Can an LLC really eliminate its manager's fiduciary duties?

In Delaware, yes. Section 18-1101 of the LLC Act allows the operating agreement to restrict or eliminate fiduciary duties, including loyalty. The one unwaivable floor is the implied contractual covenant of good faith and fair dealing, which courts apply narrowly.

What protection do investors have after a fiduciary waiver?

The contract's own commitments (fee schedules, appraisal requirements, approval mechanics), the implied covenant of good faith and fair dealing, federal securities antifraud and disclosure law, and whatever exit rights the documents provide. The waiver shifts protection from fiduciary litigation to contract terms and disclosure quality.

Where do I find a fund's fiduciary duty waiver?

In the operating agreement or LLC agreement, typically filed as an exhibit to the offering statement (Form 1-A for Reg A vehicles) on EDGAR. The offering circular may summarize it under conflicts of interest, but the operative language is in the exhibit.

Do registered funds have fiduciary waivers too?

Not in the same way. Investment Company Act funds carry statutory duties — including Section 36(b) fiduciary liability over adviser compensation — and independent-director requirements that contracts cannot remove. Broad loyalty-elimination waivers are a feature of the LLC and LP structures common at the Reg A and private-placement tiers.

Fiduciary Duty Waiver

Regulatory & Accounting

Definition

A fiduciary duty waiver is an operating-agreement provision that restricts or eliminates the fiduciary duties a manager would otherwise owe investors. Delaware's LLC Act (Section 18-1101) expressly permits an LLC agreement to expand, restrict, or eliminate fiduciary duties — including the duty of loyalty — with one floor that cannot be waived: the implied contractual covenant of good faith and fair dealing.

Why it matters

Many retail alternative-asset vehicles — non-traded REITs, Reg A funds, series LLCs — are Delaware LLCs whose operating agreements contain some form of fiduciary modification, and most investors never read the exhibit where it lives. The waiver reallocates protection: instead of being able to sue a conflicted manager for breach of loyalty, the investor's protection becomes whatever the contract promises, whatever the disclosure regime requires, and the unwaivable implied covenant. In sponsor-run structures where the manager sits on both sides of transactions and sets the price investors exit at, whether fiduciary duties survive the operating agreement is a first-order diligence question, not legal fine print. AltStreet's Arrived vs Concreit guide documents a live example: Concreit Fund I's operating agreement modifies manager duties in its Section 5.2.

Common misconceptions

•A fiduciary waiver is not fraud immunity. Federal securities antifraud liability (including Rule 10b-5) and the disclosure obligations of the offering regime cannot be waived by contract.
•The implied covenant of good faith and fair dealing survives every Delaware waiver, but it is a narrow gap-filler about honoring the contract's evident bargain — far weaker than the duty of loyalty it replaces.
•Waivers are not uniform. Agreements range from mild exculpation (no liability for ordinary negligence) to elimination of loyalty duties with express permission for self-dealing at contractually defined standards. The words control; 'there's a waiver' is the start of the analysis, not the end.
•Corporate structures are different: Delaware corporations can exculpate directors for duty-of-care damages (DGCL 102(b)(7)) but cannot eliminate the duty of loyalty. Full loyalty-elimination flexibility is a feature of the LLC and LP statutes — one reason sponsors choose those forms.
•Registered funds are different again: 1940 Act funds carry statutory protections, including Section 36(b) fiduciary liability regarding adviser compensation and independent-director requirements, that no operating agreement can remove. Comparing a Reg A LLC to an interval fund is partly a comparison of which duties are waivable.

Technical details

What Delaware law permits

Section 18-1101(c) of the Delaware LLC Act: fiduciary duties of a member or manager 'may be expanded or restricted or eliminated by provisions in the limited liability company agreement,' except that the agreement may not eliminate the implied contractual covenant of good faith and fair dealing.

Delaware courts enforce clear waivers as written. Where the agreement is ambiguous or silent, default fiduciary duties can apply — which is why sponsor-drafted agreements tend to be explicit.

Agreements often substitute contractual standards for the eliminated duties: conduct measured against 'good faith' as defined in the agreement, board or affiliate-transaction approval mechanics, or safe harbors such as third-party appraisals for related-party purchases.

What recourse remains after a waiver

The contract itself: whatever substantive commitments the operating agreement makes (appraisal ceilings, fee schedules, approval requirements) remain enforceable as contract terms.

The implied covenant of good faith and fair dealing: unwaivable, but it protects the bargain the parties evidently struck rather than imposing loyalty — Delaware case law applies it sparingly.

Securities law: the antifraud rules and the offering regime's disclosure duties. A manager may lawfully self-deal under a waiver, but misdescribing the arrangement in an offering circular is a separate, unwaivable problem.

Exit: redemption programs and secondary transfers, on whatever terms the same documents set. When duties are waived, exit terms and disclosure quality carry more of the protective load.

How to evaluate a waiver in a retail fund

Find it: waivers live in the operating agreement, usually filed as an exhibit to the Form 1-A, not in the offering circular's summary. Search the exhibit for 'fiduciary,' 'duty,' 'conflict,' and 'sole discretion.'

Grade the substitute standard: what, specifically, constrains related-party transactions after the waiver? Third-party appraisal ceilings, defined pricing formulas, or independent approval are real constraints; 'as the Manager determines in good faith' is a thin one.

Map the waiver against the conflicts: a waiver matters most where the manager transacts with the fund, prices the fund, or controls the exit. AltStreet's platform reviews read the waiver and the conflict map together — the same analysis that treats disclosed appraisal ceilings as a genuine check on a sponsor-pipeline REIT treats an unconstrained waiver plus self-dealing as the structure's central risk.

Weigh the wrapper: the identical strategy inside a 1940 Act registered fund would carry unwaivable statutory duties and independent directors. Part of what a retail investor gives up at the Reg A tier is precisely the set of duties the LLC agreement is permitted to waive.

Document hierarchy and investor economics

For secondary, regulatory, and accounting terms, the practical answer often sits in the hierarchy among statutes, fund documents, transfer agreements, subscription materials, valuation policies, and platform procedures. The same headline term can operate differently depending on which document controls in a conflict.

Investor economics should be traced from eligibility through settlement and reporting: who approves the transaction, when price is struck, what fees or discounts apply, what disclosures the buyer receives, when ownership transfers, and how the position will be valued after closing. Those steps are where many real-world surprises appear.

Frequently asked questions

Can an LLC really eliminate its manager's fiduciary duties?: In Delaware, yes. Section 18-1101 of the LLC Act allows the operating agreement to restrict or eliminate fiduciary duties, including loyalty. The one unwaivable floor is the implied contractual covenant of good faith and fair dealing, which courts apply narrowly.
What protection do investors have after a fiduciary waiver?: The contract's own commitments (fee schedules, appraisal requirements, approval mechanics), the implied covenant of good faith and fair dealing, federal securities antifraud and disclosure law, and whatever exit rights the documents provide. The waiver shifts protection from fiduciary litigation to contract terms and disclosure quality.
Where do I find a fund's fiduciary duty waiver?: In the operating agreement or LLC agreement, typically filed as an exhibit to the offering statement (Form 1-A for Reg A vehicles) on EDGAR. The offering circular may summarize it under conflicts of interest, but the operative language is in the exhibit.
Do registered funds have fiduciary waivers too?: Not in the same way. Investment Company Act funds carry statutory duties — including Section 36(b) fiduciary liability over adviser compensation — and independent-director requirements that contracts cannot remove. Broad loyalty-elimination waivers are a feature of the LLC and LP structures common at the Reg A and private-placement tiers.