director Independent/Disinterested
Direct Claims
Injunctive Relief
Aiding and Abetting Liability
Rights to Information

7. Governance Considerations in Making Choices
Massachusetts or Delaware
Corporation or LLC

8. Drafting Factors in Limiting Duties in LLCs
Basic Limitation on Duties
Safe Harbors for Conflicted Transactions
Coordinating Provisions

9. Eliminating Fiduciary Duties*
Section Elimination of Fiduciary Duties. All non-contractual duties (including fiduciary duties), at law or in equity or otherwise, that a Specified Person would otherwise have to any Company-related Persons with respect or relating to the Company are hereby expressly eliminated as to such Specified Person and are replaced by the contractual duties and obligations expressly imposed on such Specified Person under this Agreement; provided that this Agreement does not eliminate the implied contractual covenant of good faith and fair dealing.
“Company-related Persons” means the Company, each of its members and managers and each other Person that is bound by or otherwise subject to this Agreement.
“Specified Person” means any [member,] manager, officer, special committee member or liquidating trustee of the Company or any of their respective Affiliates[; provided however, that no employee of [or paid consultant to] the Company or any of the Company’s direct or indirect subsidiaries [, in such Person’s capacity as such,] shall be deemed to be a Specified Person].
*Sample Delaware LLC Agreement provisions for discussion purposes only

10. Standard of Conduct*
Section Exculpation From Liability. No Specified Person shall have any liability for [breach of this Agreement or] breach of any non-contractual duties (including fiduciary duties) of such Specified Person to any Company-related Person with respect or relating to the Company; provided however, that the foregoing shall not limit or eliminate liability for any act or omission that constitutes [(i) a breach of Section 1.3 of this Agreement or (ii)] for avoidance of doubt, a bad faith violation of the implied contractual covenant of good faith and fair dealing.
*Sample Delaware LLC Agreement provisions for discussion purposes only

11. Limitation of Liability*
Section Standard of Conduct. Whenever this Agreement provides that a Specified Person is permitted or required to make a decision [or take an action] in such Specified Person’s “discretion” or “sole discretion” [or where another standard is not expressly provided,] such Specified Person shall be entitled to consider only such interests and factors as such Specified Person desires and shall have no duty or obligation to give any consideration to any interest of, or factors affecting, the Company or any other Company-related Person. [Where a standard for making a decision [or taking an action] is not expressly stated in this Agreement, a Specified Person shall make such decision [or take such action] in good faith and in a manner such Specified Person reasonably believes to be in or not opposed to the best interests of the Company as a whole.]
*Sample Delaware LLC Agreement provisions for discussion purposes only

12. Pre-transaction v. Post-transaction
Where Are We Today on the Standards of Review of Satisfaction of Duties in Fundamental Transactions
Pre-transaction v. Post-transaction
Interested Party Transaction v. Other Transactions
Role of Disclosure