79-29-605 - Limitations on distribution.
§ 79-29-605. Limitations on distribution.
(1) No distribution may be made if, after giving effect to the distribution:
(a) The limited liability company would not be able to pay its debts as they become due in the usual course of business; or
(b) The limited liability company's total assets would be less than the sum of its total liabilities plus, unless the certificate of formation or limited liability company agreement provides otherwise, the amount that would be needed, if the limited liability company were to be dissolved at the time of the distribution, to satisfy the preferential rights of other members upon dissolution which are superior to the rights of the member receiving the distribution.
(2) The limited liability company may base a determination that a distribution is not prohibited under subsection (1) of this section either on:
(a) Financial statements prepared on the basis of accounting practices and principles that are reasonable under the circumstances; or
(b) A fair valuation or other method that is reasonable under the circumstances.
(3) Except as provided in subsection (4) of this section, the effect of a distribution under subsection (1) of this section is measured as of (a) the date the distribution is authorized if the payment occurs within one hundred twenty (120) days after the date of authorization; or (b) the date payment is made if it occurs more than one hundred twenty (120) days after the date of authorization.
(4) If terms of any indebtedness of the limited liability company provide that any payment thereon is to be made only if, and to the extent that, payment of a distribution to members could then be made under this section, such indebtedness of a limited liability company, and any indebtedness issued as a distribution, is not a liability for purposes of determinations made under this section. If the indebtedness is issued as a distribution, each payment of principal or interest on the indebtedness is treated as a distribution, the effect of which is measured on the date the payment is actually made.
Sources: Laws, 1994, ch. 402, § 41, eff from and after July 1, 1994.