(1)  Except as otherwise provided in Subsection (2), if a member of a member-managed limited liability company or manager of a manager-managed limited liability company consents to a distribution made in violation of Section 48-3a-405 and in consenting to the distribution fails to comply with Section 48-3a-409, the member or manager is personally liable to the limited liability company for the amount of the distribution which exceeds the amount that could have been distributed without the violation of Section 48-3a-405.

lawyer at desk

Need help with a review of an LLC operating agreement?
Have it reviewed by a lawyer, get answers to your questions and move forward with confidence.
Connect with a lawyer now

Terms Used In Utah Code 48-3a-406

  • 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
  • Manager: means a person that under the operating agreement of a manager-managed limited liability company is responsible, alone or in concert with others, for performing the management functions stated in Subsection 48-3a-407(3). See Utah Code 48-3a-102
  • Manager-managed limited liability company: means a limited liability company that qualifies under Subsection 48-3a-407(1). See Utah Code 48-3a-102
  • 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
  • Member-managed limited liability company: means a limited liability company that is not a manager-managed limited liability company. 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
  • right of contribution: means property or a benefit described in Section 48-3a-402, which is provided by a person to a limited liability company to become a member or in the person's capacity as a member. See Utah Code 48-3a-102
    • (2)  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 (1) applies to the other members and not the member that the operating agreement relieves of authority and responsibility.

    (3)  A person that receives a distribution knowing that the distribution violated Section 48-3a-405 is personally liable to the limited liability company but only to the extent that the distribution received by the person exceeded the amount that could have been properly paid under Section 48-3a-405.

    (4)  A person against which an action is commenced because the person is liable under Subsection (1) may:

    (a)  implead any other person that is liable under Subsection (1) and seek to enforce a right of contribution from the person; and

    (b)  implead any person that received a distribution in violation of Subsection (3) and seek to enforce a right of contribution from the person in the amount the person received in violation of Subsection (3).

    (5)  An action under this section is barred unless commenced not later than two years after the distribution.

    Enacted by Chapter 412, 2013 General Session

      Previous section
    Next section  
     Part 4 Contents