Series LLCs, the UCC, and the Bankruptcy Code—A Series of Unfortunate Events?


The Delaware Limited Liability Company Act, Del. Code Ann. tit. 6, § 18-101 et seq. (the Delaware LLC Act), facilitates the formation of entities with attributes carefully crafted to meet the needs of a given application. It is regularly revised so as to best assure that Delaware limited liability companies (LLCs) can be crafted to meet the ever-developing

needs of the marketplace. The Delaware LLC Act explicitly invokes Delaware’s policy to give “maximum effect to the principle of freedom of contract and to the enforceability of limited liability company agreements.” Since the mid-1990s, the Delaware LLC Act has permitted the formation of LLCs with separate series of members, managers, and assets.

Where separate series are properly established and maintained, the debts, liabilities, obligations, and expenses incurred, contracted for, or otherwise existing with respect to a particular series are enforceable

against the assets of such series only and not against the assets of the LLC generally or any other series. The flexibilities and advantages afforded by the Delaware LLC Act, intended as they are to address the diverse needs of various constituencies, present unique issues and risks

in certain contexts and applications. This article discusses the issues that arise when Delaware LLCs with series (Series LLCs) or such series themselves (Series) become debtors for Uniform Commercial Code Article 9 purposes and questions concerning Series LLCs and Series as debtors under the Bankruptcy Code.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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