THEDELAWAREUPDATE

PRESENTED BY:ALAN STACHURASENIOR MANAGER GOVERNMENT RELATIONS

Agenda

• 2015 in Delaware

• Delaware Updates

• Pending Legislation

• Annual Reports and Franchise Taxes

• Questions

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2015 IN DELAWARE

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What Percent of Fortune 500 Companies Are Incorporated in Delaware?

• 66% of Fortune 500

• 1,194,564 Active Entities in DE

– 300,000 Corporations

– 895,000 Alternative Entities

• 178,503 New Entities formed in 2015

• 85% of all New US IPO's

• Over 1 Business Entity Per Capita (currently 1.10)

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New Entity Formations

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Delaware Corporations & Alternative Entities

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DELAWARE UPDATES

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Delaware Updates

• House Bill 267

• Exempt Entities

• Expedite Options

• Benefit Corporations

• Certificates of Validation

• Communications Contact

• New Delaware System

• 2015 Changes

• 2016 Changes

• UCC Updates

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House Bill 267

• Four Effective Dates– Tax changes– Fee changes• Corporate• UCC

• Sunset Provisions – HB 52• House Bill 267– What DIDN’T Change!• Corporate One and Two Hour Expedite fees• Annual Taxes for LLCs, LPs, GPs, LLPs, and LLLPs• Fees to form a new entity

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Exempt Entities

• House Bill 341• New Exempt Corporations Created (Type “R”)– Federally Exempt Entities – 501(c)– Civic Organizations– Charitable/Fraternal Organizations– Religious Groups & Non Profits

• Reduced AR Fee ($25 instead of $50)• No Franchise Tax Due• Renewal Fee reduced to $5• Must state Exempt Purpose

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Expedite Options

• Standard Services

– 30 Minute - $1,500

– One Hour - $1,000

– Two Hour - $500

– Same Day - $50 - $200

– 24 Hour - $50 - $100

• Global Filing Service

– Secure Future File Date

– Preparation Needed

– $1,000 Expedite Fee

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Benefit Corporations

• Senate Bill 47 – Effective August 1st, 2013– Must state a Public Benefit Purpose– Changes the fiduciary duties of the directors• Must “balance” the economic interests with the public benefit purpose

– Can be Formed, Amended, or Converted/Merged (from non-DE)– Beneficial Purpose will not be “policed” • Cannot be obscene or hateful

– Existing Corporations need 66% shareholder vote to become B Corps– Does NOT require a “Benefit Director”– No public reporting

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Certificate of Validation

• Effective April 1st, 2014

• Ratification of defective corporate acts and stock errors

• $2,500 base filing fee + tax increases

• Three dates noted on document

– File date

– Effective date

– Corporate act effective date

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Communication Contact Changes

• House Bill 327 – LLCs– Effective August 1st, 2014– Requires LLCs to keep a current list of the names & addresses of their members

and managers– Enhanced Communications Contact requirement

• House Bill 328 – LPs– Effective August 1st, 2014– Requires LPs to keep a current list of the names & addresses of their partners– Enhanced Communications Contact requirement

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New Delaware System

• Additional features

– Same day invoicing

– Real time good standings

• Went Live Tuesday, September 8th, 2015

• Report Issues

– Incorrect evidence & verbiage

– Questions & concerns

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2015 Changes

• SB 75 – Corporations

– Substantially Similar Corporation Names (§102)

– Authorizes Forum Selection

– Prohibits Fee Shifting

– Amends Validations by allowing directors' resolution to authorize the ratification of more than one act and requiring that approval of each act meet the quorum and voting requirements applicable to the particular act. Also sets forth a procedure to ratify elections of initial directors.

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2015 Changes

• SB 75 – Corporations (cont.)

– Clarifies Restated Articles without shareholder approval – no statement needed that the document contains no further amendments if the only amendment is a change of name without stockholder approval.

– Makes public benefit corporation name indicators permissive rather than mandatory.

– Amends stockholder approval requirements for certain amendments and mergers by public benefit corporations and clarifies stockholder appraisal rights related to such transactions.

– Provides that the Secretary of State would not be required to issue copies of public records in any form other than photocopies or electronic image copies.

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2016 Changes

• Corporations (HB 371)– Revises the signatures required on stock certificates– Modifies the form used to file a Certificate of Revival of void or forfeited

corporations – Provides for the filing of a Certificate of Restoration for corporations with

expired charters and removes reference to renewal of corporations under §311– Clarifies that corporations filing a revocation of dissolution or restoration must

file all back annual reports and pay all back franchise taxes– Alters §312 to be “Revival” only, removing “Renewal”, “Extension”, and

“Restoration” • Extension still allowed under §242• Does NOT apply to Revocations by the Court of Chancery

– Alters§313 for Non-Stock Corporations

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2016 Changes (cont.)

• LLCs (HB 372)

– Requires process served on an LLC’s registered agent on behalf of a series of the LLC to include the names of both the LLC and the series

• LPs (HB 367)

– Requires process served on an LP’s registered agent on behalf of a series of the LLC to include the names of both the LLC and the series

• Trusts (SB 243)

– General clean up

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UCC Updates

• Effective July 1st, 2013

• New forms

– Old forms to be accepted indefinitely***

• XML vs. Paper Filings

• Mandatory eFiling – 12/01/2015

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PENDING LEGISLATION

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Pending Legislation Introduced

• Corporations (HB 216)

– Increase maximum Corporation tax from $180,000 to $195,000

• Series LLC Options

• Foreign Corporation Annual Reports

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FILING ANNUAL REPORTS AND PAYING FRANCHISE TAXES

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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 $350, Max tax = $180,000

• Other Issues – Penalties, Interest, Quarterly Companies, No Par Stock

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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

• 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)

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QUESTIONS?

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THANK YOU FOR ATTENDING!

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