Chancery Remedies Fraudulent Inducement in Formation of New Entity

A recent Delaware Court of Chancery decision provided remedies in connection with the formation of a business entity by two entrepreneurs based on the court’s finding that the equity, and employment agreement, given to one of the businessmen was based on fraudulent representations. Trascent Management Consulting, Inc. v. Bouri, C.A. No. 10915-VCMR (Del. Ch. Sept. 10, 2018), contains a practical statement of principles and analysis for those engaged in corporate and commercial litigation. Overview of Court’s Holding: The court found that the defendant not only fraudulently induced the formation of the limited liability company and his employment agreement, but also made numerous false statements during the litigation. As a remedy, the court rescinded the employment agreement and declared the limited liability company agreement unenforceable by the defendant.  The court also awarded some attorneys’ fees and costs as a penalty for bad faith litigation…

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