A. A limited liability company shall not make a distribution to a member to the extent that at the time of the distribution, after giving effect to the distribution, all liabilities of the limited liability company would exceed the fair value of the assets of the limited liability company, except that:
1. Liabilities to members and former members under sections 29-703 and 29-707 and liabilities for which the recourse of creditors is limited to specified property shall be excluded.
2. The fair value of property subject to a liability for which the recourse of creditors is limited to specified property shall be included in the assets of the limited liability company only to the extent that the fair value of the property exceeds that liability.
B. The limited liability company may base a determination that a distribution is not prohibited under subsection A of this section on either of the following:
1. Financial statements prepared on the basis of accounting practices and principles that are reasonable in the circumstances.
2. A fair valuation or other method that is reasonable in the circumstances.
C. The effect of a distribution under subsection A of this section is measured either as of the date the distribution is authorized if the payment occurs within one hundred twenty days after the date of authorization or as of the date the payment is made if it occurs more than one hundred twenty days after the date of authorization.
D. If a member receives a distribution with respect to his interest in a limited liability company in violation of this chapter or an operating agreement, he is liable to the limited liability company for a period of six years thereafter for the amount of the wrongful distribution.
E. Except as otherwise provided in the operating agreement or the trust instrument, a distribution to a member that is a charitable remainder trust as defined in section 664(d) of the internal revenue code is income for the purposes of title 14, chapter 7, article 4 to the extent that the value of the member’s interest in the limited liability company after distribution is equal to or greater than its value at the date of contribution of the member’s interest in the limited liability company to the charitable remainder trust. In this subsection, “internal revenue code” has the same meaning prescribed in section 43-105.
Caution: The above language was taken from Arizona’s statutes on November 13, 2016. Check the Arizona legislature’s website to determine if this statute changed after November 13, 2016.
Leave A Comment
You must be logged in to post a comment.