With the start of 2012, it is important to bear in mind the various amendments to the Delaware corporate and alternative entity statutes adopted in the previous year. The following is a brief summary of the material amendments adopted last year:
Action by Written Consent
Effective August 1, 2011, amendments to the Delaware Limited Liability Company Act, the Delaware Revised Uniform Partnership Act and the Delaware Revised Uniform Limited Partnership Act, eliminate the requirement that consents to action must be “in writing, setting forth the action so taken.” These amendments explicitly permit consent in writing or by means of electronic transmission. These amendments also make clear that when action is taken by written consent, the instrument containing the consent need not detail the action being taken. It should now be possible for a partner, member or manager to consent to the taking of action by a reply message stating “I consent” or “I agree.”
Amending LLC Agreements
A new section was added to the Delaware Limited Liability Company Act to establish a default rule for amending limited liability company agreements. Under this new rule, unless the limited liability company agreement indicates otherwise, the unanimous consent of all members is required to amend an agreement, except as otherwise permitted by law (including in the context of a merger). Non-members such as managers, lenders and other third parties have no right to vote on amendments, even if such parties are parties to the limited liability company agreement and have other rights thereunder. This amendment applies to Delaware limited liability companies formed on or after January 1, 2012.
Equal Dignities Clauses
The Delaware Limited Liability Company Act, the Delaware Revised Uniform Limited Partnership Act and the Delaware Revised Uniform Partnership Act were each amended to address the decision reached in In re LJM2 Co-Investment, L.P. In that case, the Delaware chancery court held that if a partnership or limited liability agreement contains an equal dignities clause (a clause requiring a supermajority vote to amend any provision itself requiring a supermajority vote to approve a matter), then the equal dignities clause also applies to default provisions of the applicable entity statute, regardless of whether such default provision is referenced in the agreement. These amendments clarify that, contrary to the aforementioned court’s holding, equal dignities clauses only apply to express provisions of limited liability company or partnership agreements containing supermajority voting requirements. These amendments were made effective August 1, 2011.
Correcting Certificates of Cancellation
The Delaware Limited Liability Company Act and the Delaware Revised Uniform Limited Partnership Act were amended to permit the filing of a certificate of correction for an erroneously executed certificate of cancellation. In the event that winding up was not complete when the certificate was filed, or assets are discovered after the filing of a certificate of cancellation, these amendments permit correction of the premature filing.
Partner Liability
The Delaware Revised Uniform Partnership Act was amended to confirm when an obligation of a partnership is solely the obligation of the partnership. The amendments address the decision reached in Evanston Ins. Co. v. Dillard Dept. Stores, Inc., which held that an obligation was incurred upon the rendering of a judgment, not the onset of litigation. Since the partnership ceased being a limited liability partnership after the occurrence of the conduct giving rise to the judgment, but before the judgment was rendered, the court held the partners liable. The amendment clarifies that an obligation arising out of or related to circumstances or events while the partnership is a limited liability partnership is solely the obligation of the partnership.
Future Effective Dates
The Delaware Limited Liability Company Act, the Delaware Revised Uniform Limited Partnership Act, the Delaware Revised Uniform Partnership Act and the Delaware Statutory Trust Act were each amended to limit future effective dates of statements or certificates filed with the Delaware Secretary of State to no more than 180 days after the date of filing such statements or certificates.
Amendments to Governing Instruments
The Delaware Statutory Trust Act was amended to provide that an agreement of merger adopted in accordance with the Act may amend the governing instrument of the trust or may provide for the adoption of a new governing instrument of the surviving or resulting trust.
Additional minor amendments were made to the corporate and alternative entity statutes related to filings made with the Delaware Secretary of State. If you have any questions about the amendments, please contact a member of Venable’s Corporate Practice Group or one of the authors of this alert.