The Delaware LLC "Divisive Merger" Provision – A Potentially Dangerous Loophole Under Debt Covenants

Summary

This article discusses Section 18-217 (Divisive Merger Provision) of the Delaware Limited Liability Company Act (Delaware LLC Act). Effective August 1, 2018, the Divisive Merger Provision allows a Delaware limited liability company (an LLC) to divide into two or more LLCs and allocate the assets, liabilities, rights, and duties of the dividing LLC among itself and/or newly created LLCs (Divisive Merger).