Delaware Harmonizes Alternative Entity Series and
UCC Article 9
By Norman M. Powell*
Delaware statutory trusts, limited liability com panies, and limited partnerships can form separate
series of assets that, if certain statutory requirements are met, cannot be reached by creditors
of the entity as a whole or of any other series. Recently, many practitioners and commentators
have been concerned that such series may not be among the entities falling under the UCC’s
definition of “person” and thus may fall outside the realm of potential “debtors” for purposes
ofArticle9oftheUCC.Thisarticlereviewstheseries provisions in the acts governing Delaware
statutory trusts, limited liability companies, and limited partnerships, and provides a framework
for analyzing questions regarding the perfection of security interests in the assets of a series.
I. INTRODUCTION
The term “alternative entity” is widely used to refer to legal entities other than
corporations. Among the more popular alternative entities available under Del-
aware law are the statutory trust (the “DST”), the limited liability company
(the “DLLC”), and the limited partnership (the “DLP”). They are formed and
exist, respectively, under the Delaware Statutory Trust Act of the Delaware
Code (the “DST Act”),
1
the Delaware Limited Liability Company Act of the Del-
aware Code (the “DLLC Act”),
2
and the Delaware Limited Partnership Act of the
Delaware Code (the “DLP Act”).
3
Each of these statutes facilitates the formation
of entities with attributes carefully crafted to meet the needs of a given applica-
tion, and is regularly revised so as to best assure that Delaware alternative entities
can be crafted to meet the ever-developing needs of the marketplace. Each ex-
plicitly invokes Delaware’s policy to give “maximum effect to the principle of
freedom of contract and to the enforceability of [governing agreements].”
4
* Norman M. Powell is a partner in the Delaware law firm of Young Conaway Stargatt & Taylor,
LLP, where his practice includes formation of, and service as Delaware counsel to, corporations, lim-
ited liability companies, limited partnerships, and statutory trusts, and the delivery of legal opinions
relating to such entities, security interests, and other matters of Delaware law. He can be reached via
1. D
EL.CODE ANN. tit. 12, §§ 3801–3829 (West, Westlaw through ch. 18 of the 151st Gen. As-
semb. (2021–2022)).
2. D
EL.CODE ANN. tit. 6, §§ 18-101–18-1208 (West, Westlaw through ch. 18 of the 151st Gen.
Assemb. (2021–2022)).
3. Id. §§ 17-101–17-1208.
4. D
EL.CODE ANN. tit. 12, § 3828(b) (West, Westlaw through ch. 18 of the 151st Gen. Assemb.
(2021–2022)); D
EL.CODE ANN. tit. 6, §§ 17-1101(c), 18-1101(b) (West, Westlaw through ch. 18
of the 151st Gen. Assemb. (2021–2022)).
1141
Formation of a DST, DLLC, or DLP (each, an “Alternative Entity”) requires the
filing of a short and simple certificate with the Delaware Secretary of State,
5
and
generally includes drafting of an operating agreement endowing the entity with
the special attributes desired in the application at hand.
6
Thus, many of the most
sought-after and bargained-for attributes of a given Alternative Entity are a func-
tion not of governing statutes but of carefully drafted operating agreements that
alter or displace otherwise applicable statutory default rules, or make use of
other contractual freedoms. For several decades now, the establishment of “se-
ries” has been permitted under all three types of Alternative Entities.
7
A. WHAT’SASERIES?
In some ways, a “series” is like a subsidiary. A DST with series (a “Series DST”)
is permitted, in the name of such series, to contract, hold title to assets, grant
liens and security interests, and sue and be sued.
8
Reflecting still greater auton-
omy, series of a DLLC or DLP (“DLLC Series” and “DLP Series,” respectively) are
permitted to do these things in their own names, and to carry on any lawful busi-
ness other than the business of banking.
9
That is to say, the DST Act stops short
of declaring that series of a DST (“DST Series”) themselves have power and au-
thority to do such things.
10
Thus, DLLC Series and DLP Series have more, and
DST Series fewer, of the attributes and capabilities one generally associates with
legal or commercial entities. All three Alternative Entity series differ in another
fundamental way from subsidiaries—no such series can exist beyond the exis-
tence of the Alternative Entity under which it was established and exists.
11
5. DEL.CODE ANN. tit. 12, § 3801(i)(2) (West, Westlaw through ch. 18 of the 151st Gen. Assemb.
(2021–2022)); D
EL.CODE ANN. tit. 6, §§ 17-201(a), 18-201(a) (West, Westlaw through ch. 18 of the
151st Gen. Assemb. (2021–2022)).
6. D
EL.CODE ANN. tit. 12, § 3801(e), (i)(1) (West, Westlaw through ch. 18 of the 151st Gen. As-
semb. (2021–2022)); D
EL.CODE ANN. tit. 6, §§ 17-201(d), 18-201(d) (West, Westlaw through ch. 18
of the 151st Gen. Assemb. (2021–2022)).
7. D
EL.CODE ANN. tit. 12, § 3806(b) (West, Westlaw through ch. 18 of the 151st Gen. Assemb.
(2021–2022)); D
EL.CODE ANN. tit. 6, §§ 17-218, 17-221, 18-215, 18-218 (West, Westlaw through
ch. 18 of the 151st Gen. Assemb. (2021–2022)).
8. D
EL.CODE ANN. tit. 12, § 3804(a) (West, Westlaw through ch. 18 of the 151st Gen. Assemb.
(2021–2022)).
9. D
EL.CODE ANN. tit. 6, §§ 17-218(b)(2), 17-221(c)(2), 18-215(b)(1), 18-218(c)(1) (West,
Westlaw through ch. 18 of the 151st Gen. Assemb. (2021–2022)).
10. See, e.g., D
EL.CODE ANN. tit. 12, § 3804(a) (West, Westlaw through ch. 18 of the 151st Gen.
Assemb. (2021–2022)).
11. See D
EL.CODE ANN. tit. 6, §§ 17-218(b)(10), 17-221(c)(10) (West, Westlaw through ch. 18 of
the 151st Gen. Assemb. (2021–2022) (providing that a series is terminated or dissolved upon the
dissolution of DLP); id. §§ 18-215(b)(9), 18-218(c)(9) (providing that a series is terminated or dis-
solved upon the dissolution of DLLC). While the DST Act does not contain an explicit statement to
like effect, it is implicit from the statutory provisions relating to DST Series that they, too, cannot exist
beyond the existence of the related DST. See D
EL.CODE ANN. tit. 12, § 3810(a)(1) (West, Westlaw
through ch. 18 of the 151st Gen. Assemb. (2021–2022)) (“Every [DST] shall file a certificate of
trust in the office of the Secretary of State.”); id. § 3804(a) (for a DST Series to be protected by internal
liability shields, “notice of the limitation on liabilities” of the DST Series must be “set forth in the cer-
tificate of trust of the [Series DST]”); id. § 3810(d) (“A certificate of trust shall be cancelled upon the
dissolution and the completion of winding up of a [DST] . . . .”).
1142 The Business Lawyer; Vol. 76, Fall 2021
Where specified requirements are met, internal liability shields provide that as-
sets associated with a given series are available only to creditors of that series,
and not to creditors of other series or of the Alternative Entity under which
the series was established and exists.
12
B. WHAT’S THE DIFFICULTY WITH SERIES AND UCC ARTICLE 9?
A given series’ lack of entity status may be helpful, even necessary, in some
conte xts, but prese nts troubling issues where series purp ort to be debtors
under the Uniform Commercial Code (the “UC C”).
13
Generally speaking, the
UCC defines “debtor” as “a per son having an interest . . . in the collateral.”
14
“Person” is defined as “an individual, corporation, business trust, estate, trust,
partnership, limited liability company, association, joint venture, government,
governmental subdivision, agency, or instrumen tality, public corporation, or
any oth er legal or commercial entity.”
15
Recently, many practitioner s and com -
mentators have been concerned that a given series may be none of those entities
falling under the UCC’s definition of “person” and thus may fall outside the
realm of potential “debtors” for UCC purposes.
16
Much of this concern has fo-
cused on DLLC Series.
17
By legislation enacted in 2018, with a delayed effective
date of August 1, 2019, the Delaware Ge neral Assembly sought to relieve these
conce rns by amendments to the DLLC Act.
18
By legislation enacted and effective
in 2019, the DLP Act was amended to include substant ially similar provisions.
19
Amendments to the DST Act enacted and effective in 2020 take a different ap-
proach consi sten t with historical differences between DST Series, on the one
hand, and DLLC Series and DLP Series, on th e other.
20
II. A BRIEF HISTORY OF SERIES UNDER THE DST ACT
The DST Act, initially enacted in 1988,
21
has always provided that DSTs may
sue and be sued, and that property of a DST shall be subject to attachment and
12. DEL.CODE ANN. tit. 12, § 3804(a) (West, Westlaw through ch. 18 of the 151st Gen. Assemb.
(2021–2022)); D
EL.CODE ANN. tit. 6, §§ 17-218(b), 17-221(c), 18-215(b), 18-218(c) (West, Westlaw
through ch. 18 of the 151st Gen. Assemb. (2021–2022)).
13. References to the UCC are to the official text promulgated by the Uniform Law Commission
(also known as the National Conference of Commissioners on Uniform State Laws) and the American
Law Institute, (i) as to Article 1, in 2001, as amended through 2018, and (ii) as to Article 9, in 1998
(which generally took effect on July 1, 2001), as amended through the 2010 Amendments thereto
(which generally took effect on July 1, 2013).
14. U.C.C. § 9-102(a)(28) (A
M.L.INST.&UNIF.L.COMM’N 1998). The term also includes sellers of
accounts, chattel paper, payment intangibles, or promissory notes, and consignees. Id.
15. U.C.C. § 1-201(b)(27) (A
M.L.INST.&UNIF.L.COMM’N 2001).
16. See, e.g., Norman M. Powell, Secured Lending to Series of LLCs: Beware What You Do Not (and
Cannot) Know, 46 UCC L.J. 95, 99–103 (2015).
17. See id.
18. Act of July 23, 2018, ch. 357, §§ 1–35, 81 Del. Laws (2017–2018).
19. Act of June 19, 2019, ch. 46, §§ 1–31, 82 Del. Laws (2019–2020).
20. Act of July 23, 2020, ch. 264, §§ 1–19, 82 Del. Laws (2019–2020).
21. Act of June 21, 1988, ch. 279, § 1, 66 Del. Laws 514 (1987–1988) (creating D
EL.CODE ANN.
tit. 12, §§ 3801–3815).
Delaware Harmonizes Alternative Entity Series and UCC Article 9 1143
execution as if the DST were a corporation.
22
The DST Act was amended in 1990
to permit the establishment of series.
23
The 1990 amendments explicitly pro-
vided that, if separate and distinct records are maintained for a series and
other formalities observed, the debts, liabilities, obligations, and expenses in-
curred, contracted for, or otherwise existing with respect to a particular series
shall be enforceable against the assets of such series only, and not against the
assets of the DST generally, but only in the case of a DST that is a registered in-
vestment company under the Investment Company Act of 1940.
24
Amendments
enacted in 1994 made these internal liability shields available to all DST Series
satisfying the statutory prerequisites, regardless of whether the related DST is
a registered investment company.
25
Amendments enacted in 1998 provided
that, if the statutory prerequisites have been satisfied, none of the debts, liabil-
ities, obligations and expenses incurred, contracted for, or otherwise existing
with respect to a DST generally or any other DST Series shall be enforceable
against the assets of any DST series.
26
Amendments effective in 2016 added lan-
guage central to the consideration of DST Series in this article:
As used in this chapter, a reference to assets of a series includes assets associated
with a series and a reference to assets associated with a series includes assets of a
series. Except to the extent otherwise provided in the governing instrument of a stat-
utory trust, a statutory trust that has established series in accordance with this sub-
section (a) may contract, hold title to assets (including real, personal and intangible
property), grant liens and security interests, and sue and be sued, in each case, in
the name of a series.
27
The first sentence quoted above is generally understood to have been included
for the reason that in amendments over the years the language enacted referred
variously to “assets of a series” or “assets associated with a series,” with no dis-
tinction intended.
28
The second sentence quoted above addressed the growing
practice of drafting documents, intended to create liabilities for and give rise
to recourse against assets of a given series, for execution in the name of such se-
ries. Note that, unequivocally, the power to contract, hold title to assets, grant
security interests, and the like, remains vested in the Series DST as such, despite
the Series DST’s taking such action in the name of a DST Series.
22. DEL.CODE ANN. tit. 12, § 3804 (West, Westlaw through ch. 18 of the 151st Gen. Assemb.
(2021–2022)).
23. Act of July 5, 1990, ch. 297, § 4, 67 Del. Laws 682 (1989–1990) (amending D
EL.CODE ANN.
tit. 12, § 3806).
24. Id. § 18, 67 Del. Laws 688 (amending D
EL.CODE ANN. tit. 12, § 3804).
25. Act of June 27, 1994, ch. 265, § 2, 69 Del. Laws 525 (1993–1994) (amending D
EL.CODE ANN.
tit. 12, § 3804(a)).
26. Act of June 29, 1998, ch. 335, § 2, 71 Del. Laws 859 (1997–1998) (amending D
EL.CODE ANN.
tit. 12, § 3804(a)).
27. Act of July 13, 2016, ch. 304, § 2, 80 Del. Laws (2015–2016) (amending D
EL.CODE ANN. tit.
12, § 3804(a)).
28. See S. 243, 148th Gen. Assemb. § 2 (Del. 2016) (synopsis). Currently, the DST Act references
“assets of [a] series” in sections 3804(a), 3806(b)(3), and 3808(g); it references “assets associated with
a series” in section 3804(a). D
EL.CODE ANN. tit. 12, §§ 3804, 3806, 3808 (West, Westlaw through ch.
18 of the 151st Gen. Assemb. (2021–2022)).
1144 The Business Lawyer; Vol. 76, Fall 2021
In 2020, a new sentence was added at the end of DST Act section 3804(a):
Solely with respect to any liens or security interests granted in any assets of a series
or any assets associated with a series of a statutory trust, only the statutory trust shall
be the “debtor” within the meaning of Article 9 of the [UCC] as the person having
the power to transfer rights in such assets.
29
This addition was intended to confirm, rather than to change, existing law.
30
It
explicitly states what historically has been implicit—that the Series DST, not a
given DST Series, is the debtor for UCC purposes with respect to any assets
of, or associated with, a given DST Series.
III. A BRIEF HISTORY OF SERIES UNDER THE DLLC ACT
AND THE
DLP ACT
Following two years behind the DST Act, since 1996, both the DLLC Act and
the DLP Act have permitted series. More specifically, the DLLC Act and the DLP
Act have permitted the establishment of designated series of members, managers,
or limit ed liability company interests (in the case of the DLLC Act), or limited
partners or partnership interests (in the case of the DLP Act) with separate rights,
powers, or duties with respect to specified property or obligations of a DLLC
with series (a “Series DLLC”) or a DLP with series (a “Series DLP”).
31
In 2000,
the DLLC Act and DLP Act were amended to explicitly allow assets associated
with a series to be held “directly or indirectly, including through a nominee
or otherwise.”
32
Since 2007, the DLLC Act and the DLP Act have afforded
DLLC Series and DLP Series the power and capacity, in their own names, to
“contract, hold title to assets (including real, personal and intangible property),
grant liens and security interests, and sue and be sued.”
33
Thus, and in contrast
with DST Series, DLLC Series and DLP Series may in fact hold title to their
own assets in their own names. Thus, in the parlance of UCC Article 9, the
DLLC Series or DLP Series, to the exclusion of the Series DLLC or Series DLP
itself, may “have an interest” in the collateral and be a “debtor” with respect to
such assets.
34
29. Act of July 23, 2020, ch. 264, § 2, 82 Del. Laws (2019–2020) (amending DEL.CODE ANN. tit.
12, § 3804).
30. S. 244, 150th Gen. Assemb. § 2 (Del. 2020) (synopsis).
31. Act of June 10, 1996, ch. 360, § 9, 70 Del. Laws 801 (1995–1996) (creating D
EL.CODE ANN.
tit. 6, § 18-215); Act of June 10, 1996, ch. 362, § 13, 70 Del. Laws 811 (1995–1996) (creating D
EL.
C
ODE ANN. tit. 6, § 17-218).
32. Act of June 30, 2000, ch. 389, § 14, 72 Del. Laws (1999–2000) (amending D
EL.CODE A NN. tit.
6, § 18-215(b)); Act of June 30, 2000, ch. 386, § 13, 72 Del. Laws (1999–2000) (amending D
EL.
C
ODE ANN. tit. 6, § 17-218(b)).
33. Act of July 10, 2007, ch. 105, § 25, 76 Del. Laws (2007–2008) (amending D
EL.CODE ANN. tit.
6, § 18-215 to add new subsection (c)); Act of July 10, 2007, ch. 104, § 28, 76 Del. Laws (2007–
2008) (amending D
EL.CODE ANN. tit. 6, § 17-218 to add new subsection (c)).
34. U.C.C. § 9-102(a)(28)(A) (A
M.L.INST.&UNIF.L.COMM’N 1998).
Delaware Harmonizes Alternative Entity Series and UCC Article 9 1145
IV. SERIES AND SECURED TRANSACTIONS
Those dealing with the creation and perfection of security interests in assets of,
or associated with, a DST Series, a DLLC Series, or a DLP Series must be partic-
ularly careful in identifying their “debtor,” within the meaning of Article 9 of the
UCC,
35
and in answering each question that follows from that threshold issue.
The remainder of this article discusses, and the chart at the end of this article
provides a helpful reference guide on, how to file financing statements under
UCC Article 9 to perfect security interests in assets associated with Alternative
Entities and series thereof.
Most lawyers are comfortable that DSTs, DLLCs, and DLPs are “registered
organizations” within the meaning of Article 9 of the UCC.
36
Thus, a DST (in-
cluding a Series DST), a DLLC (including a Series DLLC), and a DLP (including
a Series DLP) is “located” in Delaware under section 9-307(e) of the UCC,
37
and a
UCC financing statement identifying a Series DST, a Series DLLC, or a Series DLP
as “debtor” must feature the Series DST’s, Series DLLC’s, or Series DLP’s name
(only), as specified in UCC section 9-503(a)(1), in box 1a,
38
and be filed in
Delaware under UCC section 9-301.
39
But, what if the Series DLLC or Series
DLP is not the “debtor”—if the DLLC Series or DLP Series itself, to the exclusion
35. Id.
36. Id. § 9-102(a)(71). Note that, if so provided in its certificate of trust and its governing instru-
ment, a DST may not be a separate legal entity. D
EL.CODE ANN. tit. 12, § 3810(a)(2) (West, Westlaw
through ch. 18 of the 151st Gen. Assemb. (2021–2022)). Regardless, every DST is an “unincorpo-
rated association,” id. § 3801(i), and thus a “person” under the UCC. See U.C.C. § 1-201(b)(27)
(A
M.L.INST.&UNIF.L.COMM’N 2001) (defining “person” to include “association”).
37. U.C.C. § 9-307(e) (A
M.L.INST.&UNIF.L.COMM’N 1998) (addressing “Location of Debtor”); id.
§ 9-102(a)(71) (defining “registered organization” to mean “an organization formed or organized solely
under the law of a single State or the United States by the filing of a public organic record with . . . the
State”). Formation of any DST requires the filing of a certificate of trust with the Delaware Secretary of
State. D
EL.CODE ANN. tit. 12, §§ 3801(i), 3810 (West, Westlaw through ch. 18 of the 151st Gen. As-
semb. (2021–2022)). Similarly, formation of any DLLC or DLP requires the filing of a certificate of for-
mation or certificate of limited partnership with the Delaware Secretary of State. D
EL.CODE ANN.tit.6,
§§ 17-201, 18-201 (West, Westlaw through ch. 18 of the 151st Gen. Assemb. (2021–2022)). Thus,
excepting for the remote possibility that a given Alternative Entity will fail to be a “registered organiza-
tion” by reason of its being formed or organized under the laws of more than one state, see U.C.C.
§ 9-102(a)(71) (A
M.L.INST.&UNIF.L.COMM’N 1998), every Alternative Entity is itself a “registered or-
ganization” for UCC purposes.
38. See U.C.C. § 9-503 (A
M.L.INST.&UNIF.L.COMM’N 1998) (addressing “Name of Debtor”); id.
§ 9-521 (“Uniform Form of Written Financing Statement”). Throughout this article, the text refers to
the “box” identified in the “safe harbor” Form UCC1 (Rev. 04/20/11), but should be understood to
include the analogous field(s) in an electronic filing interface. As of this writing, a small but growing
minority of states require or encourage electronic filing. See, e.g., Uniform Commercial Code,D
EL.DIV.
C
ORPS., https://corp.delaware.gov/ucc/ (last visited June 2, 2021) (“Effective December 1, 2015, the
Delaware Division of Corporations . . . will require that all UCC filings be submitted to the Division
electronically.”); UCC Forms and Fees,V
A.STATE CORP.COMM’N, https://www.scc.virginia.gov/pages/
UCC-Forms-Fees (last visited June 2, 2021) (“The UCC-1 Financing Statement . . . can be filed online
through the Clerk’s Information System ....Alternatively, [one may] submit a UCC document for
filing by postal mail . . . .”). In deference to common parlance, and for ease of comprehension, this
article speaks of “boxes” in the “safe harbor” Form UCC1.
39. U.C.C. §§ 9-301, 9-501 (A
M.L.INST.&UNIF.L.COMM’N 1998). Of course, this general “where
to file” rule, while applicable to most UCC filings, does not apply to fixture filings and perfection of a
security interest in timber to be cut or as-extracted collateral. See id. § 9-301(3), (4).
1146 The Business Lawyer; Vol. 76, Fall 2021
of the Series DLLC or Series DLP, holds an interest in the collateral? To qualify as
a “debtor” under the UCC, such series must be a “person having an interest” in the
collateral.
40
A. DST SERIES AND SECURED TRANSACTIONS
In the case of DSTs, the “debtor,” for UCC purposes, is the DST itself, even
with respect to assets of, or associated with, a given DST Series. A security agree-
ment might provide for the Series DST’s granting of a security interest in its own
name or in the name of a given DST Series as debtor, but any UCC financing
statement would properly identify the debtor by featuring the Series DST’s
name in box 1a. Any person wishing to reflect that only the assets of, or associ-
ated with, a given series comprise the collateral might do so elsewhere on the
financing statement. Because the Series DST is a “r egistered organization,” the
financing statement would generally be filed with the Delaware Secretary of
State in accord with UCC section 9-307(e).
41
B. DLLC SERIES, DLP SERIES, AND SECURED TRANSACTIONS
Amendments to the DLLC Act and the DLP Act effective August 1, 2019, have
resulted in more harmonious interrelation of these Alternative Entity statutes and
UCC Article 9. Among other things, the amendments provide that all DLLC Se-
ries and all DLP Series are “persons” under the UCC, and a new type of DLLC
Series and DLP Series—the “registered series”—is a “registered organization”
under UCC Article 9.
1. Who’s the Debtor?
Amendments to the DLLC Act enacted in 2018 and effective August 1, 2019,
and amendments to the DLP Act enacted in 2019 and effective August 1, 2019,
essentially create a new type of series—a “registered series”—and distinguish se-
ries of the type historically available and featuring internal liability shields by re-
ferring to them as “protected series.”
42
Protected series of DLLCs and DLPs
(“DLLC Protected Series” and “DLP Protected Series,” respectively, and together,
“Protected Series”) are explicitly stated to be “associations,”
43
and so fall within
the UCC’s definition of “person” and, by implication, are embraced by its
definition of “debtor.”
44
Likewise, registered series of DLLCs and DLPs
(“DLLC Registered Series” and “DLP Registered Series,” respectively, and to-
gether, “Registered Series”) are explicitly stated to be “associations,” and so fall
40. Id. § 9-102(a)(28)(A) (emphasis added).
41. Id. §§ 9-102(a)(71), 9-307(e).
42. D
EL.CODE ANN. tit. 6, §§ 17-101(18), (19), 18-101(16), (17) (West, Westlaw through ch. 18
of the 151st Gen. Assemb. (2021–2022)).
43. Id. §§ 17-218(b)(13), 18-215(b)(12).
44. U.C.C. § 1-201(b)(27) (A
M.L.INST.&UNIF.L.COMM’N 2001) (defining “person”); U.C.C. § 9-
102(a)(28) (A
M.L.INST.&UNIF.L.COMM’N 1998) (defining “debtor”).
Delaware Harmonizes Alternative Entity Series and UCC Article 9 1147
within the UCC’s definition of “person” and, by implication, are embraced by its
definition of “debtor.”
45
For further ease and certainty in determining their
names and locations for filing purposes in secured transactions, Registered Series
are intended to be “registered organizations,” as discussed in greater detail
below.
46
2. Statutory Provisions—Protected Series
The DLLC Act and DLP Act historically have used substantially similar no-
menclature regarding what are now termed Protected Series, giving rise to the
same question: As regards the assets of a given Protected Series, who is the
“debtor” within the meaning of Article 9 of the UCC? Possibilities include
the Series DLLC or DLLC Protected Series itself, and the Series DLP or DLP Pro-
tected Series itself.
The DLLC Act provides, with respect to DLLC Protected Series, at section 18-
215 in relevant part as follows:
(b) . . . . Assets associated with a protected series may be held directly or indirectly,
including in the name of such series, in the name of the limited liability company,
through a nominee or otherwise. . . .
(1) . . . . Unless otherwise provided in a limited liability company agreement, a
protected series shall have the power and capacity to, in its own name, contract,
hold title to assets (including real, personal and intangible property), grant liens
and security interests, and sue and be sued.
47
Similarly, the DLP Act provides, with respect to DLP Protected Series, at section
17-218 in relevant part as follows:
(b) . . . . Assets associated with a protected series may be held directly or indirectly,
including in the name of such series, in the name of the limited partnership, through
a nominee or otherwise. . . .
(2) . . . . Unless otherwise provided in a partnership agreement, a protected series
shall have the power and capacity to, in its own name, contract, hold title to as-
sets (including real, personal and intangible property), grant liens and security
interests, and sue and be sued.
48
Thus, in substance, these provisions of the DLLC Act and the DLP Act are
identical.
45. DEL.CODE ANN. tit. 6, §§ 17-221(c)(13), 18-218(c)(12) (West, Westlaw through ch. 18 of the
151st Gen. Assemb. (2021–2022)); see U.C.C. § 1-201(b)(27) (A
M.L.INST.&UNIF.L.COMM’N 2001)
(defining “person”); U.C.C. § 9-102(a)(28) (A
M.L.INST.&UNIF.L.COMM’N 1998) (defining “debtor”).
46. See S. 183, 149th Gen. Assemb. § 21 (Del. 2018) (synopsis); S. 89, 150th Gen. Assemb. § 18
(Del. 2019) (synopsis); see infra Parts IV.B.3.–4.
47. D
EL.CODE ANN. tit. 6, § 18-215(b) (West, Westlaw through ch. 18 of the 151st Gen. Assemb.
(2021–2022)).
48. Id. § 17-218(b).
1148 The Business Lawyer; Vol. 76, Fall 2021
3. Statutory Provisions—Registered Series
The DLLC Act provides, with respect to DLLC Registered Series, at section 18-
218 in relevant part as follows:
(c) . . . . Assets associated with a registered series may be held directly or indirectly,
including in the name of such series, in the name of the limited liability company,
through a nominee or otherwise. . . .
(1) . . . . Unless otherwise provided in a limited liability company agreement, a
registered series shall have the power and capacity to, in its own name, contract,
hold title to assets (including real, personal and intangible property), grant liens
and security interests, and sue and be sued.
49
Similarly, the DLP Act provides, with respect to DLP Registered Series, at section
17-221 in relevant part as follows:
(c) . . . . Assets associated with a registered series may be held directly or indirectly,
including in the name of such series, in the name of the limited partnership, through
a nominee or otherwise. . . .
(2)....Unless otherwise provided in a partnership agreement, a registered series
shall have the power and capacity to, in its own name, contract, hold title to as-
sets (including real, personal and intangible property), grant liens and security
interests, and sue and be sued.
50
Thus, in substance, these provisions of the DLLC Act and the DLP Act are iden-
tical. Moreover, the parallel provisions of the DLLC Act and the DLP Act dealing
with Protected Series and Registered Series are likewise identical.
4. Sorting Through the Possible Debtors and Filing Against
the Debtor
Given that assets associated with either a Protected Series or a Registered Se-
ries can be held in a variety of ways, including in the name of the Series DLLC or
Series DLP, and in the name of the Protected Series or Registered Series, deter-
mining which option has been elected in a given instance will require review of
relevant records. For instance, one should determine, among other things, how
titled assets are held and how bills of sale are styled. Of course, some indicia will
be more definitive than others.
a. The Series DLLC or Series DLP as Debtor
If the Series DLLC or Series DLP itself is the debtor, UCC Article 9 requires an
ordinary filing against and naming the Series DLLC or Series DLP as debtor, in
49. Id. § 18-218(c).
50. Id. § 17-221(c).
Delaware Harmonizes Alternative Entity Series and UCC Article 9 1149
the Series DLLC’s or Series DLP’s location (that is, Delaware).
51
Matters unique
to the series might be addressed in the collateral description, or in box 17 (mis-
cellaneous) of the financing statement addendum, as appropriate.
52
b. A Nominee as Debtor
If a nominee is the debtor, one must consider whether that nominee is an or-
ganization, a registered organization, an individual, or something else. An effective
filing against the assets of the corresponding series would be filed in such nomi-
nee’s location (which may not be Delaware) as determined under the applicable
subpart of UCC section 9-307, and name the nominee (only) in box 1a (if an or-
ganization) or box 1b (if an individual) in accord with UCC section 9-503.
53
c. A Protected Series as Debtor
If a Protected Series is the debtor, one must consider whether it is a registered
organization, an organization (other than a registered organization), or some-
thing else. “Registered organization,” as defined in Article 9 of the UCC,
means “an organization formed or organized solely under the law of a single
State or the United States by the filing of a public organic record with, the issu-
ance of a public organic record by, or the enactment of legislation by the State or
the United States.”
54
Protected Series do not fit the UCC’s definition of “regis-
tered organization.” The Delaware Secretary of State does not necessarily receive
any record showing a given Protected Series to have been organized (nor, of in-
terest to the would-be filer, indicating its name), and the Series DLLC or Series
DLP as a whole is issued a single organizational identification number. No Pro-
tected Series is issued any organizational identification number.
Section 18-215(b) of the DLLC Act requires that notice of the limitation on li-
abilities of a DLLC Protected Series be set forth in the certificate of formation of the
Series DLLC so as to give rise to the internal liability shields discussed earlier in
this article, but requires nothing more in the organic filing. Likewise, section
17-218(b) of the DLP Act imposes the same requirement for DLP Protected Series.
Indeed, the notice may refer to the LLC agreement’s (or LP agreement’s) establish-
ment, or provision for future establishment, of DLLC Protected Series or DLP Pro-
tected Series. The DLLC Act provides that such notice “shall be sufficient for all
purposes of this subsection whether or not the limited liability company has
established any protected series when such notice is included in the certificate
51. Recall that a Series DLLC or Series DLP is a “registered organization,” U.C.C. § 9-102(a)(71)
(A
M.L.INST.&UNIF.L.COMM’N 1998), with the consequence that its name is that stated on its public
organic record, id. § 9-503(a)(1), and it is located in Delaware. Id. § 9-307(e). See generally id. § 9-301
(providing that the law of the jurisdiction in which a debtor is located generally governs perfection by
filing); id. § 9-501(a) (generally providing for filing with a secretary of state or similar central office,
with exception for fixture filings, as-extracted collateral, and timber to be cut, which instead are to be
filed in the appropriate real property records office).
52. See id. § 9-521 (“Uniform Form of Written Financing Statement”).
53. See id. §§ 9-307, 9-503, 9-521.
54. Id. § 9-102(a)(71).
1150 The Business Lawyer; Vol. 76, Fall 2021
of formation, and there shall be no requirement that . . . any specific protected
series of the limited liability company be referenced in such notice.”
55
The par-
allel provision of the DLP Act is to like effect for DLP Protected Series.
56
Simple
notice that one or more (unnamed) Protected Series might come into existence at
some unspecified time in the future will suffice. Thus, filing the certifica te spec-
ified in the DLLC Act or DLP Act with respect to Protected Series is necessary
(while not sufficient) to endow them with the attribute of series liability shields,
but is existentially irrelevant—it has nothing to do with the formation or orga-
nization of a Protected Series. In that sense, Protected Series are analogous to
limited liability partnerships (“LLPs”). General partnerships may be formed with-
out any filings, and LLPs are a subset of general partnerships that acquire limited
liability features only by way of filing, but that filing does not form the entity.
57
Thus, LLPs are not “registered organizations.”
58
For the same reasons, neither are
Protected Series.
“Organization,” as defined in the UCC, means “a person other than an individ-
ual.”
59
In turn, “person,” as defined in the UCC, means “an individual, corporation,
business trust, estate, trust, partnership, limited liability company, association,
joint venture, government, governmental subdivision, agency, or instrumentality,
public corporation, or any other legal or commercial entity.”
60
Historically, there
had been some concern that a Protected Series may not have constituted a “per-
son” or an “organization.” As mentioned above, the 2018 amendments to the
DLLC Act, effective in 2019, and the 2019 amendments to the DLP Act, ad-
dressed this issue by adding new sections 18-215(b)(12) and 17-218(b)(13),
respectively, providing that, “[f]or all purposes of the laws of the State of Dela-
ware, a ‘protected series’ is an association.”
61
One is left to determine the Protected Series’ name and location for UCC filing
purposes. Assuming any Protected Series debtor will have a name, its name for
filing purposes will be that organizational name,
62
and likely can be determined
55. DEL.CODE ANN. tit. 6, § 18-215(b) (West, Westlaw through ch. 18 of the 151st Gen. Assemb.
(2021–2022)).
56. Id. § 17-218(b) (“Notice in a certificate of limited partnership of the limitation on liabilities of
a protected series as referenced in this subsection shall be sufficient for all purposes of this subsection
whether or not the limited partnership has established any protected series when such notice is in-
cluded in the certificate of limited partnership, and there shall be no requirement that . . . any specific
protected series of the limited partnership be referenced in such notice . . . .”).
57. See id. § 15-202 (addressing the formation of a general partnership); id. § 15-1001(b) (“In
order for an existing partnership to become a limited liability partnership, . . . the partnership
shall file a statement of qualification [with the Delaware Secretary of State].”).
58. See P
ERMANENT ED.BD. FOR THE UNIF.COMMERCIAL CODE,PEBCOMMENTARY NO. 17: LIMITED LIABILITY
PARTNERSHIPS UNDER THE CHOICE OF LAW RULES OF ARTICLE 9 2–3 ( June 29, 2012), https://www.ali.org/
media/filer_pub lic/d6/5 1/d65184 b6-e23d-4fd b-9c9a -81a 1b30df55 6/peb_comme ntary_on_ llps-final.pdf.
59. U.C.C. § 1-201(b)(25) (A
M.L.INST.&UNIF.L.COMM’N 2001).
60. Id. § 1-201(b)(27).
61. D
EL.CODE ANN. tit. 6, §§ 17-218(b)(13), 18-215(b)(12) (West, Westlaw through ch. 18 of the
151st Gen. Assemb. (2021–2022)); see supra Part IV.B.1.
62. U.C.C. § 9-503(a)(6)(A) (A
M.L.INST.&UNIF.L.COMM’N 1998) (Alternative A); id. § 9-503(a)(5)(A)
(Alternative B). Recall that the UCC’s official text provides enacting states alternative language for cer-
tain parts of section 9-503 with respect to debtors’ names.
Delaware Harmonizes Alternative Entity Series and UCC Article 9 1151
by reference to the governing agreement for the Series DLLC or Series DLP under
which it was established, inclusive of any series-specific supplement thereto.
Under UCC section 9-307(b), a Protected Series’ location, for filing purposes,
is its place of business or, if it has more than one place of business, its chief ex-
ecutive office.
63
The DLLC Act and the DLP Act contain parallel provisions facilitating the con-
version of Protected Series to Registered Series,
64
and the conversion of Registered
Series to Protected Series.
65
Under those provisions, one precondition to conver-
sion in either direction is the filing of a certificate of conversion with the Delaware
Secretary of State.
66
One might suspect that the filing of the certificate that con-
verts a Protected Series to a Registered Series would yield a “registered organiza-
tion” under UCC Article 9.
67
It is well to note, however, that conversion of a Pro-
tected Series to a Registered Series requires the filing of both a certificate of
conversion and a certificate of registered series.
68
By contrast, conversion of a
Registered Series to a Protected Series requires the filing of only a certificate of
conversion.
69
It seems sound to view the certificate of conversion as a late-
stage filing in the life of the incumbent series of either type intended to be con-
verted to the other type and not, in the case of conversion from a Registered Series
to a Protected Series, as a formational document of the resulting Protected Series.
That is, no Protected Series is a “registered organization.”
d. A Registered Series as Debtor
If a Registered Series is the debtor, the task of the secured party is both simpler
and more certain. A Registered Series is an “association”
70
and a “registered
organization.”
71
The DLLC Act and the DLP Act contain substantially similar
provisions for DLLC Registered Series and DLP Registered Series.
72
Thus, a Reg-
istered Series’ name is as stated in its certificate of registered series as filed with
63. Id. § 9-307(b)(2)–(3). But see id. § 9-307(c) (addressing situations in which the pertinent ju-
risdiction lacks a UCC Article 9-style filing system).
64. D
EL.CODE ANN. tit. 6, §§ 17-222, 18-219 (West, Westlaw through ch. 18 of the 151st Gen.
Assemb. (2021–2022)).
65. Id. §§ 17-223, 18-220.
66. See id. §§ 17-222(e), 17-223(e), 18-219(e), 18-220(e).
67. See U.C.C. § 9-102(a)(71) (A
M.L.INST.&UNIF.L.COMM’N 1998).
68. See D
EL.CODE ANN. tit. 6, §§ 17-222(a), 18-219(a) (West, Westlaw through ch. 18 of the 151st
Gen. Assemb. (2021–2022)).
69. See id. §§ 17-223(e), 18-220(e).
70. See id. §§ 17-221(c)(13), 18-218(c)(12); supra Part IV.B.1.
71. See D
EL.CODE ANN. tit. 6, §§ 17-221(a), 18-218(a) (West, Westlaw through ch. 18 of the 151st
Gen. Assemb. (2021–2022)); U.C.C. § 9-102(a)(71) (A
M.L.INST.&UNIF.L.COMM’N 1998). Of
course, there is at least the theoretical possibility that a given Registered Series will fail to be a “reg-
istered organization,” as defined in Article 9 of the UCC, by reason of its being formed or organized
under the laws of more than one state (as, for instance, certain public utilities are incorporated and
exist simultaneously under the laws of two or more states), but this seems an exceedingly remote
possibility.
72. Compare D
EL.CODE ANN. tit. 6, § 18-218 (West, Westlaw through ch. 18 of the 151st Gen.
Assemb. (2021–2022)) (addressing DLLC registered series), with id. § 17-221 (addressing DLP reg-
istered series).
1152 The Business Lawyer; Vol. 76, Fall 2021
the Delaware Secretary of State,
73
and its location is Delaware—the state under
the laws of which it is organized.
74
Note that the DLLC Act and the DLP Act
mandate that the name of each Registered Series shall begin with the name of
the related Series DLLC or Series DLP.
75
Recall that the DLLC Act mandates
that th e names of DLLCs contain the words “Limited Liability Company” or
the abbreviation “L.L.C.” or the designation “LLC.”
76
Similarly, the DLP Act
mandates that the names of DLPs contain the words “Limited Partnership” or
the abbreviation “L.P.” or the designation “LP.”
77
Under the search logic em-
ployed by many UCC filing offices, including the Delaware Secretary of State’s
office, “ending noise words,” such as the foregoing, are disregarded.
78
Imprecise
rendering of “ending noise words,” thus, will not cause a financing statement to
be “seriously misleading” by reason of failing the search logic test of UCC section
9-506(c).
79
But, where such “noise words” are not at the end—as in the case of a
Registered Series—the search logic test is not so forgiving.
V. CONCLUSION
Delaware’s Alternative Entities provide extraordinary flexibility and can be
formed with characteristics chosen to facilitate outcomes not feasible for corpo-
rations and other traditional operating companies. Such characteristics include
legal isolation of assets in a given transaction from the consequences of a future
insolvency, special mechanisms to better assure continuity of existence, and
modification of fiduciary and other duties. There is a complicated interplay be-
tween the series provisions of Delaware’s Alternative Entity acts and UCC Article
9. Recent amendments to each of the DLLC Act and the DLP Act provide much
needed certainty where series of DLLCs or DLPs endeavor to borrow on a se-
cured basis. More recent amendments to the DST Act confirm that a Series
DST, not a given DST Series, is the debtor for UCC Article 9 purposes. Still,
care must be taken in determining how, in fact, assets associated with a given
series are held, and the related questions as to the identity of the relevant debtor,
as well as its name for UCC section 9-503 purposes and its location for UCC
section 9-307 purposes. Indeed, the price of contractual freedom is careful con-
sideration and drafting. The chart below provides a helpful reference guide for
filing financing statements under UCC Article 9 to perfect security interests in
assets associated with Delaware’s Alternative Entities and series thereof.
73. U.C.C. § 9-503(a)(1) (AM.L.INST.&UNIF.L.COMM’N 1998).
74. Id. § 9-307(e).
75. D
EL.CODE ANN. tit. 6, §§ 17-221(e)(1), 18-218(e)(1) (West, Westlaw through ch. 18 of the
151st Gen. Assemb. (2021–2022)).
76. Id. § 18-102(1).
77. Id. § 17-102(1).
78. See, e.g., U
NIF.COM.CODE ART.9MODEL ADMIN.RULES r. 503.1.3 (2015); DEL.SEC’YOFSTATE,
A
DMIN.RULES FOR UCC ART. 9 § 503.1.5 (July 11, 2017).
79. See U.C.C. § 9-506(c) (A
M.L.INST.&UNIF.L.COMM’N 1998) (“If a search of the records of the filing
office under the debtor’s correct name, using the filing office’s standard search logic, if any, would disclose
a financing statement that fails sufficient ly to provide the name of the debtor in accordance with Section
9-503(a), the name provided does not make the financing statement seriously misleading.”).
Delaware Harmonizes Alternative Entity Series and UCC Article 9 1153
Filings Against Delaware Alternative Entities and Series Thereof Under UCC Article 9
UCC1 Financing
Statement Box
(rev. 04.20.11)
Collateral is Owned by or
“Associated with” a
Delaware LLC, Delaware LP,
or Delaware Statutory Trust
(whether with or without
series)
Collateral is “Associated with” a Series of a Delaware LLC or LP
Collateral is
“Associated
with” a Series of
a DST
Protected Series Registered Series
Held in
Series’
Name
Held in
LLC’s or
LP’s
Name
Held in
Nominee’s
Name
Held in
Series’
Name
Held in
LLC’s or
LP’s
Name
Held in
Nominee’s
Name
Box 1a (debtor
organization’s
name)
ABAD*CAD*A
Box 1b (debtor
individual’s name)
N/A N/A N/A E* N/A N/A E* N/A
Box 1c (debtor’s
mailing address)
JKJMLJMJ
Where to File
FGFIHFIF
1154 The Business Lawyer; Vol. 76, Fall 2021
KEY
A Name of LLC, LP, or DST per RA-9 § 503(a)(1) H Location of Registered Series per RA-9 § 307(e) (Delaware)
B
Name of Protected Series per RA-9 § 503(a)(6) [Alternative A] or RA-9
§ 503(a)(5) [Alternative B] I Location of Nominee per RA-9 § 307
C Name of Registered Series per RA-9 § 503(a)(1) J Mailing Address of LLC, LP, or DST
D Name of Organization Nominee per RA-9 § 503* K Mailing Address of Protected Series
E
Name of Individual Nominee per RA-9 § 503(a)(4) or (5) [Alternative
A] or RA-9 § 503(a)(4) [Alternative B]* L Mailing Address of Registered Series
F Location of LLC, LP, or DST per RA-9 § 307(e) (Delaware) M Mailing Address of Nominee
G Location of Protected Series per RA-9 § 307(b)(2) or (3)
*
In any given financing statement, either, but not both, of
Boxes 1a and 1b will be completed.
Delaware Harmonizes Alternative Entity Series and UCC Article 9 1155
