Utah Code 48-3a-405. Limitation on distributions
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(1) A limited liability company may not make a distribution, including a distribution under Section 48-3a-711, if after the distribution:
Terms Used In Utah Code 48-3a-405
- Assets: (1) The property comprising the estate of a deceased person, or (2) the property in a trust account.
- 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
- Liabilities: The aggregate of all debts and other legal obligations of a particular person or legal entity.
- Member: means a person that:(14)(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(14)(b) has not dissociated under Section 48-3a-602. See Utah Code 48-3a-102
- Operating agreement: means the agreement, whether or not referred to as an operating agreement and whether oral, implied, in a record, or in any combination thereof, of all the members of a limited liability company, including a sole member, concerning the matters described in Subsection 48-3a-112(1). 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
- Property: means all property, whether real, personal, or mixed or tangible or intangible, or any right or interest therein. 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
(1)(a) the limited liability company would not be able to pay its debts as they become due in the ordinary course of the limited liability company’s activities and affairs; or(1)(b) the limited liability company’s total assets would be less than the sum of its total liabilities plus, unless the operating agreement permits otherwise, the amount that would be needed, if the limited liability company were to be dissolved and wound up at the time of the distribution, to satisfy the preferential rights upon dissolution and winding up of members and transferees whose preferential rights are superior to those of persons receiving the distribution.
(2) A limited liability company may base a determination that a distribution is not prohibited under Subsection (1) on:
(2)(a) financial statements prepared on the basis of accounting practices and principles that are reasonable in the circumstances; or
(2)(b) a fair valuation or other method that is reasonable under the circumstances.
(3) Except as otherwise provided in Subsection (5), the effect of a distribution under Subsection (1) is measured:
(3)(a) in the case of a distribution as defined in Subsection 48-3a-102(4)(a), as of the earlier of:
(3)(a)(i) the date money or other property is transferred or debt is incurred by the limited liability company; or
(3)(a)(ii) the date the person entitled to the distribution ceases to own the interest or right being acquired by the limited liability company in return for the distribution;
(3)(b) in the case of any other distribution of indebtedness, as of the date the indebtedness is distributed; and
(3)(c) in all other cases, as of the date:
(3)(c)(i) the distribution is authorized, if the payment occurs not later than 120 days after that date; or
(3)(c)(ii) the payment is made, if the payment occurs more than 120 days after the distribution is authorized.
(4) A limited liability company’s indebtedness to a member or transferee incurred by reason of a distribution made in accordance with this section is at parity with the limited liability company’s indebtedness to its general, unsecured creditors, except to the extent subordinated by agreement.
(5) A limited liability company’s indebtedness, including indebtedness issued as a distribution, is not a liability for purposes of Subsection (1) if the terms of the indebtedness provide that payment of principal and interest is made only if and to the extent that payment of a distribution could then be made under this section. If the indebtedness is issued as a distribution, each payment of principal or interest is treated as a distribution, the effect of which is measured on the date the payment is made.