South Dakota Codified Laws 47-34A-407. Liability for improper distributions
(a) Any member of a member-managed company, or a manager of a manager-managed company who votes for or assents to a distribution made in violation of § 47-34A-406, the articles of organization, or the operating agreement is personally liable to the company for the amount of the distribution which exceeds the amount that could have been distributed without violating § 47-34A-406, the articles of organization, or the operating agreement if it is established that the member or manager did not perform the member’s or manager’s duties in compliance with § 47-34A-409.
(b) To the extent the operating agreement of a member-managed limited liability company expressly relieves a member of the authority and responsibility to consent to distributions and imposes that authority and responsibility on one or more other members, the liability stated in subsection (a) applies to the other members and not the member that the operating agreement relieves of authority and responsibility.
Terms Used In South Dakota Codified Laws 47-34A-407
- Articles of organization: means initial, amended, and restated articles of organization and articles of merger. See South Dakota Codified Laws 47-34A-101
- Contribution: means any benefit provided by a person to a limited liability company:
(A) In order to become a member upon formation of the company and in accordance with an agreement between or among the persons that have agreed to become the initial members of the company. See South Dakota Codified Laws 47-34A-101
- Distribution: means a transfer of money, property, or other benefit from a limited liability company to a member in the member's capacity as a member or to a transferee of the member's distributional interest. See South Dakota Codified Laws 47-34A-101
- Manager: means a person, whether or not a member of a manager-managed company, who is vested with authority under section 301. See South Dakota Codified Laws 47-34A-101
- Manager-managed company: means a limited liability company which is so designated in its articles of organization. See South Dakota Codified Laws 47-34A-101
- Member: means a person that:
(A) Prior to formation of the limited liability company, becomes a member as agreed by that person and the organizer of the limited liability company. See South Dakota Codified Laws 47-34A-101
- Member-managed company: means a limited liability company other than a manager-managed company. See South Dakota Codified Laws 47-34A-101
(c) A member of a manager-managed company who knew a distribution was made in violation of § 47-34A-406, the articles of organization, or the operating agreement is personally liable to the company, but only to the extent that the distribution received by the member exceeded the amount that could have been properly paid under § 47-34A-406.
(d) A member or manager against whom an action is brought under this section may implead in the action all:
(1) Other members or managers who voted for or assented to the distribution in violation of subsection (a) and may compel contribution from them; and
(2) Members who received a distribution in violation of subsection (b) and may compel contribution from the member in the amount received in violation of subsection (b).
(e) A proceeding under this section is barred unless it is commenced within two years after the distribution.
Source: SL 1998, ch 272, § 407; SL 2013, ch 233, § 11.