CHAPTER 260

FORMERLY

SENATE BILL NO. 312

AN ACT TO AMEND CHAPTER 18, TITLE 6 OF THE DELAWARE CODE RELATING TO THE CREATION, REGULATION, OPERATION AND DISSOLUTION OF DOMESTIC LIMITED LIABILITY COMPANIES AND THE REGISTRATION AND REGULATION OF FOREIGN LIMITED LIABILITY COMPANIES.

BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF DELAWARE (three-fifths of all members elected to each House thereof concurring therein):

Section 1. Amend §18-101, Chapter 18, Title 6 of the Delaware Code by redesignating paragraphs "(5)" through "(13)", as paragraphs "(6)" through "(14)", and by adding a new paragraph designated as paragraph "(5)" in its appropriate numerical order reading as follows:

"(5) 'Knowledge' means a person's actual knowledge of a fact, rather

than the person's constructive knowledge of the fact."

Section 2. Amend §18-102(3). Chapter 18, Title 6 of the Delaware Code by adding at three places in the subsection immediately following the words "business trust", the words ", registered limited liability partnership".

Section 3. Amend §18-103(b), Chapter 18, Title 6 of the Delaware Code by deleting the words "together with a duplicate copy, which may be either a signed or conformed copy," in the three places where such words are contained in §18-103(b), and the last sentence of §18-103(b) in its entirety, and by adding a new sentence immediately following the last sentence of §18-103(b) reading as follows:

"Unless the Secretary of State finds that any application, notice of transfer, or notice of cancellation filed with the Secretary of State as required by this subsection does not conform to law, upon receipt of all filing fees required by law he shall prepare and return to the person who filed such instrument a copy of the filed instrument with a notation thereon of the action taken by the Secretary of State."

Section 4. Amend §18-107, Chapter 18, Title 6 of the Delaware Code by deleting the word "specific" contained therein, and by adding the punctuation mark "," immediately following the words and transact other business with".

Section 5. Amend Subchapter I, Chapter 18, Title 6 of the Delaware Code by adding thereto a new section to be designated as "§18-110" to read as follows:

"§18-110. Contested Matters Relating to Managers; Contested Votes.

(a) Upon application of any member or manager, the Court of Chancery may hear and determine the validity of any admission, election, appointment or withdrawal of a manager of a limited liability company, and the right of any person to be a manager of a limited liability company, and, in case the right to serve as a manager is claimed by more than 1 person, may determine the person or persons entitled to serve as managers; and to that end make such order or decree in any such case as may be just and proper, with power to enforce the production of any books, papers and records of the limited liability company relating to the issue. In any such application, service of copies of the application upon the registered agent of the limited liability company shall be deemed to be service upon the limited liability company and upon the person or persons whose right to serve as a manager is contested and upon the person or persons, if any, claiming to be a manager or claiming the right to be a manager; and the registered agent shall forward immediately a copy of the application to the limited liability company and to the person or persons whose right to serve as a manager is contested and to the person or persons, if any, claiming to be a manager or the right to be a manager, in a postpaid, sealed, registered letter addressed to such limited liability company and such person or persons at their post-office addresses last known to the registered agent or furnished to the registered agent by the applicant member or manager. The Court may

make such order respecting further or other notice of such application as it deems proper under these circumstances.

(b) Upon application of any member or manager, the Court of Chancery may hear and determine the result of any vote of members or managers upon matters as to which the members or managers of the limited liability company, or any class or group of members or managers, have the right to vote pursuant to the limited liability company agreement or other agreement or this chapter (other than the admission, election, appointment or
withdrawal of managers). Service of the application upon the registered agent of the limited liability company shall be deemed to be service upon the limited liability company, and no other party need be joined in order for the Court to adjudicate the result of the vote. The Court may make such order respecting further or other notice of such application as it deems proper under these circumstances.

(c) 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."

Section 6. Amend Subchapter I, Chapter 18, Title 6 of the Delaware Code by adding thereto a new section to be designated as 118-111" to read as follows:

118-111. Interpretation and Enforcement of Limited Liability Company Agreement.

Any action to interpret, apply or enforce the provisions of a limited liability company agreement, or the duties, obligations or liabilities of a limited liability company to the members or managers of the limited liability company, or the duties, obligations or liabilities among members or managers and of members or managers to the limited liability company, or the rights or powers of, or restrictions on, the limited liability company, members or managers, may be brought in the Court of Chancery."

Section 7. Amend §18-201(a), Chapter 18, Title 6 of the Delaware Code by adding immediately after the punctuation mark ";" appearing at the end of subsection 18-201(a)(2) the word "and", by deleting subsection 18-201(a)(3) in its entirety, and by redesignating paragraph "(4)" as paragraph "(3)".

Section 8. Amend §18-206(a), Chapter 18, Title 6 of the Delaware Code by adding after the words "certificates of amendment", the words ", correction, termination of a merger or consolidation".

Section 9. Amend §18-206(a)(1), Chapter 18, Title 6 of the Delaware Code by adding after the words "certificate of amendment," the words "the certificate of correction, the certificate of termination of a merger or consolidation,".

Section 10. Amend §18-206(b), Chapter 18, Title 6 of the Delaware Code by adding immediately following "(or judicial decree of amendment)", the words ", certificate of correction", and by adding the following sentence at the end of said subsection:

"Upon the filing of a certificate of termination of a merger or consolidation, the certificate of merger or consolidation identified in the certificate of termination of a merger or consolidation is terminated."

Section 11. Amend §18-206(c), Chapter 18, Title 6 of the Delaware Code by adding immediately following the words "certificate of amendment," the words "a certificate of correction, a certificate of termination of a merger or consolidation,".

Section 12. Amend §18-209(a), Chapter 18, Title 6 of the Delaware Code by adding after the word "general", the words "(including a registered limited liability partnership)".

Section 13. Amend §18-209(d), Chapter 18, Title 6 of the Delaware Code by adding the following sentence at the end of said subsection:

If a certificate of merger or consolidation provides for a future effective date or time and if an agreement of merger or consolidation is terminated or amended to change the future effective date or time as permitted by §18-209(b) of this chapter prior to the future effective date or time, the certificate of merger or consolidation shall be terminated by the filing of a certificate of termination of a merger or consolidation which shall identify the certificate of merger or consolidation and the agreement of merger or consolidation which has been terminated or amended and shall state that the agreement of merger or consolidation has been terminated or amended."

Section 14. Amend Subchapter II, Chapter 18, Title 6 of the Delaware Code by adding a new section to be designated as "§18-210" to read as follows:

"§18-210. Contractual Appraisal Rights.

A limited liability company agreement or an agreement of merger or consolidation may provide that contractual appraisal rights with respect to a limited liability company interest or another interest in a limited liability company shall be available for any class or group of members or limited liability company interests in connection with any amendment of a limited liability company agreement, any merger or consolidation in which the limited liability company is a constituent party to the merger or consolidation, or the sale of all or substantially all of the limited liability company's assets. The Court of Chancery shall have jurisdiction to hear and determine any matter relating to any such appraisal rights."

Section 15. Amend Subchapter II, Chapter 18, Title 6 of the Delaware Code by adding thereto a new section to be designated as "§18-211" to read as follows:

"§18-211. Certificate of Correction.

Whenever any certificate authorized to be filed with the Office of the Secretary of State under any provision of this chapter has been so filed and is an inaccurate record of the action therein referred to, or was defectively or erroneously executed, such certificate may be corrected by filing with the Office of the Secretary of State a certificate of correction of such certificate. The certificate of correction shall specify the inaccuracy or defect to be corrected, shall set forth the portion of the certificate in corrected form and shall be executed and filed as required by this chapter. The corrected certificate shall be effective as of the date the original certificate was filed, except as to those persons who are substantially and adversely affected by the correction, and as to those persons the corrected certificate shall be effective from the filing date."

Section 16. Amend §18-301(a), Chapter 18, Title 6 of the Delaware Code by deleting the words "acquiring a limited liability company interest".

Section 17. Amend §18-301(b), Chapter 18, Title 6 of the Delaware Code by deleting the words "acquiring a limited liability company interest".

Section 18. Amend §18-301(b)(1), Chapter 18, Title 6 of the Delaware Code by deleting the words "a person acquiring a limited liability company interest directly from the limited liability company,", and by substituting in lieu thereof the words "a person who is not an assignee of a limited liability company interest, including a person acquiring a limited liability company interest directly from the limited liability company and a person to be admitted as a member of the limited liability company without acquiring a limited liability company interest in the limited liability company," and by deleting the word "or" appearing at the end of said subsection.

Section 19. Amend §18-301(b)(2), Chapter 18, Title 6 of the Delaware Code by deleting the period appearing at the end of said subsection and by substituting in lieu thereof "; or".

Section 20. Amend §18-301(b), Chapter 18, Title 6 of the Delaware Code by adding a new paragraph to said subsection to be designated as paragraph "(3)" to read as follows:

"(3) Unless otherwise provided in an agreement of merger or consolidation or a limited liability company agreement, in the case of a person acquiring a limited liability company interest in a surviving or esulting limited liability company pursuant to a merger or consolidation approved in accordance with §18-209(b) of this chapter, at the time provided in and upon compliance with the limited liability company agreement of the surviving or resulting limited liability company."

Section 21. Amend §18-301(c), Chapter 18, Title 6 of the Delaware Code by adding at the end of said subsection a new sentence reading: "Unless otherwise provided in a limited liability company agreement, a person may be admitted to a limited liability company as a member of the limited liability company without acquiring a limited liability company interest in the limited liability company.".

Section 22. Amend §18-303, Chapter 18, Title 6 of the Delaware Code by designating the existing paragraph of said section as "(a)", by deleting the ";" as it currently appears therein and replacing such punctuation mark with the punctuation mark ",". and by adding a new subsection to §18-303 to be designated as subsection "(b)" to read as follows:

"(b) Notwithstanding the provisions of §18-303(a) of this chapter, under a limited liability company agreement or under another agreement, a member or manager may agree to be obligated personally for any or all of the debts, obligations and liabilities of the limited liability company."

Section 23. Amend §18-401, Chapter 18, Title 6 of the Delaware Code by deleting "§18-101(9)" and by substituting in lieu thereof "§18-101(10)".

Section 24. Amend §18-402, Chapter 18, Title 6 of the Delaware Code by adding a new sentence immediately following the last sentence of §18-402 reading as follows:

"Unless otherwise provided in a limited liability company agreement, each member and manager has the authority to bind the limited liability company."

Section 25. Amend Subchapter IV, Chapter 18, Title 6 of the Delaware Code by adding thereto a new section to be designated as "§18-407" to read as follows:

"§18-407. Delegation of Rights and Powers to Manage.

Unless otherwise provided in the limited liability company agreement, a member or manager of a limited liability company has the power and authority to delegate to one or more other persons the member's or manager's, as the case may be, rights and powers to manage and control the business and affairs of the limited liability company, including to delegate to agents and employees of a member or manager or the limited liability company, and to delegate by a management agreement or another agreement with, or otherwise to, other persons. Unless otherwise provided in the limited liability company agreement, such delegation by a member or manager of a limited liability company shall not cause the member or manager to cease to be a member or manager, as the case may be, of the limited liability company."

Section 26. Amend Subchapter V, Chapter 18, Title 6 of the Delaware Code by adding thereto a new section to be designated as "§18-505" to read as follows:

"§18-505. Defense of Usury Not Available.

No obligation of a member or manager of a limited liability company to the limited liability company arising under the limited liability company agreement or a separate agreement or writing, and no note, instrument or other writing evidencing any such obligation of a member or manager, shall be subject to the defense of usury, and no member or manager shall interpose the defense of usury with respect to any such obligation in any action."

Section 27. Amend §18-603, Chapter 18, Title 6 of the Delaware Code by deleting from the last sentence of said subsection the words "set forth in this chapter", and by substituting in lieu thereof "under applicable law".

Section 28. Amend §18-605, Chapter 18. Title 6 of the Delaware Code by adding a new sentence to the end of said section to read as follows:

"Except as provided in the limited liability company agreement, a member may be compelled to accept a distribution of any asset in kind from a limited liability company to the extent that the percentage of the asset distributed to him is equal to a percentage of that asset which is equal to the percentage in which he shares in distributions from the limited liability company."

Section 29. Amend §18-607(b), Chapter 18, Title 6 of the Delaware Code by deleting from the last sentence of said subsection the words "a limited liability company", and by substituting in lieu thereof the word "an".

Section 30. Amend §18-702(b)(1), Chapter 18, Title 6 of the Delaware Code by adding immediately following the word "assignment", the words of a limited liability company interest".

Section 31. Amend §18-702, Chapter 18, Title 6 of the Delaware Code by adding a new subsection to be designated as "(e)" to read as follows:

"(e) Unless otherwise provided In the limited liability company agreement, a limited liability company may acquire, by purchase, redemption or otherwise, any limited liability company interest or other interest of a member or manager in the limited liability company. Unless otherwise provided in the limited liability company agreement, any such interest so acquired by the limited liability company shall be deemed canceled."

Section 32. Amend §18-801(1), Chapter 18, Title 6 of the Delaware Code by deleting said subsection in its entirety and by substituting in lieu thereof the following:

"(1) At the time specified in a limited liability company agreement, which limited liability company agreement may include a provision providing for the perpetual existence of the limited liability company, or thirty (30) years from the date of the formation of the limited liability company if no such time Is set forth In the limited liability company agreement or the limited liability company agreement does not provide for the perpetual existence of the limited liability company;"

Section 33. Amend §18-804(a)(1), Chapter 18, Title 6 of the Delaware Code by adding immediately following the words "distributions to members", the words and former members".

Section 34. Amend §18-903(b), Chapter 18, Title 6 of the Delaware Code by deleting §18-903(b) in its entirety and substituting in lieu thereof the following:

"(b) The Secretary of State shall prepare and return to the person who filed the application or his representative a copy of the original signed application, similarly endorsed, and shall certify such copy as a true copy of the original signed application."

Section 35. Amend §18-1101(c), Chapter 18, Title 6 of the Delaware Code by adding the words "or other person" after the word "manager" and before the words "has duties", by adding the words or other person" after the words any such member or manager" and before the words "acting under", by adding the words "or other person's" after the words "for the member's or manager's" and before the words "good faith reliance", and by adding the words or other person's" after the words "and (2) the member's or manager's" and before the words "duties and liabilities".

Section 36. Amend §18-1105(a)(2), Chapter 18, Title 6 of the Delaware Code by deleting "$10", and by substituting in lieu thereof 12.50".

Section 37. Amend §18-1105(a)(3), Chapter 18, Title 6 of the Delaware Code by deleting the word "or" appearing after the words "under §18-209 of this chapter", and by substituting in lieu thereof a ".", and by adding after the words "under §18-208 of this chapter," the words "a certificate of termination of a merger or consolidation under §18-209(d) of this chapter, a certificate of correction under §18-211 of this chapter or a certificate of restoration under §18-1107(i) of this chapter,".

Section 38. Amend §18-1107(h), Chapter 18, Title 6 of the Delaware Code by deleting said subsection in its entirety and by substituting in lieu thereof the following:

"(h) A domestic limited liability company or foreign limited liability company that neglects, refuses or fails to pay the annual tax when due shall cease to be in good standing as a domestic limited liability company or registered as a foreign limited liability company in the State of Delaware."

Section 39. Amend §18-1107(i), Chapter 18, Title 6 of the Delaware Code by adding at the end of said subsection the following new sentence:

"A fee as set forth in §18-1105(a)(3) of this title shall be paid at the time of the filing of any such certificate."

Section 40. This Act shall become effective on August 1, 1994.

Approved June 27, 1994.