Domiciles Q&A: DLA Piper’s Tope on Delaware

Is Delaware gaining or losing interest as a fund domicile?

It’s remained steady with slight increases with the recent tax code changes in the US. It still remains the number one choice for US funds. Also, we are seeing more interest from foreign investors. In particular, Delaware has no public beneficial owner disclosures, so it is a good choice for persons that value privacy.

What is the attraction compared with other domiciles?

Delaware is attractive as it is a flexible statute. You can have the parties agree to most anything and it is generally enforceable. Delaware has significant case law on many fund-related items and a special Chancery Court which decides cases.

What is the fund structure of choice?

The Delaware limited partnership is the structure of choice. We do see Delaware LLCs, primarily in venture capital funds, but most private equity and infrastructure funds are limited partnerships.

Which investors does it appeal to?

Generally, US taxable investors. It is less appealing to non-US investors, though with recent tax law changes, Delaware can be an acceptable jurisdiction (using a blocker) for foreign investors.

What is its weakness/downside compared with other domiciles?

Some investors, particularly those outside the US, are wary of interaction with US entities.