Delaware Governor Approves Delaware Business Entity Amendments

By: Clare Oliva, COGENCY GLOBAL INC. on Jul 24, 2017 2:08:25 PM

On July 21, 2017, Delaware Governor John C. Carney signed into law Senate Bill No. 72, Senate Bill No.71 and Senate Bill No.70.

Senate Bill No. 72 amends the Delaware Limited Liability Company Act. (Delaware Code, Title 6, Chapter 18, Sections 18-101 to 18-1109), Senate Bill No. 71 amends the Delaware Revised Uniform Limited Partnership Act (Delaware Code, Title 6, Chapter 17, 17-101 to 17-1111). Senate Bill No. 70 amends the Delaware Revised Uniform Partnership Act (Delaware Code, Title 6, Chapter 5, Sections 15-101 to 15-1210). Section numbers citations refer to sections in these Acts.

The amendatory legislation will become effective on August 1, 2017.

Highlights of the amendatory legislation include the following:

Formation Requirements

Sections 18-201 and 17-201 contain filing requirements for formation documents for domestic limited liability companies and domestic limited partnerships with the Secretary of State. The sections currently require an address for the registered agent and office for service of process in the formation documents. The sections are amended, with inclusion of a new subsection, to provide that a Certificate of Formation or Certificate of Limited Partnership substantially complies with section 18-201 or 17-201, whichever is applicable, if it contains the name of the registered agent and the address of the registered office even if the Certificate of Formation or Certificate of Limited Partnership does not expressly designate such person as the registered agent or such address as the registered office or the address of the registered agent.

Delegation

Sections 18-407, 17-403, and 15-401 are amended to further define the powers and authority of a member or manager of a limited liability company, a general partner of a limited partnership, and a partner of a partnership to delegate any of his or her rights, powers, and duties to manage and control the entity’s business and affairs. Any such delegation may be to agents, officers, and employees, and by a management or another agreement with, or otherwise to, other persons. The amendments also provide that no other provisions of the chapter shall be construed to restrict a member’s, manager’s, general partner’s or partner’s authority to manage and control the entity’s business and affairs.

Classification

Sections in all three Acts listed above are amended to further differentiate between domestic and foreign entities by including additional separate references to both domestic and foreign entities. Sections in the Acts pertaining to merger, consolidation, and conversion are amended to add the phrase “incorporated” or “unincorporated business or entity” within the definition of “other business entity” or “entity” for merger, consolidation or conversion purposes. Provisions relating to domestication are amended to add: “incorporated” or “unincorporated business or entity” within the definition of non-United States entities for domestication purposes.  

This phrase previously referred only to unincorporated businesses or entities. Now, it is clear that it applies to either an incorporated or unincorporated business or entity.

Increase of Limited Partner Protection from Limited Partnership Obligations

Section 17-303(a) provides that a limited partner is not liable for the obligations of a limited partnership unless he or she is also a general partner or, in addition to the exercise or rights of a limited partner, he or she participates in the control of the business. However, if the limited partner does participate in the control of the business, he or she is liable only to persons who transact business with the limited partnership reasonably believing, based upon the limited partner’s conduct, that the limited partner is a general partner. Section 17-303(b)(1) provides a list of capacities which are not considered to be in control of the business. The section is amended to include that a limited partner may be in the following additional roles without being considered participating in the control of the business:

  • an interest holder of a corporate general partner or
  • an interest holder of a partnership that is a general partner of the limited partnership or
  • an interest holder of an estate or trust which is a general partner or
  • beneficial owner or interest holder of a business trust or a statutory trust which is a general partner or interest holder of a limited liability company which is a general partner.

 For additional information, review the full text of the legislation:

Senate Bill No.70 - Delaware Revised Uniform Partnership Act amendments

Senate Bill No.71 - Delaware Revised Uniform Limited Partnership Act amendments

Senate Bill No. 72 – Delaware Limited Liability Company Act amendments

Subscribe to our updates to receive e-mail alerts of holiday closings every two months.

Topics: Delaware Corporate, UCC and Compliance