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Delaware lawmakers broaden the authority of alternative entity principals to delegate rights

September 22, 2021

The Delaware General Assembly enacted new legislation during the 2021 session that allows members, managers, and partners (i.e. principals) of LLCs or partnerships, as the case may be, to delegate rights, powers, or duties to someone else, even if such principal has a conflict of interest. The change creates a rule different from the one applied by the Delaware Court of Chancery in Wenske v. Bluebell Creameries, Inc., which held that a principal can’t delegate their authority if they have a conflict of interest in the issue under consideration, even if the delegate is independent. The amendment became effective August 1, 2021.

Other 2021 changes to Delaware’s business entity statutes include the following:

  • An amendment to the Delaware General Corporation Law clarifying stock of a corporation held by another non-corporate entity cannot be voted or used to establish a quorum if the corporation holds a majority of such other entity’s voting power or otherwise controls such other entity.
  • Amendments that provide LLCs and partnerships with a safe harbor procedure to ratify acts or transactions that are void or voidable and to waive failures to comply with requirements of a governing agreement that make any acts and transactions void or voidable.
  • Amendments to the LLC and partnership acts that clarify members' and partners’ rights to obtain information.
  • Amendments to provide the manner by which an LLC or limited partnership may become a statutory public benefit entity if it is not formed as such, and to require that public benefit LLCs and limited partnerships state in their governing agreements that the entity is a statutory public benefit entity and set forth the specific public benefit(s) to be promoted by the entity.
  • An amendment to the Delaware Revised Uniform Partnership Act that confirms and clarifies the effect of modifications made in a statement of partnership existence or a statement of qualification and in a partnership agreement.

These and other changes are captured in the Fall 2021 Edition of Delaware Laws Governing Business Entities Annotated. In-depth analysis of the changes, as well as changes to the state’s General Corporation Law and LLC and partnership laws, are provided by CSCPublishing’s Senior Legal Advisor Matthew O’Toole and his partner Michael Maxwell of the Delaware law firm Potter, Anderson & Corroon LLP.

Fall 2021

The Fall 2021 Edition is updated through Act Chapter 86 of the 151st General Assembly. Blackline Amendment Notes indicate clearly how legislation has changed. The Table of Sections Affected lists legislative changes, and Blackline Amendment notes in the statutory content clearly indicate the changes made. The Rules of the Court of Chancery have also been updated through August 2021.

There are more than 80 new case notes from Delaware state courts and from courts in other jurisdictions applying Delaware business entity law, as well as five new full text cases in Volume 2 focusing on the latest legal developments concerning board members, bankruptcy, derivative claims, the collective entity doctrine, and reverse veil-piercing. A Table of New Annotations lists added cases, and gray bars in the body of the book indicate where they have been inserted.

A comprehensive resource

CSCPublishing releases Delaware Laws Governing Business Entities—its flagship publication—twice a year to ensure that practitioners are working with the most up-to-date statutory information and have access to the very latest case law. Unique features such as the legislative analysis and special commentary in this Fall edition provide additional resources and valuable insight for legal professionals working with Delaware entities.

A comprehensive fee table provides up-to-date information for calculating annual franchise taxes and other related entity fees, while Volume 2 contains the helpful “Guidelines for Persons Litigating in the Court of Chancery.”

The book includes online access to more than 150 forms for incorporation/formation, qualification, mergers, dissolution, and name reservation for all business entity types in Delaware via the LexisNexis Online Download Center. A listing of the forms and contact information for Delaware’s Division of Corporations can be found in the book’s appendix.

The Fall 2021 Edition of Delaware Laws Governing Business Entities is available as a two-volume softbound book or as an ebook, compatible with dedicated e-reader devices, computers, tablets and smartphones that use e-reader software or applications. It is also available on the LexisNexis Digital Library.