What is the standard for evaluating self-dealing transactions in Delaware LLCs?

• A. Entire fairness, including fair dealing and fair price
• B. Market value analysis only
• C. Business judgment rule applies
• D. Fair dealing alone suffices

Answer: (A)

In Delaware LLCs, when a fiduciary engages in a self-dealing transaction, the review standard is entire fairness. This means the court looks at both how the deal was arranged (fair dealing) and what was paid (fair price). Fair dealing covers the conduct of negotiations, disclosure of conflicts, involvement of independent advisors, and whether the process was inherently fair to the LLC. Fair price assesses whether the consideration is commercially reasonable given risks, timing, and value. Because the fiduciary stands on both sides of a conflicted deal, a simple market value check or a pure business judgment rule protection does not suffice; the transaction must be proven to be fair in both process and price. Fair dealing alone is not enough; and market value analysis alone ignores the necessary procedural safeguards.