Delaware General Assembly


CHAPTER 389

FORMERLY

SENATE BILL NO. 367

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 (Two-thirds of all members elected to each house thereof concurring therein):

Section 1. Amend § 18-102(3), Chapter 18, Title 6 of the Delaware Code by deleting the word "registered" in all three places where it appears before the words "limited liability partnership".

Section 2. Amend § 18-109(a), Chapter 18, Title 6 of the Delaware Code by deleting from the last sentence thereof the words "subsections (b) and (c)" and by substituting in lieu thereof the words "subsections (b), (c) and (d)" and by deleting from the last sentence thereof the words "to a person who is a member of a limited liability company and who" and by substituting in lieu thereof "to a person, whether or not a member of a limited liability company, who".

Section 3. Amend § 18-109(d), Chapter 18, Title 6 of the Delaware Code by adding the following sentence to the end of subsection (d) thereof: "Except by agreeing to arbitrate any arbitrable matter in a specified jurisdiction or in the State of Delaware, a member who is not a manager may not waive its right to maintain a legal action or proceeding in the courts of the State of Delaware with respect to matters relating to the organization or internal affairs of a limited liability company."

Section 4. Amend § 18-203, Chapter 18, Title 6 of the Delaware Code by deleting the words ", or upon the conversion of a domestic limited liability company approved in accordance with § 18-216 of this title" from the first sentence thereof.

Section 5. Amend § 18-203, Chapter 18, Title 6 of the Delaware Code by deleting the words "or upon the conversion of a domestic limited liability company approved in accordance with § 18-216 of this title" from the second sentence thereof.

Section 6. Amend § 18-203, Chapter 18, Title 6 of the Delaware Code by deleting subsection (5) of the second sentence thereof, by adding the word "and" after the ";" at the end of subsection (4) of the second sentence thereof and by renumbering existing subsection (6) as subsection (5) of the second sentence thereof.

Section 7. Amend § 18-209(a), Chapter 18, Title 6 of the Delaware Code by deleting the word "registered" in both places where it appears before the words "limited liability".

Section 8. Amend § 18-212(a), Chapter 18, Title 6 of the Delaware Code by deleting the word "registered" in both places where it appears before the words "limited liability".

Section 9. Amend § 18-212, Chapter 18, Title 6 of the Delaware Code by deleting subsection (h) in its entirety and by substituting in lieu thereof the following new subsection (h):

“(h) When any domestication shall have become effective under this section, for all purposes of the laws of the State of Delaware, all of the rights, privileges and powers of the non-United States entity that has been domesticated, and all property, real, personal and mixed, and all debts due to such non-United States entity, as well as all other things and causes of action belonging to such non-United States entity, shall remain vested in the domestic limited liability company to which such non-United States entity has been domesticated and shall be the property of such domestic limited liability company, and the title to any real property vested by deed or otherwise in such non-United States entity shall not revert or be in any way impaired by reason of this chapter; but all rights of creditors and all liens upon any property of such non-United States entity shall be preserved unimpaired, and all debts, liabilities and duties of the non-United States entity that has been domesticated shall remain attached to the domestic limited liability company to which such non-United States entity has been domesticated, and may be enforced against it to the same extent as if said debts, liabilities and duties had originally been incurred or contracted by it in its capacity as a domestic limited liability company. The rights, privileges, powers and interests in property of the non-United States entity, as well as the debts, liabilities and duties of the non-United States entity, shall not be deemed, as a consequence of the domestication, to have been transferred to the domestic limited liability company to which such non-United States entity has domesticated for any purpose of the laws of the State of Delaware.”

Section 10. Amend § 18-213, Chapter 18, Title 6 of the Delaware Code by adding at the end of subsection (d) thereof a new sentence reading as follows:

“Unless otherwise agreed, the transfer or domestication of a limited liability company out of the State of Delaware in accordance with this section shall not require such limited liability company to wind up its affairs under § 18-803 of this title or pay its liabilities and distribute its assets under § 18-804 of this title.”

Section 11. Amend § 18-214(a), Chapter 18, Title 6 of the Delaware Code by deleting the word "registered" in both places where it appears before the words "limited liability".

Section 12. Amend § 18-214, Chapter 18, Title 6 of the Delaware Code by deleting subsection (f) in its entirety and by substituting in lieu thereof the following new subsection (f):

“(f) When any conversion shall have become effective under this section, for all purposes of the laws of the State of Delaware, all of the rights, privileges and powers of the other entity that has converted, and all property, real, personal and mixed, and all debts due to such other entity, as well as all other things and causes of action belonging to such other entity, shall remain vested in the domestic limited liability company to which such other entity has converted and shall be the property of such domestic limited liability company, and the title to any real property vested by deed or otherwise in such other entity shall not revert or be in any way impaired by reason of this chapter; but all rights of creditors and all liens upon any property of such other entity shall be preserved unimpaired, and all debts, liabilities and duties of the other entity that has converted shall remain attached to the domestic limited liability company to which such other entity has converted, and may be enforced against it to the same extent as if said debts, liabilities and duties had originally been incurred or contracted by it in its capacity as a domestic limited liability company. The rights, privileges, powers and interests in property of the other entity, as well as the debts, liabilities and duties of the other entity, shall not be deemed, as a consequence of the conversion, to have been transferred to the domestic limited liability company to which such other entity has converted for any purpose of the laws of the State of Delaware.”

Section 13. Amend § 18-214, Chapter 18, Title 6 of the Delaware Code by redesignating existing subsection (i) thereof as a new subsection (j) and adding the following as a substitute subsection (i):

"(i) In connection with a conversion hereunder, rights or securities of, or interests in, the other entity which is to be converted to a domestic limited liability company may be exchanged for or converted into cash, property, rights or securities of, or interests in, such domestic limited liability company or, in addition to or in lieu thereof, may be exchanged for or converted into cash, property, rights or securities of, or interests in, another domestic limited liability company or other entity."

Section 14. Amend §18-215(b), Chapter 18, Title 6 of the Delaware Code by inserting the words "(directly or indirectly, including through a nominee or otherwise)" immediately after the word "held".

Section 15. Amend § 18-215(h), Chapter 18, Title 6 of the Delaware Code by deleting the words "; provided that a" immediately after the words "subsection (b) of this section" and by inserting in lieu thereof the words ". A", and by inserting immediately prior to the third to last sentence thereof the following new sentence: "For purposes of the immediately preceding sentence, the term "distribution" shall not include amounts constituting reasonable compensation for present or past services or reasonable payments made in the ordinary course of business pursuant to a bona fide retirement plan or other benefits program."

Section 16. Amend §18-215(j), Chapter 18, Title 6 of the Delaware Code by inserting in subsection (3) thereof the words "affirmative vote or" immediately prior to the words "written consent of".

Section 17. Amend §18-215(j), Chapter 18, Title 6 of the Delaware Code by deleting subsection (4) in its entirety, by inserting the word "or" after the ";" at the end of subsection (3), and by renumbering subsection (5) as subsection (4).

Section 18. Amend § 18-215(k), Chapter 18, Title 6 of the Delaware Code by deleting the third sentence thereof in its entirety and by substituting in lieu thereof the following new sentence: "The persons winding up the affairs of a series shall provide for the claims and obligations of the series and distribute the assets of the series as provided in § 18-804 of this title, which section shall apply to the winding up and distribution of assets of a series."

Section 19. Amend § 18-216, Chapter 18, Title 6 of the Delaware Code by deleting the word "registered" in both places where it appears before the words "limited liability" in the first sentence thereof.

Section 20. Amend § 18-216, Chapter 18, Title 6 of the Delaware Code by adding at the end thereof two new sentences reading as follows:

“Unless otherwise agreed, the conversion of a domestic limited liability company to another business form pursuant to this section shall not require such limited liability company to wind up its affairs under § 18-803 of this title or pay its liabilities and distribute its assets under § 18-804 of this title. In connection with a conversion of a domestic limited liability company to another business form pursuant to this section, rights or securities of, or interests in, the domestic limited liability company which is to be converted may be exchanged for or converted into cash, property, rights or securities of, or interests in, the business form into which the domestic limited liability company is being converted or, in addition to or in lieu thereof, may be exchanged for or converted into cash, property, rights or securities of, or interests in, another business form.”

Section 21. Amend §18-302(d), Chapter 18, Title 6 of the Delaware Code by deleting the phrase "interests in the liability company" in the first sentence thereof and substituting the word "members" in lieu thereof.

Section 22. Amend §18-404(d), Chapter 18, Title 6 of the Delaware Code by adding the words "at which all managers entitled to vote thereon were present and voted" at the end of the first sentence.

Section 23. Amend § 18-607, Chapter 18, Title 6 of the Delaware Code by adding to the end of subsection (a) thereof a new sentence reading as follows: "For purposes of this subsection (a), the term "distribution" shall not include amounts constituting reasonable compensation for present or past services or reasonable payments made in the ordinary course of business pursuant to a bona fide retirement plan or other benefits program."

Section 24. Amend § 18-703, Chapter 18, Title 6 of the Delaware Code by deleting said section together with its heading in its entirety and substituting in lieu thereof the following:

"18-703 Member's limited liability company interest subject to charging order.

(a) On application by a judgment creditor of a member or of a member's assignee, a court having jurisdiction may charge the limited liability company interest of the judgment debtor to satisfy the judgment. The court may appoint a receiver of the share of the distributions due or to become due to the judgment debtor in respect of the limited liability company which receiver shall have only the rights of an assignee, and the court may make all other orders, directions, accounts and inquiries the judgment debtor might have made or which the circumstances of the case may require.

(b) A charging order constitutes a lien on the judgment debtor's limited liability company interest. The court may order a foreclosure of the limited liability company interest subject to the charging order at any time. The purchaser at the foreclosure sale has only the rights of an assignee.

(c) Unless otherwise provided in a limited liability company agreement, at any time before foreclosure, a limited liability company interest charged may be redeemed:

(1) by the judgment debtor;

(2) with property other than limited liability company property, by one or more of the other members; or

(3) by the limited liability company with the consent of all of the members whose interests are not so charged.

(d) This chapter does not deprive a member of a right under exemption laws with respect to the member's limited liability company interest.

(e) This section provides the exclusive remedy by which a judgment creditor of a member or member's assignee may satisfy a judgment out of the judgment debtor's limited liability company interest.

(f) No creditor of a member shall have any right to obtain possession of, or otherwise exercise legal or equitable remedies with respect to, the property of the limited liability company."

Section 25. Amend § 18-804, Chapter 18, Title 6 of the Delaware Code by inserting the following new sentence immediately after the first sentence of subsection (c) thereof: "For purposes of the immediately preceding sentence, the term "distribution" shall not include amounts constituting reasonable compensation for present or past services or reasonable payments made in the ordinary course of business pursuant to a bona fide retirement plan or other benefits program."

Section 26. Amend § 18-1101(c), Chapter 18, Title 6 of the Delaware Code by adding the words "or to an other person that is a party to or is otherwise bound by a limited liability company agreement" after the words "another member or manager", by deleting the word "a" after the word "under" in subsection (1) thereof and by substituting in lieu thereof the word "the", by adding the words "or to any such other person" after the words "other member or manager" in subsection (1) thereof and by deleting the word "a" after the words "by provisions in" in subsection (2) thereof and by substituting in lieu thereof the word "the".

Section 27. This Act shall become effective August 1, 2000.

Approved June 30, 2000