SB 91

Abstract

This bill continues the practice of amending periodically the Delaware Limited Liability Company Act (the “Act”) to keep it current and to maintain its national preeminence. The following is a section-by-section review of the proposed amendments of the Act. Section 1. This section amends Section 18-101 of the Act to include definitions for “document” and “electronic transmission,” and to amend the definitions of “manager” and “member.” The terms “document” and “electronic transmission” appear in new Section 18-113 among other places in the Act. The changes to the definition of “manager” confirm that the term includes a manager of the limited liability company generally and a manager associated with a series of the limited liability company, and the changes to the definition of “member” confirm that the term includes a member of the limited liability company generally and a member associated with a series of the limited liability company. Section 2. This section amends Section 18-102(3) of the Act to provide that the name of a limited liability company must be such as to distinguish it from the name of any registered series of a limited partnership formed under the laws of the State of Delaware. Section 3. This section amends Section 18-104(d) of the Act to provide that if a limited liability company’s certificate of formation has been cancelled pursuant to Section 18-1108 of the Act, its registered agent may resign without appointing a successor registered agent. The amendment also adds requirements regarding the content and form of the certificate of resignation filed with the Delaware Secretary of State when the registered agent resigns without appointing a successor, and provides that such information regarding the communications contact that must be included in such a certificate shall not be deemed public. This section also amends Section 18-104(g) to conform with the addition of the defined term “electronic transmission” in Section 18-101. Section 4. This section adds new Section 18-113 of the Act, which establishes non-exclusive, safe harbor methods to reduce certain acts or transactions to a written or electronic document and to sign and deliver a document manually or electronically. The terminology in Section 18-113(a) is based on analogous provisions in existing Sections 18-302(d) and 18-404(d) of the Act, the Delaware Uniform Electronic Transactions Act (“UETA”), and the Model Business Corporation Act, with modifications. Section 18-113(a) permits limited liability company transactions (such as entering into agreements of merger not filed with the Secretary of State) to be documented, signed and delivered through “Docusign” and similar electronic means. The Section 18-113(a) safe harbor provisions apply solely for purposes of determining whether an act or transaction has been documented, and whether a document has been signed and delivered, in accordance with the Act and the limited liability company agreement. Section 18-113(a) does not preempt any statute of frauds or other law that might require actions be documented, or that documents be signed and delivered, in a specified manner. Section 18-113(a) clarifies how its provisions operate in connection with a transaction conducted pursuant to UETA. To the extent UETA does not apply to a transaction (under Section 12A-103 of UETA) because the transaction is governed by the Act, the parties to the transaction can satisfy the Act by complying with Section 18-113(a). Section 18-113(b) addresses certain actions and documents that are not governed by Section 18-113(a). There is no presumption that these excluded items are prohibited from being effected by electronic or other means, but Section 18-113 may not be relied on as a basis for documenting an act or transaction, or signing or delivering a document, if the exclusions set forth in Section 18-113(b) apply. Certain of these excluded items are governed by separate provisions that facilitate the use of electronic media, including documents filed with the Secretary of State (governed by Section 18-206(a)). Section 18-113(b) permits limited liability company agreement provisions that restrict the use of Section 18-113(a), but those restrictions must be expressly stated. A provision merely specifying that an act or transaction will be documented in writing, or that a document will be signed or delivered manually, will not prohibit the application of Section 18-113(a). Section 18-113(c) addresses the interaction between the provisions of the Act and the Electronic Signatures in Global and National Commerce Act (the “E-Sign Act”). Section 18-113(c) evidences an intent to allow the Act to govern the documentation of actions, and the signature and delivery of documents, to the fullest extent the Act is not preempted by the E-Sign Act. Section 5. This section amends Section 18-206(b) of the Act to clarify that the certificate of formation or certificate of registered series, as applicable, shall be amended, corrected or restated upon the filing of a certificate of amendment (or judicial decree of amendment), certificate of correction, corrected certificate or restated certificate, and to confirm that a certificate of registered series is canceled upon a certificate of conversion of such registered series to protected series becoming effective. Section 6. This section amends Section 18-210 of the Act to provide that a plan of division may provide for contractual appraisal rights and that contractual appraisal rights may be made available in connection with any merger or consolidation in which a registered series is a constituent party, any division of the limited liability company, any conversion of a protected series to a registered series of the limited liability company, and any conversion of a registered series to a protected series of the limited liability company. Section 7. This section amends Section 18-215(b) of the Act to provide with respect to protected series that neither the limited liability company agreement nor the notice of the limitation on liabilities of a protected series in the certificate of formation must use the term protected when referencing series or refer to Section 18-215. Section 8. This section amends: Section 18-217(a) of the Act to add a reference to Section 18-301; Section 18-217(b) to clarify that the obligations and liabilities of the dividing company shall be allocated to and vested in, and valid and enforceable obligations of, such division company or companies to which such obligations and liabilities have been allocated pursuant to the plan of division, as provided in Section 18-217(l); Sections 18-217(f) and 18-217(l)(1) to make technical changes; Section 18-217(h) to provide that a certificate of division shall be executed on behalf of, and along with the certificate of formation for each resulting company filed by, the dividing company; and Section 18-217(l)(9) to clarify and confirm the operation of 18-217(l)(4) even though a pending action or proceeding may be continued against the surviving company as if the division did not occur. Sections 9, 11, 12, and 18. These sections amend Sections 18-218, 18-220, 18-221, and 18-1110 of the Act to make technical changes regarding certain certificates filed with respect to registered series. Section 10. This section amends Section 18-219 of the Act to make technical changes regarding certain certificates filed with respect to protected series. Section 13. This section amends Section 18-301 of the Act to add a new subsection (b)(4) that clarifies in connection with a division the mechanics for the admission of a member to a division company or to a limited liability company that is not a division company in the division. Sections 14 and 15. These sections amend Sections 18-302(d) and 18-404(d) of the Act to conform with the addition of the defined term “electronic transmission” in Section 18-101. Section 16. This section amends Section 18-1105(a)(3) of the Act to make a technical change regarding certificates of merger or consolidation filed with respect to registered series under Section 18-221 of the Act, Section 18-1105(a)(4) to provide for the fee payable where the Secretary of State provides the copies of the document to be certified, Section 18-1105(a)(5) to clarify that the fee payable thereunder is for copies that are not certified by the Secretary of State, Section 18-1105(a)(9) to provide for the fee payable for a written report of a record search, and Section 18-1105(a)(10) to provide for the fee payable for any certificate issued via the Secretary of State’s online services. Section 17. This section amends Section 18-1107(n) of the Act to clarify and confirm that a protected series or registered series of a domestic limited liability company is not liable for the debts, obligations or liabilities of such company or any other series thereof solely by reason of the neglect, refusal or failure of another series to pay an annual tax or by reason of another series ceasing to be in good standing. Section 19. This section provides that the proposed amendments to the Act shall become effective August 1, 2019.