(1)  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 (6), a charging order constitutes a lien on a judgment debtor’s transferable interest and, after the limited liability company has been served with the charging order, 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.

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Terms Used In Utah Code 48-3a-503

  • Distribution: means a transfer of money or other property from a limited liability company to a person on account of a transferable interest or in the person's capacity as a member. See Utah Code 48-3a-102
  • Foreclosure: A legal process in which property that is collateral or security for a loan may be sold to help repay the loan when the loan is in default. Source: OCC
  • Lien: A claim against real or personal property in satisfaction of a debt.
  • Member: means a person that:
(a) has become a member of a limited liability company under Section 48-3a-401 or was a member in a company when the company became subject to this chapter under Section 48-3a-1405; and
(b) has not dissociated under Section 48-3a-602. See Utah Code 48-3a-102
  • Person: means an individual, business corporation, nonprofit corporation, partnership, limited partnership, limited liability company, limited cooperative association, unincorporated nonprofit association, statutory trust, business trust, common-law business trust, estate, trust, association, joint venture, public corporation, government or governmental subdivision, agency, or instrumentality, or any other legal or commercial entity. See Utah Code 48-3a-102
  • Transferable interest: means the right, as initially owned by a person in the person's capacity as a member, to receive distributions from a limited liability company in accordance with the operating agreement, whether or not the person remains a member or continues to own any part of the right. See Utah Code 48-3a-102
  • Transferee: means a person to which all or part of a transferable interest has been transferred, whether or not the transferor is a member. See Utah Code 48-3a-102
    • (2)  To the extent necessary to effectuate the collection of distributions pursuant to a charging order in effect under Subsection (1), the court may:

    (a)  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

    (b)  make all other orders necessary to give effect to the charging order.

    (3)  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 (6), the purchaser at the foreclosure sale only obtains the transferable interest, does not thereby become a member, and is subject to Section 48-3a-502.

    (4)  At any time before foreclosure under Subsection (3), the member or transferee whose transferable interest is subject to a charging order under Subsection (1) 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.

    (5)  At any time before foreclosure under Subsection (3), 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.

    (6)  If a court orders foreclosure of a charging order lien against the sole member of a limited liability company:

    (a)  the court shall confirm the sale;

    (b)  the purchaser at the sale obtains the member’s entire interest, not only the member’s transferable interest;

    (c)  the purchaser thereby becomes a member; and

    (d)  the person whose interest was subject to the foreclosed charging order is dissociated as a member.

    (7)  This chapter does not deprive any member or transferee of the benefit of any exemption laws applicable to the transferable interest of the member or transferee.

    (8)  This section provides the exclusive remedy by which a person seeking to enforce a judgment against a member or transferee may, in the capacity of judgment creditor, satisfy the judgment from the judgment debtor’s transferable interest.

    Enacted by Chapter 412, 2013 General Session

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