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Delaware Amends LLC and Partnership Acts
Practical Law Legal Update w-002-7210 (Approx. 4 pages)
Delaware Amends LLC and Partnership Acts
by Practical Law Real Estate
| Published on 07 Jul 2016 • Delaware |
On June 22, 2016, Delaware enacted legislation amending its limited liability company (LLC), limited partnership (LP), and general partnership (GP) laws. These amendments take effect on August 1, 2016.
On June 22, 2016, Delaware enacted legislation amending its:
- Limited Liability Company Act (LLC Act) (6 Del. C. §§ 18-101 to 18-1109).
- Revised Uniform Limited Partnership Act (LP Act) (6 Del C. §§ 17-101 to 17-1111).
- Revised Uniform Partnership Act (GP Act) (6 Del. C. §§ 15-101 to 15-1210).
This Update highlights the amendments to the LLC Act, the LP Act, and the GP Act (Acts).
Elimination of Requirement of Written Approval or Consent
The Acts were amended to allow in certain circumstances, members of limited liability companies (LLCs) and partners of limited partnerships (LPs) and general partnerships (GPs) to consent to specified actions by means other than writing, including:
- The right of an assignee to become a member of a single member LLC (see Right of Assignees to Become Members of a Single Member Delaware LLCs).
- The dissolution of an LLC, LP, or GP.
- The revocation of dissolution of an LLC, LP, or GP.
- The approval of a transaction.
The amendments to the Acts align these actions with the merger and conversion provisions contained in the Acts, which do not require written approval or consents.
Right of Assignees to Become Members of Single Member Delaware LLCs
The recent legislation amends the rights of assignees to become members of single member LLCs under the LLC Act. The new subsection 18-704(a)(3) provides that a single assignee of a single member LLC becomes a member on:
- The voluntary assignment by the sole member of the LLC of all of its interests in the LLC to the assignee, unless otherwise provided in:
- connection with the assignment; or
- the LLC agreement by a specific reference to Section 18-704(a)(3).
This amendment safeguards against the risk of unintentionally dissolving a Delaware LLC when the assignee was not provided for in connection with the LLC agreement. Before the new legislation was passed:
- An assignee of a member's LLC interest did not have the right to participate in the management of the LLC if the right was not provided for in the LLC agreement.
- If at any time no members of the LLC existed (such as when the sole member of an LLC assigns its interests) the LLC could be dissolved. This amendment safeguards against the risk of unintentionally dissolving a Delaware LLC when the assignee was not provided for in connection with the LLC agreement.
Service of Process on a Series of a Delaware LLC or LP
The LLC Act and the LP Act were amended to provide a method for effecting service of legal process on a series of an LLC or a series of an LP. Previously, service of process could only be brought against the LLC or LP entity itself. Service of process on a series of an LLC or an LP was not addressed.
Liability of a Series of a Delaware LLC or LP
The LLC Act and the LP Act were amended to clarify that a series of a Delaware LLC or LP may agree, but is not required, to assume liability with respect to the entity itself or another series of the entity regarding any or all of the following, whether incurred, contracted for, or otherwise existing:
- Debts.
- Liabilities.
- Obligations.
- Expenses.
Practical Implications
The recent amendments represent Delaware's interest in addressing and clarifying the issues surrounding limited liability company and partnership law. These changes diverge from the "formalities" typically associated with LLCs, LPs, and GPs, and makes the management of these entities less rigid. These changes also benefit the attorneys who manage the legal matters of these entities.