SENATE BILL NO. 415
AN ACT TO AMEND CHAPTER 5 OF TITLE 25 AND CHAPTER 38 OF TITLE 12 OF THE DELAWARE CODE RELATING TO BUSINESS TRUSTS.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF DELAWARE:
Section 1. Amend §503(b)(3), Chapter 5, Title 25 of the Delaware Code by deleting the words "and with the Register in Chancery of each county within the state in which such business trust has a place of business or in which a trustee is domiciled or has a principal place of business" currently appearing therein.
Section 2. Amend §3801(a), Chapter 38, Title 12 of the Delaware Code by deleting the word "business" following the words "'Business trust' means an unincorporated", and by adding at the end of present §3801(a) the following:
"A business trust may be organized to carry on any lawful business or activity, whether or not conducted for profit, and/or for any of the purposes referred to in clause (i) of this subsection (a) (including, without limitation, for the purpose of holding or otherwise taking title to property, whether in an active or custodial capacity)."
Section 3. Amend §3801(c), Chapter 38, Title 12 of the Delaware Code by deleting the words "to manage the business and affairs of such business trust" currently appearing therein.
Section 4. Amend §3802, Chapter 38, Title 12 of the Delaware Code by deleting the existing provisions of §3802 in their entirety and by adding a new §3802 to read as follows:
"§3802. Contributions by beneficial owners.
(e) A contribution of a beneficial owner to the business trust may be in cash, property or services rendered, or a promissory note or other obligation to contribute cash or property or to perform services; provided, however, that a person may become a beneficial owner of a business trust and may receive a beneficial interest in a business trust without making a contribution or being obligated to make a contribution to the business trust.
(f) Except as provided in the governing instrument, a beneficial owner is obligated to the business trust to perform any promise to contribute cash, property or to perform services, even if the beneficial owner is unable to perform because of death, disability or any other reason. If a beneficial owner does not make the required contribution of property or services the beneficial owner is obligated at the option of the business trust to contribute cash equal to that portion of the agreed value (as stated in the records of the business trust) of the contribution that has not been made. The foregoing option shall be in addition to, and not in lieu of, any other rights, including the right to specific performance, that the business trust may have against such beneficial owner under the governing instrument of applicable law.
(d) A governing instrument may provide that the interest of any
beneficial owner who fails to make any contribution that he is obligated to make shall be subject to specific penalties for, or specified consequences of, such failure. Such penalty or consequence may take the form of
reducing or eliminating the defaulting beneficial owner's proportionate interest in the business trust, subordinating his beneficial interest to that of nondefaulting beneficial owners, a forced sale of his beneficial interest, forfeiture of his beneficial interest, the lending by other beneficial owners of the amount necessary to meet his commitment, a fixing of the value of his beneficial interest by appraisal or by formula and redemption or sale of his beneficial interest at such value, or any other penalty or consequence."
Section 5. Amend §3803(a), Chapter 38, Title 12 of the Delaware Code by adding the words "organized under the General Corporation Law of the State of Delaware" after the word "profit" and before the period in said subsection.
Section 6. Amend §3804, Chapter 38, Title 12 of the Delaware Code by designating the current language in said section as subsection (a) and by adding new subsections (b) through (h) to read as follows:
"(b) A trustee of a business trust may be served with process in the manner prescribed in subsection (c) of this section in all civil actions or proceedings brought in the State of Delaware involving or relating to the activities of the business trust or a violation by a trustee of a duty to the business trust, or any beneficial owner, whether or not the trustee is a trustee at the time suit is commenced. Every resident or nonresident of the State of Delaware who accepts election or appointment or serves as a trustee of a business trust shall, by such acceptance or service, be deemed thereby to have consented to the appointment of the Delaware trustee or registered agent of such business trust required by §3807 of this title (or, if there is none, the Secretary of State) as such person's agent upon whom service of process may be made as provided in this section. Such acceptance or service shall signify the consent of such trustee that any process when so served shall be of the same legal force and validity as if served upon such trustee within the State of Delaware and such appointment of such Delaware trustee or registered agent (or, if there is none, the Secretary of State) shall be irrevocable.
(6) Service of process shall be effected by serving the Delaware trustee or registered agent of such business trust required by §3807 of this title (or, if there is none, the Secretary of State) with 1 copy of such process in the manner provided by law for service of writs of
summons. In the event service is made under this subsection upon the
Secretary of State, the plaintiff shall pay to the Secretary of State the sum of $50 for the use of the State of Delaware, which sum shall be taxed as part of the costs of the proceeding if the plaintiff shall prevail therein. In addition, the Prothonotary or the Register in Chancery of the court in which the civil action or proceeding is pending shall, within 7 days of such service, deposit in the United States mails, by registered mail, postage prepaid, true and attested copies of the process, together with a statement that service is being made pursuant to this section, addressed to the defendant at his address last known to and furnished by the party desiring to make such service.
(7) In any action in which any such trustee has been served with process as hereinafter provided, the time in which a defendant shall be required to appear and file a responsive pleading shall be computed from the date of mailing by the Prothonotary or the Register in Chancery as provided in subsection (c) of this section; provided, however, the court in which such action has been commenced may order such continuance or continuances as may be necessary to afford such trustee reasonable opportunity to defend the action.
(8) In the governing instrument of the business trust or other writing, a trustee may consent to be subject to the nonexclusive jurisdiction of the courts of, or arbitration in, a specified jurisdiction, or the exclusive jurisdiction of the courts of, or the exclusivity of arbitration in, the State of Delaware, and to be served with legal process in the manner prescribed in such governing instrument of the business trust or other writing.
(9) Nothing herein contained limits or affects the right to serve
process in any other manner now or hereafter provided by law. This section is an extension of and not a limitation upon the right otherwise existing of service of legal process upon nonresidents.
(10) The Court of Chancery and the Superior Court may make all
necessary rules respecting the form of process, the manner of issuance and return thereof and such other rules which may be necessary to implement this section and are not inconsistent with this section.
(1) A partnership (whether .general or limited), corporation or other non-natural person formed or organized under the laws of any foreign country or other foreign jurisdiction or the laws of any state other than
the State of Delaware shall not be deemed to be doing business in the State of Delaware solely be reason of its being a trustee of a business trust."
Section 7. Amend §3805(c), Chapter 38, Title 12 of the Delaware Code by adding a new sentence at the end of subsection (c) to read as follows:
"Except to the extent otherwise provided in the governing instrument of a business trust, a beneficial owner has no interest in specific business trust property."
Section 8. Amend §3805, Chapter 38, Title 12 of the Delaware Code by
adding a new subsection (e) to read as follows:
"(e) Except to the extent otherwise provided in the governing
instrument of a business trust, at the time a beneficial owner becomes entitled to receive a distribution, he has the status of, and is entitled to all remedies available to, a creditor of the business trust with respect to the distribution. A governing instrument may provide for the establishment of record dates with respect to allocations and distributions by a business trust."
Section 9. Amend §3806, Chapter 38, Title 12 of the Delaware Code by
adding a new subsection (c) to read as follows:
"(c) To the extent that, at law or in equity, a trustee has duties (including fiduciary duties) and liabilities relating thereto to a business trust or to a beneficial owner, (1) any such trustee acting under a governing instrument shall not be liable to the business trust or to any such beneficial owner for the trustee's good faith reliance on the provisions of such governing instrument, and (2) the trustee's duties and liabilities may be expanded or restricted by provisions in a governing instrument."
Section 10. Amend §3807(b), Chapter 38, Title 12 of the Delaware Code by deleting the word "the" as it appears immediately preceding the words "issuance of beneficial interests" as currently appearing therein and inserting in lieu thereof the words or within 180 days following the first".
Section 11. Amend §3812, Chapter 38, Title 12 of the Delaware Code by adding a new subsection (e) to read as follows:
"(e) Any signature on any certificate authorized to be filed with the Secretary of State under any provision of this chapter may be a facsimile. Any such certificate may be filed by telecopy, fax or similar electronic transmission; provided, however, that the Secretary of State shall have no obligation to accept such filing if such certificate is illegible or otherwise unsuitable for processing."
Section 12. Amend §3816, Chapter 38, Title 12 of the Delaware Code by changing the word "Derivation" to the word "Derivative" in the heading of said section.
Section 13. Amend §3816(b), Chapter 38, Title 12 of the Delaware Code by adding the word "and" after the word "action" and before the colon in said subsection.
Section 14. Amend .§3816, Chapter 38, Title 12 of the Delaware Code by adding a new subsection (e) to read as follows:
"(e) A beneficial owner's right to bring a derivative action may be subject to such additional standards and restrictions, if any, as are set forth in the governing instrument of the business trust, including, without limitation, the requirement that beneficial owners owning a specified beneficial interest in the business trust join in the bringing of the derivative action."
Section 15. Amend Chapter 38, Title 12 of the Delaware Code by
redesignating current §3819 as §3820 and by adding a new §3819 to read as follows:
"§3819. Construction and application of chapter and governing instrument
(a) The rule that statutes in derogation of the common law are to be strictly construed shall have no application to this chapter.
(b) It is the policy of this chapter to give maximum effect to the principle of freedom of contract and to the enforceability of governing instruments."
Approved July 15, 1992