Presenting a live 90-minute webinar with interactive Q&A Rendering Structured Finance Opinions of Counsel: Substantive Consolidation, Authority to File Bankruptcy and More Navigating Assumptions, Qualifications, Limitations and Use of Letters; Reducing Risks for Opinion Givers THURSDAY, AUGUST 21, 2014 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific Today’s faculty features: Scott J. Gordon, Partner, Kirkland & Ellis , New York Michelle P . Quinn, Partner, Berger Harris , Wilmington, Del. The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10 .
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RENDERING STRUCTURED FINANCE OPINIONS OF COUNSEL: SUBSTANTIVE CONSOLIDATION, AUTHORITY TO FILE BANKRUPTCY AND MORE NAVIGATING ASSUMPTIONS, QUALIFICATIONS, LIMITATIONS AND USE OF LETTERS; REDUCING RISKS FOR OPINION GIVERS MICHELLE P. QUINN, ESQUIRE mquinn@bergerharris.com
INTRODUCTION Why Delaware? LLCs Opinions Provided Non- dissolution opinion or the “Delaware State Law” opinion “Authority to file” opinion UCC Opinion Entity Authority Opinion Non-consolidation opinion True Sale opinion Series LLCs 5
WHY DELAWARE? Delaware Business Entities The Delaware Limited Liability Company Act 0 200 400 600 800 Increase of use of LLCs in the In Thousands mid-1990s Statutory Trusts Limited Partnerships Limited Liability Companies Corporations As of March 29, 2013 from the Delaware Division of Corporations 6
EASY ADMINISTRATIVE PROCEDURES Online Services Expedited and same day service Filing of UCC documents Payment of franchise taxes Access to relevant provisions of the Delaware Code Help with finding a registered agent Name reservations Status check for Delaware entities 7
EXPERTISE OF JUDICIARY IN BUSINESS MATTERS Delaware's Court of Chancery Limited jurisdiction High volume of corporate and LLC matters Corporations Section of the Delaware State Bar Association Generates legislation after careful study of case law and business trends Easy access to elected and appointed officials due to the small size of the state 8
CONTRACT FLEXIBILITY Section 18- 1101(b) of the DE LLC Act: “It is the policy of this chapter to give the maximum effect to the principle of freedom of contract and to the enforceability of limited liability company agreements.” " Except as provided in a limited liability company agreement“ or similar language is found in most provisions of the DE LLC Act. Delaware LLC Act is friendly to the SPV structure. 9
THE DELAWARE STATE LAW OPINION THE “NON - DISSOLUTION” OPINION
DOCUMENTS REQUIRED A certified copy of the Certificate of Formation from the Delaware Secretary of State. A fully executed limited liability company agreement A Certificate of Good Standing from the Delaware Secretary of State 11
CONTENTS OF THE OPINION LETTER The Company has been duly formed and is validly existing in good standing as a limited liability company under the laws of the State of Delaware. In Delaware, this requires an LLC Agreement and a Certificate of Formation. Should not be based solely on a good standing certificate. The LLC Agreement constitutes a legal, valid and binding agreement of the Member, and is enforceable against the Member, in accordance with its terms. Given with standard enforceability carve-outs, including bankruptcy Sometimes drafted to cover only the Special Member provisions 12
CONTENTS OF THE OPINION LETTER (CONT.) If properly presented to a Delaware court, a Delaware court applying Delaware law, would conclude that (i) [so long as any Obligation is outstanding,] in order for a Person to file a voluntary bankruptcy petition on behalf of the Company, the prior unanimous written consent of the Member and all Independent Managers, as provided for in Section ___ of the LLC Agreement, is required, and (ii) such provision, contained in Section ___ of the LLC Agreement, that requires, [so long as any Obligation is outstanding,] the prior unanimous written consent of the Member and all Independent Managers in order for a Person to file a voluntary bankruptcy petition on behalf of the Company, constitutes a legal, valid and binding agreement of the Member, and is enforceable against the Member, in accordance with its terms. Given with only an equitable principles carve-out. No bankruptcy carve-out. Should track language of LLC Agreement. LLC Agreement should not prohibit a bankruptcy filing or require lender consent for a bankruptcy filing 13
INDEPENDENT MANAGER Disinterested third party granted authority to vote on bankruptcy of the LLC Often serves as the special member Lender limits on identity and replacement Designate as a “manager” within the meaning of the LLC Act. 14
CONTENTS OF THE OPINION LETTER (CONT.) While under the Delaware Limited Liability Company Act, 6 Del. C. § 18-101, et seq.) (the "LLC Act"), on application to a court of competent jurisdiction, a judgment creditor of the Member may be able to charge the Member's share of any profits and losses of the Company and the Member's right to receive distributions of the Company's assets (the "Member's Interest"), to the extent so charged, the judgment creditor has only the right to receive any distribution or distributions to which the Member would otherwise have been entitled in respect of the Member's Interest. Under the LLC Act, no creditor of the Member shall have any right to obtain possession of, or otherwise exercise legal or equitable remedies with respect to, the property of the Company. Thus, under the LLC Act, a judgment creditor of the Member may not satisfy its claims against the Member by asserting a claim against the assets of the Company. Under the LLC Act (i) the Company is a separate legal entity, and (ii) the existence of the Company as a separate legal entity shall continue until the cancellation of the LLC Certificate. 15
CONTENTS OF OPINION LETTER (CONT.) Under the LLC Act and the LLC Agreement, the Bankruptcy or dissolution of the Member will not, by itself, cause the Company to be dissolved or its affairs to be wound up. LLC Agreement should override LLC Act regarding bankruptcy of a member Mandatory Events Dissolution 1. As specified in the limited liability company agreement 2. At such time as there are no remaining members 3. When ordered by the Court of Chancery 16
THE SPECIAL MEMBER A special member/springing member becomes a member of the LLC upon occurrence of any event that would causes the last remaining equity member to cease to be a member by operation of law or contract Provisions: May not resign or transfer its rights unless a successor Special Member has been admitted Has no interest in the profits, losses and capital of the Company Has no right to receive any distributions of Company assets Is not required to make any capital contributions to the Company, 6 Del. C. § 18-301(d) May not bind the Company except as required by any mandatory provision of the LLC Act Has no right to vote on, approve or otherwise consent to any action by, or matter relating to, the Company, including, without limitation, the merger, consolidation or conversion of the Company 17
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