On July 7, 2011, the governor of Delaware signed into law several amendments to 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). These acts govern general partnerships (GPs), limited liability partnerships (LLPs), limited partnerships (LPs), and limited liability companies (LLCs). The amendments became effective on August 1, 2011. Outlined below is a summary of the more significant revisions contained in the 2011 amendments to the acts governing alternative entities:
- Amendment Provisions and Consents (§ 15-407(d)-(e) DRUPA; §§ 17-302(e)-(f), 17-405(d) DRULPA; §§ 18-302(d)-(e), 18-404(d) DLLCA) – The 2011 amendments provide that supermajority amendment provisions shall only apply to provisions expressly contained in the partnership agreement, LP agreement, or LLC agreement and not to default voting provisions in the alternative entity acts that apply to the applicable entity. The amendments change the interpretation of supermajority amendment provisions set out in In re LJM Co-Investment, L.P., 866 A.2d 762 (Del. Ch. 2004), which provided that supermajority amendment sections applied to voting provisions of the alternative entity acts that were incorporated in an alternative entity agreement in the absence of a specific provision in the alternative entity agreement to the contrary. The amendments are not intended, however, to affect the interpretation of supermajority amendment provisions when applied to provisions expressly included in the partnership, LP, or LLC agreement.
The 2011 amendments also clarify that, in addition to a formal meeting, entity action may be taken by both written consent and electronic transmission. An electronic transmission is any form of communication, not directly involving the physical transmission of paper, that creates a record that may be retained, retrieved and reviewed by a recipient thereof and may be directly reproduced in paper form by the recipient through an automated process. Thus, the writing or transmission does not need to restate the subject matter of the consent.
- New Default Rule for Amending LLC Agreements (§ 18-302(f) DLLCA) – The 2011 amendments to DLLCA add a new subsection that provides a default rule for amending a LLC agreement where the LLC agreement does not specify the procedure. The amendment requires approval of all members of the LLC to amend the LLC agreement unless otherwise permitted by law. If a procedure to amend the LLC agreement is provided for by the LLC agreement, however, that procedure will control, rather than the newly created default rule. This new default rule clarifies that managers or non-members consent would not be required. The rule only applies to LLCs whose original certificate of formation is filed with the Secretary of State on or after January 1, 2012.
- Canceling Certificates (§§ 15-105(d), 15-902(f), 15-1001(d) DRUPA; § 17-203 DRULPA; § 18-203 DLLCA) – Amendments to DRULPA and DLLCA confirm that a certificate of correction may be filed to correct a certificate of cancellation that has been filed prior to the dissolution or the completion of the winding up of a LP or LLC, thereby negating the termination of the entity.
- Address of Registered Office and Agent (§§ 15-105(l), 15-111(k) DRUPA; §§ 17-104(k), 17-206(f) DRULPA; §§ 18-104(k), 18-206(g) DLLCA) – The 2011 amendments add new subsections to the alternative entity acts providing that when filing any statement or document with the Secretary of State, the address of the registered agent or registered office of the entity must include the street, number, city and postal code. This requirement does not apply to any documents filed with the Secretary of State before August 1, 2011 other than for documents filed on or after August 1, 2011 to change the registered office of the registered agent of the entity.
- Registered Name of Alternative Entities (§ 15-108(c) DRUPA; § 17-102(3) DRULPA; § 18-102(3) DLLCA) – The alternative entity statutes were amended to provide that an alternative entity may not register under a name that does not distinguish it upon the records in the office of the Delaware Secretary of State from the name of another entity of the same type. The 2011 amendments, however, provide that entities registered as of July 31, 2011 under a name that does not meet this requirement are not obligated to amend the certificate in order to comply with the section.
- Effective Date of Filings (§ 15-105(h) DRUPA; § 17-206(b) DRULPA; § 18-206(b) DLLCA) – The alternative entity statutes have historically allowed entities to file statements, certificates, or other documents that will become effective at a future date or time. The 2011 amendments limit this right by requiring filings made on or after January 1, 2012 to become effective within 180 days of the applicable filing.
- Filing Requirements for Domesticating and Converting Alternative Entities (§§ 15-901(b), 15-904(b) DRUPA; §§ 17-215(b), 17-217(b) DRULPA; §§ 18-212(b), 18-214(b) DLLCA) – The alternative entity acts have been amended to specify that converting entities must file certificates of conversion and the applicable certificate of formation with the Secretary of State simultaneously or provide for the same future effective date or time. Likewise, the amended alternative entity acts require non-U.S. entities domesticating to Delaware to file the certificate of domestication and the applicable certificate of formation simultaneously or provide for the same future effective date or time.
- Personal Liability of Partners of LLPs (§15-306(c) DRUPA) – DRUPA provides that a Delaware GP may be formed as, or may become, an LLP. Partners of a LLP have limited liability and are not generally liable for the obligations of the LLP. The new amendment confirms that a partner of an LLP is not personally liable for liabilities arising out of circumstances or events occurring while the partnership is organized as an LLP. The former rule only explicitly covered liability incurred while the GP had LLP status.
- Fees and Taxes (§§ 15-207(a)-(b), 15-1208(d) DRUPA; §§ 17-1107(a)-(b), 17-1109(d) DRULPA; §§ 18-1105(a)-(b), 18-1107(e) DLLCA) – The 2011 amendments to the alternative entity acts make various changes to the fees associated with filings with the Delaware Secretary of State.