Delaware Helps Federal Investigators by Requiring Delaware LLC’s “Communications Contact” Have Access to a Record of Each Member and Manager
A few years ago, pressure from U.S. Treasury and International countries prompted Delaware to require a “communications contact” for each LLC formed in Delaware. A 2014 Amendment clarified what is required of this communications contact, including access to ownership and management contact information.
What is a Communications Contact for a Delaware LLC?
Before these 2014 amendments, legislation passed in 2007 that stated every Delaware LLC must provide to its commercial registered agent, the name and contact information of “a natural person who is a member, manager, officer, employee or designated agent of the limited liability company”¹ who is authorized to receive communications from its registered agent. Although the amendment stated that this communications contact is a natural person (human being) who is authorized to receive communications via the LLC’s registered agent, it did not explicitly state who was to have the members’ contact information should it be requested of the communications contact. The 2007 Amendment was to make sure the communications contact was a human being and not another entity, to avoid a wild goose chase for information. This was to facilitate communication with an LLC by third parties, including investigators.
Additionally, the U.S. Department of Treasury and U.S. Senator Carl Levin were pushing a bill to require “beneficial owner” disclosure on state records or agent records. This would have been unworkable for a number of reasons, but Delaware enacted this compromise to make investigations easier for law enforcement.
What if a non-member obtains a subpoena requesting member and manager information?
For example, when a registered agent receives a subpoena addressed to a Delaware LLC that seeks a list of the names and contact information of its members and managers; that subpoena is forwarded to the communications contact. Then the communications contact is required to request that list from the LLC. I know this sounds strange because an LLC is run by people and making a request upon “the LLC” will inevitably be upon some natural person. Therefore making a request upon the LLC just means making the request upon a person acting with authority on behalf of the LLC. When the communications contact requests this information from the LLC, the LLC is required to provide the communications contact with the contact information of the person who keeps this record, as required by the 2014 amendment. This was to address further concerns by the U.S. Treasury because the Delaware LLC Act did not expressly require records of owners even to be kept within the LLC’s private record.
What if a member wants to know who the other members are?
If a member of an LLC requests this list, the LLC must make this information available to the member. This request does not need to go to the registered agent or communications contact.
What if more information about books and records of an LLC is desired by a member?
In addition to access to a list of the current members, members of a Delaware LLC are entitled to:
- “True and full information” regarding the status of the business and the financial condition of the LLC;
- A copy of the LLC’s federal, state and local income tax returns for each year;
- A copy of the LLC’s Agreement and Certificate of Formation and all amendments thereto;
- True and full information regarding the amount of cash and other property or services contributed by each member;
- What date each member became a member; and
- “Other information regarding the affairs of the limited liability company that is just and reasonable.”²
Although the above list of books and records available to a member upon demand can be modified, expanded or eliminated by an LLC Agreement, access to a list of members and managers may not be eliminated by a private agreement.
One of the more remarkable aspects of the 2014 Communications Contact legislation is that requiring the LLC to keep a list of members and managers cannot be waived or modified by written agreement, either through contract with the registered agent or through the operating agreement. Almost everything else in the Delaware LLC Act can be changed by private contract away from the default rules. This may be one of the lone exceptions. A Delaware LLC is a “creature of contract”, meaning that the internal operations are governed by its LLC Agreement which may modify or eliminate default statutory laws. This law cannot be contracted around in the LLC Agreement or any other agreement between members. Considering that, this is a remarkable addition to the Delaware LLC Act. It is not just “lip service” to satisfy the U.S. Treasury and Senator Levin.
1. 6 Del. C. §18-104(g)
2. 6 Del. C. §18-305(a)