Delaware Chancery Litigation Over Continuation Vehicle Transaction Highlights Considerations For GP-Led Secondaries

An action filed in late November 2025 in the Delaware Court of Chancery by an investor in a private equity fund highlights the potential risks to fund sponsors when investors are dissatisfied with continuation vehicle ("CV") transactions and the related conflict of interest and fiduciary duty issues that can arise in these deals.

Through the lawsuit, the plaintiff successfully delayed closing of the CV transaction pending resolution of the dispute. Though the underlying fund agreements require the merits of the dispute to be resolved in confidential arbitration, the plaintiff sought an injunction preventing the CV from closing before that arbitration could conclude. Shortly after the lawsuit was filed, the sponsor of the fund ("Sponsor") agreed to defer closing of the CV transaction until March 2026 to permit the arbitration to take place, and that agreement now governs the timing of the transaction. The dispute has since expanded to include additional investor