CHAPTER 259
COURT OF CHANCERY
AN ACT in relation to Investments by Trustees, Guardians and Other Fiduciaries and to Property taken over by them, being an Amendment of Chapter 117 of the Revised Code of the State of Delaware.
Be it enacted by the Senate and House of Representatives of the State of Delaware in General Assembly met:
Section 1. That Chapter 117 of the Revised Code of Delaware (1915) be and the same is hereby amended by striking out and repealing all of 3875. Sec. 32. and by substituting in lieu thereof the following:
3875. Sec. 32. TRUST SECURITIES DESIGNATED: Trustees, Guardians and other fiduciaries may invest the funds of their trusts as follows:
(A)In accordance with the provisions pertaining to investments contained in instruments under which they are acting;
(B)In the absence of any such provisions, then in securities of the following classes:
(1)Bonds and other interest-bearing obligations of the United States, for which the faith and credit of the United States are pledged to provide for the payment of the interest and principal thereof.
(2)Bonds and other interest-bearing obligations of the State of Delaware and of any other state of the United States, and of the District of Columbia, for which the faith and credit of any such state or District are pledged to provide for the payment of the interest and principal thereof.
(3)Bonds and other interest-bearing obligations of any county of the State of Delaware, for which the faith and credit of any such county are pledged to provide for the payment of the interest and principal thereof.
(4)Bonds and other interest-bearing obligations of any school district of the State of Delaware issued pursuant to the authority of the law relating thereto and for which the faith and credit of any such district are pledged to provide for the payment of the interest and principal thereof.
(5)Bonds and other interest-bearing obligations of any incorporated city or town of the State of Delaware for which the faith and credit of any such city or town are pledged to provide for the payment of the interest and principal thereof.
(6)Bonds and other interest-bearing obligations of any incorporated city of any state of the United States (other than the State of Delaware) for which the faith and credit of the city issuing the same are pledged to provide for the payment of the interest and principal thereof ; provided that at the date of purchase of such obligation the city issuing the same shall have a population of not less than one hundred thousand (100,000) persons, according to the most recent Federal census, and shall have a total net debt (determined in accordance with the law applicable to such city defining its total net debt) of not more than ten per cent (10%) of the most recent assessed valuation of the taxable property in such city.
(7)Bonds of either natural persons or corporations secured by first mortgage upon improved and productive real estate (including buildings occupied by owner), free from prior encumbrances, the amount of which mortgage does not exceed sixty per cent (60%) of the value of the property covered thereby as determined at the date of investment.
(8)Bonds of railroad, transportation, public service and industrial corporations incorporated in one or more states of the United. States, secured by mortgage upon the whole or a part of the property, plants and systems of such corporations, the earnings of which, after depreciation, for a period of five fiscal years immediately preceding the date of the purchase, have averaged, in the case of railroad bonds, one and one- half times ; in the case of transportation and public service bonds, two times ; and in the case of industrial bonds, three times the total fixed charges (including therein interest on funded debt, on bank loans and other forms of floating debt, amortization charges, and discounts on securities sold).
(9)Equipment trust obligations, issued in connection with the purchase of new standard gauge equipment for use on railroads incorporated in one or more states of the United States, secured by an instrument vesting title to such equipment in a trustee free of any prior encumbrance; provided, however, that the maximum amount of such obligations so issued shall not exceed eighty per cent (80%) of the cost of such equipment, and that such obligations shall mature within fifteen (15) years from the date of issue in approximately equal annual or semi-annual installments, be- ginning not later than three (3) years after the date of issue.
(10)Bonds of railroad and public service corporations, the principal and interest of which have been assumed or guaranteed by a corporation whose mortgage bonds meet the requirements of paragraph (8) of this section; provided, however, that no default has occurred in the payment of interest on such bonds for a period of five years next preceding the date of purchase thereof.
(11)Such stocks, bonds and securities as may be approved by the Court having jurisdiction.
(C)The foregoing specification of the classes of securities in which Trustees, Guardians and other fiduciaries may invest the funds of their trusts shall not be construed to relieve such Trustees, Guardians and other fiduciaries from the duty of exercising due care in selecting securities within such classes. (D)Nothing contained in this section shall be interpreted as prohibiting Trustees, Guardians or other fiduciaries from taking over (other than by purchase) from any source whatsoever property of any kind, including securities not within any of the classes specified in sub-division (B) hereof; but Trustees, Guardians or other fiduciaries may take over such property and may without liability for any loss or depreciation therein continue to hold the same unwise until in the exercise of due care it shall become no longer wise so to do ; provided, however, that in case a Trustee, Guardian or other fiduciary is acting under authority of an instrument, the terms and provisions of such instrument shall be controlling as to the power and duty of such Trustee, Guardian or other fiduciary.
(E)Securities and/or other property acquired or invested in by Trustees, Guardians or other fiduciaries prior to May 1, 1931, in conformity with the law of the State of to hold Delaware in effect at the time of such acquisition or investment, which are not authorized in sub-division (A) or (B) of this Section, may be retained by such Trustees, Guardians or other fiduciaries without liability for any loss or depreciation therein until in the exercise of due care it shall be come no longer wise so to do.
(F)The proceeds of the sale or other disposition of any securities and/or other property held in accordance with sub-division (D) or (E) of this section shall be invested in accordance with the provisions of sub-division (A) or (B) of this section, as the case may be.
Section 2. That Chapter 117 of the Revised Code of Repeal Delaware (1915) be and the same is hereby amended by striking out and repealing 3876. Sec. 33. and 3877. Sec. 34 thereof.
Section 3. All Acts or parts of Acts inconsistent with the provisions of this Act shall be and the same are hereby repealed.
Approved April 3, 1931.