SB 284

Abstract

This Act continues the practice of amending periodically the Delaware Statutory Trust Act (the “Act”) to keep it current and to maintain its national preeminence. The following is a section-by-section review of proposed amendments of the Act. Sections 1, 3, 6, 8, 9, 13 and 15-17. The amendments add business development companies to a number of provisions of the Act that previously applied only to registered investment companies (within the meaning of the Investment Company Act of 1940). Though similar to registered investment companies in many respects, business development companies as a technical matter are not registered investment companies but instead elect to be subject to many of the federal regulations applicable to registered investment companies. Section 2. Section 3804(a) of the Act has been amended to clarify that, except to the extent otherwise provided in the governing instrument of a statutory trust, the trustees or other authorized persons, or the duly authorized agents of such trustees or other authorized persons, may bind a statutory trust to a contract or instrument by entering into such contract or instrument in the name of the statutory trust or in the name of any such person acting on behalf of the statutory trust. Section 4. This section amends Section 3806(b)(7) of the Act to provide that a trustee, officer, employee, manager or other person who may manage the business and affairs of the statutory trust may delegate any of its rights, powers and duties irrespective of whether it has a conflict of interest with respect to the matter as to which such rights, powers or duties are being delegated, and that the person or persons to whom any such rights, powers or duties are being delegated shall not be deemed conflicted solely by reason of the conflict of interest of the trustee, officer, employee, manager or other person who may manage the business and affairs of the statutory trust. The amendments to Section 3806(b)(7) create a different rule than the rule applied in cases such as Wenske v. Bluebell Creameries, Inc., 214 A.3d 958 (Del. Ch. 2019), that a conflicted principal is legally disabled from delegating authority over the subject matter as to which the principal is conflicted even to an independent delegate. Section 5. This section amends Section 3806(i) of the Act to confirm and clarify the broad power and authority of a trustee to delegate any or all of the trustee’s rights, powers and duties to manage and control the business and affairs of a statutory trust, including any core governance functions. In addition, this section amends Section 3806(i) of the Act to provide that a trustee may delegate any of its rights, powers and duties irrespective of whether it has a conflict of interest with respect to the matter as to which such rights, powers or duties are being delegated, and that the person or persons to whom any such rights, powers or duties are being delegated shall not be deemed conflicted solely by reason of the conflict of interest of the trustee. The amendments to Section 3806(i) create a different rule than the rule applied in cases such as Wenske v. Bluebell Creameries, Inc. 214 A.3d 958 (Del. Ch. 2019), that a conflicted principal is legally disabled from delegating authority over the subject matter as to which the principal is conflicted even to an independent delegate. Section 7. This section amends Section 3806 of the Act to add subsection (o) to provide a safe harbor procedure for ratifying acts or transactions that may be taken by or in respect of a statutory trust under the Act or a governing instrument that are void or voidable and waiving failures to comply with requirements of a governing instrument that make such acts and transactions void or voidable. New subsection (o) is intended to provide a rule different from the rule applied in Composecure, L.L.C. v. Cardux, LLC, 206 A.3d 807 (Del. 2018), and Absalom Absalom Trust v. Saint Gervais LLC, 2019 WL 2655787 (Del. Ch. June 27, 2019), that acts or transactions determined to be void generally may not be ratified. The penultimate sentence of new subsection (o) confirms that void or voidable actions may be ratified or requirements may be waived by other means permitted by law, and accordingly, new subsection (o) is not intended to preempt or restrict other valid means of ratifying acts or transactions or waiving requirements or to impair the effectiveness of any valid ratification or waiver previously effected. Section 10. This section adds a provision for the filing of a certificate by a trustee who has succeeded the predecessor trustee of one or more statutory trusts in order to amend the name and address of such trustee in each affected certificate of trust. Section 11. This section amends Section 3811(c) of the Act to clarify that the execution of a certificate by a person who is authorized by the Act to execute such certificate constitutes an oath or affirmation that, to the best of such person’s knowledge and belief, the facts stated therein shall be true at the time such certificate becomes effective, not at the time such certificate is executed. Section 12. This section specifies the fee payable in connection with the filing of a certificate under Section 3807(n). Section 14. This section amends Section 3819 of the Act to make certain clarifying and conforming changes, and to provide that when a beneficial owner is entitled to obtain information for a stated purpose (whether pursuant to Section 3819 or a governing instrument), the beneficial owner’s right shall be to obtain such information as is necessary and essential to achieving that purpose, unless such right has been expanded or restricted in the governing instrument. To the extent current law is that the “necessary and essential” test does not apply by default to (i) a beneficial owner’s right under Section 3819(a) of the Act to obtain information from a statutory trust for a purpose reasonably related to the beneficial owner’s interest as a beneficial owner of the statutory trust or (ii) a beneficial owner’s right under a governing instrument to obtain information from a statutory trust for a stated purpose, new subsection (f) is intended to change that law. Section 18. This section amends Section 3826(b) of the Act to confirm that a signature on a certificate of beneficial interest may be a manual, facsimile or electronic signature. Section 19. This section adds Subchapter III to the Act to add a control beneficial interest acquisition provision for statutory trusts registered under the 1940 Act as closed-end management investment companies or statutory trusts that are closed-end management investment companies that have elected to be regulated as business development companies under the 1940 Act and that in either case have a class of equity securities listed on a national securities exchange registered under the Securities Exchange Act of 1934 (15 U.S.C. § 78a et seq.) or designated for trading on the National Association of Securities Dealers Automated Quotation System (NASDAQ). Section 20. This section provides that the proposed amendments of the Act shall become effective August 1, 2022.