Sec. 10.50.305. Restrictions on distributions.

331 words·~2 min read·/ak/title-10/chapter-50/10-50-305

A research copy — for the controlling text, always check the official state or federal source. Not legal advice.

(a)A distribution may not be made by a limited liability company if, after giving effect to the distribution,

(1)the company would not be able to pay its debts as they become due in the usual course of conducting its affairs; or

(2)the limited liability company's assets would be less than the sum of its liabilities plus, unless otherwise provided in an operating agreement, 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 that are superior to the rights of the member receiving the distribution.

(b)A limited liability company may base a determination that a distribution is not prohibited under

(a)of this section on

(1)financial statements prepared on the basis of accounting practices and principles that are reasonable under the circumstances; or

(2)a fair valuation or other method that is reasonable under the circumstances.

(c)Except as provided in

(e)of this section, the effect of a distribution in accordance with

(a)of this section is measured as of the date

(1)the distribution is authorized if the payment occurs within 120 days after the date of authorization; or

(2)payment is made if the payment occurs more than 120 days after the date of authorization.

(d)If the terms of an indebtedness provide that payment of principal and interest is to be made only if and to the extent that payment of a distribution to members could then be made under this section, indebtedness of a limited liability company, including indebtedness issued as a distribution, is not a liability for purposes of determinations made under

(b)of this section.

(e)If indebtedness is issued as a distribution, each payment of principal or interest on the indebtedness is treated as a distribution, and the effect of the distribution is measured on the date the payment is actually made.