Treasury Department Issues Proposed Series LLC Regs

Posted on September 27, 2010 by Shannon S. Frazier

Earlier this month, the Treasury Department issued the long-awaited proposed regulations regarding the Federal tax classification of series limited liability companies. 

In a nutshell, the proposed regs provide that, regardless of whether a series of an LLC is considered a "person" for local law purposes, such series will be treated as a separate entity for Federal tax purposes.

Given the similarity under Delaware law between series LLC's and series trusts, it will be interesting to see if the regs are ultimately expanded to apply to series trusts, as well.  It will also be interesting to see how far the "separate entity" theory with respect to the individual series can stretch-- can an individual series stand as a debtor in bankruptcy, for instance?  Based on this recent article in the Delaware Journal of Corporate Law, that may well be the case. 

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2010 Amendments to the Delaware Statutory Trust Act

Posted on September 7, 2010 by Shannon S. Frazier

The Delaware Legislature, as part of the ongoing effort to maintain the national preeminence of the Delaware Statutory Trust Act (the "DST Act"), has once again enacted amendments to expand, change and clarify certain provisions of the Act. 

Once of the nicest things about using a Delaware statutory trust (and this is true for all of the Delaware entity statutes, actually) is the responsiveness of the Delaware Legislature in making changes to the statute as the need arises. 

So, for instance, as businesses more frequently engaged in transactions involving the merger or consolidation of a Delaware statutory trust, it became evident that the language of the DST Act relating to the dissolution of a Delaware statutory trust which was not the survivor in a merger or consolidation was troublesome to practitioners.  In response, the new amendments to the DST Act have clarified that a non-surviving statutory trust is not considered to have dissolved and does not need to wind-up its affairs.   Likewise, when practitioners were faced with the question of whether the doctrine of independent legal significance, a traditionally corporate concept, applied to statutory trusts, the Legislature was able to swiftly resolve the issue by a statutory amendment. 

The new amendments also remedy the distinction between a corrected certificate of trust (which is retroactive in nature) and a certificate of correction of a certificate of trust (which previously was not retroactive).  That both types of corrective filings have a retroactive effective time certainly simplifies matters.

This responsiveness of the Legislature to the concerns of businesses and to the practical realities of working within the statutory trust framework really is one of the stand-out characteristics of the DST Act.

 

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