July 21, 2015
Delaware Adopts 2015 Legislative Updates to the Delaware Limited Liability Company Act, the Delaware Revised Uniform Limited Partnership Act, and the Delaware Uniform Partnership Act
By Marla H. Norton
On June 24, 2015, Delaware Governor Jack Markell signed into law Senate Bills 78 (“SB 78”), 77 (“SB 77”) and 76 (“SB 76”), which implement the annual legislative updates to the Delaware Revised Uniform Limited Partnership Act, 6 Del. C. §17-101 et seq. (the “DE LP Act”), the Delaware Limited Liability Company Act, 6 Del. C. §18-101 et seq. (the “DE LLC Act”), and the Delaware Revised Uniform Partnership Act, 6 Del. C. §15-101 et seq. (the “DE GP Act”), respectively. All amendments are effective August 1, 2015, except as otherwise noted. Key provisions of the legislative changes are as follows:
DE LLC Act Amendments
SB 78 updates the DE LLC Act in a number of respects.
Section 18-204(c) of the DE LLC Act has been expanded (1) to extend the provisions governing an irrevocable power of attorney to include an irrevocable proxy delivered in connection with a limited liability company (an “LLC”), and (2) to eliminate language limiting the scope of an irrevocable power of attorney or proxy to “matters relating to the organization, internal affairs or termination” of an LLC and limiting the grantor to “a member or assignee or a person seeking to become a member or an assignee.” The statute now recognizes a proxy or power of attorney granted “with respect to a limited liability company” by “any person” as irrevocable, provided that the power or proxy complies with the applicable statutory requirements (that is, the instrument must expressly state that it is irrevocable and must be coupled with an interest sufficient to support an irrevocable power or proxy under applicable law). The revised statute retains the presumption that a power or proxy as to the organization, internal affairs or termination of an LLC, or otherwise granted by an actual or prospective member or assignee, is coupled with a legally sufficient interest if granted either to the LLC, to a member or manager of the LLC or to officers, directors, managers, members, partners, trustees, employees or agents of any of them. The amendment also provides that an LLC agreement may eliminate or limit the power and authority of a person to grant an irrevocable power of attorney in connection with an LLC, and confirms that Section 18-204(c) is not intended to limit the enforceability of a power of attorney or proxy contained within an LLC Agreement.
In order to eliminate uncertainty as to when, in the absence of an LLC agreement provision affording a class or group vote, the DE LLC Act required a special vote by a “class” or “group” of members. SB 78 amends Sections 18-209(b), 18-213(b), 18-216(b), 18-801(a) and 18-803(a) of the DE LLC Act to eliminate the default requirements1 for a class or group vote by each class or group of members in connection with, respectively, a merger or consolidation, a domestication or continuance (to the extent not prohibited), a conversion (to the extent not prohibited) or a dissolution of an LLC and the default rule that the winding up of a dissolved LLC without a manager is conducted by a majority in interest of the members in each class or group of members (or a person approved by them). Under the revised versions of these sections, unless the LLC Agreement provides a different threshold of approval, an agreement of merger or consolidation or a plan of merger, a domestication or transfer, a conversion or a dissolution need only be approved on behalf of each constituent Delaware LLC by members holding a majority of the aggregate voting interest in the LLC and the winding up of a dissolved LLC may be conducted by such members or their designee(s).
Similarly, Sections 18-215(k) and (l) of the DE LLC Act have been amended to eliminate the requirement that the termination and winding up of a series (in an LLC whose governing documents pro
On June 24, 2015, Delaware Governor Jack Markell signed into law Senate Bills 78 (“SB 78”), 77 (“SB 77”) and 76 (“SB 76”), which implement the annual legislative updates to the Delaware Revised Uniform Limited Partnership Act, 6 Del. C. §17-101 et seq. (the “DE LP Act”), the Delaware Limited Liability Company Act, 6 Del. C. §18-101 et seq. (the “DE LLC Act”), and the Delaware Revised Uniform Partnership Act, 6 Del. C. §15-101 et seq. (the “DE GP Act”), respectively. All amendments are effective August 1, 2015, except as otherwise noted. Key provisions of the legislative changes are as follows:
DE LLC Act Amendments
SB 78 updates the DE LLC Act in a number of respects.
Section 18-204(c) of the DE LLC Act has been expanded (1) to extend the provisions governing an irrevocable power of attorney to include an irrevocable proxy delivered in connection with a limited liability company (an “LLC”), and (2) to eliminate language limiting the scope of an irrevocable power of attorney or proxy to “matters relating to the organization, internal affairs or termination” of an LLC and limiting the grantor to “a member or assignee or a person seeking to become a member or an assignee.” The statute now recognizes a proxy or power of attorney granted “with respect to a limited liability company” by “any person” as irrevocable, provided that the power or proxy complies with the applicable statutory requirements (that is, the instrument must expressly state that it is irrevocable and must be coupled with an interest sufficient to support an irrevocable power or proxy under applicable law). The revised statute retains the presumption that a power or proxy as to the organization, internal affairs or termination of an LLC, or otherwise granted by an actual or prospective member or assignee, is coupled with a legally sufficient interest if granted either to the LLC, to a member or manager of the LLC or to officers, directors, managers, members, partners, trustees, employees or agents of any of them. The amendment also provides that an LLC agreement may eliminate or limit the power and authority of a person to grant an irrevocable power of attorney in connection with an LLC, and confirms that Section 18-204(c) is not intended to limit the enforceability of a power of attorney or proxy contained within an LLC Agreement.
In order to eliminate uncertainty as to when, in the absence of an LLC agreement provision affording a class or group vote, the DE LLC Act required a special vote by a “class” or “group” of members. SB 78 amends Sections 18-209(b), 18-213(b), 18-216(b), 18-801(a) and 18-803(a) of the DE LLC Act to eliminate the default requirements1 for a class or group vote by each class or group of members in connection with, respectively, a merger or consolidation, a domestication or continuance (to the extent not prohibited), a conversion (to the extent not prohibited) or a dissolution of an LLC and the default rule that the winding up of a dissolved LLC without a manager is conducted by a majority in interest of the members in each class or group of members (or a person approved by them). Under the revised versions of these sections, unless the LLC Agreement provides a different threshold of approval, an agreement of merger or consolidation or a plan of merger, a domestication or transfer, a conversion or a dissolution need only be approved on behalf of each constituent Delaware LLC by members holding a majority of the aggregate voting interest in the LLC and the winding up of a dissolved LLC may be conducted by such members or their designee(s).
Similarly, Sections 18-215(k) and (l) of the DE LLC Act have been amended to eliminate the requirement that the termination and winding up of a series (in an LLC whose governing documents pro