§ 3825 — Division of a statutory trust

(a) As used in this section and § 3810 of this title:

(1) “Dividing trust” means the statutory trust that is effecting a division in the manner provided in this section.

(2) “Division” means the division of a dividing trust into 2 or more statutory trusts in accordance with this section.

(3) “Division contact” means, in connection with any division, a natural person who is a Delaware resident, any division trust in such division or any other statutory trust or other business entity formed or organized under the laws of the State of Delaware, which division contact shall maintain a copy of the plan of division for a period of 6 years from the effective date of the division and shall comply with paragraph (g)(3) of this section.

(4) “Division trust” means a surviving trust, if any, and each resulting trust.

(5) “Resulting trust” means a statutory trust formed as a consequence of a division

(6) “Surviving trust” means a dividing trust that survives the division.

(b) Pursuant to a plan of division, any statutory trust may, in the manner provided in this section, be divided into 2 or more statutory trusts. The division of a statutory trust in accordance with this section and, if applicable, the resulting cessation of the existence of the dividing trust pursuant to a certificate of division shall not be deemed to affect the personal liability of any person incurred prior to such division with respect to matters arising prior to such division, nor shall it be deemed to affect the validity or enforceability of any obligations or liabilities of the dividing trust incurred prior to such division; provided, that the obligations and liabilities of the dividing trust shall be allocated to and vested in, and valid and enforceable obligations of, such division trust or trusts to which such obligations and liabilities have been allocated pursuant to the plan of division, as provided in subsection (l) of this section. Each resulting trust in a division shall be formed in compliance with the requirements of this chapter and subsection (i) of this section.

(c) If the governing instrument of the dividing trust specifies the manner of adopting a plan of division, the plan of division shall be adopted as specified in the governing instrument. If the governing instrument of the dividing trust does not specify the manner of adopting a plan of division and does not prohibit a division of the statutory trust, the plan of division shall be adopted in the same manner as is specified in the governing instrument for authorizing a merger or consolidation that involves the statutory trust as a constituent party to the merger or consolidation. If the governing instrument of a dividing trust that is not registered as an investment company or regulated as a business development company under the Investment Company Act of 1940, as amended (15 U.S.C. § 80a-1 et seq.), does not specify the manner of adopting a plan of division or authorizing a merger or consolidation that involves such statutory trust as a constituent party and does not prohibit a division of such statutory trust, the adoption of a plan of division shall be authorized by the approval by of all of the trustees and the beneficial owners of such statutory trust. If the governing instrument of a dividing trust that is registered as an investment company or regulated as a business development company under the Investment Company Act of 1940, as amended (15 U.S.C. § 80a-1 et seq.), does not specify the manner of adopting a plan of division or authorizing a merger or consolidation that involves such statutory trust as a constituent party and does not prohibit a division of such statutory trust, the adoption of a plan of division shall be authorized by the approval by all of the trustees and the beneficial owners who own more than 50% of the then current percentage or other interest in the profits of such dividing trust owned by all of the beneficial owners. Notwithstanding prior approval, a plan of division may be terminated or amended pursuant to a provision for such termination or amendment contained in the plan of division.

(d) Unless otherwise provided in a plan of division, the division of a statutory trust pursuant to this section shall not require such statutory trust to wind up its affairs or pay its liabilities and distribute its assets under § 3808 of this title, and the division shall not constitute a dissolution of such statutory trust.

(e) In connection with a division under this section, rights or securities of, or interests in, the dividing trust may be exchanged for or converted into cash, property, rights or securities of, or interests in, the surviving trust or any resulting trust or, in addition to or in lieu thereof, may be exchanged for or converted into cash, property, rights or securities of, or interests in, a statutory trust or any other business entity which is not a division trust or may be canceled or remain outstanding (if the dividing trust is a surviving trust).

(f) A plan of division adopted in accordance with subsection (c) of this section:

(1) May effect any amendment to the governing instrument of the dividing trust if it is a surviving trust in the division; or

(2) May effect the adoption of a new governing instrument for the dividing trust if it is a surviving trust in the division; and

(3) Shall effect the adoption of a governing instrument for each resulting trust.

Any amendment to a governing instrument or adoption of a new governing instrument for the dividing trust, if it is a surviving trust in the division, or adoption of a governing instrument for each resulting trust made pursuant to the foregoing sentence shall be effective at the effective time or date of the division. Any amendment to a governing instrument or adoption of a governing instrument for the dividing trust, if it is a surviving trust in the division, shall be effective notwithstanding any provision in the governing instrument of the dividing trust relating to amendment or adoption of a new governing instrument, other than a provision that by its terms applies to an amendment to the governing instrument or the adoption of a new governing instrument, in either case, in connection with a division, merger or consolidation.

(g) If a statutory trust is dividing under this section, the dividing trust shall adopt a plan of division which shall set forth:

(1) The terms and conditions of the division, including:

a. Any conversion or exchange of the beneficial interests of the dividing trust into or for beneficial interests or other securities or obligations of any division trust or cash, property or rights or securities or obligations of or interests in any other business entity or statutory trust which is not a division trust, or that the beneficial interests of the dividing trust shall remain outstanding or be canceled, or any combination of the foregoing; and

b. The allocation of assets, property, rights, series, debts, liabilities and duties of the dividing trust among the division trusts;

(2) The name of each resulting trust and, if the dividing trust will survive the division, the name of the surviving trust;

(3) The name and business address of a division contact which shall have custody of a copy of the plan of division. The division contact, or any successor division contact, shall serve for a period of 6 years following the effective date of the division. During such 6-year period the division contact shall provide, without cost, to any creditor of the dividing trust, within 30 days following the division contact’s receipt of a written request from any creditor of the dividing trust, the name and business address of the division trust to which the claim of such creditor was allocated pursuant to the plan of division; and

(4) Any other matters that the dividing trust determines to include therein.

(h) If a statutory trust divides under this section, the dividing trust shall file a certificate of division executed by at least 1 trustee of the dividing trust on behalf of such dividing trust in the office of the Secretary of State in accordance with § 3811 of this title and a certificate of trust that complies with § 3810 of this title for each resulting trust executed by all of the trustees of each resulting trust in accordance with § 3811 of this title. The certificate of division shall state:

(1) The name of the dividing trust and, if it has been changed, the name under which its certificate of trust was originally filed and whether the dividing trust is a surviving trust;

(2) The date of filing of the dividing trust’s original certificate of trust with the Secretary of State;

(3) The name of each division trust;

(4) The name and business address of the division contact required by paragraph (g)(3) of this section;

(5) The future effective date or time (which shall be a date or time certain) of the division if it is not to be effective upon the filing of the certificate of division;

(6) That the division has been approved in accordance with this section;

(7) That the plan of division is on file at a place of business of such division trust as is specified therein, and shall state the address thereof;

(8) That a copy of the plan of division will be furnished by such division trust as is specified therein, on request and without cost, to any beneficial owner of the dividing trust; and

(9) Any other information the dividing trust determines to include therein.

(i) The certificate of division and each certificate of formation for each resulting trust required by subsection (h) of this section shall be filed simultaneously in the office of the Secretary of State and, if such certificates are not to become effective upon their filing as permitted by § 3812(b) of this title, then each such certificate shall provide for the same effective date or time in accordance with § 3812(b) of this title. Concurrently with the effective date or time of a division, the governing instrument of each resulting trust shall become effective.

(j) A certificate of division shall act as a certificate of cancellation for a dividing trust which is not a surviving trust.

(k) A governing instrument may provide that a statutory trust shall not have the power to divide as set forth in this section.

(l) Upon the division of a statutory trust becoming effective:

(1) The dividing trust shall be divided into the distinct and independent resulting trusts named in the plan of division, and, if the dividing trust is not a surviving trust, the existence of the dividing trust shall cease.

(2) For all purposes of the laws of the State of Delaware, all of the rights, privileges and powers, and all the property, real, personal and mixed, of the dividing trust and all debts due on whatever account to it, as well as all other things and other causes of action belonging to it, shall without further action be allocated to and vested in the applicable division trust in such a manner and basis and with such effect as is specified in the plan of division, and the title to any real property or interest therein allocated to and vested in any division trust shall not revert or be in any way impaired by reason of the division.

(3) Each division trust shall, from and after effectiveness of the certificate of division, be liable as a separate and distinct statutory trust for such debts, liabilities and duties of the dividing trust as are allocated to such division trust pursuant to the plan of division in the manner and on the basis provided in paragraph (g)(1)b. of this section.

(4) Each of the debts, liabilities and duties of the dividing trust shall without further action be allocated to and be the debts, liabilities and duties of such division trust as is specified in the plan of division as having such debts, liabilities and duties allocated to it, in such a manner and basis and with such effect as is specified in the plan of division, and no other division trust shall be liable therefor, so long as the plan of division does not constitute a fraudulent transfer under applicable law, and all liens upon any property of the dividing trust shall be preserved unimpaired, and all debts, liabilities and duties of the dividing trust shall remain attached to the division trust to which such debts, liabilities and duties have been allocated in the plan of division, and may be enforced against such division trust to the same extent as if said debts, liabilities and duties had originally been incurred or contracted by it in its capacity as a statutory trust.

(5) In the event that any allocation of assets, debts, liabilities and duties to division trusts in accordance with a plan of division is determined by a court of competent jurisdiction to constitute a fraudulent transfer, each division trust shall be jointly and severally liable on account of such fraudulent transfer notwithstanding the allocations made in the plan of division; provided, however, the validity and effectiveness of the division are not otherwise affected thereby.

(6) Debts and liabilities of the dividing trust that are not allocated by the plan of division shall be the joint and several debts and liabilities of all of the division trusts.

(7) It shall not be necessary for a plan of division to list each individual asset, property, right, series, debt, liability or duty of the dividing trust to be allocated to a division trust so long as the assets, property, rights, series, debts, liabilities or duties so allocated are reasonably identified by any method where the identity of such assets, property, rights, series, debts, liabilities or duties is objectively determinable.

(8) The rights, privileges, powers and interests in property of the dividing trust that have been allocated to a division trust, as well as the debts, liabilities and duties of the dividing trust that have been allocated to such division trust pursuant to a plan of division, shall remain vested in each such division trust and shall not be deemed, as a result of the division, to have been assigned or transferred to such division trust for any purpose of the laws of the State of Delaware.

(9) Any action or proceeding pending against a dividing trust may be continued against the surviving trust as if the division did not occur, but subject to paragraph (l)(4) of this section, and against any resulting trust to which the asset, property, right, series, debt, liability or duty associated with such action or proceeding was allocated pursuant to the plan of division by adding or substituting such resulting trust as a party in the action or proceeding.

(m) In applying the provisions of this chapter on distributions, a direct or indirect allocation of property or liabilities in a division is not deemed a distribution for purposes of this chapter.

(n) The provisions of this section shall not be construed to limit the means of accomplishing a division by any other means provided for in a governing instrument or other agreement or as otherwise permitted by this chapter or as otherwise permitted by law.

(o) All statutory trusts formed on or after August 1, 2020, shall be governed by this section. All statutory trusts formed prior to August 1, 2020, shall be governed by this section; provided, that if the dividing trust is a party to any written contract, indenture or other agreement entered into prior to August 1, 2020, that, by its terms, restricts, conditions or prohibits the consummation of a merger or consolidation by the dividing trust with or into another party, or the transfer of assets by the dividing trust to another party, then such restriction, condition or prohibition shall be deemed to apply to a division as if it were a merger, consolidation or transfer of assets, as applicable.

Legislative History

82 Del. Laws, c. 264, § 16 ; 83 Del. Laws, c. 381, § 17