Richards Layton & Finger

Clarifying the New Amendments

September 27, 2016

Recent amendments to the Delaware Statutory Trust Act, effective August 1, 2016, provide for the ability to opt out of separate legal entity status. [Read our July 2016 update HERE] Some practitioners have expressed concern that by opting out of separate legal entity status, a Delaware statutory trust might not qualify as a “person” who can be a debtor or a “registered organization” under the UCC.

This concern is unfounded because, under Section 3801(g) of the Delaware Statutory Trust Act, a Delaware statutory trust that opts out of entity status is still an “association.” Under the UCC, the definition of a “person” includes an “association,” and any person, other than a natural person, is an “organization.” In addition, the conditions for qualifying as a “registered organization” under the UCC are met by both ordinary Delaware statutory trusts and those that opt out of entity status.