INTRODUCTION

In the days before the end of the 144th General Assembly, Delaware's Governor, Ruth Ann Minner, signed into law bills amending Delaware's renowned alternative business entity statutes, namely the Delaware Revised Uniform Partnership Act, 6 Del. C. § 15-101, et seq. ("DRUPA"), the Delaware Revised Uniform Limited Partnership Act, 6 Del. C. § 17-101, et seq. ("DRULPA"), and the Delaware Limited Liability Company Act, 6 Del. C. § 18-101, et seq. ("DLLCA"). The amendments to these statutes represent a continuing effort by Delaware to create a flexible statutory framework for alternative business organizations. The balance of this article will touch upon some of the more significant amendments to DRUPA, DRULPA and DLLCA. Each of these amendments becomes effective August 1, 2007.

AMENDMENTS TO DRUPA, DRULPA AND DLLCA

 REQUIREMENT OF AN AGREEMENT FOR FORMATION OF A LIMITED PARTNERSHIP AND A LIMITED LIABILITY COMPANY

Amendments to DRULPA and DLLCA clarify that a limited partnership agreement or a limited liability company agreement, as the case may be, is required to form a limited partnership or a limited liability company. Prior to these amendments, neither DRULPA nor DLLCA contained an explicit requirement for a limited partnership agreement or a limited liability company agreement, as applicable, in order to form a limited partnership or a limited liability company. DRULPA and DLLCA have now been clarified to provide that an agreement is required, consistent with the advice Delaware practitioners have given for years. In addition, DRULPA has been amended to provide that a partnership agreement need not be entered into prior to the filing of a certificate of limited partnership with the office of the Secretary of State of the State of Delaware (the "Secretary of State"). Previously, DRULPA required that a certificate of limited partnership be filed by at least one general partner who had been admitted to the limited partnership. Often, at the time of filing of the certificate of limited partnership with the Secretary of State, the partners of a limited partnership have not yet entered into a formal partnership agreement. Accordingly, parties routinely would enter into a short- form initial limited partnership agreement for the sole purpose of admitting a general partner and a limited partner so that the general partner could execute, deliver and file the certificate of limited partnership with the Secretary of State. Now, DRULPA has been revised to clarify that a limited partnership agreement need not be entered into prior to the execution, delivery and filing of the certificate of limited partnership with the Secretary of State. (6 Del. C. §§ 17-201(d), 18- 201(d)). While we do not recommend availing oneself of this new provision unless it is necessary to do so,2 DRULPA now permits making a partnership agreement effective as of a date prior to its execution – something that has been possible with a limited liability company agreement for a number of years. In addition, the amendments to DRULPA and DLLCA expand the definition of "partnership agreement" and "limited liability company agreement," respectively, to include implied contracts as one form of such agreement. DRUPA already had included implied contracts in its definition of a "partnership agreement." Now DRULPA and DLLCA are consistent with such definition in DRUPA, all of which provide that such an agreement may be written, oral or implied. (6 Del. C. §§ 17-101(12), 18-101(7)).

MERGER, CONSOLIDATION, CONVERSION, TRANSFER, DOMESTICATION, AND CONTINUANCE OF PARTNERSHIPS, LIMITED PARTNERSHIPS AND LIMITED LIABILITY COMPANIES

Amendments to each of DRUPA, DRULPA and DLLCA clarify certain steps, approvals and potential restrictions in the process of merging, consolidating, converting, transferring, domesticating and/or continuing partnerships, limited partnerships or limited liability companies. For example, amendments to each of these statutes confirm that a partnership agreement or a limited liability company agreement may provide that a partnership, limited partnership or limited liability company shall not have the power to merge, consolidate, convert, transfer, domesticate or transfer. (6 Del. C. §§ 15-902(l), 15-903(i), 15-905(h), 17- 211(k), 17-216(h), 17-219(h), 18-209(h), 18-213(h), 18-216(i)). Amendments to each of these statutes also confirm that a merger or consolidation of a domestic partnership, limited partnership or limited liability company does not constitute a dissolution of such entity, unless the respective parties agree otherwise. (6 Del. C. §§ 15-902(h), 17-17-211(h), 18-209(g)). These amendments are not meant to suggest that the non-survivor in a merger does not cease to exist, but rather that compliance with the dissolution provisions of the relevant statute is not required. Consistent with the results if the surviving entity is a partnership, limited partnership or limited liability company, the amendments to DRULPA and DLLCA provide that a certificate of merger need not contain a consent to jurisdiction where the surviving or resulting entity is a Delaware general partnership. (6 Del. C. §§ 17-211(c)(8), 18-209(c)(8)). Finally, amendments to DRUPA delete the requirement for obtaining the approval of all persons who will be partners in connection with a domestication of a non-United States entity to a Delaware general partnership where the continuing partnership will be a limited liability partnership. (6 Del. C. § 15-904(g)). These amendments should serve to clarify key provisions and provide increased flexibility relating to the merger, consolidation, conversion, transfer, domestication and continuance of partnerships, limited partnerships and limited liability companies.

SERIES OF LIMITED PARTNERSHIPS AND LIMITED LIABILITY COMPANIES

Amendments to DRULPA and DLLCA extend the usefulness and flexibility of statutory series in organizing and operating an entity's affairs. For example, amendments to DRULPA and DLLCA confirm that a partnership agreement or a limited liability company agreement, as the case may be, may establish or provide for the establishment of one or more series of assets. Previously, DRULPA and DLLCA only expressly provided that a partnership agreement or a limited liability company agreement could establish or provide for the establishment of one or more series of limited partners, general partners, partnership interests, members, managers or limited liability company interests, as the case may be. (6 Del. C. §§ 17- 218(a), 18-215(a)).

The amendments to DRULPA and DLLCA clarify that each statutory series may have broad purposes and powers. Pursuant to the amendments, unless otherwise provided in a partnership agreement or a limited liability company agreement, as the case may be, such a series may carry on any lawful business, purpose or activity, whether for profit or not, with the exception of the business of banking. In addition, except as otherwise provided in a partnership agreement or a limited liability company agreement, as the case may be, a series established under Section 17-218 of DRULPA or Section 18-215 of DLLCA may, in its own name, contract, hold title to assets, grant liens and security interests, and sue and be sued. (6 Del. C. §§ 17- 218(c), 18-215(c)).

The amendments to DRULPA and DLLCA also provide increased flexibility to parties insofar as their ability to maintain separate and distinct records for each statutory series. Pursuant to the amendments, records are deemed to be sufficient to account for the assets associated with such series separately from the assets of the limited partnership or the limited liability company, as the case may be, or any other series thereof if such records reasonably identify the series' assets by any method where the identity of such assets is objectively determinable. In addition, the amendments confirm that the assets associated with a series may be held directly or indirectly, including in the name of such series, in the name of the limited partnership or the limited liability company, as the case may be, through a nominee or otherwise. (6 Del. C. §§ 17-218(b), 18-215(b)).

The amendments to DRULPA and DLLCA also confirm that a partnership agreement, a limited liability company agreement or an agreement of merger or consolidation also may provide that contractual appraisal rights with respect to an interest in a limited partnership or a limited liability company, as the case may be, shall be available for any series of such limited partnership or such limited liability company. (6 Del. C. §§ 17-212, 18-210).

The increased clarity with respect to the characteristics of statutory series should expand the utility of series for a variety of business objectives.

CERTIFICATES OF GOOD STANDING

Amendments to DRUPA, DRULPA and DLLCA provide additional guidelines as to when certificates of good standing will not be issued by the Secretary of State for a particular entity. For example, DRUPA now confirms that a certificate of good standing shall not be issued for a foreign limited liability partnership that has not filed an annual report and paid the required filing fee or if its statement of qualification or statement of foreign qualification has been canceled or revoked. (6 Del. C. § 15-1003(c)). Also, amendments to DRUPA, DRULPA and DLLCA now make it clear that a certificate of good standing will not be issued for a partnership, limited partnership or limited liability company after its statement of partnership existence, certificate of limited partnership or certificate of formation, as the case may be, is cancelled. (6 Del. C. §§ 15-105(d), 17-203, 18-203).

CERTIFICATES OF INTEREST IN BEARER FORM

Amendments to DRUPA, DRULPA and DLLCA provide that a general partnership, a limited partnership and a limited liability company, as the case may be, may not issue certificates of interest in such entity in bearer form. (6 Del. C. §§ 15-503(h), 17-702(b), 18-702(c)).

CONCLUSION

By clarifying existing law where the clarifications were deemed beneficial and creating more flexibility where additional contractual freedoms were viewed as advantageous, the recent amendments to DRUPA, DRULPA and DLLCA continue Delaware's leadership as the jurisdiction of choice for the formation of all types of business entities.