DelawareSB 267153rd General Assembly (2024–2026)SenateWALLET

AN ACT TO AMEND TITLE 10 AND TITLE 30 OF THE DELAWARE CODE RELATING TO THE UNIFORM ASSIGNMENT FOR BENEFIT OF CREDITORS ACT.

Sponsored By: Darius J. Brown (Democratic)

Signed by Governor

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Bill Overview

Analyzed Economic Effects

10 provisions identified: 1 benefits, 0 costs, 9 mixed.

Creditor property transfers avoid Delaware tax

Property transfers made by an asset owner or manager for creditors under this process avoid Delaware realty transfer tax. The exemption applies to qualifying assignment transfers, not every real estate sale. No tax rate or transaction value is provided to calculate savings.

Asset managers gain powers and duties

Managers must act loyally, in good faith, and with reasonable care to maximize creditor payments. They must keep funds in a separate account, preserve records, report to creditors, disclose compensation changes, and meet tax requirements. A single, nondiscriminatory deadline for claims needing timely proof must be at least 90 days after the agreement takes effect. Unless the agreement limits these powers, managers can operate the business, borrow, hire professionals, sell or redeem assets, settle cases, and invest prudently. They can abandon assets when doing so is more economical, and pay administration costs from available unencumbered assets. For creditors filing claims, managers alone can challenge transfers those creditors could challenge; recovery must benefit the estate and cannot exceed that creditor's recovery, with federal limits protecting specified financial contracts.

Asset owners must disclose and cooperate

The asset owner and independent manager, called the assignee, must sign an agreement listing parties, addresses, assets, payment plans, and fees. The manager cannot be a creditor, insider, affiliate, or financially interested party beyond agreed fees and expenses, with a limited exception for noncontrolling publicly traded shares. Prior work for the owner alone does not disqualify the manager. The owner must swear that all assets are transferred; reasonable, good-faith reliance makes that transfer complete even if the statement is inaccurate. Transfers take effect at the last required signature unless a later date is stated, preserve existing interests, and include an organization's later-acquired assets. Owners and their designated representatives must protect and turn over assets, help obtain required transfer consents, and provide verified asset, employee, and creditor lists at effectiveness or as soon as practical.

Creditors gain court oversight and accounting

Managers accept Court of Chancery authority and must petition it within 14 days after entering the assignment agreement. The court can resolve administration issues and, at a manager's request, issue orders about sales, assets, or borrowing. Owners or creditors with reasonable grounds can seek removal for fraud, dishonesty, incompetence, gross mismanagement, major noncompliance, or creditors' best interests. An eligible named successor takes over unless subject to removal; otherwise, the court appoints one. Creditors with accepted claims that remain unpaid in full must receive a final accounting of assets, costs, collections, sales, payments, and remaining work. Managers' duties end only after the accounting, full asset distribution, and completion of required work.

Creditors get notice and claim rules

Known creditors must receive notice within a reasonable time, no later than 30 days after the agreement takes effect. This includes contract partners and people employed within 90 days of the assignment; creditors can waive notice in a signed record. Notice gives contact details, claim instructions, and the deadline, while reasonable outreach must reach unknown creditors. Following court notice rules creates a presumption of receipt, but recipients can challenge it. Properly submitted claims must be accepted unless disputed before final payment; some claims need no proof, and reasonably excused late claims can be accepted. Creditors can also win disputed claims, and the unsecured portion is valued when the agreement takes effect.

Cross-state assignments can reach Delaware assets

Delaware recognizes another state's assignment on an issue when the result is substantially similar under Delaware law. Managers can apply another state's creditor treatment when they determine it should apply; agreements choosing Delaware law follow that law. The Court of Chancery can appoint an eligible out-of-state manager or nominee to handle assigned assets in Delaware or under its authority. After recorded notice, people holding assigned Delaware assets must turn them over. Creditors with a lien or a related right to offset or recover value are exempt from that turnover duty.

Good-faith buyers gain asset lien protections

A sale for value transfers the manager's rights and clears the manager's lien and subordinate liens. Good-faith buyers receive these protections even when the manager failed to follow the law or court process. Buyers without these protections take assets subject to the specified rights and liens.

Liability shields have limits for managers

Asset owners and managers are not personally liable for each other's acts or omissions. An owner's designated representative remains responsible for gross negligence or willful misconduct. Managers face liability for creditor-specific or estate harm from duty breaches, but good-faith reliance on specified records or advice protects them. Agreements cannot excuse bad faith or reckless indifference, or waive the law's mandatory duties. They can set duty standards, add duties, permit reimbursement from estate assets, and limit some liability; standards and allowed time periods cannot be plainly unreasonable.

New Delaware rules for paying creditors

The law creates a process for transferring assets to a manager who pays creditors. Delaware residents and organizations based in Delaware or governed by Delaware law qualify; banks and insurers do not. Wholly owned organizations can qualify through an eligible owner. Partly owned organizations qualify only if an eligible owner controls them, they have no business location or employees, and they rely on that owner's services. New assignments no longer require the former filed inventory, affidavit, appraisals, or manager's bond; assignments made before the law's effective date keep the old rules.

Payment order protects wages and lenders

Lenders with perfected liens that cannot be undone and do not rank below the manager's lien get their collateral or proceeds first. Only reasonable, necessary expenses that benefited the lender and were consented to reduce that payment. Next come administration costs, federally preferred claims, qualifying wages, other priority unsecured claims, and general unsecured claims. Wage priority covers earnings within 180 days before the earlier of the assignment's effective date or business closure. The wage priority amount is the greater of the applicable bankruptcy-law or other-law amount; equal-ranking creditors share proportionally when money falls short. Agreements placing claims behind others remain enforceable, and specified securities-related claims rank lower, with common-equity claims ranked like common equity. Eligible late claims and leftover assets are handled only after the listed claims are fully paid.

Sponsors & Cosponsors

Sponsor

Darius J. Brown
Democratic • Senate

Cosponsors

Krista Griffith
Democratic • House
Kerri Evelyn Harris
Democratic • House

Roll Call Votes

All Roll Calls

Yes: 52 • No: 0

House vote • 5/19/2026

Passed (SM required)

Yes: 31 • No: 0

Senate vote • 5/5/2026