Richards Layton & Finger
 

Changes to the Limited Liability Company Act Affecting Commercial Real Estate

August 7, 2018

On July 23, 2018, Delaware Governor John Carney signed into law Senate Bill No. 183, which amends the Delaware Limited Liability Company Act. The legislation addresses a number of aspects of Delaware limited liability companies; however, the amendment most affecting commercial real estate transactions is the creation of a new type of Delaware series LLC known as a "registered series."

To form a registered series, the certificate of formation of the Delaware LLC must contain a notice of the limitation of liabilities of the registered series, and a certificate of registered series must be filed with the Delaware Secretary of State. A registered series addresses two aspects of the present law governing a Delaware series LLC that make it challenging for use in many real estate transactions. One challenge has been the inability to obtain a certificate of good standing from the Secretary of State for a specific series. The other challenge has been uncertainty of where to file a financing statement under the Uniform Commercial Code with respect to a specific series.

The new legislation addresses both of these challenges. The Delaware Secretary of State will now be able to issue certificates of good standing with respect to a registered series. And a registered series will qualify as a registered organization under the Delaware Uniform Commercial Code, thereby clarifying that the Delaware Secretary of State is the place to file a financing statement for a registered series as debtor. Although much of the legislation was effective August 1, 2018, the provisions with respect to the registered series will be effective August 1, 2019 in order to provide the Delaware Secretary of State's office with the time necessary to prepare for the new filing process.

Governor Carney also signed into law Senate Bill No. 196, which amends the Delaware Uniform Commercial Code to include in the definition of "registered organization" a series limited liability company, whether formed in Delaware or in another state where series are authorized, and thereby authorizing the filing of a financing statement for a Delaware registered series with the Delaware Secretary of State. This legislation will also be effective August 1, 2019.

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