CHAPTER 418

FORMERLY

HOUSE BILL NO. 445

AN ACT TO AMEND CHAPTER 38, TITLE 12 OF THE DELAWARE CODE RELATING TO STATUTORY TRUSTS.

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 § 3801(a), Chapter 38, Title 12 of the Delaware Code by inserting the following sentence: “A statutory 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 (including, without limitation, for the purpose of holding or otherwise taking title to property, whether in an active or custodial capacity).” immediately after the second sentence thereof.

Section 2. Amend § 3801(d), Chapter 38, Title 12 of the Delaware Code by deleting “, limited partnership” and substituting in lieu thereof “(whether general or limited)”, by inserting “(including any group, organization, co-tenancy, plan, board, council or committee)” immediately after the word “association”, by inserting “government (including a country, state, county or any other governmental subdivision, agency or instrumentality),” immediately prior to the word “custodian”, and by inserting “(or series thereof)” immediately after the word “entity”.

Section 3. Amend § 3801(f), Chapter 38, Title 12 of the Delaware Code by (1) inserting the sentence “A beneficial owner or a trustee is bound by the governing instrument whether or not such beneficial owner or trustee executes the governing instrument.” immediately after the last sentence thereof, and (2) deleting the words “and shall become bound by the governing instrument” contained in Section 3801(f)(1).

Section 4. Amend Section 3804, Chapter 38, Title 12 of the Delaware Code by deleting subsection (h) thereof in its entirety.

Section 5. Amend § 3806(c), Chapter 38, Title 12 of the Delaware Code by deleting said subsection in its entirety and substituting in lieu thereof the following:

“(c) To the extent that, at law or in equity, a trustee or beneficial owner or other person has duties (including fiduciary duties) to a statutory trust or to another trustee or beneficial owner or to another person that is a party to or is otherwise bound by a governing instrument, the trustee’s or beneficial owner’s or other person’s duties may be expanded or restricted or eliminated by provisions in the governing instrument; provided, that the governing instrument may not eliminate the implied contractual covenant of good faith and fair dealing.”.

Section 6. Amend § 3806(d), Chapter 38, Title 12 of the Delaware Code by deleting said subsection in its entirety and substituting in lieu thereof the following:

“(d) Unless otherwise provided in a governing instrument, a trustee or beneficial owner or other person shall not be liable to a statutory trust or to another trustee or beneficial owner or to another person that is a party to or is otherwise bound by a governing instrument for breach of fiduciary duty for the trustee’s or beneficial owner’s or other person’s good faith reliance on the provisions of the governing instrument.”.

Section 7. Amend § 3806, Chapter 38, Title 12 of the Delaware Code by re-designating subsections “(e)” through “(i)” thereof, as subsections “(f)” through “(i)” respectively, and by inserting a new subsection (e) thereto immediately prior to the newly designated subsection (f) thereof to read as follows:

“(e) A governing instrument may provide for the limitation or elimination of any and all liabilities for breach of contract and breach of duties (including fiduciary duties) of a trustee, beneficial owner or other person to a statutory trust or to another trustee or beneficial owner or to another person that is a party to or is otherwise bound by a governing instrument; provided, that a governing instrument may not limit or eliminate liability for any act or omission that constitutes a bad faith violation of the implied contractual covenant of good faith and fair dealing.”.

Section 8. Amend newly designated Section 3806(f), Chapter 38, Title 12 of the Delaware Code by inserting the following sentence at the beginning thereof: “Unless otherwise provided in the governing instrument of a statutory trust, meetings of beneficial owners may be held by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this subsection shall constitute presence in person at the meeting.”.

Section 9. Amend newly designated § 3806(g), Chapter 38, Title 12 of the Delaware Code by inserting the following sentence at the beginning thereof: “Unless otherwise provided in the governing instrument of a statutory trust, meetings of trustees may be held by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this subsection shall constitute presence in person at the meeting.”.

Section 10. Amend § 3806, Chapter 38, Title 12 of the Delaware Code by inserting a new subsection (k) thereto immediately after the newly designated subsection (j) thereof to read as follows:

“(k) A trustee, beneficial owner or an officer, employee, manager or other person designated in accordance with subsection (b)(7) of this Section shall be fully protected in relying in good faith upon the records of the statutory trust and upon information, opinions, reports or statements presented by another trustee, beneficial owner or officer, employee, manager or other person designated in accordance with subsection (b)(7) of this Section, or by any other person as to matters the trustee, beneficial owner or officer, employee, manager or other person designated in accordance with subsection (b)(7) of this Section reasonably believes are within such other person’s professional or expert competence, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, profits or losses of the statutory trust, or the value and amount of assets or reserves or contracts, agreements or other undertakings that would be sufficient to pay claims and obligations of the statutory trust or to make reasonable provision to pay such claims and obligations, or any other facts pertinent to the existence and amount of assets from which distributions to beneficial owners or creditors might properly be paid.”.

Section 11. Amend § 3807(b)(2), Chapter 38, Title 12 of the Delaware Code by deleting the two references to “corporation” in such subsection and inserting in lieu thereof “corporation, limited partnership, limited liability company or statutory trust”.

Section 12. Amend § 3808(c), Chapter 38, Title 12 of the Delaware Code by inserting after the first sentence thereof the following:

“Notwithstanding the happening of events specified in the governing instrument, the statutory trust shall not be dissolved and its affairs shall not be wound up if, prior to the filing of a certificate of cancellation as provided in § 3810 of this Chapter, the statutory trust is continued, effective as of the happening of such event, pursuant to the affirmative vote or written consent of all remaining beneficial owners of the statutory trust (and any other person whose approval is required under the governing instrument to revoke a dissolution pursuant to this Section), provided, however, if the dissolution was caused by a vote or written consent, the dissolution shall not be revoked unless each beneficial owner and other person (or their respective personal representatives) who voted in favor of, or consented to, the dissolution has voted or consented in writing to continue the statutory trust.”.

Section 13. Amend § 3808(e), Chapter 38, Title 12 of the Delaware Code by inserting the words “and claims and obligations that have not been made known to the statutory trust or that have not arisen but that, based on the facts known to the statutory trust, are likely to arise or to become known to the statutory trust within 10 years after the date of dissolution” immediately following the words “claimant is unknown” in the first sentence thereof.

Section 14.. Amend § 3810(a)(2), Chapter 38, Title 12 of the Delaware Code by inserting after the first sentence thereof the following sentence “A statutory trust formed under this Chapter shall be a separate legal entity, the existence of which as a separate legal entity shall continue until cancellation of the statutory trust’s certificate of trust.”.

Section 15. Amend § 3820(a), Chapter 38, Title 12 of the Delaware Code by deleting “(f)” after the word “subsection” and before the word “of” in the first sentence thereof and replacing such deletion with “(g)”.

Section 16. Amend § 3820(f), Chapter 38, Title 12 of the Delaware Code by deleting the words “or as required under applicable non-Delaware law” and inserting in lieu thereof the words “for all purposes of the laws of the State of Delaware” in the first sentence thereof.

Section 17. Amend § 3822(i), Chapter 38, Title 12 of the Delaware Code by deleting the words “or as required under applicable non-Delaware law” and inserting in lieu thereof the words “for all purposes of the laws of the State of Delaware” in the second sentence thereof.

Section 18. Amend Section 3823(b), Chapter 38, Title 12 of the Delaware Code by deleting the first two sentences thereof in their entirety and inserting the following sentences in lieu thereof: “If the governing instrument specifies the manner of authorizing a transfer or domestication or continuance described in (a) of this Section, the transfer or domestication or continuance shall be authorized as specified in the governing instrument. If the governing instrument does not specify the manner of authorizing a transfer or domestication or continuance described in (a) of this Section and does not prohibit such a transfer or domestication or continuance, the transfer or domestication or continuance shall be authorized in the same manner as is specified in the governing instrument for authorizing a merger or consolidation that involves the statutory trust as a constituent party to the merger or consolidation. If the governing instrument does not specify the manner of authorizing a transfer or domestication or continuance described in (a) of this Section or a merger or consolidation that involves the statutory trust as a constituent party and does not prohibit such a transfer or domestication or continuance, the transfer or domestication or continuance shall be authorized by the approval by all of the beneficial owners and all of the trustees. If a transfer or domestication or continuance described in (a) of this Section shall be approved as provided in this subsection (b), a certificate of transfer if the statutory trust’s existence as a statutory trust of the State of Delaware is to cease, or a certificate of transfer and continuance if the statutory trust’s existence as a statutory trust in the State of Delaware is to continue, executed in accordance with § 3811 of this Chapter, shall be filed in the Office of the Secretary of State in accordance with § 3812 of this Chapter.”.

Section 19. Amend § 3852, Chapter 38, Title 12 of the Delaware Code by deleting subsection (b) in its entirety.

Section 20. Amend Chapter 38, Title 12 of the Delaware Code by adding a new Section 3863. New § 3863 shall read as follows:

Ҥ 3863. Activities Not Constituting Doing Business.

(a) Activities of a foreign statutory trust in the State of Delaware that do not constitute doing business for the purpose of this Chapter include:

(1) maintaining, defending or settling an action or proceeding;

(2) holding meetings of its beneficial owners or trustees or carrying on any other activity concerning its internal affairs;

(3) maintaining bank accounts;

(4) maintaining offices or agencies for the transfer, exchange or registration of the statutory trust’s own securities or maintaining trustees or depositories with respect to those securities;

(5) selling through independent contractors;

(6) soliciting or obtaining orders, whether by mail or through employees or agents or otherwise, if the orders require acceptance outside the State of Delaware before they become contracts;

(7) selling, by contract consummated outside the State of Delaware, and agreeing, by the contract, to deliver into the State of Delaware, machinery, plants or equipment, the construction, erection or installation of which within the State of Delaware requires the supervision of technical engineers or skilled employees performing services not generally available, and as part of the contract of sale agreeing to furnish such services, and such services only, to the vendee at the time of construction, erection or installation;

(8) creating, as borrower or lender, or acquiring indebtedness with or without a mortgage or other security interest in property;

(9) collecting debts or foreclosing mortgages or other security interests in property securing the debts, and holding, protecting and maintaining property so acquired;

(10) conducting an isolated transaction that is not one in the course of similar transactions;

(11) doing business in interstate commerce; and

(12) doing business in the State of Delaware as an insurance company.

(b) A person shall not be deemed to be doing business in the State of Delaware solely by reason of being a beneficial owner or trustee of a domestic statutory trust or a foreign statutory trust.

(c) This Section does not apply in determining whether a foreign statutory trust is subject to service or process, taxation or regulation under any other law of the State of Delaware.”.

Section 21. This Act shall become effective on August 1, 2006.

Approved July 10, 2006