Delaware Update - Annual Reports, Taxes, and Recent Law Changes
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This document summarizes Alan Stachura's presentation on recent Delaware legal updates. The presentation covered: (1) key statistics on Delaware entity formations in 2018, including over 200,000 new entities formed; (2) new legislation under Senate Bills 88, 183, 89, 90, and 91 that updates requirements for corporations, LLCs, LPs, and other entities; and (3) reminders about annual reporting and franchise tax deadlines and payment amounts for corporations and other business entities.
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Delaware Update - Annual Reports, Taxes, and Recent Law Changes
- 1. CT CorporationWolters Kluwer CT CorporationWolters Kluwer The Delaware Update PRESENTED BY: ALAN STACHURA SENIOR MANAGER GOVERNMENT RELATIONS
- 2. CT CorporationWolters Kluwer Agenda • 2018 in Delaware • Delaware Updates • Annual Reports and Franchise Taxes • Questions 2
- 3. CT CorporationWolters Kluwer 2018 in Delaware 3
- 4. CT CorporationWolters Kluwer What percent of Fortune 500 Companies are Incorporated in Delaware? • 67% of Fortune 500 • 1,405,460 Active Entities in DE – 321,000 Corporations – 1,084,000 Alternative Entities • 219,744 New Entities formed in 2018 • 85% of all New US IPO's • Over 1 Business Entity Per Capita (currently 1.42) 4
- 5. CT CorporationWolters Kluwer New Entity Formations 5
- 6. CT CorporationWolters Kluwer Delaware Corporations & Alternative Entities 6
- 7. CT CorporationWolters Kluwer Delaware Updates 7
- 8. CT CorporationWolters Kluwer Delaware Updates • Senate Bill 88 • Senate Bills 183 (2018) & 91 • Senate Bills 89, & 90 • Policy Updates 8
- 9. CT CorporationWolters Kluwer Senate Bill 88 - Corporations • Annual Validation Update – Amends §104 – Provides that Corporations are liable for all taxes, penalties, interest, & annual report filings regardless of entity status • Electronic Documentation – New §116 called “Document Form, Signature, and Delivery” – Addresses when acts and transactions can be documented, signed, and delivered electronically • Delivery of Notices to Stockholders – Amends §232 Amends §284 – Changes the default rule of email delivery – no prior affirmative consent required 9
- 10. CT CorporationWolters Kluwer Senate Bill 88 – Corporations (continued) • Organizational Meetings – Amends §108 – Provides that a consent to action will be effective at a future date (within 60 days) • Execution of Agreement of Merger or Consolidation – Amends §251 & §255 – Permits any authorized person to execute ▪ Agreements filed with the Secretary of State must still follow §103 • Regulated Investment Companies (RICs) – Amends §503 – Increases annual franchise tax from $90,000 to $100,000 per year ▪ Retroactively effective to January 1st, 2019 10
- 11. CT CorporationWolters Kluwer Senate Bill 183 (2018) - LLCs • Effective August 1st, 2019 • Big Changes to existing Series LLC statutes – Creation of Protected Series and Registered Series ▪ Registered Series voluntarily file Qualification - Annual tax of $75 per Registered Series ($50 penalty for delinquency) - Unlimited number of Protected & Registered Series (Registered Series Elements) - Registered Series can obtain Good Standings, Certified Copies, & Certificates of Registered Series Listing plus complete filings like a standard LLC (except COA) - Registered Agent flows down from parent LLC - Each Registered Series has their own status, but parent can override - Can convert to and from Protected & Registered Series – Proposed names must be distinguishable from names on Record ▪ Registered Series Names must begin with the complete name of the parent ▪ If the Parent changes their name, all RSEs must change their names too – Can file UCCs on series within a Series LLC 11
- 12. CT CorporationWolters Kluwer Senate Bill 91 - LLCs • Several technical clarifications • Adds new §18-113 (LLC equivalent of §116) titled “Document Form, Signature, and Delivery” • Contractual Appraisal Rights – Amends §18-210 – Plan of Division may provide for Contractual Appraisal Rights – May also be made available in connection with a Merger or Consolidation • LLC Certificate of Division – Amends & Clarifies §18-217 12
- 13. CT CorporationWolters Kluwer Senate Bill 89 - LPs • Effective August 1st, 2019 • Big Changes to existing Series LP statutes – Creation of Protected Series and Registered Series ▪ Registered Series voluntarily file Qualification - Annual tax of $75 per Registered Series ($50 penalty for delinquency) - Unlimited number of Protected & Registered Series (Registered Series Elements) - Registered Series can obtain Good Standings, Certified Copies, & Certificates of Registered Series Listing plus complete filings like a standard LP (except COA) - Registered Agent flows down from parent LP - Each Registered Series has their own status, but parent can override - Can convert to and from Protected & Registered Series – Proposed names must be distinguishable from names on Record ▪ Registered Series Names must begin with the complete name of the parent ▪ If the Parent changes their name, all RSEs must change their names too – Can file UCCs on series within a Series LP 13
- 14. CT CorporationWolters Kluwer Senate Bill 89 – LPs (continued) • Several technical clarifications • Adds new §17-113 (LP equivalent of §116) titled “Document Form, Signature, and Delivery” • New Public Benefit LP §17-1201 – For profit public benefit LP – Combines the benefits of Delaware’s PBC and the advantages of LP law • New Certificates of Division §17-220 – Domestic LPs ONLY – Division MUST be accompanied by one or more Formation(s) – Cert Re Division available – Separate filing fees – Annual taxes on each resulting entity 14
- 15. CT CorporationWolters Kluwer Senate Bill 90 – GPs • Several technical clarifications • Adds new §15-124 (GP equivalent of §116) titled “Document Form, Signature, and Delivery” 15
- 16. CT CorporationWolters Kluwer Policy Updates • Increases Price of Amended Annual Reports – From $0 to $50 – Effective September 1st, 2019 • Statutory Trust Communications Contact 16
- 17. CT CorporationWolters Kluwer Filing Annual Reports and Paying Franchise Taxes 17
- 18. CT CorporationWolters Kluwer Annual Franchise Tax — Corporations • March 1st - Franchise tax deadline – Annual Taxes must be paid and the tax report must be filed each year on or before March 1 – Charter becomes void if no tax is paid for 2 consecutive years • Two methods are provided for calculating tax – Authorized Shares – Assumed Par Value Method – Lesser tax is payable, Min tax = $175 or $400, Max tax = $200,000 or $250,000 • Other Issues – Penalties, Interest, Quarterly Companies, No Par Stock 18
- 19. CT CorporationWolters Kluwer Annual Taxes for Other Delaware Entities • LLCs, LPs, GPs must pay Annual Tax – Due on or before June 1 – Flat fee of $300 per year ▪ Registered Series pay flat fee of $75 per year • LLPs & LLLPs must pay Annual Tax and File Report – Due on or before June 1 – Fee of $200.00 per General Partner per year • LLC, LP, GP, LLP or LLLP’s failure to pay by due date will result in loss of “good standing” status – State will not file documents for entity – Entity may not maintain lawsuit in state courts – No filing necessary to return to good standing (except for LLP & LLLP) 19
- 21. CT CorporationWolters Kluwer CT CorporationWolters Kluwer The Delaware Update Thank You for Attending 21