Amendments to Delaware’s Statutory Trust Legislation Enacted
July 23, 2014
Publication| Corporate Trust & Agency Services
The Delaware General Assembly has recently enacted legislation amending the Delaware Statutory Trust Act (the Statutory Trust Act). The following is a brief summary of some of the more significant amendments that affect Delaware statutory trusts.
Usury
The Statutory Trust Act was amended to clarify that a defense of usury shall not apply to obligations of a beneficial owner or trustee of a statutory trust owed to a beneficial owner or trustee of a statutory trust when the obligations arise under the governing instrument or a separate agreement in writing.
Trustees
The Statutory Trust Act was amended to clarify that a governing instrument of a statutory trust may designate a threshold number of trustees whose vote is required to approve any action on behalf of a trust. When the governing instrument is silent, the default threshold will be a majority of the trustees.
Consents with a Future Effective Date
The Statutory Trust Act was amended to confirm and clarify that unless otherwise provided in a governing instrument, a person who is not then a beneficial owner may consent to any matter as a beneficial owner provided that such consent will only be effective at a time when such person is a beneficial owner of the statutory trust, and a person who is not then a trustee may consent to any matter as a trustee provided that such consent will only be effective at a time when such person is a trustee of the statutory trust.
Trust Names
The Statutory Trust Act was amended to restrict the use of the word “bank” in the name of a statutory trust.
Survival of Rights and Interests
The Statutory Trust Act was amended to expressly allow for the rights or securities of, or interests in, (i) a non-United States entity which is to be domesticated as a domestic statutory trust to remain outstanding upon such domestication, (ii) a statutory trust which is to be transferred to or domesticated in another jurisdiction to remain outstanding upon such transfer or domestication, (iii) the other business entity which is converted into a statutory trust to remain outstanding upon such conversion, (iv) a statutory trust which is to be converted to another business entity to remain outstanding upon such conversion, and (v) a statutory trust or other business entity which is a constituent party to a merger or consolidation to remain outstanding upon such merger or consolidation.
The recent amendments reflect Delaware’s continuing commitment to maintaining statutes governing Delaware statutory trusts that effectively serve the business needs of the national and international business communities. These amendments to the Delaware Statutory Trust Act are contained in House Bill No. 364 (effective August 1, 2014).