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Amendments of Delaware's Alternative Entities Legislation Enacted

July 25, 2007

Amendments of Delaware's Alternative Entities Legislation Enacted
The Delaware General Assembly has recently enacted legislation amending the Delaware Limited Liability Company Act (DLLCA), the Delaware Revised Uniform Partnership Act (DRUPA) and the Delaware Revised Uniform Limited Partnership Act (DRULPA, and collectively, the Acts). The recent amendments to the Acts will become effective on August 1, 2007. The following is a brief summary of some of the significant amendments that affect Delaware limited liability companies, general partnerships and limited partnerships (Delaware Alternative Entities).

Freedom to Contractually Restrict Powers to Make Organic Changes
New language has been added to each of the Acts confirming the ability of a Delaware Alternative Entity to provide in a partnership agreement or limited liability company agreement, as the case may be, that such entity does not have power to merge or consolidate, transfer, domesticate, continue or convert under the applicable Act.

Requirements for Formation Under DLLCA and DRULPA
The recent amendments to DLLCA and DRULPA confirm that a limited liability company agreement or a partnership agreement, as applicable, in addition to the filing of a certificate of formation or a certificate of limited partnership with the Secretary of State of the State of Delaware, is required. New language has also been added to DRULPA, conforming it to a provision in DLLCA. Such new language provides that a partnership agreement may be entered into before, after or at the time of the filing of a certificate of limited partnership and made effective as of the formation of the limited partnership or at such other time or date as provided in the partnership agreement.

Series Entities
DRULPA and DLLCA permit a Delaware limited partnership and a Delaware limited liability company to have designated series of members, partners or interests with separate rights, powers and duties with respect to specified property or obligations of such limited partnership or limited liability company. Significantly, a series may have many of the characteristics of a separate limited partnership or limited liability company, and the debts, liabilities, obligations and expenses incurred or existing with respect to a particular series are only enforceable against the assets of such series, and not against the assets of the limited partnership or limited liability company generally, or any other series thereof.

In order to qualify as a series limited liability company or limited partnership under the applicable Act, certain statutory conditions must be met. For example, notice of the limitation on liabilities of a series must be set forth in the certificate of limited partnership or the certificate of formation, as the case may be, although this notice does not need to include reference to any specific series. Additionally, separate and distinct records must be maintained for any series and such records must account for the assets associated with such series separately from the other assets of the entity or any other series thereof.

The recent amendments to DRULPA and DLLCA clarify the manner in which assets may be accounted for, confirm the flexibility that exists thereunder and provide that in addition to series of members, partners or interests, a limited liability company or limited partnership may also have separate series of assets. The recent statutory amendments also confirm the broad purposes and powers granted to series, including that, unless otherwise provided in the partnership agreement or limited liability company agreement, as applicable, a series shall have the power, in its own name, to contract, hold title to assets (including real, personal and intangible property), grant liens and security interests, and sue and be sued.

The recent amendments reflect Delaware's continuing commitment to maintaining statutes governing Delaware Alternative Entities that effectively serve the business needs of the national and international business communities. The recent amendments of the Delaware Limited Liability Company Act, 6 Del. C. § 18-101, et seq., are contained in Senate Bill No. 96 (effective August 1, 2007). The recent amendments of the Delaware Revised Uniform Partnership Act, 6 Del. C. § 15-101, et seq., are contained in Senate Bill No. 98 as amended by Senate Amendment No. 1 thereto (effective August 1, 2007). The recent amendments of the Delaware Revised Uniform Limited Partnership Act, 6 Del. C. § 17-101, et seq., are contained in Senate Bill No. 95 (effective August 1, 2007).