Alerts

Delaware Allows Formation of Registered Series

People love series. They love to watch the World Series, read the Harry Potter series, and binge on the Friends television series. Now there is a new series in town. Get ready for the Delaware registered series!

In 1996, Delaware allowed for the creation of a series LLC, a unique form of limited liability company in which the articles of formation specifically allow for unlimited segregation of membership interests, assets, and operations into independent series. Other states soon followed by passing their own series LLC legislation. To date, seventeen states have enacted series LLC legislation, four additional states acknowledge series LLCs but do not offer the liability shield, and at least three states have introduced series LLC legislation for consideration this year. In 2017, the Uniform Law Commission approved the Uniform Protected Series Act in an attempt to provide consistency across the states, and most recently, the Delaware Limited Liability Company Act was amended to address certain limitations in connection with their existing series LLC statute.

Effective August 1, 2019, Delaware will allow for formation of a registered series LLC by filing a certificate of registered series in the office of the Secretary of State. This new legislation allows for the merger and consolidation of registered series, issuance of certificate of good standing for registered series, and the conversion of a protected series into a registered series. There will be an annual tax of $75 per registered series, and the statute allows for the administrative cancellation of a registered series after three years of delinquency. So why are series LLCs gaining so much attention? Shockingly, not for the same reasons that people love watching a home run that turns around Game 4, reading another lengthy tale of wizardry, or revisiting the scene where Monica has a turkey on her head.

Series LLCs offer a method of liability segregation without the cost and upkeep of forming multiple LLCs. Instead, they permit a single LLC to be formed with the designation that it will allow for series to be created within the limited liability company agreement. Thereafter, each individual series will operate like a separate entity with a unique name, bank account, and separate books and records. Each series within the LLC may enter into contracts, sue or be sued, and hold title to real and personal property, and the assets owned by each series are shielded from the risk of liability of the other series within the same series LLC.

Series LLCs may not be as exciting as the World Series, or as entertaining as Harry Potter and Friends, but they are gaining in popularity and are expected to continue to increase in number.

(Illustration ©Vecteezy)

 

 

Delaware Act Promotes Sustainability

Effective October 1, 2018, Delaware’s Certification of Adoption of Transparency and Sustainability Standards Act (the “Act”) is the first of its kind. The Act’s purpose is to enable Delaware entities to demonstrate their commitment to sustainability to the public.

To become a reporting entity under the Act, the entity’s governing body must first adopt resolutions creating standards and assessment measures of the impact of the entity’s activities on society and the environment. The proposed assessment measures must include any procedures for internal or external verification of the measures. However, the entity is free to rely on various sources in designing its standards and assessment measures without judgment from the Secretary of State.

After adopting the required resolutions, the entity can obtain certification under the Act by submitting a standards statement to the Secretary of State detailing the resolutions, making specific acknowledgments concerning its commitment to implementing and maintaining its standards and assessment measures, and paying the corresponding fees. Entity types that register or form with the Secretary of State must be in good standing.

Entities must file annual renewal statements between October 1 and December 31 of each year and remain in good standing to maintain certification under the Act.

Entity Management Made Simple

Routine upkeep of corporate information such as officers, directors, and shareholders is a must for any company. Our Corporate Entity Manager is a user-friendly, customizable platform on our Client Dashboard that allows you to organize and maintain business entity information, such as corporate names, entity types, charter numbers, dates, tax identification numbers, and ownership and management information.

Other important data can be maintained through fields tailored to your specific needs. Powerful search and export functions allow you to quickly find and download entity information with ease. Other features include:

• Searchable entity records
• Corporate registration information
• Access to legal and notice records
• Annual Report Calendar
• Access to Annual Report Management Filings
• Customizable data management
• Corporate contacts library

If you have any questions about our Corporate Entity Manager or your online access please call us at 800.345.4647 or email us at info@capitolservices.com.

A Word of Corporate Caution

The file-date given to a corporate filing is not always the date of submission. Some states assign the date the filing is processed and accepted as the file-date. Given the processing time of the state filing office there may be a difference of days or even weeks between the date of submission and the actual file date.

The calculation of a projected file date is made even more complicated by the manner in which states handle errors within filings or rejected documents. For example, Texas gives filings the date of submission if they are accepted, but the date is lost if the document is rejected. Once accepted, the corrected filing is given the date of resubmission as the file-date. Other states, such as Delaware, will give you a finite period of time to address any issues in the filing and still hold the date of original submission as the file-date.

Knowledge of filing date rules in each jurisdiction is invaluable as deadlines occur. Let us help you navigate the nuances.

Mergers, Conversions, and Dissolutions

Keeping up with the requirements for mergers, conversions, and dissolutions is pivotal for entities looking to modify their current operating procedures.

Being a timely year end matter, Capitol Services’ corporate experts put together a list of the top 5 most frequently asked questions and their answers to help you better navigate these topics.

Q: Do all states allow for conversions?
A: No, there are still a number of states that have no provision in their statute for the conversion from one entity type to another. Still others restrict it to some types of conversions and not others.

Q: What is “redomestication”?
A: This is the term that some states use when an entity converts from one state or country to another.

Q: Is tax clearance required from this merger, conversion, or dissolution?
A: This varies greatly by state and entity type. Our customer service representatives can help you navigate the requirements of each jurisdiction.

Q: May I list a delayed effective date on my filing?
A: This, too, varies by jurisdiction and filing type. We can help.

Q: What needs to be done in the foreign jurisdictions when a company merges, converts, or dissolves in the home state?
A: Filings will need to be made in each state in which the company is qualified to evidence the merger, conversion, or dissolution. We can guide you as to what filings are required in the relevant jurisdictions.

Capitol Services is always happy to help with any other questions you may have.

The Special Agreement

In the most common type of agent representation, a jurisdiction requires an entity to appoint a registered agent in its formation or qualification documents filed with the secretary of state (or equivalent office). In the second type of agent representation, a governmental agency, such as a state insurance or contractor’s board, requires an entity to appoint a registered agent in connection with registration or licensing procedures. This appointment is separate from, or in addition to, the appointment with the secretary of state.

A third, less common type of representation is the appointment of agent for service of process in connection with a special agreement. Examples of special agreements include loan/credit agreements, guaranties, leases, and employment contracts. Special agreements include the requirement to appoint a process agent in a particular jurisdiction as well as identify such agent and its address. Many special agreements include foreign parties. Requiring a local agent for service of process ensures that a U.S.-based party can serve a foreign party in the U.S. in the event of default or breach.

Special agreement representation requires a written appointment between the entity requiring representation and Capitol Services. We can help you navigate the requirements under your special agreement and provide a lender acceptance letter when necessary. For more information about special agreement representation, or any other type of agent representation, please contact our Registered Agent department.