Delaware Enacts Amendments to the Statutory Trust Act
July 19, 2010
Publication| Corporate Trust & Agency Services
Consistent with Delaware’s commitment to maintaining statutes that are state-of-the-art with respect to business entities, including statutory trusts, the Delaware Statutory Trust Act, 12 Del. C. § 3801, et seq. (the "Act"), was amended on July 15, 2010. The amendments to the Act (the "2010 Amendments") are set forth in Senate Bill No. 302 and will become effective on August 1, 2010. Many of the 2010 Amendments are technical in nature, but the more notable aspects of the 2010 Amendments are discussed below.
– Establishment of Designated Series. The 2010 Amendments amend Section 3806(b)(2) of the Act to clarify that a governing instrument of a statutory trust may establish or provide for the establishment of designated series of "assets" in addition to series of trustees, beneficial owners or beneficial interests, having separate rights, powers and duties with respect to specified property or obligations of the statutory trust or profits and losses associated with specified property or obligations. This amendment confirms that segregated pools of assets may constitute series under the Act.
– Death, Incapacity, Dissolution, Termination or Bankruptcy of Beneficial Owner or Trustee. The 2010 Amendments amend Section 3808(b) of the Act to clarify that, except to the extent otherwise provided in the governing instrument of a statutory trust, neither the death, incapacity, dissolution, termination nor bankruptcy of a trustee shall result in the termination or dissolution of a statutory trust. This amendment confirms that a statutory trust will not be void for lack of a trustee.
– Execution Constitutes Oath or Affirmation. The 2010 Amendments amend Section 3811(c) of the Act to clarify that, in addition to a trustee, the execution of a certificate by any other person authorized pursuant to Section 3811(a) of the Act (such as a person signing on behalf of an "other business entity" or "non-United States entity") constitutes an oath or affirmation, under penalties of perjury in the third degree, that, to the best of such person’s knowledge and belief, the facts stated in such certificate are true.
– Amendment of Governing Instrument. The 2010 Amendments amend Section 3815(f) so that a governing instrument of a statutory trust no longer needs to contain a specific reference to this Section in order for an agreement of merger or consolidation approved in accordance with Section 3815(a) of the Act to (1) effect any amendment to the governing instrument of a statutory trust or (2) effect the adoption of a new governing instrument of the statutory trust, if it is the surviving or resulting statutory trust in the merger or consolidation. The 2010 Amendments further amend Section 3815(f) to clarify that any amendment or adoption made pursuant to this Section shall be effective notwithstanding any provision of the governing instrument, including a provision relating to amendment or adoption of a new governing instrument other than a provision that by its terms applies to an amendment to the governing instrument or the adoption of a new governing instrument in connection with a merger or consolidation. The 2010 Amendments to Section 3815(f) do not apply to statutory trusts created prior to the effective date of the 2010 Amendments unless the governing instrument of such statutory trust provides otherwise.
– Effect of Merger or Consolidation. The 2010 Amendments amend Section 3815(g) of the Act to clarify that, unless otherwise agreed, a merger or consolidation of a statutory trust that is not the surviving or resulting entity does not constitute the dissolution of such statutory trust and does not require such statutory trust to wind-up its affairs, pay its liabilities or distribute its assets.
– Power to Merge or Consolidate. The 2010 Amendments amend Section 3815 to clarify that a governing instrument of a statutory trust may provide that such statutory trust does not have the power to merge or consolidate with or into another entity.
– Power to Covert. The 2010 Amendments amend Section 3821 of the Act to clarify that a governing instrument of a statutory trust may provide that such statutory trust does not have the power to convert into another entity.
– Power to Transfer, Domesticate or Continue. The 2010 Amendments amend Section 3823 of the Act to clarify that a governing instrument of a statutory trust may provide that such statutory trust does not have the power to transfer, domesticate or continue as set forth in such Section.
– Independent Legal Significance. The 2010 Amendments amend Section 3825 of the Act to clarify that the doctrine of independent legal significance, as developed in Delaware corporation law, applies to statutory trusts. Although the 2007 decision of the Delaware Court of Chancery in the Twin Bridges Limited Partnership case did not involve a statutory trust, it did cast some doubt on whether the doctrine was applicable outside the corporate context. New Section 3825(c) provides that action validly taken pursuant to one provision of the Act shall not be deemed invalid solely because it is identical or similar in substance to an action that could have been taken pursuant to some other provision of the Act but fails to satisfy one or more requirements prescribed by such other provision.
– Service of Process on Secretary of State. The 2010 Amendments amend numerous provisions of the Act that require service of process on the Delaware Secretary of State to allow for service of process by means of electronic transmission, but only as prescribed by the Secretary of State, and to authorize the Secretary of State to issue rules and regulations with respect to such service as the Secretary of State deems necessary or appropriate.
If you have any questions with respect to the foregoing or would like further information regarding the Delaware Statutory Trust Act, please do not hesitate to contact any of the attorneys in Richards Layton’s Business Trust and Agency Services Group.