Yearly Archives: 2019

Private equity deal professionals frequently serve on the boards of the portfolio companies in which their fund invests. And many of those portfolio companies are incorporated under Delaware law. The role of the private equity professional as a board member of a Delaware corporation is fundamentally different than the role of the private equity professional acting on behalf of the fund as a shareholder. One of the most well-known of those differences is that the private equity professional, while acting as a director, typically has individual fiduciary duties (at least in the corporate context) to the portfolio company and its shareholders as a whole. A less well-known difference is the fact that, unlike communications among the private equity firm’s professionals concerning the status and performance of its investment in a portfolio company, communications among two or more board members serving on behalf of a private equity firm regarding their actions as board members may constitute “books and records of the company” for which any other director may, with a proper purpose, demand the right to inspect under Section 220 of the Delaware General Corporation Law (the “DGCL”). In this modern age, of course, those communications can include any of the various forms of electronic communications and social media now available, including text messages (by mobile carriers or via social media) and emails. And it matters not that those communications may have been sent through your or your firm’s phone, or on your firm’s email server or your private email account. Understanding this fact may cause some pause before pressing send on a text message to your colleague and fellow board member concerning another board member’s approach or competence in considering an appropriate course of action for the company.

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