Richards Layton & Finger
 

Delaware LLC & Partnership Law Update

July 18, 2012

Amendments to Delaware's Alternative Entity 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) (collectively, the Acts). The following is a brief summary of some of the more significant amendments that affect Delaware limited liability companies (Delaware LLCs), Delaware general partnerships (Delaware GPs) and Delaware limited partnerships (Delaware LPs) (each, a Delaware Alternative Entity, and collectively, Delaware Alternative Entities).

Expansion of Obligations Not Subject to Defense of Usury
The Acts provide that no obligation of a partner, member or manager, as applicable, of a Delaware Alternative Entity to such Delaware Alternative Entity, arising under the partnership agreement or limited liability company agreement of such Delaware Alternative Entity or a separate agreement or writing, is subject to the defense of usury. The Acts have been amended to provide that, in addition to the foregoing, no obligation between or among partners, members and/or managers, as applicable, of a Delaware Alternative Entity, arising under the partnership agreement or limited liability company agreement of such Delaware Alternative Entity or a separate agreement or writing, is subject to the defense of usury.

General Restriction on the Word "Bank" in the Names of Delaware Alternative Entities
The Acts have been amended to confirm the practice of restricting the use of the word "bank" in the names of Delaware Alternative Entities. Excepted from this restriction are (i) banks reporting to and under the supervision of the State Bank Commissioner of the State of Delaware or a subsidiary of a bank or savings association (as such terms are defined in the Federal Deposit Insurance Act, at 12 U.S.C. § 1813), and (ii) Delaware Alternative Entities regulated under (a) the Bank Holding Company Act of 1956 (12 U.S.C. § 1841 et seq.), or (b) the Home Owners' Loan Act (12 U.S.C. § 1461 et seq.). The amendments to the Acts specifically provide that the restriction should not be construed to prevent the use of the word "bank" or any variation thereof in a context clearly not purporting to refer to a banking business or otherwise not likely to mislead the public or lead to a pattern and practice of abuse that might cause harm to the interests of the public or the State of Delaware, as determined by the Division of Corporations in the Department of State of the State of Delaware.

Effectiveness of Limited Partnership Agreements and Limited Liability Company Agreements
DRULPA has been amended to clarify that the limited partnership agreement of a Delaware LP may be made effective as of the effective time of the filing of such Delaware LP's certificate of limited partnership. Similarly, DLLCA has been amended to clarify that the limited liability company agreement of a Delaware LLC may be made effective as of the effective time of the filing of such Delaware LLC's certificate of formation. 

The recent amendments reflect Delaware's continuing commitment to maintaining statutes governing Delaware LLCs, Delaware LPs and Delaware GPs that effectively serve the business needs of the national and international business communities. The recent amendments to DLLCA are contained in House Bill No. 338 (effective August 1, 2012). The recent amendments to DRULPA are contained in House Bill No. 340 (effective August 1, 2012). The recent amendments to DRUPA are contained in House Bill No. 339 (effective August 1, 2012).