News

Ellisa Habbart was a speaker in London at the second Global Business Law Forum Sponsored by the American Bar Association’s Business Law Section.  The program was entitled “The Private Company M&A: Structure, Diligence and Documentation” and Ms. Habbart focused on what to do when non-corporate entities are a part of the M&A transaction.  The Chief Justice of the Supreme Court of Delaware, The Honorable Myron T. Steele, Jonathan Baird, a partner of  Freshfields Bruckhaus Deringer in London and Stanley Freedman, a partner of  Heenan Blaikie LLP in Toronto joined Ms. Habbart on the panel.  During the discussion, Chief Justice Steele noted the need to understand alternative entities given they will be at issue in transactions as a result of their ever increasing numbers.  For further information about the program and its content, please feel free to contact Ms. Habbart at 302-576-9600 or ehabbart@decg.com.

Posted: February 1st, 2012

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Ellisa Habbart joins corporate governance experts in Amsterdam …  The Netherlands will be introducing the option to use a one tier board similar to that used in Delaware corporations. To date, Dutch law only permitted a  two tiered board structure that separates a supervisory board from a management board.  Ellisa Habbart, a partner with The Delaware Counsel Group LLP, attorneys at law, Wilmington, Delaware, participated in an invitation only seminar on January 27, 2012 in the Netherlands on “One Tier Boards: Flexibiity For Best Practices”.   The seminar included experts on corporate governance from many European countries and was organized by   NautaDutilh, a Dutch law firm.  Chief Justice Steele of the Supreme Court of Delaware presented at the seminar and other seminar attendees included Sir Andrian Cadbury, former CEO and Chair of Cadbury, Jeroen van der Veer, a non-executive director and former CEO of Shell and Hans Wijers, the CEO of Akzo Nobel.

Posted: February 1st, 2012

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Ellisa Opstbaum Habbart, a founding partner of the Delaware Counsel Group LLP, has been listed in The International Who’s Who of Corporate Governance Lawyers, published by Who’s Who Legal. She is one of only 20 private-practice lawyers in Delaware to gain a spot on the selective list, and among these Delaware practitioners, she is the only woman.

The official research partner of the International Bar Association and a strategic research partner of the American Bar Association’s Section of International Law, Who’s Who Legal has been identifying the foremost legal practitioners in 31 areas of business law since 1996. Its lists feature over 10,000 of the world’s leading private practice lawyers in over 100 countries.

Who’s Who Legal prides itself on the integrity and authority of it findings. It is impossible to buy entry into a Who’s Who Legal publication. Nominees are selected based upon comprehensive, independent survey work with both general counsel and private practice lawyers worldwide. Only specialists who have met independent international research criteria are listed.

Ms. Habbart’s years of experience and high level of practice earned her a place on the Who’s Who corporate governance list. She founded The Delaware Counsel Group with a partner in 2004 to exclusively represent Delaware corporations and Delaware alternative entities in national and international business transactions. The Delaware Counsel Group’s clients range from U.S. and international law firms to businesses such as Accenture Inc., Sun Trust Delaware Trust Co. and Capmark Financial Group Inc.

Rated “AV” by Martindale-Hubbell, Ms. Habbart is also ranked as one of “America’s Leading Business Lawyers” in Delaware corporate and mergers and acquisitions law by Chambers USA, which describes her as “bright and business like with a dynamic presence in front of a room of people.”

Prior to founding The Delaware Counsel Group, Ms. Habbart was with Prickett Jones & Elliott in Wilmington, Del., where she was an associate from 1988 to 1993 and partner from 1993 to 1999. Ms. Habbart also served as the partner in charge of the Delaware office of Stradley Ronon Stevens & Young from 1999 to 2004. She has a juris doctor degree from Villanova University School of Law, a bachelor of business administration degree from Temple University, and a master’s degree in taxation from Drexel University.

Posted: August 1st, 2011

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Building a Better Mousetrap: Delaware General Assembly Amends LLC, Limited Partnership and General Partnership Acts for 2011

by Scott L. Matthews and Elizabeth M. Bennett, The Delaware Counsel Group LLP

 Scott L. Matthews is Counsel at The Delaware Counsel Group, where he focuses on Delaware corporate and alternative entity advice and commercial transactions.  Elizabeth M. Bennett is a Summer Associate at The Delaware Counsel Group, and a former correspondent for DLW.

 

As the cool breezes and festivals of spring give way to summer heat, it can mean only one thing in Delaware: amendments to the state’s cutting-edge Limited Liability Company Act, or LLC Act, Delaware Revised Uniform Limited Partnership Act, or DRULPA, and the Delaware Revised Uniform Partnership Act, or DRUPA.  On June 23, 2011, the Delaware General Assembly passed another round of amendments to these important alternative business entity statutes in order to keep them current and maintain their “national preeminence,” as noted in the synopses. The amendments were signed by Governor Jack Markell on July 7, 2011 and take effect Aug. 1, 2011.

Each of the LLC Act, DRULPA and DRUPA was amended to add a new subsection confirming that a certificate of correction may be filed to “correct” a certificate of cancellation that has been filed prior to the dissolution or the completion of winding up of the entity.  A primary example of the utility of such a provision is the circumstance where members or partners of a terminated entity discover an asset, and want to revive the entity solely for the purpose of distributing such asset in accordance with the applicable statute.

The LLC Act, DRULPA and DRUPA were also amended to clarify that members or managers of an LLC, or partners, limited partners or general partners of a partnership, according to the respective statutes, may consent to an action in writing or by electronic transmission, without such writing or transmission restating the subject matter of the consent, unlike stockholders of a Delaware corporation, who under the General Corporation Law of the State of Delaware, or DGCL, must include a restatement of the subject matter of the consent when consenting to an action via electronic transmission.

Perhaps most notably, the LLC Act, DRULPA and DRUPA were revised to statutorily adopt a rule different from the result of the 2004 Court of Chancery case In re LJM2 Co-Investment, L.P. Limited Partners Litigation, in which the Court said that the “general power of amendment is subject to limitations, including, pertinently, a requirement for supermajority approval of any provision that requires supermajority consent to take action.”

These statutory changes establish that provisions stating that a supermajority vote is required to amend apply only to those provisions that are expressly included in the partnership or LLC agreement of the entity, and do not apply to default voting provisions of the applicable entity statute unless otherwise provided in the partnership or LLC agreement. These revisions to the statutes are not intended to affect the interpretation of such supermajority amendment requirement clauses as applied to the express language of the partnership or LLC agreement.

In addition, the LLC Act was amended to provide a default amendment rule for entities whose certificate of formation is filed on or after Jan. 1, 2012. The default rule now requires the unanimous consent of all members to amend the LLC agreement. Previously, the statute did not specifically identify who could amend the LLC agreement if there was not a relevant amendment provision contained in the LLC agreement, and it was not clear whether managers or other non-member parties to the LLC agreement were required to consent.

Finally, the DRUPA was amended to confirm that a partner of an LLP is not personally responsible for liabilities arising from circumstances or events occurring while the partnership is a limited liability partnership.  The prior language of the statute with regard to limitation of liability referred solely to obligations incurred while a partnership is a limited liability partnership, and the revision now confirms that a partner is protected from such personal liability even if the liability is incurred after the relevant partnership ceases to be a limited liability partnership, so long as the circumstances or events creating the liability occurred while such partnership was a limited liability partnership.

The LLC Act, DRULPA and DRUPA were also amended significantly to address certain administrative and record-keeping concerns of various constituencies.

Amendments were adopted to provide that a General Partnership, or GP, a Limited Partnership, or LP, or an LLC may only register with the Secretary of State of the State of Delaware, or SOS, if the name of the entity serves to distinguish it upon the records of the SOS from the name upon such records of another domestic entity of the same type. Entities with certificates on file as of July 31, 2011, are grandfathered in and need not amend their registrations.  Previously, for example, an LLC could be formed under the name ABC LLC, even if there was previously anotherDelawareentity called ABC LLC, provided that the party forming the new ABC LLC obtained consent from the relevant authorizing parties of the former ABC LLC.  The relevant provisions of the three acts continue to allow for authorizing parties of an existing entity of another type, or a foreign entity of the same type, to consent to the use of a name that is not such as to distinguish the new entity from the existing entity in the SOS’s filing system – e.g., ABC LLC, a Pennsylvania LLC registered to do business in Delaware as a foreign limited liability company, may consent to the use of the name ABC LLC by a new Delaware LLC.

This amendment prevents the circumstance of an entity being terminated under one name followed by another entity being formed later under the same name, which can create confusion among various constituencies, including the SOS, law firms and clients.

The LLC Act, DRULPA and DRUPA were also amended to provide that the address of a registered agent or registered office must include a postal code. While existing filings need not be amended, a postal code will now be now required any time a new filing is made that references a registered agent or office.

To address another record-keeping issue, the LLC Act, DRULPA and DRUPA were amended to provide that, for filings made on or after Jan. 1, 2012, a certificate cannot have a future effective date later than 180 days from the date of filing.

In addition, the LLC Act, DRULPA and DRUPA were amended to clarify that a certificate of domestication and a certificate of formation or limited partnership, or statement of partnership existence, as applicable, must be filed simultaneously when domesticating a foreign LLC, LP or GP, and if such filings contain a future effective date, the dates must be identical. A similar amendment was made to the same statutes with respect to conversion of a Delaware entity to a LLC, LP or GP, clarifying that a certificate of conversion and a certificate of formation or limited partnership, or statement of partnership existence, as the case may be, must be filed simultaneously with the SOS.

Each of the three statutes was amended to provide that an agent may resign as registered agent for multiple entities by filing a single certificate, and the fee for each additional entity after the first will be $2. The fee for the initial entity remains $200. There is also a new $50 fee for a filing that only changes the registered agent and registered office of a Delaware GP, LP or LLC.

Finally, DRUPA was amended to clarify that a Statement of Partnership Existence for a GP and a Statement of Qualification for an LLP must be cancelled separately and that cancellation of one does not of itself cancel the other.

These statutory improvements, updates and clarifications will help to ensure that Delaware’s pre-eminent role in crafting business entity statutes that are simultaneously immensely practical, comprehensive and coherent is maintained for years to come.  Building a better mousetrap, indeed, is a continuing process, and stakeholders in Delaware, while extolling this year’s round of augmentations, are already considering what the future holds for Delaware LLCs and partnerships.

 

Reprinted with permission from the July 20, 2011 issue of the Delaware Business Court Insider. © 2011 ALM Media Properties, LLC.

Posted: July 20th, 2011

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Amendments to the Delaware Alternative Entity Statutes.

• The Delaware Limited Liability Company Act (the “LLC Act”), the Delaware Statutory Trust Act (the “DSTA”), the Delaware Revised Uniform Limited Partnership Act (“DRULPA”), and the Delaware Revised Uniform Partnership Act (“DRUPA” and, together with the LLC Act, the DSTA and DRULPA, the “Alternative Entity Statutes”) have been amended to provide that a LLC, statutory trust, limited partnership or general partnership may not register under a name that is not such as to distinguish it upon the records of the office of the Secretary of State from the name on such records of another domestic entity of the same type, provided that those on file as of July 31, 2011 are grandfathered in.  (This is to prevent the case of an entity being terminated under one name and then another entity later being formed under the same name, which apparently creates confusion at the SOS.)  For example, if there is an entity called ABC LLC, a Delaware limited liability company (“ABC LLC Delaware”), on the records of the Secretary of State, then: ABC LLC, an Alabama limited liability company, may register to do business in Delaware as a foreign limited liability company, with the consent of ABC LLC Delaware; ABC Corporation may be formed as a Delaware corporation, with the consent of ABC LLC Delaware; but another ABC LLC may not be formed in Delaware even with the consent of ABC LLC Delaware. A companion amendment to each statute is being made to clarify that existing filings need not be amended, but any time a new filing is made that references a registered agent or office, the postal code must be included.

• The Alternative Entity Statutes have been amended to provide that, for filings made on or after January 1, 2012, a certificate cannot have a future effective date later than 180 days from the date of filing.  This addresses a Secretary of State record-keeping concern.

• The Alternative Entity Statutes have been amended to provide that an agent may resign as registered agent for multiple entities by filing a single certificate, and the fee for each additional entity after the first will be $2.  In addition, the DSTA has been amended to provide that a registered agent may resign with or without appointing an agent (though if such resignation is made without appointing a successor registered agent, it shall not become effective until 30 days after the certificate of resignation is filed, and in addition, must include a certification that the resigning agent provided written notice of such resignation at least 30 days prior to the filing of the certificate).

Amendments to All Entity Statutes

• Each of the Alternative Entity Statutes, as well as the Delaware General Corporation Law (the, “DGCL,” and together with the Alternative Entity Statutes, the “Entity Statutes”), has been amended to provide that, effective August 1, 2011, the address of a registered agent or registered office (or, in the case of a statutory trust, a trustee) must include a postal code.  Each of the Entity Statutes provides that the new requirement only applies to newly-filed certificates referencing a registered agent, registered office or trustee, and that existing certificates need not be amended solely to comply with the new requirement.

• Each of the Entity Statutes has been amended to clarify that a certificate of domestication or certificate of conversion, on the one hand, and a certificate of incorporation/trust/formation/limited partnership or statement of partnership existence, on the other hand,  must be filed simultaneously and if there is a future effective date and time such time must be identical.

Other Amendments to the DGCL

• The DGCL was amended to confirm that a provision of a corporate charter or bylaws that provides for a right to indemnification or advancement of expenses may not be eliminated or impaired by a change to the certificate of incorporation or bylaws after the occurrence of the act or omission that is the subject of such provision, unless the provision in effect at the time of the act or omission expressly authorizes such elimination or impairment. The provision had been added in 2009 to supersede a contrary judicial decision, but it was unclear whether the provision was limited to restricting the effect of the amendment solely of the original provision giving rise to the right to indemnification or advancement, and not other provisions of the charter or bylaws.

• The DGCL was also amended to confirm that the filing of a certificate of dissolution, merger, transfer or conversion requires the payment of franchise taxes due through the month of effectiveness of the filing, and the filing of an annual report for the year in which the filing is to become effective, on the part of the corporation that is to be dissolved, merged, transferred or converted by the filing.

• A number of minor changes were made to certain sections of the DGCL governing specific types of corporations, such as foreign and tax-exempt corporations.  For example, an exception to the requirement that the name of a corporation contain certain words or abbreviations that identifies it as such, including “inc.” and “corp.” was added to Section 102 of the DGCL for corporations that are both nonstock corporations and professional associations.  Similarly, Sections 102 and 395 were amended to allow the Director of the Division of Corporations and the State Banking Commissioner to waive certain restrictions on corporations that contain the word “trust” in their names, such as the requirement that such corporations file reports with the State Bank Commissioner, where the corporation is not regulated under The Bank Holding Act of 1956 or Section 10 of the Home Owners’ Loan Act.

• Conforming changes were made to Sections 313, 391 and 501 of the DGCL to take into account last year’s amendment to Section 501 of the DGCL classifying corporations that do not pay franchise taxes as “exempt corporations.” The definition of “exempt corporation” in Section 501 was also clarified to confirm that captive insurance companies and certain purely charitable and educational associations are “exempt corporations.”

Other Amendments to the Alternative Entity Statutes

• The LLC Act, DRULPA and DRUPA have been amended to provide for a new $50 filing fee for a filing that only changes the registered agent and registered office of the entity.

• DRUPA has been amended to provide that a Statement of Partnership Existence and a Statement of Qualification of a limited liability partnership must be cancelled separately and that cancellation of one does not of itself cancel the other.

• The LLC Act, DRULPA and DRUPA have been amended to add a new subsection confirming that a certificate of correction may be filed to “correct” a certificate of cancellation that has been filed prior to the dissolution or the completion of winding up of the entity.

• The LLC Act, DRULPA and DRUPA have been amended to clarify that members, managers, partners, limited partners or general partners, respectively, may consent to an action in writing or by electronic transmission, without such writing or transmission restating the subject matter of the consent (as in the DGCL).

• The LLC Act, DRULPA and DRUPA have been amended to provide a result different from that articulated by the Chancery Court in In re LJM2 Co-Investment, L.P. Limited Partners Litigation, 866 A.2d 762 (Del. Ch. 2004).  The amendments apply to provisions of a partnership or LLC agreement that require, where a supermajority vote is required for an action, that such a vote is required to amend.  The amendments provide that such amendment provisions only apply to provisions expressly included in the partnership or LLC agreement and do not apply to default voting provisions of the applicable entity statute unless otherwise provided in the partnership or LLC agreement. The amendments are not intended to affect the interpretation of such amendment provisions as applied to provisions expressly included in the partnership or LLC agreement.

• The LLC Act has been amended to provide a default rule for amendment of the LLC agreement of any LLC whose certificate of formation is filed on or after January 1, 2012.  The default rule will now be unanimous consent of all members.  (The problem was that the statute did not delineate who could amend if there was not an express amendment provision in the LLC Agreement, and it is not clear whether managers or other non-members must consent or not.)

• DRUPA has been amended to confirm that a partner of an LLP is not personally liable for liabilities arising from circumstances or events occurring while the partnership is a limited liability partnership.  The former rule simply addressed liabilities incurred while the GP has LLP status.

• The DSTA was amended to provide that an agreement of merger adopted in accordance with the DSTA may amend the governing instrument of the trust or may provide for the adoption of a new governing instrument of the surviving or resulting trust.

Posted: July 19th, 2011

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