SECTIONS 17250-17255 - California Statutes

CORPORATIONS CODE

SECTION 17250-17255

17250. Distributions of the money or property of a limited
liability company shall be made to the members and to any classes of
members in the manner provided in the operating agreement. If the
operating agreement does not otherwise provide, distributions that
are a return of capital shall be made in proportion to the
contributions made by each member and distributions that are not a
return of capital shall be made in proportion to the allocation of
profits.
Subject to Sections 17254 and 17353, at the time a member becomes
entitled to receive a distribution, the member has the status of, and
is entitled to all remedies available to, a creditor of the limited
liability company with respect to the distribution. An operating
agreement may provide for the establishment of a record date with
respect to the sharing of profits and distributions from a limited
liability company.

17251. Except as provided in this chapter, a member is entitled to
receive distributions from a limited liability company before the
withdrawal of that member from the company and before the dissolution
and winding up of the company, subject to the limitations contained
in Section 17254, to the extent and at the times or upon the
happening of the events specified in the operating agreement.

17252. (a) The articles of organization or a written operating
agreement may provide that a member may withdraw, resign, or retire
from a limited liability company at the time or upon the happening of
events specified in the operating agreement or that the member shall
not have the right to withdraw, resign, or retire as a member of a
limited liability company. Notwithstanding any restriction upon the
right of a member to withdraw, resign, or retire, a member may
withdraw from a limited liability company at any time by giving
written notice to the other members. However, unless the articles of
organization or written operating agreement provide otherwise, the
withdrawn member shall not be entitled to payment for the member's
interest in the limited liability company, and, beginning on the date
of the withdrawal, the withdrawn member shall have only the right of
a holder of an economic interest with respect to that withdrawn
member's interest in the limited liability company, and then only
with respect to distributions, if any, to which a holder of an
economic interest is entitled under the operating agreement of the
limited liability company, and the withdrawn member shall no longer
be a member of the limited liability company. If the withdrawal,
resignation, or retirement is in violation of the operating
agreement, the limited liability company shall have the right to
offset any damages for the breach of the operating agreement from the
amounts, if any, otherwise distributable to the withdrawn member
with respect to the withdrawn member's economic interest in the
limited liability company.
(b) Upon the withdrawal of a member, the list required to be kept
pursuant to paragraph (1) of subdivision (a) of Section 17058 shall
be amended accordingly.

17253. (a) A member, regardless of the nature of the member's
contribution, has no right to demand and receive any distribution
from a limited liability company in any form other than money.
(b) No member may be compelled to accept from a limited liability
company a distribution of any asset in kind in lieu of a
proportionate distribution of money being made to other members.
(c) Except upon a dissolution and winding up of a limited
liability company, no member may be compelled to accept a
distribution of any asset in kind.

17254. (a) No distribution shall be made if, after giving effect to
the distribution, either of the following occurs:
(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 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 that are superior to the rights of the member
receiving the distribution.
(b) The limited liability company may base a determination that a
distribution is not prohibited under subdivision (a) on any of the
following:
(1) Financial statements prepared on the basis of accounting
practices and principles that are reasonable in the circumstances.
(2) A fair valuation.
(3) Any other method that is reasonable in the circumstances.
(c) Except as provided in subdivision (e), the effect of a
distribution under subdivision (a) is measured as of (1) the date the
distribution is authorized if the payment occurs within 120 days
after the date of authorization, or (2) the date payment is made if
it occurs more than 120 days after the date of authorization.
(d) (1) If terms of the 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, is not a liability for
purposes of determinations made under subdivision (b).
(2) If the indebtedness is issued as a distribution, each payment
of principal or interest on the indebtedness is treated as a
distribution, the effect of which is measured on the date the payment
is actually made.
(e) A member or assignee of a member is obligated to return a
distribution from a limited liability company to the extent that (1)
the member or assignee had actual knowledge of facts indicating the
impropriety of the distribution, and (2) immediately after giving
effect to the distribution, and notwithstanding the compromise of an
obligation referred to in subdivision (b) of Section 17201, all
liabilities of the limited liability company, other than liabilities
to members or assignees on account of their interest in the limited
liability company and liabilities as to which recourse of creditors
is limited to specified property of the limited liability company,
exceed the fair market value of the limited liability company's
assets, provided that the fair market value of any property that is
subject to a liability as to which recourse of creditors is so
limited shall be included in the limited liability company assets
only to the extent that the fair market value of the property exceeds
this liability.
(f) A cause of action with respect to an obligation to return a
distribution pursuant to subdivision (e) is extinguished unless the
action is brought within four years after the distribution is made.

17255. (a) A member or manager who votes for a distribution in
violation of the operating agreement or Section 17254 or 17353 is
personally liable to the limited liability company for the amount of
the distribution that exceeds what could have been distributed
without violating Section 17254 or 17353 or the operating agreement
if it is established that the member or manager did not act in
compliance with Section 17254 or 17353.
(b) Each member or manager held liable under subdivision (a) for
an unlawful distribution is entitled to compel contribution:
(1) From each other member or manager who could be held liable
under subdivision (a) for the unlawful distribution.
(2) From each member for the amount the member received with
knowledge of facts indicating that the distribution was made in
violation of Section 17254 or 17353 or the operating agreement.
(c) A proceeding under this section is barred unless it is
commenced within four years after the date on which the effect of the
distribution is measured under Section 17254 or 17353.