2006 Minnesota Statutes

322B.54 LIMITATIONS ON DISTRIBUTION.
    Subdivision 1. When distributions are permitted. (a) The board of governors may
authorize and cause the limited liability company to make a distribution only if the board of
governors determines, in accordance with subdivision 2, that the limited liability company will
be able to pay its debts in the ordinary course of business after making the distribution and the
board of governors does not know before the distribution is made that the determination was
or has become erroneous.
(b) The limited liability company may make the distribution if it is able to pay its debts in
the ordinary course of business after making the distribution.
(c) The effect of a distribution on the ability of the limited liability company to pay its debts
in the ordinary course of business after making the distribution must be measured in accordance
with subdivision 3.
(d) The right of the board of governors to authorize, and the limited liability company to
make, distributions may be prohibited, limited, or restricted by the articles of organization, a
member control agreement, or bylaws or an agreement.
    Subd. 2. Determination presumed proper. A determination that the limited liability
company will be able to pay its debts in the ordinary course of business after the distribution is
presumed to be proper if the determination is made in compliance with the standard of conduct
provided in section 322B.663 on the basis of financial information prepared in accordance with
accounting methods, or a fair valuation or other method, reasonable in the circumstances. No
liability under section 322B.663 or 322B.56 will accrue if the requirements of this subdivision
have been met.
    Subd. 3. Effect measured. (a) In the case of a distribution made by a limited liability
company in connection with a redemption of its membership interests, the effect of the distribution
must be measured as of the date on which money or other property is transferred, or indebtedness
payable in installments or otherwise is incurred, by the limited liability company, or as of the
date on which the member ceases to be a member of the limited liability company, whichever is
the earliest.
(b) The effect of any other distribution must be measured as of the date of its authorization if
payment occurs 120 days or less following the date of authorization, or as of the date of payment
if payment occurs more than 120 days following the date of authorization.
(c) Indebtedness of a limited liability company incurred or issued in a distribution in
accordance with this section to a member who as a result of the transaction is no longer a member
is on a parity with the indebtedness of the limited liability company to its general unsecured
creditors, except to the extent subordinated, agreed to, or secured by a pledge of any assets of the
limited liability company or a related organization, or subject to any other agreement between
the limited liability company and the member.
(d) Sections 322B.54 to 322B.56 supersede all other statutes of this state with respect to
distributions, and the provisions of sections 513.41 to 513.51 do not apply to distributions made
by a limited liability company governed by this chapter.
    Subd. 4. Restrictions. (a) A distribution may be made to the owners of a class or series of
membership interests only if:
(1) all amounts payable to the owners of membership interests having a preference for the
payment of that kind of distribution, other than those owners who give notice to the limited
liability company of their agreement to waive their rights to that payment, are paid; and
(2) the payment of the distribution does not reduce the remaining net assets of the limited
liability company below the aggregate preferential amount payable in the event of liquidation to
the owners of membership interests having preferential rights, unless the distribution is made
to those members in the order and to the extent of their respective priorities or the owners of
membership interests who do not receive distributions in that order give notice to the limited
liability company of their agreement to waive their rights to that distribution.
A determination that the payment of the distribution does not reduce the remaining net assets
of the limited liability company below the aggregate preferential amount payable in the event
of termination to the owners of membership interests having preferential rights is presumed to
be proper if the determination is made in compliance with the standard of conduct provided in
section 322B.663 on the basis of financial information prepared in accordance with accounting
methods, or a fair valuation or other method, reasonable in the circumstances. Liability under
section 322B.663 or 322B.56 will not arise if the requirements of this paragraph are met.
(b) If the money or property available for distribution is insufficient to satisfy all preferences,
the distributions shall be made pro rata according to the order of priority of preferences by classes
and by series within those classes unless those owners who do not receive distributions in
that order give notice to the limited liability company of their agreement to waive their rights
to that distribution.
History: 1992 c 517 art 2 s 60; 1993 c 137 s 40; 1996 c 361 s 33; 1999 c 85 art 2 s 55,96