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ULLCA 503(h) Exclusive Remedy
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Exclusive_Remedy [--ULLCASection503hExclusiveRemedy--]
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Exclusive_Remedy [[!Code]] [--ULLCASection503hExclusiveRemedy--]
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!(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.
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!(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 [[CodeTransferTransferableInterest|transferable interest]].
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(:title ULLCA 503(h) Exclusive Remedy:)
(:Summary: ULLCA 503(h) Exclusive Remedy::)
(:description ULLCA 503(h) Exclusive Remedy::)
(:keywords charging order, exclusive, remedy, exclusivity:)
(:Summary: ULLCA 503(h) Exclusive Remedy::)
(:description ULLCA 503(h) Exclusive Remedy::)
(:keywords charging order, exclusive, remedy, exclusivity:)
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Exclusive_Remedy [--ULLCASection503hExclusiveRemedy--]
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Reporter's Comment to Section 503 generally
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).
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).
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!!!Reporter's Comment to Section 503 generally
->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 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.
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This subsection does not override Uniform Commercial Code, Article 9, which may provide different remedies for a secured
A secured creditor with a judgment might decide to proceed under Article 9 alone
Reporter's Comment to Subsection (h) ¶2.
This subsection is not intended to prevent
In a reverse pierce, the court conflates the entity and its owner to hold
Likewise, this subsection does not supplant fraudulent transfer law.
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JayNote: Paragraph (h) is one of the primary reasons that LLCs and partnerships are such popular business entities, which is that the creditor's remedy is limited to a charging order. However, the enormous limitation of ¶ (h) must be realized, which is that ¶ (h) applies only and exclusively to the creditor's attempt to reach the debtor's [[CodeTransferTransferableInterest | transferable interest]], which is utterly different than a creditor's attempt to access the value of the assets of the LLC. The latter may be accomplished, as the Reporter's Comment notes, through a number of theories, the most popular of which is so-called "reverse veil-piercing" (or "reverse alter ego") theories.
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For further discussion on the exclusivity of charging orders [[TopicsExclusivity | click here]].
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!!!JayNote
->Paragraph (h) is one of the primary reasons that LLCs and partnerships are such popular business entities, which is that the creditor's remedy is limited to a charging order. However, the enormous limitation of ¶ (h) must be realized, which is that ¶ (h) applies only and exclusively to the creditor's attempt to reach the debtor's [[CodeTransferTransferableInterest | transferable interest]], which is utterly different than a creditor's attempt to access the value of the assets of the LLC. The latter may be accomplished, as the Reporter's Comment notes, through a number of theories, the most popular of which is so-called "reverse veil-piercing" (or "reverse alter ego") theories.
->For further discussion on the exclusivity of charging orders [[TopicsExclusivity | click here]].
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!(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.
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Reporter's Comment to Section 503 generally
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).
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).
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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.
----
JayNote: Paragraph (h) is one of the primary reasons that LLCs and partnerships are such popular business entities, which is that the creditor's remedy is limited to a charging order. However, the enormous limitation of ¶ (h) must be realized, which is that ¶ (h) applies only and exclusively to the creditor's attempt to reach the debtor's [[CodeTransferTransferableInterest | transferable interest]], which is utterly different than a creditor's attempt to access the value of the assets of the LLC. The latter may be accomplished, as the Reporter's Comment notes, through a number of theories, the most popular of which is so-called "reverse veil-piercing" (or "reverse alter ego") theories.
----
For further discussion on the exclusivity of charging orders [[TopicsExclusivity | click here]].
----
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!!EXCLUSIVE REMEDY OPINIONS
(:pagelist link=Category.Exclusive_Remedy list=normal fmt=title:)
----
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.
----
JayNote: Paragraph (h) is one of the primary reasons that LLCs and partnerships are such popular business entities, which is that the creditor's remedy is limited to a charging order. However, the enormous limitation of ¶ (h) must be realized, which is that ¶ (h) applies only and exclusively to the creditor's attempt to reach the debtor's [[CodeTransferTransferableInterest | transferable interest]], which is utterly different than a creditor's attempt to access the value of the assets of the LLC. The latter may be accomplished, as the Reporter's Comment notes, through a number of theories, the most popular of which is so-called "reverse veil-piercing" (or "reverse alter ego") theories.
----
For further discussion on the exclusivity of charging orders [[TopicsExclusivity | click here]].
----
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!!EXCLUSIVE REMEDY OPINIONS
(:pagelist link=Category.Exclusive_Remedy list=normal fmt=title:)
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