Content area
Full text
We are all familiar with the story of the frog prince. A handsome prince turned into a frog by a wicked witch wanders the swamp waiting to be kissed by a fair maiden in order to regain his human form. One can only imagine the maidens parents' response to the idea of their daughter running through the swamp kissing amphibians. You do not know where that frog has been! It's unseemly. What would the neighbors think? Thankfully, at least for the frog, the fair maiden had a rebellious streak. She kissed; he transformed; they lived happily ever after.
What is the moral of the story? Perhaps, it is "nothing ventured, nothing gained" or "with great risk comes great reward." Whichever moral one chooses, both are particularly apt when we talk about a series limited liability company (Series LLC), because this frog is a prince, warts and all.
History of the Series LLC
For the uninitiated, the Series LLC is the next step in the evolution of unincorporated entities. The concept was derived from the offshore mutual fund and captive insurance industries, which have used segregated portfolio companies and protected cell companies established in locations such as the Cayman Islands, the British Virgin Islands, Belize, Bermuda, Guernsey, and Mauritius.
Like an ordinary limited liability company (LLC), a Series LLC is a separate legal entity. However, unlike an ordinary LLC, a Series LLC has the ability to partition its assets, debts, obligations, liabilities, and rights among distinct series. A series is akin to a cell or vault maintaining assets and liabilities separate and distinct from those held within other series. Each series may have a different business purpose, and different rights, powers, and duties with respect to the assets held within the series. The debts, obligations, and liabilities incurred by each series are enforceable only against that series. In this way, "series" are different from traditional classes or series of stock or partnership interests. Though the Series LLC first arrived on the scene more than a decade ago, it has garnered little attention, and much of that has been negative.
Delaware was the first to adopt a provision authorizing the Series LLC in 1996. Rather than create a standalone statute, Delaware added the Series LLC provision,...