On June 19, Delaware Gov. John Carney signed into law bills amending the Delaware General Corporation Law (DGCL), the Delaware Limited Liability Company Act (the DLLCA), the Delaware Revised Uniform Limited Partnership Act (DRULPA) and the Delaware Revised Uniform Partnership Act (DRUPA and, together with the DGCL, the DLLCA and DRULPA, the acts). The most significant changes affected by this year's amendments provide safe harbors for electronic documentation of certain acts and transactions and electronic signature of documents, and permit electronic delivery of stockholder notices, including appraisal notices. The amendments will become effective Aug. 1.

Electronic Transactions and Signatures

The amendments to the acts establish nonexclusive, safe harbor methods to reduce certain acts and transactions to a written or electronic document and to execute and deliver a document electronically. The amendments permit a wide variety of acts and transactions that are “contemplated or governed by” the acts to be documented and executed electronically, including merger agreements, stockholders agreements, proxies and LLC or partnership agreements. Under the amendments, an electronic document is deemed functionally equivalent to a written document.

The amendments broadly define an electronic signature as an electronic symbol or process that is attached to, or logically associated with, a document and executed or adopted by a person with an intent to authenticate or adopt the document. Under the amendments, any document contemplated or governed by the acts may be documented, signed and delivered electronically, including by Docusign and similar electronic means.

With respect to electronic delivery, unless otherwise provided in an entity's organizational documents or agreed between the sender and recipient, an electronic transmission will be deemed to be delivered to a person for purposes of the acts and the organizational documents when it enters an information processing system that the recipient has designated for the purpose of receiving electronic transmissions of the type delivered, so long as the electronic transmission is in a form capable of being processed by that system and such recipient is able to retrieve the electronic transmission. The recipient's designation of an information processing system will be determined by the organizational documents or from the context and surrounding circumstances, including the parties' conduct. Notably, the amendments provide that an electronic transmission delivered in accordance with the above procedures is deemed delivered even if no person is aware of its receipt.

The safe harbor provisions under the amendments apply solely for purposes of determining whether an act or transaction has been documented, and whether a document has been signed and delivered, in accordance with the acts and the entity's organizational documents. The safe harbor will not preempt any statute of frauds or other laws that might require actions be documented, or that documents be signed and delivered, in a specified manner.

The amendments are based, in part, on the Delaware Uniform Electronic Transactions Act (UETA), and clarify how UETA interacts with the acts. UETA provides that it does not apply to transactions that are governed by the acts. As a result, documents such as merger agreements, stockholders' agreements, LLC agreements, partnership agreements and other documents governed by the acts could not be executed electronically in reliance on UETA. Once the amendments become effective, however, parties may document, execute and deliver such documents electronically by complying with the provisions of the amendments. The intent of the amendments is to allow the acts to govern the documentation of actions and the signature and delivery of documents to the fullest extent that they are not preempted by the Electronic Signatures in Global and National Commerce Act.

A corporation, limited liability company or limited or general partnership will be able to opt out of the provisions of the amendments by expressly providing specific restrictions on documenting electronic transactions in its certificate of incorporation, bylaws, LLC agreement or partnership agreement. It is important to note that any provisions in the organizational documents requiring that an act or transaction be documented in writing, or that a document be signed or delivered manually, will not prohibit the use of electronic transmission or an electronic signature.

The amendments also specify certain documents that will not qualify for this safe harbor, including, among other things, documents filed with the secretary of state, the Register in Chancery, or a court or other judicial or governmental body of Delaware; a document comprising part of the stock ledger; actions by written consent of directors, stockholders or incorporators (which may be delivered electronically under existing provisions of the DGCL); stock certificates and certificates evidencing limited liability company or partnership interests or other securities and waivers of notice. However, it is important to note that many of these excluded items are governed by separate provisions of the acts that facilitate the use of electronic media or transmission, including, for example, documents filed with the secretary of state and delivery of written consents and electronic notices.

Default Provisions for Delivery of Notice to Stockholders

The amendments to the DGCL also include noteworthy changes to the statutory default provisions relating to delivery of stockholder notices. Under the amendments, a corporation will be permitted to send notices to a stockholder's valid email address, as it appears on the corporation's records, without first obtaining the consent of such stockholder, unless such stockholder specifically notifies the corporation in writing (including by electronic transmission) of its objection to receiving notices by email. The amendments provide that a corporation may provide notice to stockholders by U.S. mail, with time of notice being when the notice is placed in the mail, (ii) courier service, with time of notice being the earlier of when it is received by the stockholder or left at stockholder's address or electronic mail, with time of notice being when it is directed to the stockholder's email address. Even if the corporation's certificate of incorporation or bylaws requires that notice be delivered by U.S. mail or courier service, the amendments permit it to nonetheless deliver stockholder notices electronically, thus eliminating the need for corporations to amend their organizational documents in order to take advantage of the provisions of the amendments.

The new statutory default notice provisions apply to any notice required by the DGCL, the certificate of incorporation or the bylaws (including notice of appraisal rights), but do not alter any other notice requirements by which the corporation may be bound, including, for example, requirements under securities laws. The amendments also permit a corporation to deliver appraisal notices electronically to its stockholders, including by email, or by courier (or U.S. mail). Additionally, the amendments allow for the delivery of stockholder demand for appraisal to the corporation by electronic transmission, but only if the corporation expressly designates, in the notice of appraisal rights given by the corporation, an information processing system for receipt of electronic delivery of demands. Among other things, the amendments permit the corporation to designate an email address for purposes of receiving stockholder appraisal demands.

Division of a Limited Partnership

The amendments to DRULPA enable a limited partnership to divide, consistent with the 2018 amendments to the DLLCA with respect to division of a limited liability company. Under the amendments, a limited partnership may divide into two or more newly formed resulting limited partnerships with the dividing limited partnership continuing its existence or terminating as the case may be. Upon effectiveness of a division, the dividing limited partnership's assets and liabilities are “allocated” to, and vested in, the resulting limited partnerships, as specified in the plan of division, without the need for any further action by any party. Divisions will facilitate a spin-off or the sale of assets or business line by limited partnerships, eliminating the need to transfer assets and liabilities to a buyer or newly formed limited partnerships.

Registered Series of a Limited Partnership

Under the amendments to DRULPA, a limited partnership may form registered series, similar to the amendments to the DLLCA adopted in 2018, effective as of Aug. 1. The amendments enable registered series of limited partnerships to, among other things, obtain good standing certificates and to merge, providing a more practical way to combine the assets and liabilities of two series than presently available under applicable law. The amendments also provide that an existing protected series may convert to a registered series by filing a certificate of conversion and a certificate of registered series.

Resignation of a Registered Agent

Finally, the amendments allow registered agents of a corporation, limited liability company or limited or general partnership to resign without appointing a successor, including for entities whose certificate of incorporation, certificate of formation or certificate of limited partnership has become void as a result of failure to pay franchise taxes or annual fees. Such resignation may be effected by filing a certificate of resignation with the secretary of state after delivering 30-days' prior written notice to the affected entity. The certificate of resignation must be accompanied by the last known information for a communications contact for the affected entity, which information must be provided to the secretary of state, but will not be deemed public or subject to FOIA requests.

Allison Land, a partner with Skadden, Arps, Slate, Meagher & Flom, is the head of the M&A/corporate group in the firm's Wilmington office. She has a diverse corporate practice with experience in joint ventures, Delaware corporate and alternative entity law, and mergers and acquisitions.

Aarish Sheikh, an associate with the firm in the Wilmington office, focuses his practice on mergers and acquisitions.