Christopher Bruner, ‘Opting Out of Fiduciary Duties and Liabilities in US and UK Business Entities’

This chapter explores the extent of contractual freedom to opt out of fiduciary duties and liabilities in US and UK business entities, including the US corporation, general partnership, limited partnership, limited liability partnership, and limited liability company, and the UK limited company, general partnership, limited partnership, and limited liability partnership.

Discernible commonalities emerge from this comparative analysis. Notably, corporate law readily permits reducing liability exposure for breaches of duty in each jurisdiction, yet provides only quite limited capacity to carve back at the substance of the duties themselves. Meanwhile, unincorporated entities in each jurisdiction offer substantially greater latitude to limit the duties themselves, in some cases resulting in purely contractual business relationships.

Yet substantial differences are also apparent. US corporate law permits greater insulation from liability exposure, and US unincorporated entities generally provide clearer and more extensive latitude to eliminate default duties of loyalty and care outright (particularly in Delaware). One cannot comprehensively declare that US law universally deviates further from the ‘fiduciary’ governance paradigm, however, because the UK limited liability partnership has gone further by providing an entity form in which no such general default duties apply at all.

The analysis raises some complex comparative questions, and the chapter closes with brief reflections on why such trends, commonalities, and divergences may have arisen.

Bruner, Christopher M, Opting Out of Fiduciary Duties and Liabilities in US and UK Business Entities (August 29, 2017). Research Handbook on Fiduciary Law (Andrew Gold and Gordon Smith eds, Edward Elgar Publishing, forthcoming).

First posted 2017-09-02 08:47:46

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