Proposed changes to Delaware’s alternative entity statutes, including amendments providing greater flexibility in finance and other transactions, were passed unanimously by the state House of Representatives on June 10, 2014. 

The proposed amendments to the Limited Liability Company Act, 6 Del. C. §§ 18-101, et seq. (LLC Act),  the Revised Uniform Limited Partnership Act, 6 Del. C. §§ 17-101, et seq. (LP Act) and the Revised Uniform Partnership Act, 6 Del. C. §§ 15-101, et seq. (GP Act), if approved by the Senate and Governor Markell, by their own terms will become effective on August 1, 2014.

Most notable may be amendments that provide more certainty as to the validity of written consents and other signature pages provided by parties in escrow prior to the closing of a finance or other transaction.  Changes to Section 18-302(d)  of the LLC Act, Sections 17-302(e) and 17-405(d) of the LP Act, and Section 15-407(d) of the GP Act, would allow a person to provide a consent with a future effective date as a member or manager of an LLC, as a general or limited partner of a limited partnership, or as a partner of a general partnership, whether or not the person is at such time a member, manager or partner.  The consent will be effective so long as the person is a member, manager or partner, as the case may be, upon the effective date of the consent.  Thus, a future member or manager of an LLC, or a future partner of a partnership, can provide written consents, and presumably other signature pages, into “escrow” in advance of a transaction closing and have the consent and signature pages be effective upon the consenting party becoming a member, manager, or partner, as the case may be.

The changes provide greater flexibility for obtaining signature pages in advance of closing a transaction, and ratify what is already the practice in many transactions.  The amendments will also provide comfort to attorneys giving Delaware law due execution and due authorization opinions.   

By the terms of the statute, the new provisions would be default provisions governing only in the event that the limited liability company agreement or partnership agreement, as the case may be, does not provide otherwise.

Other amendments in the Bills passing the House include:

  • Revocation of Dissolution – amendments to Section 17-806 of the LP Act and Section 18-806 of the LLC Act modify and provide additional means by which the dissolution of a company may be revoked.  The amendments provide greater flexibility in revocation of dissolution, including (i) by allowing revocation of dissolution by the same vote or consent that authorized dissolution, if the dissolution occurred by way of a member, manager or partner vote, and (ii) in the case of a dissolution triggered by a provision in a limited liability company agreement or limited partnership agreement, by a vote or consent that would be sufficient to provide for an amendment to such triggering provision.
  • Communications Contact Authorization – amendments to Section 18-104(g) of the LLC Act and Section 17-104(g) of the LP Act would require a limited liability company or a limited partnership, upon the written request of its “communications contact,” to provide such communications contact the name, business address and business telephone number of a natural person who has access to the record that contains the name and address of,  in the case of a limited liability company, each member and manager, and in the case of a limited partnership, each partner.
  • Books and Records Request  – amendments to Section 18-305 of the LLC Act, Section 17-305 of the LP Act and Section 15-403(d) of the GP Act to confirm that a member of a limited liability company, the limited partner of a limited partnership, or the partner of a general partnership, may make a books and records request to the limited liability company or partnership, as the case may be, in person or by an attorney or other agent.
  • Member and Manager Information – amendments to Section 18-305 of the LLC Act and Section 17-305 of the LP Act would add a new subsection which provides that a limited liability company or a limited partnership is required to maintain a current record of the name and last known address of each member and manager, or each partner, as the case may be.