The legislation keeps on comin! On April 26, 2018, the Delaware Senate introduced Senate Bill 182 and Senate Bill 183. SB183 makes a number of revisions to the the Delaware Limited Liability Act (“LLC Act”), and tucked neatly inside the bill is a revision that would allow Delaware LLC’s to use blockchains to create and maintain limited liability company records. As stated in the bill summary, the LLC Act is revised:
“to provide specific statutory authority for domestic limited liability companies to use networks of electronic databases (examples of which are described currently as “distributed ledgers” or a “blockchain”) for the creation and maintenance of limited liability company records and for certain “electronic transmissions.”
In particular, the LLC Act specifies how LLC’s can perform certain functions, like how members and managers can cast and store votes, and how the LLC can provide its statutory agent with information for it’s communications contact. The LLC Act already allowed LLC’s to fulfill these functions through “electronic transmissions.” SB 182 amends the definition of “electronic transmissions” to include “the use of, or participation in, 1 or more electronic networks or databases (including 1 or more distributed electronic networks or databases).”
Section 26 of the amendment would also allow limited liability companies to maintain its records on the blockchain (proposed additions underlined):
(d) A limited liability company may maintain its records in other than a written form, including on, by means of, or in the form of any information storage device, method, or 1 or more electronic networks or databases (including 1 or more distributed electronic networks or databases), if such form is capable of conversion into written form within a reasonable time.
SB 182 would similarly amend the Delaware Revised Uniform Limited Partnership Act (“Partnership Act”) to give limited partnerships the same ability to create and maintain records on the blockchain.
The proposed Delaware bills follow similar legislation already signed into law in Arizona. On March 29, 2017, Arizona Governor Doug Ducey signed into law Arizona’s HB 2417, which amended the Arizona Electronic Transactions Act, A.R.S. § 44-7001 et seq., to explicitly recognize the validity of signatures and records secured through blockchain technology. Arizona HB 2603 was also recently signed into law on April 3, 2018 , which modifies Title 10 (Corporations and Associations) of the Arizona Revised Statutes to clarify that any requirement that something be “written” or in “writing” shall also include blockchain technology as defined in the Arizona Electronic Transactions Act.
Delaware’s recently proposed bills are very notable because other states have historically followed Delaware’s lead with respect to corporate and limited liability company law. If Delaware continues to pass blockchain friendly legislation, it may have a ripple effect throughout the nation as other states follow suit.