A.  No distribution shall be made if, after giving effect to the distribution:

(1)  The limited liability company would not be able to pay its debts as they become due in the usual course of business.  

(2)  The limited liability company’s total assets would be less than the sum of its total liabilities plus, unless the articles of organization or a written operating agreement provides otherwise, the amount that would be needed if the limited liability company were to be dissolved at the time of the distribution to satisfy the preferential rights of other members upon dissolution which are superior to the rights of the member receiving the distribution.  

(3)  The authorization or payment thereof would be contrary to any restrictions contained in the articles of organization or a written operating agreement.  

B.(1)  The limited liability company may base a determination that a distribution is not prohibited under Subsection A of this Section either on financial statements prepared on the basis of accounting practices and principles that are reasonable under the circumstances or a fair valuation or other method that is reasonable under the circumstances.  For purposes of this Section, generally accepted accounting principles are deemed to be reasonable.  

(2)  Unless the articles of organization provide otherwise, a limited liability company, including a limited liability company engaged in extractive or oil and gas activities, which owns wasting assets, including oil and gas properties, intended for sale in the ordinary or usual course of business or which owns property having a limited life, such as a lease for a term of years or patents, need make no allowance for depletion or amortization of the cost of such assets in computing total assets.  

(3)  In computing amounts available for distribution, proper allowance shall, except as provided in Paragraph (2) of this Subsection, be made for depreciation and depletion sustained, and ascertained or known losses of every character.  Deferred assets and prepaid expenses shall be considered as assets only to the extent of amounts thereof not used or amortized.  

(4)  Without limitation of other items that may be properly included therein, limited liability companies engaged in the business of extraction and sale of oil and gas may include in the calculation of depletion for such purposes their aggregate intangible drilling costs of drilling oil and gas wells.  Such costs may include any item of expense or cost not recoverable from a well after it becomes uneconomical other than casing, such as seismic costs, drilling costs, stimulation costs, secondary and tertiary recovery costs, completion costs, work over costs, well site preparation expenses, and other similar expenses or costs, aggregate leasehold costs, and any item of expense or cost relating to the acquisition of a lease other than rental, such as title verification, other title review expenses, and lease bonuses.  

(5)  If terms of indebtedness provide that payment of principal and interest is to be made only if and to the extent that payment of a distribution to members could then be made under this Section, indebtedness of a limited liability company, including indebtedness issued as a distribution, shall not be a liability for purposes of determinations made under this Subsection.  

C.  The effect of a distribution under Subsection A of this Section shall be measured as of the date upon which the distribution is authorized if the payment occurs within one hundred twenty days after the date of authorization, or the date upon which payment is made if it occurs more than one hundred twenty days after the date of authorization.  

Acts 1992, No. 780, §2, eff. July 7, 1992.