Richards Layton & Finger
 

Market Embraces Legal Entity Opt-Out Option of Delaware Statutory Trust Act

January 20, 2017

Amendments to the Delaware Statutory Trust Act (the “DSTA”), effective August 1, 2016, provide for the ability to opt out of separate legal entity status. [Read our July 2016 update HERE]. In the five months since the effective date of the amendments, the opt-out provisions of the DSTA have been embraced and utilized by many in the industry. We have acted as Delaware counsel in transactions involving consumer loans, automobile receivables and mortgages where statutory trusts have been formed utilizing the opt-out provisions of the DSTA. Based on our ongoing discussions with industry participants, we anticipate many more such transactions.

Opting out of separate legal entity status is voluntary. The amendments provide the industry with an attractive alternative to the use of common law trusts. The amendments make available the DSTA’s organized scheme of statutory provisions specifically devoted to the use of trusts in commercial transactions where separate legal entity status is not desired because of state licensing or other reasons.