ULLCA Article V
UNIFORM LIMITED LIABILITY COMPANY ACT (2006)
(Last Amended 2013)
TRANSFERABLE INTERESTS AND RIGHTS OF TRANSFEREES AND CREDITORS
For the full text of the Uniform Limited Liability Company Act click here
SECTION 501. NATURE OF TRANSFERABLE INTEREST.
A transferable interest is personal property.
Reporter's Comment ¶ 1.
For the definition of transferable interest, see Section 102(24).
Absent a contrary provision in the operating agreement or the consent of the members, a “transferable interest” is the only interest in an LLC which can be transferred to a person who is not already a member. See Section 502.
As to whether a member may transfer governance rights to a fellow member, the question is moot absent a provision in the operating agreement changing the default rule, see Section 407(b)(2) (allocating governance rights per capita).
In the default mode, a member’s transfer of governance rights to another member: (i) does not increase the transferee’s governance rights; (ii) eliminates the transferor’s governance rights; and (iii) thereby changes that denominator but not the numerator in calculating governance rights.
Reporter's Comment ¶ 2.
EXAMPLE: LCN Company, LLC is a member-managed limited liability company with three members, Laura, Charles, and Nora.
The operating agreement does not displace this act’s default rule on the allocation of governance rights among members.
Thus, each member has 1/3 of those rights. Laura transfers her entire ownership interest to Charles.
The transfer does not increase Charles’s governance rights but does eliminate Laura’s.
After the transfer, Laura has no governance rights (regardless of whether Charles and Nora agree to expel Laura under Section 602(5)(B)).
As a result, Charles and Nora each have 1/2 of the governance rights.
Reporter's Comment ¶ 3.
Whether a transferable interest pledged as security is governed by Article 8 or 9 of the Uniform Commercial Code depends on the rules stated in those articles.
SECTION 502. TRANSFER OF TRANSFERABLE INTEREST.
Reporter' Comment ¶ 1.
One of the most fundamental characteristics of LLC law is its fidelity to the “pick your partner” principle. See, e.g., Bynum v. Frisby, 73 Nev. 145, 149-50, 311 P.2d 972, 975 (1957) (stating that (i) “the assignment of a partnership interest from one partner to a stranger does not bring that stranger into fiduciary relationship with the remaining partners” and (ii) absent consent by the remaining partners “[t]he stranger remains a stranger” with no rights to management or even information).
Reporter' Comment ¶ 2.
This section is the core of the act’s provisions reflecting and protecting that principle.
A member’s rights in a limited liability company are bifurcated into economic rights (the transferable interest) and governance rights (including management rights, consent rights, rights to information, rights to seek judicial intervention).
Unless the operating agreement otherwise provides, a member acting without the consent of all other members lacks both the power and the right to: (i) bestow membership on a non-member, Section 401(d); or (ii) transfer to a non-member anything other than some or all of the member’s transferable interest, Section 502(a)(3).
The rights of a mere transferee are quite limited – i.e., to receive distributions, Section 502(b), and, if the LLC dissolves and winds up, to receive specified information pertaining to the LLC from the date of dissolution. Section 502(c).
Reporter' Comment ¶ 3.
This section applies regardless of whether the transferor is a member, a transferee of a member, a transferee of a transferee, etc. See Section 102(24) (defining “transferable interest” in terms of a right “initially owned by a person in the person’s capacity as a member” regardless of “whether or not the person remains a member or continues to own any part of the right”).
Reporter' Comment ¶ 4.
This section does not directly consider whether a member may transfer governance rights to another member without obtaining consent from all the other members.
As noted above, Section 501, cmt., the question is moot under this act’s default rule for allocating governance rights.
Reporter' Comment ¶ 5.
However, the question can be pivotal when the operating agreement displaces the default rule on governance rights but does not determine whether transfer restrictions (whether contractual, statutory, or both) apply to transfers of governance rights from one member to another.
Case law is scant but suggests that this act does not protect members from control shifts that result from transfers among members (as distinguished from transfers to non-members who seek thereby to become members). Blythe v. Bell, No. 11 CVS 933. 2012 WL 7807800, at ¶ 6 (N.C. Dist. Dec. 10, 2012) (holding in a case of “first impression in North Carolina” that “in the absence of articles of incorporation or an operating agreement to the contrary . . . the assignment of control (i.e., governance) interests between members is effective without unanimous member consent;” Achaian, Inc. v. Leemon Family L.L.C., 25 A.3d 800, 810 (Del. Ch. 2011) (Strine, Ch.) (holding that the terms of the LLC agreement did not preclude one member of a three-member LLC from transferring the member’s entire interest (including governance rights) to a second member without first having the consent of the third member; stating that the third member’s “argument relies on a very thinly sliced version of [the “pick-your-partner principle, the strained version being] . . . that once one chooses his initial co-members, one continues to hold a veto over how much additional voting power they may acquire;” explaining that “[t]he problem for [the third member] is that nothing in the LLC Agreement supports [that member’s] reading of it that would require an already admitted Member, like [the acquirer – i.e., the second member], to be become once, twice (or even three times) a Member each and every time that Member acquires an additional block of Interests”).
Reporter' Comment ¶ 6.
Other law may affect the applicability of this section. See 11 U.S.C. § 541(c)(1) (providing that, initially at least, all property of a debtor becomes part of the bankruptcy estate regardless of restrictions on transfer); UCC §§ 9-406, 9-408 (overriding specified restrictions on assignment in specified circumstances, regardless of whether state law or a contract imposes the restrictions).
Reporter' Comment ¶ 7.
In any event, this section does not apply to the transfer of ownership interests in a member that is an entity.
Reporter' Comment ¶ 8.
EXAMPLE: ABC, LLC has three members: Ralph (an individual), Alice, Inc. (“Alice”), and Norton, LLC (“Norton”).
Section 502 applies to any attempt by Ralph, Alice, or Norton to transfer their respective membership interest in ABC.
Section 502 is inapplicable, however, to a change in control of Alice or Norton or even a complete change in their respective membership.
(a) Subject to Section 503(f), a transfer, in whole or in part, of a transferable interest:
Reporter's Comment to Subsection (a).
The definition of “transfer,” Section 102(23), and this subsection’s reference to “in whole or in part” combine to mean that this section encompasses not only unconditional, permanent, and complete transfers but also temporary, contingent, and partial ones.
Thus, for example, a charging order under Section 503 effects a transfer of part of the judgment debtor’s transferable interest, as does the pledge of a transferable interest as collateral for a loan and the gift of a life-interest in a member’s rights to distribution.
(1) is permissible;
(2) does not by itself cause a person’s dissociation as a member or a dissolution and winding up of the limited liability company’s activities and affairs; and
Reporter's Comment to Subsection (a)(2).
The phrase “by itself” contemplates Section 602(5)(B), which creates a risk of dissociation via expulsion when a member transfers all of the member’s transferable interest.
(3) subject to Section 504, does not entitle the transferee to:
Reporter's Comment to Subsection (a)(3) ¶ 1.
Mere transferees have no right to participate in management or otherwise intrude as the members carry on the affairs of the limited liability company and their activities as members.
Reporter's Comment to Subsection (a)(3) ¶ 2.
Because Section 102(22)(G) defines “transfer” to include “a transfer by operation of law,” this section affects the power of other law to effect transfers of a member’s ownership interest.
For example, a divorce court lacks the power to award a member’s spouse anything beyond the member’s transferable interest.
Nor does the member have the power to enter into a property settlement purporting to effect any greater transfer.
Reporter's Comment to Subsection (a)(3) ¶ 3.
For the divorce court, the best solution is to value the member’s complete ownership interest (i.e., the transferable interest as enhanced by the management and information rights and the standing to sue) and: (i) if possible, award the member’s spouse marital property of equal value; or (ii) if not possible, award the member’s spouse a money judgment and a charging order to enforce the judgment.
Reporter's Comment to Subsection (a)(3) ¶ 4.
Granting the non-member any part of member’s transferable interest is almost always imprudent; marital discord will almost inevitably carry over into the business relationship.
Granting the member’s ex-spouse the entire transferable interest is rarely a viable alternative.
If the member is an active participant in the limited liability company, the approach is impossible.
The member’s transferable interest will typically constitute much or all of the member’s remuneration for the partner’s activity.
Even if the member is essentially passive, granting the transferable interest to the ex-spouse puts him or her at great risk as a “bare naked assignee.” See the comment to Section 107(b).
Reporter's Comment to Subsection (a)(3) ¶ 5.
When a member dies, subject to the operating agreement other law may effect a transfer of the member’s transferable interest to the member’s estate or personal representative.
However, for the reasons just stated, other law lacks the power to transfer anything more than a transferable interest. (Section (504) does provide extra information rights for the purposes of settling the estate of the deceased member.)
(A) participate in the management or conduct of the company’s activities and affairs; or
(B) except as otherwise provided in subsection (c), have access to records or other information concerning the company’s activities and affairs.
Reporter's Comment to Subsection (a)(3)(B).
See Section 410(g) (providing that that section’s information rights do not apply to transferees).
(b) A transferee has the right to receive, in accordance with the transfer, distributions to which the transferor would otherwise be entitled.
Reporter's Comment to Subsection (b).
Amounts due under this subsection are of course subject to offset for any amount owed to the limited liability company by the member or person dissociated as a member on whose account the distribution is made. Section 404(d).
As to whether an LLC may properly offset for claims against a transferor that was never a member is matter for other law, specifically the law of contracts dealing with assignments.
(c) In a dissolution and winding up of a limited liability company, a transferee is entitled to an account of the company’s transactions only from the date of dissolution.
Reporter's Comment to Subsection (c) ¶ 1.
This very limited grant of information rights encompasses only transactions occurring at or after the date of the LLC’s dissolution.
The transferee has only the right to information as to the allocation of net assets among the LLC’s creditors, members, and transferees - and only from the date of dissolution.
Reporter's Comment to Subsection (c) ¶ 2.
This subsection does not prevent a transferee from contracting with a member-transferor to require the member-transferor to disclose further information to the transferee.
Whether such an agreement would breach the operating agreement, the implied contractual obligation of good faith and fair dealing, Section 409(d), or a fiduciary duty depends on the circumstances.
Reporter's Comment to Subsection (c) ¶ 3.
If a dissolved LLC rescinds its dissolution, Section 703, this subsection no longer applies.
(d) A transferable interest may be evidenced by a certificate of the interest issued by a limited liability company in a record, and, subject to this section, the interest represented by the certificate may be transferred by a transfer of the certificate.
Reporter's Comment to Subsection (d).
The use of certificates can raise issues relating to Articles 8 and 9 of the Uniform Commercial Code.
(e) A limited liability company need not give effect to a transferee’s rights under this section until the company knows or has notice of the transfer.
(f) A transfer of a transferable interest in violation of a restriction on transfer contained in the operating agreement is ineffective if the intended transferee has knowledge or notice of the restriction at the time of transfer.
Reporter's Comment to Subsection (f) ¶ 1.
This provision originated as UPA (1997) § 503(e), was then consistent with U.C.C section 9-318(3), and is now consistent with U.C.C section 9-406(a) (stating that “an account debtor . . . may discharge its obligation by paying the assignor until, but not after, the account debtor receives a notification, authenticated by the assignor or the assignee, that the amount due or to become due has been assigned and that payment is to be made to the assignee”).
Reporter's Comment to Subsection (f) ¶ 2.
The term “notice” includes “reason to know,” Section 103(b)(1), and ordinarily a potential transferee has reason to inquire about transfer restrictions that might be contained in the operating agreement.
(g) Except as otherwise provided in Section 602(5)(B), if a member transfers a transferable interest, the transferor retains the rights of a member other than the transferable interest transferred and retains all the duties and obligations of a member.
Reporter's Comment to Subsection (g).
Under this subsection, a member remains a member (with all attendant rights and obligations) even after permanently transferring the entirety of the transferable interest, unless: (i) the other members opt for expulsion under Section 602(5)(B); or (ii) as otherwise provided in the operating agreement.
(h) If a member transfers a transferable interest to a person that becomes a member with respect to the transferred interest, the transferee is liable for the member’s obligations under Sections 403 and 406 known to the transferee when the transferee becomes a member.
SECTION 503. CHARGING ORDER.
Reporter's Comment ¶ 1.
The charging order concept dates back to the English Partnership Act of 1890 and in the United States has been a fundamental part of law of unincorporated business organizations since 1914. See UPA (1914) § 28.
As much a remedy limitation as a remedy, the charging order is the sole method by which a person acting as judgment creditor of a member or transferee can extract value from the member’s or transferee’s ownership interest in a limited liability company. See the comment to Subsection (h).
Reporter's Comment ¶ 2.
Under this section, the judgment creditor of a member or transferee is entitled to a charging order against the relevant transferable interest.
While in effect, that order entitles the judgment creditor to whatever distributions would otherwise be due to the member or transferee whose interest is subject to the order.
However, the judgment creditor has no say in the timing or amount of those distributions.
The charging order does not entitle the judgment creditor to accelerate any distributions or to otherwise interfere with the management and activities of the limited liability company.
Reporter's Comment ¶ 3.
By its terms, this section does not apply to foreign limited liability companies. See Section 102(8) (defining “[l]imited liability company” to mean “an entity formed under this [act] or which becomes subject to this [act]”) (emphasis added); see also Fannie Mae v. Heather Apartments Ltd. P'ship, A13-0562, 2013 WL 6223564, at *6 (Minn. Ct. App. Dec. 2, 2013) (considering the remedies available to a judgment creditor with respect to the judgment debtor’s interest in a Cook Islands LLC; rejecting the debtor’s argument that the creditor’s “only remedy is to obtain a charging order under” [the Minnesota LLC statute]; explaining that “this argument fails because that statute only applies to Minnesota limited liability companies” which that statute “defines . . . as ‘a limited liability company, other than a foreign limited liability company, organized or governed by this chapter’”) (emphasis added) (statutory citations omitted).
Reporter's Comment ¶ 4.
The operating agreement has no power to alter the provisions of this section to the prejudice of third parties. Section 105(c)(15).
(a) On application by a judgment creditor of a member or transferee, a court may enter a charging order against the transferable interest of the judgment debtor for the unsatisfied amount of the judgment. Except as otherwise provided in subsection (f), a charging order constitutes a lien on a judgment debtor’s transferable interest and requires the limited liability company to pay over to the person to which the charging order was issued any distribution that otherwise would be paid to the judgment debtor.
Reporter's Comment to Subsection (a) ¶ 1.
The phrase “judgment debtor” encompasses both members and transferees.
The lien pertains only to a distribution, which excludes “amounts constituting reasonable compensation for present or past service or payments made in the ordinary course of business under a bona fide retirement plan or other bona fide benefits program.” Section 102(4)(B).
A judgment creditor that wishes to levy on such amounts should use the appropriate creditor’s remedy, such as garnishment (which may be subject to exemptions or exclusions not relevant to a charging order). Cf. PB Real Estate, Inc. v. Dem II Props., 719 A.2d 73, 76 (Conn. 1998) (rejecting the contention of an LLC’s two members that “payments of $28,000 to each of them” should be treated “as expenses for wages” rather than as distributions).
Reporter's Comment to Subsection (a) ¶ 2.
Whether an application for a charging order must be served on the limited liability company, the judgment debtor, or both is a matter for other law, principally the law of remedies and civil procedure.
The order itself must be served on the limited liability company. Whether the order must also be served on the judgment debtor is a matter for other law.
Reporter's Comment to Subsection (a) ¶ 3.
If a distribution consists of rights to acquire interests in a limited liability company, the charging order applies only to those rights within the definition of transferable interest. See Section 102(24) (defining transferable interest).
(b) To the extent necessary to effectuate the collection of distributions pursuant to a charging order in effect under subsection (a), the court may:
Reporter's Comment to Subsection (b).
Paragraph (2) refers to “other orders” rather than “additional orders.” Therefore, given appropriate circumstances, a court may invoke Paragraph (1), Paragraph (2), or both.
(1) appoint a receiver of the distributions subject to the charging order, with the power to make all inquiries the judgment debtor might have made; and
Reporter's Comment to Subsection (b)(1).
The receiver contemplated here is emphatically not a receiver for the limited liability company, but rather a receiver for the distributions subject to the charging order.
The principal advantage provided by this paragraph is an expanded right to information.
However, that right goes no further than “the extent necessary to effectuate the collections of distributions pursuant to a charging order.”
For a correctly narrow reading of this provision, see Wells Fargo Bank, Nat. Ass'n v. Continuous Control Solutions, Inc., No. 11-1285, 2012 WL 3195759 (Iowa Ct. App. Aug. 8, 2012).
(2) make all other orders necessary to give effect to the charging order.
Reporter's Comment to Subsection (b)(2) ¶ 1.
This paragraph must be understood in the context of: (i) the very limited nature of the charging order; and (ii) the importance of preventing overreaching on behalf of a person that is not a judgment creditor of the LLC, has no claim on the LLC’s assets, and has no right to interfere in the activities, affairs, and management of the LLC.
In particular, the court’s power to make “all other orders” is limited to “orders necessary to give effect to the charging order.”
Reporter's Comment to Subsection (b)(2) ¶ 2.
EXAMPLE: A judgment creditor with a charging order believes that the limited liability company should invest less of its surplus in operations, leaving more funds for distributions.
The creditor moves the court for an order directing the limited liability company to restrict re-investment. Subsection (b)(2) does not authorize the court to grant the motion.
Reporter's Comment to Subsection (b)(2) ¶ 3.
EXAMPLE: A judgment creditor with a judgment for $10,000 against a member obtains a charging order against the member’s transferable interest. Having been properly served with the order, the limited liability company nonetheless fails to comply and makes a $3000 distribution to the member.
The court has the power to order the limited liability company to pay $3000 to the judgment creditor to “give effect to the charging order.”
Reporter's Comment to Subsection (b)(2) ¶ 4.
Under Subsection (b)(2), the court has the power to decide whether a particular payment is a distribution, because that decision determines whether the payment is part of a transferable interest subject to a charging order.
Reporter's Comment to Subsection (b)(2) ¶ 5.
EXAMPLE: Member A of ABC, LLC has for some years received distributions form the LLC.
However, when a judgment creditor of Member A obtains a charging order against Member A’s transferable interest, the LLC ceases to make distributions to Member A and instead provides a salary to Member A equivalent to former distributions.
A court might deem this salary a disguised distribution. (In any event, however, the salary will be subject to garnishment.)
Reporter's Comment to Subsection (b)(2) ¶ 6.
This act has no specific rules for determining the fate or effect of a charging order when the limited liability company undergoes a merger, conversion, interest exchange, or domestication under [Article] 10.
In the proper circumstances, such an organic change might trigger an order under Subsection (b)(2).
(c) Upon a showing that distributions under a charging order will not pay the judgment debt within a reasonable time, the court may foreclose the lien and order the sale of the transferable interest. Except as otherwise provided in subsection (f), the purchaser at the foreclosure sale obtains only the transferable interest, does not thereby become a member, and is subject to Section 502.
Reporter's Comment to Subsection (c).
The phrase “that distributions under the charging order will not pay the judgment debt within a reasonable period of time” comes from case law. See, e.g., Stewart v. Lanier Park Med. Office Bldg., Ltd., 578 S.E.2d 572, 574 (Ga. Ct. App. 2003) (“Judicial sale may be appropriate where . . . it is apparent that distributions under the charging order will not pay the judgment debt within a reasonable amount of time.”); Nigri v. Lotz, 453 S.E.2d 780, 783 (Ga. Ct. App. 1995). ).
A purchaser at a foreclosure sale obtains only the very limited rights of a transferee under Section 502 and is in some ways more vulnerable and less powerful than the holder of a charging order.
After foreclosure and sale, Subsection (b) no longer applies. More generally, the court is no longer involved in the matter. For the vulnerability of a transferee, see Section 107(b), comment.
(d) At any time before foreclosure under subsection (c), the member or transferee whose transferable interest is subject to a charging order under subsection (a) may extinguish the charging order by satisfying the judgment and filing a certified copy of the satisfaction with the court that issued the charging order.
Reporter's Comment to Subsection (d).
This provision allows the judgment debtor to end the charging order without need for a hearing.
(e) At any time before foreclosure under subsection (c), a limited liability company or one or more members whose transferable interests are not subject to the charging order may pay to the judgment creditor the full amount due under the judgment and thereby succeed to the rights of the judgment creditor, including the charging order.
Reporter's Comment to Subsection (e) ¶ 1.
Traditionally, charging order provisions referred to the possibility of “redeeming” an interest subject to a charging order.
That usage was confusing, leaving several important questions unanswered.
This act substitutes a far simpler approach, contemplating the limited partnership or its members buying the underlying judgment and thereby dispensing with any interference the judgment creditor might seek to inflict on the partnership.
Reporter's Comment to Subsection (e) ¶ 2.
In many circumstances, buying the judgment is superior to the mechanism provided by this subsection, because: (i) this subsection requires full satisfaction of the underlying judgment; and (ii) the LLC or the other members might be able to buy the judgment for less than face value.
On the other hand, this subsection operates without need for the judgment creditor’s consent, so it remains a valuable protection in the event a judgment creditor seeks to do mischief to the LLC.
Reporter's Comment to Subsection (e) ¶ 3.
Whether a member-managed LLC’s decision to invoke this subsection is “ordinary course” or “outside the ordinary course,” Section 407(b)(3) and (4)(A), depends on the circumstances.
However, the involvement of this subsection does not by itself make the decision “outside the ordinary course.”
For a manager-managed LLC, the distinction is irrelevant. Section 407(c)(1).
(f) If a court orders foreclosure of a charging order lien against the sole member of a limited liability company:
Reporter's Comment to Subsection (f) ¶ 1.
The charging order remedy - and, more particularly, the exclusiveness of the remedy - protect the “pick your partner” principle.
That principle is inapposite when a limited liability company has only one member.
The exclusivity of the charging order remedy was never intended to protect a judgment debtor, but rather only to protect the interests of the judgment debtor’s co-owners.
Reporter's Comment to Subsection (f) ¶ 2.
Put another way, the charging order remedy was never intended as an “asset protection” device for judgment debtors. See Olmstead v. F.T.C., 44 So. 3d 76, 83 (Fla. 2010) (recognizing “the full scope of a judgment creditor's rights with respect to a judgment debtor's freely alienable membership interest in a single-member LLC”); In re Albright, 291 B.R. 538, 540 (Bankr. D. Colo. 2003) (holding that, “[b]ecause there are no other members in the LLC, . . . the Debtor’s bankruptcy filing effectively assigned her entire membership interest in the LLC to the bankruptcy estate, and the Trustee obtained all her rights, including the right to control the management of the LLC”).
Accordingly, when a charging order against an LLC’s sole member is foreclosed, the member’s entire ownership interest is sold and the buyer replaces the judgment debtor as the LLC’s sole member.
Reporter's Comment to Subsection (f) ¶ 3.
This subsection was added during the Harmonization Project but not for the purposes of harmonization.
The subsection addresses an issue that does not exist with partnerships; neither a general nor a limited partnership can continue perpetually in existence with only one partner. See ULPA (2001) (Last Amended 2013) § 801(a)(5) (stating that dissolution is caused upon “the passage of 90 consecutive days during which the partnership has only one partner”); UPA (1997) (Last Amended 2013) § 801(6) (stating that dissolution is caused upon “the passage of 90 consecutive days during which the partnership does not have at least two partners”).
(1) the court shall confirm the sale;
(2) the purchaser at the sale obtains the member’s entire interest, not only the member’s transferable interest;
(3) the purchaser thereby becomes a member; and
(4) the person whose interest was subject to the foreclosed charging order is dissociated as a member.
(g) This [act] does not deprive any member or transferee of the benefit of any exemption law applicable to the transferable interest of the member or transferee.
Reporter's Comment to Subsection (g)
This subsection preserves otherwise applicable exemptions but does not create any. In re Foos, 405 B.R. 604, 609 (Bankr. N.D. Ohio 2009) (interpreting the comparable provision in UPA (1997) and stating, “it is clear that [the provision] does not create an exemption”).
(h) This section provides the exclusive remedy by which a person seeking in the capacity of judgment creditor to enforce a judgment against a member or transferee may satisfy the judgment from the judgment debtor’s transferable interest.
Reporter's Comment to Subsection (h) ¶ 1.
This subsection does not override Uniform Commercial Code, Article 9, which may provide different remedies for a secured creditor acting in that capacity.
A secured creditor with a judgment might decide to proceed under Article 9 alone, under this section alone, or under both Article 9 and this section.
In the last-mentioned circumstance, the constraints of this section would apply to the charging order but not to the Article 9 remedies.
Reporter's Comment to Subsection (h) ¶ 2.
This subsection is not intended to prevent a court from effecting a “reverse pierce” where appropriate.
In a reverse pierce, the court conflates the entity and its owner to hold the entity liable for a debt of the owner. Litchfield Asset Mgmt. Corp. v. Howell, 799 A.2d 298, 312 (Conn. App. Ct. 2002) (approving a reverse pierce where a judgment debtor had established a limited liability company in a patent attempt to frustrate the judgment creditor), overruled on other grounds by, Robinson v. Coughlin, 830 A.2d 1114 (Conn. 2003).
Likewise, this subsection does not supplant fraudulent transfer law.
SECTION 504. POWER OF LEGAL REPRESENTATIVE OF DECEASED MEMBER.
If a member dies, the deceased member’s legal representative may exercise:
(1) the rights of a transferee provided in Section 502(c); and
(2) for the purposes of settling the estate, the rights the deceased member had under Section 410.
The estate and those claiming through the estate are transferees, and as such they have very limited rights to information.
This section provides temporary, additional information rights to the legal representative of the estate.
Sections 410 and 502(c) pertain only to information rights.
For the full text of the Uniform Limited Liability Company Act click here