Overview
On July 16, 2020, Governor Carney signed into law certain amendments (the Amendments) to the Delaware Limited Liability Company Act (the LLC Act), the Delaware Revised Uniform Limited Partnership Act (the LP Act) and the Delaware Revised Uniform Partnership Act (the GP Act and, together with the LLC Act and the LP Act, the Acts) that: (i) confirm the unavailability of statutory appraisal rights for alternative entities; (ii) reduce the possibility of technical pitfalls in connection with the admission of a member to a Delaware limited liability company or the admission of a limited partner to a Delaware limited partnership; (iii) permit the inclusion of additional information in a Certificate of Division; (iv) confirm the flexibility of alternative entities to document transactions and books and records electronically; and (v) address naming requirements of a registered series of a Delaware limited liability company or limited partnership.
Appraisal Rights
The Acts currently provide that appraisal rights are available in the alternative entity context only if the organizational documents expressly provide for them. The Amendments confirm that the statutory appraisal rights normally available to stockholders in Delaware corporations are unavailable in the alternative entity context unless the organizational documents explicitly provide for them.
Admission of Members and Limited Partners
Under the LLC Act and LP Act, a member’s or limited partner’s admission to a Delaware limited liability company or limited partnership was required to be reflected on the books and records of the limited liability company or limited partnership. To reduce unnecessary pitfalls, and to facilitate the guiding principle of the Acts of giving maximum effect to freedom of contract, these requirements have been eliminated by the Amendments.
Certificates of Division
In the past two years, the LLC Act and the LP Act were amended to permit a Delaware limited liability company or limited partnership to divide into two or more limited liability companies or limited partnerships. As part of such division, the limited liability company or limited partnership must file with the Delaware Secretary of State a Certificate of Division, including certain required information. The Amendments provide that a Certificate of Division may now include “any other information” that the dividing entity “determines to include,” which allows for greater flexibility in documenting the division.
Electronic Documentation
In 2019, the Acts were amended to permit transactions to be documented, signed and delivered via electronic means. The Amendments include changes to the Acts intended to confirm that a person may execute a document through any means contemplated in the Acts, including through a “wet” signature or electronic signature. The Amendments also effect several changes to the books and records provisions of the Acts in an attempt to replace the term “written” with “paper,” providing that an alternative entity may maintain its records in other than “paper form,” if such form is capable of conversion into “paper form” within a reasonable time.
Registered Series
The LLC Act and the LP Act were previously amended to permit the use of a “registered series.” A registered series will qualify as a registered organization under the Uniform Commercial Code and will be subject to the provisions of the UCC regarding security interests. The Amendments effect changes to the LLC Act and the LP Act that require that the name of a registered series be distinguishable from the name of any other registered series.
