§ 10A-5A-5.03 — Charging Order

Alabama § 10A-5A-5.03

• Jurisdiction: Alabama
• Title 10A: Alabama Business and Nonprofit Entities Code
• Ch. 5A: Alabama Limited Liability Company Law of 2014
• Art. 5: Transferable Interests and Rights of Transferees and Creditors

Text

(a) On application to a court of competent jurisdiction by any judgment creditor of a member or transferee, the court may charge the transferable interest of the judgment debtor with payment of the unsatisfied amount of the judgment with interest. To the extent so charged and after the limited liability company has been served with the charging order, the judgment creditor has only the right to receive any distribution or distributions to which the judgment debtor would otherwise be entitled in respect of the transferable interest.
(b) A limited liability company, after being served with a charging order and its terms, shall be entitled to pay or deposit any distribution or distributions to which the judgment debtor would otherwise be entitled in respect of the charged transferable interest into the hands of the clerk of the court so issuing the charging order, and the payment or deposit shall discharge the limited liability company and the judgment debtor from liability for the amount so paid or deposited and any interest that might accrue thereon. Upon receipt of the payment or deposit, the clerk of the court shall notify the judgment creditor of the receipt of the payment or deposit. The judgment creditor shall, after any payment or deposit into the court, petition the court for payment of so much of the amount paid or deposited as is held by the court as may be necessary to pay the judgment creditor’s judgment. To the extent the court has excess amounts paid or deposited on hand after the payment to the judgment creditor, the excess amounts paid or deposited shall be distributed to the judgment debtor and the charging order shall be extinguished. The court, may in its discretion, order the clerk to deposit, pending the judgment creditor’s petition, any money paid or deposited with the clerk, in an interest bearing account at a bank authorized to receive deposits of public funds.
(c) A charging order constitutes a lien on the judgment debtor’s transferable interest.
(d) Subject to subsection (c):
(1) a judgment debtor that is a member retains the rights of a member and remains subject to all duties and obligations of a member; and
(2) a judgment debtor that is a transferee retains the rights of a transferee and remains subject to all duties and obligations of a transferee.
(e) This chapter does not deprive any member or transferee of the benefit of any exemption laws applicable to the member’s or transferee’s transferable interest.
(f) This section provides the exclusive remedy by which a judgment creditor of a member or transferee may satisfy a judgment out of the judgment debtor’s transferable interest and the judgment creditor shall have no right to foreclose, under this chapter or any other law, upon the charging order, the charging order lien, or the judgment debtor’s transferable interest. A judgment creditor of a member or transferee shall have no right to obtain possession of, or otherwise exercise legal or equitable remedies with respect to, the property of a limited liability company. Court orders for actions or requests for accounts and inquiries that the judgment debtor might have made, are not available to the judgment creditor attempting to satisfy the judgment out of the judgment debtor’s transferable interest and may not be ordered by a court.

Legislative History

(Act 2014-144, p. 265, §1.)