Texas Business Organizations Code 101.613 – Distributions
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(a) A limited liability company may make a distribution with respect to a protected series or registered series.
(b) A limited liability company may not make a distribution with respect to a protected series or registered series to a member if, immediately after making the distribution, the total amount of the liabilities of the protected series or registered series, other than liabilities described by Subsection (c), exceeds the fair value of the assets associated with the protected series or registered series.
Terms Used In Texas Business Organizations Code 101.613
- Assets: (1) The property comprising the estate of a deceased person, or (2) the property in a trust account.
- Business: means a trade, occupation, profession, or other commercial activity. See Texas Business Organizations Code 1.002
- Entity: means a domestic entity or foreign entity. See Texas Business Organizations Code 1.002
- Law: means , unless the context requires otherwise, both statutory and common law. See Texas Business Organizations Code 1.002
- Liabilities: The aggregate of all debts and other legal obligations of a particular person or legal entity.
- Limited liability company: means an entity governed as a limited liability company under Title 3 or 7. See Texas Business Organizations Code 1.002
- Member: means :
(A) in the case of a limited liability company, a person who has become, and has not ceased to be, a member in the limited liability company as provided by its governing documents or this code;
(B) in the case of a nonprofit corporation, a person who has membership rights in the nonprofit corporation under its governing documents;
(C) in the case of a cooperative association, a member of a nonshare or share association;
(D) in the case of a nonprofit association, a person who has membership rights in the nonprofit association under its governing documents; or
(E) in the case of a professional association, a person who has membership rights in the professional association under its governing documents. See Texas Business Organizations Code 1.002 - Membership interest: means a member's interest in an entity. See Texas Business Organizations Code 1.002
- Obligation: An order placed, contract awarded, service received, or similar transaction during a given period that will require payments during the same or a future period.
- Property: includes tangible and intangible property and an interest in that property. See Texas Business Organizations Code 1.002
- Protected series: means a series of a domestic limited liability company that is established as a protected series in accordance with § 101. See Texas Business Organizations Code 1.002
- Recourse: An arrangement in which a bank retains, in form or in substance, any credit risk directly or indirectly associated with an asset it has sold (in accordance with generally accepted accounting principles) that exceeds a pro rata share of the bank's claim on the asset. If a bank has no claim on an asset it has sold, then the retention of any credit risk is recourse. Source: FDIC
- Registered series: means a series of a domestic limited liability company that is formed as a registered series in accordance with § 101. See Texas Business Organizations Code 1.002
- Subsidiary: means an organization for which another organization, either directly or indirectly through or with one or more of its other subsidiaries:
(A) owns at least 50 percent of the outstanding ownership or membership interests of the organization; or
(B) possesses at least 50 percent of the voting power of the owners or members of the organization. See Texas Business Organizations Code 1.002
(c) For purposes of Subsection (b), the liabilities of a protected series or registered series do not include:
(1) a liability to a member related to the member’s membership interest associated with the protected series or registered series; or
(2) except as provided by Subsection (e), a liability of the protected series or registered series for which the recourse of creditors is limited to specified property of the protected series or registered series.
(d) For purposes of Subsection (b), the assets associated with a protected series or registered series include the fair value of property of the protected series or registered series subject to a liability for which recourse of creditors is limited to specified property of the protected series or registered series only if the fair value of that property exceeds the liability.
(e) A member who receives a distribution from a protected series or registered series in violation of this section is not required to return the distribution to the protected series or registered series unless the member had knowledge of the violation.
(f) This section may not be construed to affect the obligation of a member to return a distribution to the protected series or registered series under the company agreement, another agreement, or other state or federal law.
(g) § 101.206 does not apply to a distribution with respect to a protected series or registered series.
(h) For purposes of this section, “distribution” does not include an amount constituting reasonable compensation for present or past services or a reasonable payment made in the ordinary course of business under a bona fide retirement plan or other benefits program.
(i) For purposes of this subchapter, the determination of the amount of the liabilities or the value of the assets of a protected series or registered series may be based on:
(1) financial statements of the protected series or registered series, which may include the financial statements of subsidiary entities of the protected series or registered series accounted for on a consolidated basis or on the equity method of accounting that:
(A) present the financial condition of the protected series or registered series, and any subsidiary entity included in those financial statements, in accordance with generally accepted accounting principles or international financial reporting standards; or
(B) have been prepared using the method of accounting used to file a federal income tax return for the protected series or registered series or using any other accounting practices or principles that are reasonable under the circumstances;
(2) financial information, including condensed or summary financial statements, that is prepared on the same basis as financial statements described by Subdivision (1);
(3) projections, forecasts, or other forward-looking information relating to the future economic performance, financial condition, or liquidity of the protected series or registered series that is reasonable under the circumstances;
(4) a fair valuation or information from any other method that is reasonable under the circumstances; or
(5) a combination of a statement, valuation, or information authorized by this subsection.
(j) Subsection (i) does not apply to the computation of any tax imposed on a protected series or registered series under the laws of this state.
(k) An action alleging a distribution is made in violation of this section must be commenced not later than the second anniversary of the date of the distribution.