Series LLCs: Structuring and Financing Concerns for Lenders and Investors

Navigating UCC Perfection, Bankruptcy Risks, and Conflicting State Statutes

Recording of a 90-minute premium CLE webinar with Q&A


Conducted on Tuesday, December 3, 2019

Recorded event now available

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Program Materials

This CLE webinar will discuss the formation and structuring of series LLCs and examine the issues and risks lenders face in loan transactions involving series LLCs, including UCC Article 9, the Bankruptcy Code, and treatment of series LLCs under state statutes.

Description

Some people say that a "series" is similar to a subsidiary of the LLC. Perhaps the closest analog is a single LLC with different divisions or lines of business. A series is not a separate legal entity. The series LLC structure segregates the assets and liabilities of each series such that the debts, liabilities, and obligations of any given series may be enforced only against the assets of that particular series and not the assets of any other series or the LLC itself.

There is increasing interest in series LLCs among private equity sponsors and other market participants. Each series can have different investors--with varying investment strategies, business purposes, and commitment periods--within a structure that offers flexibility and efficiencies in the documentation, administration, and filing costs. In recent years an increasing number of series have been utilized for real estate and other investments, in contexts far from the regulated investment fund and captive insurance company applications historically using these structures.

Financing and enforceability concerns persist. About half of the states in the U.S. plus D.C. have statutes authorizing the formation of series LLCs, but it is unclear whether a court in one state will honor the internal liability shields of a series LLC formed in another state. The treatment of a series in bankruptcy is mostly untested. UCC perfection against the financed assets of a series has also been a concern, except for Delaware series LLCs due to recent amendments to the Delaware LLC statute that allow for registered series.

Listen as our authoritative panel of practitioners analyzes the pros and cons of utilizing series LLCs and potential issues lenders face when dealing with series LLCs, and the steps lenders can take to mitigate some risks.

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Outline

  1. Structuring a series LLC
    1. What are series?
    2. Liability shields
    3. Entity status
    4. Governance considerations
    5. Issues faced by lenders and potential solutions
  2. Series and UCC Article 9
    1. Identifying the debtor with rights in the collateral
    2. Issues with UCC filings against series
    3. Delaware's amendments to address UCC and other issues
  3. Series LLCs and the Bankruptcy Code
    1. Can a series be a debtor in bankruptcy?
    2. Will liability shields be respected in bankruptcy?
  4. Closing opinions for series of LLCs
    1. Salient differences in opining on series rather than LLCs
    2. How Delaware's amendments address opinion issues
    3. Inherent limitations

Benefits

The panel will review these and other noteworthy topics:

  • Establishing internal shields
  • Will internal shields be respected in other states?
  • Series are not entities

Faculty

Frazier, Shannon
Shannon S. Frazier

Partner
Morris James

In her personal practice, Ms. Frazier renders legal advice to Delaware business entities in the areas of formation,...  |  Read More

Monzo, Eric
Eric J. Monzo

Partner
Morris James

Mr. Monzo focuses his practice on issues relating to business restructuring and insolvency. He regularly represents a...  |  Read More

Strauss, Jonathan
Jonathan G. Strauss

Partner
Morris James

Mr. Strauss is a partner in Morris James’ Business Transactions, Strategic Planning and Counseling Practice, a...  |  Read More

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