Symonds & O'Toole on Delaware Limited Liability Companies

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Symonds & O'Toole on Delaware Limited Liability Companies

Author(s): Matthew J. O'Toole (Author), Robert L. Symonds (Author), Michael P. Maxwell (Executive Editor), Alyssa Gerace Frank (Executive Editor)

The latest release provides in-depth analysis of the most current amendments to Delaware limited liability company statute — The Delaware Court of Chancery has called the publication "the leading Delaware LLC treatise." The authors are intimately involved in drafting the Delaware Limited Liability Company Act and bring their extensive experience in authoring the book.

Publisher: CSC

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Symonds & O’Toole on Delaware Limited Liability Companies is a in-depth resource for business attorneys that offers workable solutions for complex transactions involving Delaware LLCs, and well as practical insight into case law interpreting statutes. This updated work helps provide the best possible representation and advice to your clients who are looking to make the most of Delaware LLCs with:

discussion of statutory and case law;
legal analysis and practice recommendations;
appendices that include the current Delaware Limited Liability Company Act (the "Act"), historical versions of the statute, legislative history, and up-to-date forms.

This release updates many chapters and sections to address amendments to the Act.

Readers will also find in-depth analysis of recent case law developments, including interpretation, enforcement and amendment of LLC agreements; voidness and voidability of acts by members or managers of Delaware LLCs; admission and resignation of members; jurisdiction of Delaware courts; management authority and other governance issues, including fiduciary duties; and dissolution and winding up.

As in previous releases, the authors draw on their extensive experience to cover the life cycle of a Delaware LLC, including:

LLC formation and organization
Drafting the LLC agreement
Financing the LLC
Members and managers
Ownership, voting and LLC interests
Indemnification and Other Liability Protections
Fiduciary duties
Series LLCs
Creditors’ rights, protections, and remedies
Mergers, conversions, divisions, and other fundamental transactions
Dissolution, winding up and termination of the LLC

The treatisecontinues to be cited by the Delaware Court of Chancery, such as in Campus Eye Management Holdings, LLC v. E. Bruce DiDonato, OD and Campus Eye Management, LLC, C.A. No. 2024-0121-LWW (Del. Ch. Aug. 30, 2024)

eBooks, CDs, downloadable content, and software purchases are noncancelable, nonrefundable and nonreturnable. Click here for more information about LexisNexis eBooks. The eBook versions of this title may feature links to Lexis+® for further legal research options. A valid subscription to Lexis+® is required to access this content.

Pub. 28378

Table of Contents

Table of contents

Chapter 1 INTRODUCTION: HISTORY AND STRUCTURE OF THE DLLC ACT; POPULARITY AND USES OF DELAWARE LLCs
§ 1.01 — HISTORY OF THE DLLC ACT
§ 1.02 — POPULARITY OF DELAWARE LIMITED LIABILITY COMPANIES
§ 1.03 — NATURE AND STRUCTURE OF THE DLLC ACT
§ 1.04 — BRIEF OVERVIEW OF DELAWARE LIMITED LIABILITY COMPANIES
§ 1.05 — SOME OBSERVATIONS ON THE VARIOUS USES OF DELAWARE LIMITED LIABILITY COMPANIES

Chapter 2 FORMATION AND POWERS
§ 2.01 — FORMATION OF A DELAWARE LIMITED LIABILITY COMPANY, GENERALLY
§ 2.02 — CERTIFICATE OF FORMATION
§ 2.03 — SUBSTANTIAL COMPLIANCE STANDARD APPLICABLE TO FORMATION
§ 2.04 — TIME OF FORMATION
§ 2.05 — SEPARATE LEGAL ENTITY
§ 2.06 — POWERS OF A DELAWARE LIMITED LIABILITY COMPANY, GENERALLY
§ 2.07 — EXPLICIT POWERS OF A DELAWARE LIMITED LIABILITY COMPANY
§ 2.08 — IMPLIED POWERS OF A DELAWARE LIMITED LIABILITY COMPANY
§ 2.09 — RESTRICTIONS ON POWERS OF A DELAWARE LIMITED LIABILITY COMPANY
§ 2.10 — ULTRA VIRES DOCTRINE
§ 2.11 — ADDRESSING POWER AND AUTHORITY MATTERS IN THE LIMITED LIABILITY COMPANY AGREEMENT
§ 2.12 — JURISDICTION OF THE COURT OF CHANCERY OF THE STATE OF DELAWARE

Chapter 3 FILING OF DOCUMENTS WITH THE DELAWARE SECRETARY OF STATE
§ 3.01 — DOCUMENTS FILED WITH THE DELAWARE SECRETARY OF STATE UNDER THE DLLC ACT
§ 3.02 — EXECUTION OF DOCUMENTS FILED WITH THE DELAWARE SECRETARY OF STATE UNDER THE DLLC ACT
§ 3.03 — FILING OF DOCUMENTS WITH THE DELAWARE SECRETARY OF STATE UNDER THE DLLC ACT

Chapter 4 THE LIMITED LIABILITY COMPANY AGREEMENT
§ 4.01 — DEFINITION, NATURE, AND FUNCTION OF LIMITED LIABILITY COMPANY AGREEMENT
§ 4.02 — FORM OF LIMITED LIABILITY COMPANY AGREEMENT
§ 4.03 — PARTIES TO LIMITED LIABILITY COMPANY AGREEMENT
§ 4.04 — EXECUTION OF LIMITED LIABILITY COMPANY AGREEMENT
§ 4.05 — TIME OF ENTERING INTO, AND EFFECTIVE TIME OF, LIMITED LIABILITY COMPANY AGREEMENT
§ 4.06 — AMENDMENT OF LIMITED LIABILITY COMPANY AGREEMENT
§ 4.07 — EFFECT OF DEFAULT RULES AND OTHER PROVISIONS UNDER THE DLLC ACT
§ 4.08 — DRAFTING THE LIMITED LIABILITY COMPANY AGREEMENT
§ 4.09 — FREEDOM OF CONTRACT AND ENFORCEABILITY OF LIMITED LIABILITY COMPANY AGREEMENT
§ 4.10 — JURISDICTION OF THE COURT OF CHANCERY OF THE STATE OF DELAWARE

Chapter 5 MEMBERS, ASSIGNEES, AND LIMITED LIABILITY COMPANY INTERESTS

PART A: MEMBERS
§ 5.01 — MEMBERS GENERALLY
§ 5.02 — ADMISSION OF MEMBERS
§ 5.03 — LIABILITY OF MEMBERS
§ 5.04 — CESSATION OF MEMBERSHIP
§ 5.05 — CLASSES AND GROUPS OF MEMBERS
§ 5.06 — DEALINGS BETWEEN MEMBER AND LIMITED LIABILITY COMPANY
§ 5.07 — MEMBERS SUBJECT TO CHANGES IN THE DLLC ACT

PART B: LIMITED LIABILITY COMPANY INTERESTS
§ 5.08 — LIMITED LIABILITY COMPANY INTERESTS, GENERALLY
§ 5.09 — CLASSES OR GROUPS OF LIMITED LIABILITY COMPANY INTERESTS
§ 5.10 — TERMS RELATING TO LIMITED LIABILITY COMPANY INTERESTS
§ 5.11 — DENOMINATION OF LIMITED LIABILITY COMPANY INTERESTS
§ 5.12 — NATURE OF A LIMITED LIABILITY COMPANY INTEREST
§ 5.13 — ASSIGNABILITY OF LIMITED LIABILITY COMPANY INTERESTS
§ 5.14 — CERTIFICATE OF LIMITED LIABILITY COMPANY INTEREST
§ 5.15 — CREATION AND ISSUANCE OF LIMITED LIABILITY COMPANY INTERESTS AND RELATED RIGHTS
§ 5.16 — LIMITED LIABILITY COMPANY’S ACQUISITION OF ITS OWN LIMITED LIABILITY COMPANY INTERESTS
§ 5.17 — ESTABLISHMENT OF RECORD DATE

PART C: ASSIGNEES
§ 5.18 — ASSIGNEES, GENERALLY
§ 5.19 — RIGHTS AND LIABILITIES OF ASSIGNEES
§ 5.20 — LIMITED LIABILITY COMPANY ITSELF AS HOLDER OF A LIMITED LIABILITY COMPANY INTEREST

PART D: CREDITORS' RIGHTS
§ 5.21 — RIGHTS OF CREDITORS OF MEMBERS AND ASSIGNEES

Chapter 6 FINANCE
§ 6.01 — DEBT FINANCING
§ 6.02 — DEFENSE OF USURY UNAVAILABLE TO A DELAWARE LIMITED LIABILITY COMPANY
§ 6.03 — "EQUITY" FINANCING
§ 6.04 — OTHER FINANCING TRANSACTIONS
§ 6.05 — CONTRIBUTIONS TO A DELAWARE LIMITED LIABILITY COMPANY

Chapter 7 DISTRIBUTIONS
§ 7.01 — LIMITATIONS ON DISTRIBUTIONS BY DELAWARE LIMITED LIABILITY COMPANIES
§ 7.02 — RIGHTS TO RECEIVE DISTRIBUTIONS
§ 7.03 — FORM OF DISTRIBUTION
§ 7.04 — MECHANICS OF DISTRIBUTIONS
§ 7.05 — LIABILITY FOR RECEIPT OF UNLAWFUL DISTRIBUTION
§ 7.06 — LIABILITY FOR AUTHORIZING UNLAWFUL DISTRIBUTION

Chapter 8 ASSIGNMENTS OF INTERESTS
§ 8.01 — ASSIGNMENT OF LIMITED LIABILITY COMPANY INTERESTS
§ 8.02 — ASSIGNMENT OF MEMBERSHIP
§ 8.03 — ASSIGNMENT OF OTHER RIGHTS, INTERESTS, AND DUTIES UNDER THE LIMITED LIABILITY COMPANY AGREEMENT
§ 8.04 — POWERS OF PERSONAL REPRESENTATIVE

Chapter 9 MANAGEMENT
§ 9.01 — MANAGEMENT OVERVIEW
§ 9.02 — MANAGERS
§ 9.03 — DELEGATEES AND OTHERS POSSESSING MANAGEMENT AUTHORITY
§ 9.04 — MANAGEMENT AND VOTING RIGHTS AND POWERS; MANAGEMENT DUTIES
§ 9.05 — APPOINTMENT, RESIGNATION, AND REMOVAL OF MANAGERS
§ 9.06 — BINDING EFFECT OF LIMITED LIABILITY COMPANY AGREEMENT ON MANAGERS
§ 9.07 — INFORMATION ACCESS RIGHTS
§ 9.08 — SPECIFIC REMEDIES AGAINST MANAGERS; LIABILITY PROTECTIONS FOR MANAGERS
§ 9.09 — DERIVATIVE ACTIONS
§ 9.10 — MANAGEMENT OF A SERIES LIMITED LIABILITY COMPANY
§ 9.11 — MANAGEMENT OF A DISSOLVED LIMITED LIABILITY COMPANY
§ 9.12 — APPOINTMENT OF TRUSTEE OR RECEIVER FOR LIMITED LIABILITY COMPANY
§ 9.13 — SERVICE OF PROCESS ON MANAGERS AND OTHERS
§ 9.14 — SUBJECT MATTER JURISDICTION OF THE COURT OF CHANCERY OF THE STATE OF DELAWARE

Chapter 10 SERIES OF MEMBERS, MANAGERS, LIMITED LIABILITY COMPANY INTERESTS, AND ASSETS; PUBLIC BENEFIT LIMITED LIABILITY COMPANIES
§ 10.01 — SERIES GENERALLY
§ 10.02 — PROTECTED SERIES
§ 10.03 — REGISTERED SERIES
§ 10.04 — FUNDAMENTAL TRANSACTIONS INVOLVING SERIES
§ 10.05 — FOREIGN SERIES LIMITED LIABILITY COMPANY
§ 10.06 — PUBLIC BENEFIT LIMITED LIABILITY COMPANIES

Chapter 11 INDEMNIFICATION, ADVANCEMENT OF EXPENSES, AND RELATED MATTERS
§ 11.01 — LIMITED LIABILITY COMPANY POWERS
§ 11.02 — RIGHTS TO INDEMNIFICATION AND ADVANCEMENT OF EXPENSES
§ 11.03 — OTHER PROTECTION FROM LIABILITY
§ 11.04 — JURISDICTION OF THE COURT OF CHANCERY OF THE STATE OF DELAWARE

Chapter 12 BOOKS AND RECORDS
§ 12.01 — RECORDS REQUIRED UNDER THE DLLC ACT
§ 12.02 — SUGGESTED RECORDS REGARDING LIMITED LIABILITY COMPANY’S INTERNAL AFFAIRS
§ 12.03 — FORM OF LIMITED LIABILITY COMPANY RECORDS
§ 12.04 — LOCATION OF LIMITED LIABILITY COMPANY RECORDS
§ 12.05 — RECORDKEEPING RESPONSIBILITY
§ 12.06 — LIMITED LIABILITY COMPANY SEAL
§ 12.07 — INFORMATION ACCESS RIGHTS OF MEMBERS AND MANAGERS
§ 12.08 — INFORMATION ACCESS RIGHTS OF NON-MEMBERS AND NON-MANAGERS
§ 12.09 — CONFIDENTIALITY

Chapter 13 [RESERVED]

Chapter 14 FUNDAMENTAL TRANSACTIONS
§ 14.01 — CERTIFICATE OF FORMATION
§ 14.02 — AMENDMENTS AND OTHER CHANGES EFFECTED BY REGISTERED AGENT
§ 14.03 — LIMITED LIABILITY COMPANY AGREEMENT
§ 14.04 — MERGER AND CONSOLIDATION
§ 14.05 — CONVERSION
§ 14.06A — DIVISION
§ 14.06 — TRANSFER, DOMESTICATION, AND CONTINUANCE
§ 14.07 — DISPOSITIONS OF LIMITED LIABILITY COMPANY ASSETS
§ 14.08 — APPRAISAL RIGHTS
§ 14.09 — BANKRUPTCY AND INSOLVENCY PROCEEDINGS
§ 14.10 — REVIVAL OF A DELAWARE LIMITED LIABILITY COMPANY
§ 14.11 — CERTIFICATE OF CORRECTION AND CORRECTED CERTIFICATE
§ 14.12 — CANCELLATION OR AMENDMENT OF A CERTIFICATE WITH A FUTURE EFFECTIVE TIME
§ 14.13 — OTHER FUNDAMENTAL TRANSACTIONS
§ 14.14 — DOCTRINE OF INDEPENDENT LEGAL SIGNIFICANCE

Chapter 15 CREDITOR RIGHTS, PROTECTIONS, AND REMEDIES
§ 15.01 — RIGHTS UNDER THE LIMITED LIABILITY COMPANY AGREEMENT
§ 15.02 — STATUTORY RIGHT TO ENFORCE MEMBER OBLIGATION TO CONTRIBUTE OR RETURN ASSETS
§ 15.03 — STATUTORY LIMITATIONS ON LIMITED LIABILITY COMPANY DISTRIBUTIONS
§ 15.04 — STATUTORY PRESERVATION OF CREDITOR RIGHTS AND LIENS
§ 15.05 — LIABILITY OF MEMBERS AND OTHERS FOR LIMITED LIABILITY COMPANY DEBTS AND OBLIGATIONS
§ 15.06 — UNAVAILABILITY OF THE DEFENSE OF USURY
§ 15.07 — APPOINTMENT OF TRUSTEE OR RECEIVER FOR LIMITED LIABILITY COMPANY
§ 15.08 — CREDITORS OF MEMBERS, ASSIGNEES, AND MANAGERS
§ 15.09 — CREDITORS’ LACK OF STANDING TO ASSERT CERTAIN CLAIMS

Chapter 16 DISSOLUTION, WINDING UP, AND TERMINATION
§ 16.01 — LIMITED LIABILITY COMPANY EXISTENCE, DISSOLUTION, WINDING UP, AND TERMINATION, GENERALLY
§ 16.02 — CAUSES OF DISSOLUTION
§ 16.03 — SPECIFIC EVENTS THAT DO NOT CAUSE DISSOLUTION ABSENT CONTRARY AGREEMENT
§ 16.04 — DISSOLUTION SAFEGUARDS AND FLEXIBILITY TO AVOID DISSOLUTION
§ 16.05 — CONSEQUENCES OF DISSOLUTION
§ 16.06 — WINDING UP
§ 16.07 — TERMINATION OF LIMITED LIABILITY COMPANY
§ 16.08 — CERTIFICATE OF CANCELLATION
§ 16.09 — POST-TERMINATION MATTERS

Chapter 17 TAXATION AND FEES UNDER THE DLLC ACT
§ 17.01 — ANNUAL TAX UNDER THE DLLC ACT
§ 17.02 — CONSEQUENCES OF FAILURE TO PAY ANNUAL TAX
§ 17.03 — MATTERS NOT AFFECTED BY FAILURE TO PAY ANNUAL TAX
§ 17.04 — FEES PAYABLE UNDER THE DLLC ACT
§ 17.05 — CLASSIFICATION OF LIMITED LIABILITY COMPANIES, MEMBERS, AND ASSIGNEES FOR PURPOSES OF DELAWARE TAXATION

Chapter 18 FOREIGN LIMITED LIABILITY COMPANIES
§ 18.01 — DEFINITION OF FOREIGN LIMITED LIABILITY COMPANY
§ 18.02 — LAW GOVERNING FOREIGN LIMITED LIABILITY COMPANIES
§ 18.03 — REGISTRATION OF FOREIGN LIMITED LIABILITY COMPANIES
§ 18.04 — DOING BUSINESS IN DELAWARE
§ 18.05 — SERVICE OF PROCESS ON A FOREIGN LIMITED LIABILITY COMPANY IN DELAWARE
§ 18.06 — TAXATION OF FOREIGN LIMITED LIABILITY COMPANIES

Chapter 19 MISCELLANEOUS PROVISIONS: DEFINITIONS, RULES OF CONSTRUCTION, RESERVED POWER, AND SERVICE OF PROCESS
§ 19.01 — DEFINITIONS IN THE DLLC ACT
§ 19.02 — CONSTRUCTION OF THE DLLC ACT AND THE LIMITED LIABILITY COMPANY AGREEMENT
§ 19.03 — RESERVED POWER OF THE STATE OF DELAWARE
§ 19.04 — SHORT TITLE
§ 19.05 — SERVICE OF PROCESS ON A DELAWARE LIMITED LIABILITY COMPANY
§ 19.06 — DOCUMENT FORM, SIGNATURE, AND DELIVERY
§ 19.07 — RATIFICATION OF VOID OR VOIDABLE ACTS

APPENDIX A CURRENT DLLC ACT WITH 2018 AMENDMENTS (BLACKLINED)

APPENDIX B HISTORY OF THE DLLC ACT: LEGISLATIVE BILLS [on download center]

APPENDIX C HISTORY OF THE DLLC ACT: ANNUAL VERSIONS OF THE STATUTE [on download center]

APPENDIX D FORM DOCUMENTS

Table 1 TABLE OF STATUTES

Table 2 "DEFAULT RULES" UNDER THE DELAWARE LIMITED LIABILITY COMPANY ACT

Table 3 PROVISIONS OF THE DELAWARE LIMITED LIABILITY COMPANY ACT THAT EXPRESSLY PERMIT PARTICULAR CONTRACTUAL TERMS IN THE LIMITED LIABILITY COMPANY AGREEMENT

Table 4 TABLE OF CASES

Index

Featured Authors

Matthew J. O'Toole Robert L. Symonds Michael P. Maxwell Alyssa Gerace Frank

Matthew J. O'Toole

Matthew J. O'Toole is past Chair of the Business Group of Potter Anderson Corroon LLP, and a member of the firm's Executive Committee. He concentrates his practice on corporate and business transactions, particularly the structure and use of Delaware business entities, including corporations, limited liability companies, partnerships (general and limited) and statutory trusts. He often serves as counsel to lenders, borrowers, investors, managers, trustees and other parties involved in both domestic and international business transactions. His practice frequently involves providing third-party legal opinions concerning Delaware’s General Corporation Law, Delaware’s alternative entity statutes, the Delaware UCC, and other applicable law. Mr. O’Toole is a past chair and current member of the Council of the Corporation Law Section of the Delaware State Bar Association, which monitors and proposes amendments to the General Corporation Law of the State of Delaware, and sits as well on the committee that monitors the Delaware Statutory Trust Act. He is a past chair and current member of the Delaware State Bar Association committee responsible for proposing amendments to the Delaware Limited Liability Company Act and to Delaware’s limited partnership and general partnership laws. Matt has served previously on other committees established by the Council, including the Technology Update Committee, which undertook a comprehensive review of Delaware’s General Corporation Law to study and recommended changes to that statute to accommodate current technology. He is one of the principal drafters of the Delaware Revised Captive Insurance Company Act and the Delaware Insurance Company Mutual-to-Stock Conversion Act. Mr. O’Toole is co-author of Symonds & O'Toole on Delaware Limited Liability Companies, published by CSC/LexisNexis. His articles on amendments to Delaware’s corporate and alternative entity statutes and the Delaware UCC are published regularly in CSC’s Delaware Laws Governing Business Entities and he is author of the "Delaware Limited Liability Company Practice Guide," in State Limited Liability Company & Partnership Laws, published by Aspen Law & Business. In addition, he has written a number of other publications and guides that serve as references for both business and legal professionals. Mr. O’Toole has been recognized in The Best Lawyers in America for corporate law, mergers and acquisitions law, business organizations, and securitization and structured finance law. He also has been recognized as one of the leading corporate, alternative entities, and M&A lawyers in Delaware by Chambers & Partners.

View All Books by Matthew J. O'Toole (2)

Robert L. Symonds

Robert L. Symonds is a partner in the Business Group of Potter Anderson Corroon LLP. He focuses his practice on corporate and business transactions, particularly the structure and use of Delaware business entities, including Delaware corporations, limited liability companies, partnerships and statutory trusts. He often serves as Delaware counsel to lenders, borrowers, investors, managers, trustees and other parties in domestic and international business transactions. His practice frequently involves providing third-party legal opinions as to matters of Delaware corporate law, Delaware alternative entity law and other applicable law.

In addition to being one of the original drafters of the Delaware Limited Liability Company Act, Mr. Symonds is a former chairman of the drafting committee responsible for amendments to that statute and to the Delaware Revised Uniform Limited Partnership Act and the Delaware Revised Uniform Partnership Act. He also is a member of the drafting committee for the Delaware Statutory Trust Act and is one of the principal drafters of the Delaware Revised Captive Insurance Company Act and the Delaware Insurance Company Mutual-to-Stock Conversion Act. In addition, he serves as a member of the legislative drafting committee of the Delaware Captive Insurance Association.

Mr. Symonds is a former chair of the Delaware State Bar Association's Commercial Law Section, which monitors and recommends changes to Delaware's business and commercial laws. He has frequently appeared before the Delaware Legislature to provide testimony on proposed Delaware legislation and related matters.

Mr. Symonds is co-author of the law treatise Symonds and O'Toole on Delaware Limited Liability Companies, published by CSC/LexisNexis. His articles on amendments to Delaware's corporate and alternative entity statutes and the Delaware UCC are published regularly in CSC's Delaware Laws Governing Business Entities. He is the author of a number of publications and guides that serve as references to both business professionals and legal advisors who participate in transactions involving Delaware business entities and has spoken at numerous seminars on topics of Delaware law.

View All Books by Robert L. Symonds (1)

Symonds & O'Toole on Delaware Limited Liability Companies

Featured Authors

Matthew J. O'Toole

Robert L. Symonds

Michael P. Maxwell

Alyssa Gerace Frank

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