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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 provide for the establishment of series) must be approved by each class or group of members associated with such series and to eliminate the default rule affording to the members of each such class or group the authority to wind up the affairs of a series.

In order to avoid prejudice to existing parties who may have relied upon the voting rules as in effect prior to the amendment, all LLCs formed on or prior to July 31, 2015 will continue to be governed by the voting requirements in effect prior to the amendment, unless they amend their LLC Agreements to opt in to the revised version of Sections 209(b), 18-213(b), 18-216(b),18-801(a), 18-803(a) and Sections 18-215(k) and (l), respectively.

Practice tipWhen drafting LLC Agreements for Delaware LLCs formed by the filing of a certificate of formation prior to August 1, 2015, consider whether to include the opt-in language for each of the relevant determinations.  When forming Delaware LLCs after July 31, 2015, you will need to expressly provide for approval of a plan of merger or consolidation or an agreement of merger, or a domestication or continuance, conversion, dissolution of the LLC by a particular class or group or the approval of the termination of a series by a particular class or group associated with that series.

SB 78 revises Section 18-407 of the DE LLC Act to confirm that, unless an LLC Agreement provides otherwise, any delegation by a member or manager of any of its rights and power to manage and control the business and affairs of the LLC may be made irrevocable by its express terms.  Any such irrevocable delegation may be made to agents, officers and employees of the LLC or agents, officers and employees of a member or manager of the LLC and may be a separate delegation or may be included in an LLC Agreement,  a management agreement or other agreement.

Section 18-603 of the DE LLC Act, the current version of which was adopted in 1996, provides that, unless an LLC Agreement expressly permits resignation, a member may not resign in advance of the dissolution and winding up of the LLC.  This provision contains a “grandfather clause” stating that an LLC whose certificate of formation was filed on or prior to July 31, 1996 will continue to be governed by Section 18-603 as in effect on July 31, 1996 (unless it opts in to the current version of 18-603 by amending its LLC agreement).  The 2015 amendment deletes additional language expressing the implicit consequence that an LLC formed prior to August 1, 1996 that has not opted in will not be governed by the August 1, 1996 version of Section 18-603.  The deletion of this surplusage should eliminate any negative implication that might otherwise have arisen from the absence of similar language in the amendments to Sections 18-209(b), 18-213(b), 18-216(b), 18-801(a) and 18-803(a) and Sections 18-215(k) and (l).

SB 78 revises Section 18-1105(a)(5) of the DE LLC Act to clarify the obligation of the Division of Corporations to provide public access to records.  The amendment first eliminates the obsolete reference to the Secretary of State issuing microfiche copies of records and the associated fee.  Second, the amendment clarifies that the Secretary of State has no duty to provide access to information or copies of records (including bulk data, digital copies or any other type of access) in any form other than photocopies or electronic images of specific records associated with one or more specific entity files upon a request therefor, in each case, upon payment of the applicable fees for each as specified in Section 18-1105 or in Section 2318 of Title 29.  The amendment makes clear that a person cannot subvert the Section 18-1105 and the fee schedule contained therein, or obtain unlimited access to the Division of Corporations database, by making a Freedom of Information Act request.  This amendment was effective immediately upon its enactment.

DE LP Act Amendments

Sections 17-211(b), 17-214(a), 17-216(b), 17-218(k), 17-218(l), 17-219(b), 17-801, 17-803(a) and 17-806 of the DE LP Act are amended in a manner consistent with the changes to the LLC Act eliminating the default requirement for a class or group vote in connection with mergers and consolidations,  limited liability limited partnership elections, transfers or continuances, conversions, the dissolution and winding up of a limited partnership, the termination and winding up of series and the revocation of a dissolution.  Section § 17-204(a)(3)of the DE LP Act  is amended to delete the default provision that if a limited partnership is being wound up by the limited partners, a certificate of cancellation should be signed by limited partners holding a majority in interest of each class or group.  Note:  the LLC Act does not have parallel amendments to 17-204(a)(3) and 17-806, because Sections 18-204 and 18-806 of the LLC Act did not refer to classes or groups of members.  The amendments to Sections 17-204(a)(3) (dealing with execution of a certificate of cancellation by limited partners in the event that limited partners are winding up the partnership), 17-214(a) (dealing with approval of an election to become a limited liability limited partnership), and 17-806 (dealing with revocation of dissolution based upon the withdrawal of a general partner) are applicable to all limited partnerships, including those formed on or prior to July 31, 2015, because it is unlikely that any party would be prejudiced by elimination of separate class or group treatment in those instances.  As to the remaining affected Sections (dealing with approval of mergers and consolidations, transfer and continuance, termination and winding up of series, conversion and dissolution and winding up of the partnership), the amendments will not apply to any limited partnership formed on or prior to July 31, 2015, unless its partnership agreement is amended to opt in to the amended versions of the relevant sections of the DE LP Act.

See the Practice Tip in the discussion of the DE LLC Act amendments above, which is equally relevant to drafting limited partnership agreements.

Section 17-204(c) of the DE LP Act has been amended to include irrevocable proxies in a manner analogous to the amendments to Section 18-204(c) of the DE LLC Act.

Section 17-403(c) of the DE LP Act is being amended clarify that a general partner of a limited partnership may irrevocably delegate its rights and or powers to manage and control the business and affairs of the partnership pursuant to a delegation that expressly states that it is irrevocable.

Section 17-603 of the DE LP Act, which was amended in 1996 to prohibit resignation by a partner contemporaneously with the analogous change to the DE LLC Act prohibiting resignation.  The DE LP Act is also being amended by SB 77 to eliminate the unnecessary language in Section 17-603 as to the inapplicability of the 1996 version of that Section to a partnership whose certificate of limited partnership was filed prior to August 1, 1996.

DE GP Act

SB 76 addresses some of the same issues as the LLC and LP amendments.

In particular, the power of attorney provisions in Section 15-123 have been amended in a manner consistent with the analogous provisions of the DE LLC Act and the DE LP Act to include irrevocable proxies.

Section 15-401(1) of the DE GP Act has been amended to confirm that unless otherwise limited in a partnership agreement, a delegation of rights and powers may be made irrevocable to the extent that expressly states that it is irrevocable.

Section 12-1207(a)(5) parallels the amendments to the DE LLC Act and the DE LP Act clarifying that the Division of Corporations need only provide access to partnership records by issuing photocopies or electronic images for the fees specified in Section 15-1207 and Section 2318 of Title 29.

Finally, the legislations amends sections 15-202(f), § 15-401(m), § 15-407(d), § 15-407(e), § 15-807(h) and § 15-902(b) to strike the phrase “Unless otherwise provided in a partnership agreement,” or equivalent language, in light of the global statement in Section 15-103  stating that any provision of the DE GP Act may be contractually overridden in a partnership agreement except those provisions of the DE GP Act not subject to contractual modification as specified  in clauses (b) and (c) of that section.

You can access copies of SB 78, SB 77 and SB 76 by clicking on the relevant links.


1 A “default” rule or requirement is the rule or requirement that applies if the LLC Agreement is silent on the matter.  If the agreement contains a provision addressing what happens under the applicable circumstances, then the statutory default is contractually overridden (except in the rare case that the statute expressly imposes a mandatory rule that cannot be altered by agreement or fails to permit a contractual modification of a standard that is imposed for the protection of third parties).

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