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Delaware Amends its Limited Liability Company Act Including Provisions Relating to Member’s and Manager’s Authority to Delegate Duties

Certain amendments to the Delaware Limited Liability Company Act, 6 Del. C. §§ 18-101 et seq. (the “DE LLC Act”) will become effective on August 1, 2017. The amendments are mainly technical or clarifying in nature, including:

  • clarifying and confirming the distinction between domestic and foreign LLCs (in Sections 18-101(4), 18-101(11), 18-102(5), 18-104(g), 18-104(i)(4) and 18-1107(a));
  • clarifying and confirming that an LLC’s certificate of formation complies with Section 18-201(a)(2)’s requirement that it include the address of the registered office and the name and address of the registered agent for service of process if the certificate contains the name of the registered agent and the address of the registered office even if the certificate does not expressly designate such person as the registered agent or such address as the registered office or address of the registered agent;
  • clarifying and confirming that an “other business entity” in connection with a merger or consolidation transaction or a conversion to an LLC includes any incorporated or unincorporated business or entity other than a domestic LLC (Sections 18-209(a) and 18-214(a));
  • amending Section 18-212(a) relating to the domestication of non-United States entities to confirm that the term “non-United States entity” includes any incorporated or unincorporated non-United States business or entity; and
  • amending Section 18-216(a) to confirm that a domestic limited liability company may convert to any incorporated or unincorporated business or entity other than a domestic LLC.

Section 18-407

One amendment, relating to the authority of an LLC’s managers and members to delegate their management duties, bears more substantive discussion.

Section 18-407 of the DE LLC Act deals with the authority of members and managers of an LLC to delegate their duties to others. Prior to the amendment, Section 18-407 provided that “[u]nless otherwise provided in the limited liability company agreement”, a member or manager of an LLC had “the power to delegate to 1 or more other persons the member’s or manager’s … rights and powers to manage and control” the LLC. Section 18-407 now has been amended to state that managers and members may delegate “any or all of” their “rights, powers and duties” (italicized words representing the changes to the statute). Section 18-407 also has been amended to state affirmatively that no other provision of the DE LLC Act restricts a member’s or manager’s power and authority to delegate.

Although these changes may seem insubstantial in context they could have significant impact, including on the continued vitality of the June 10, 2016 decision of the Delaware Chancery Court in Obeid v. Hogan. That discussion is beyond the scope of this report, but can be found here.

For More Information

If you have any questions regarding this News Alert, please contact John D. Demmy at 302.425.3308 or the Stevens & Lee attorney with whom you normally consult.

Related Professionals:
John D. Demmy

This News Alert has been prepared for informational purposes only and should not be construed as, and does not constitute, legal advice on any specific matter. For more information, please see the disclaimer.