The 2018 legislative updates to the Delaware Statutory Trust Act (DSTA), which became effective August 1, 2018, provide for the use of so-called blockchain technology and clarify the rights, duties and liabilities of trustees and agents to whom a trustee delegates authority.
In an effort to stay current with the emergence of distributive electronic networks and database technologies (including what is commonly referred to as “blockchain” or “distributed ledger” technologies), the DSTA has been updated to provide that each of the following activities may be evidenced, provided, or maintained by such technologies: the registration of a beneficial interest in a statutory trust, a vote or a proxy of the beneficial owners, the vote or proxy of trustees, and the records of a statutory trust.
The amendments also update and clarify certain sections of the DSTA regarding a trustee’s and an agent’s rights, duties and obligations. As previously drafted, Section 3803(c) protected persons acting as agents under Section 3806(b)(7) from personal liability to any person other than the statutory trust or a beneficial owner, except as provided in a governing instrument. The changes make clear that protection from personal liability extends to any person to whom a trustee has delegated its rights, powers or duties to manage and control the business and affairs of the statutory trust, including those appointed pursuant to Section 3806(i), not just Section 3806(b)(7). However, the amendments also add the trustee to the list of parties, which previously included the statutory trust and a beneficial owner, to whom an agent may be personally liable. Similarly, an amendment to Section 3806(k) clarifies that agents appointed pursuant to Section 3806(i), not just Section 3806(b)(7), shall be provided protections for good faith reliance on certain records obtained in the performance of its delegated duties.
Section 3806(b)(7) of the DSTA was amended to remove the default duty of the trustee to choose and supervise the officers, managers, employees or other persons of such agents and independent contractors of the statutory trust appointed to manage the business of the trust. Those default duties are now replaced by a new Section 3806(m). This Section provides for the circumstances in which a trustee’s duties and liabilities will be limited for the actions of an officer, employee, manager or other person acting pursuant to Section 3806(b)(7) or a delegate acting pursuant to Sections 3806(i). The new Section also provides for the default standard of care required of any person acting pursuant to Sections 3806(b)(7) and 3806(i).
Section 3806(i) is amended to clarify that a trustee may delegate its duties in addition to its rights and powers.
These amendments are intended to keep the DSTA current and to maintain its national preeminence.
If you have questions about the Delaware Limited Liability Company Act or would like additional information, please contact Ross Antonacci (rantonacci@morrisjames.com; 302.888.6914), Nick Caggiano (ncaggiano@morrisjames.com; 302.888.6845), Shannon Frazier (sfrazier@morrisjames.com; 302.888.6916), Lew Ledyard (lledyard@morrisjames.com; 302.888.6869), Mike Ledyard (mledyard@morrisjames.com; 302.888.6917) or Jonathan Strauss (jstrauss@morrisjames.com; 302.888.6848).
