Indiana § 23-18-5-6 Distributions

Indiana Statutes

§ 23-18-5-6 — Distributions

Indiana·Title 23 BUSINESS AND OTHER ASSOCIATIONS·Art. 18 LIMITED LIABILITY COMPANIES·Ch. 5 Finance

(a)A distribution may not be made if after giving effect to the distribution:

(1)the limited liability company would not be able to pay its debts as the debts become due in the usual course of business; or

(2)the limited liability company's total assets would be less than the sum of its total liabilities plus, unless the operating agreement permits otherwise, the amount that would be needed if the affairs of the limited liability company were to be wound up at the time of the distribution to satisfy any preferential rights that are superior to the rights of members receiving the distribution.

(b)The limited liability company may base a determination that a distribution is not prohibited under subsection (a) upon one (1) of the following:

(1)Financial statements prepared on the basis o

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(a) A distribution may not be made if after
giving effect to the distribution:
(1) the limited liability company would not be able to pay its
debts as the debts become due in the usual course of business; or
(2) the limited liability company's total assets would be less than
the sum of its total liabilities plus, unless the operating agreement
permits otherwise, the amount that would be needed if the affairs
of the limited liability company were to be wound up at the time
of the distribution to satisfy any preferential rights that are
superior to the rights of members receiving the distribution.
(b) The limited liability company may base a determination that a
distribution is not prohibited under subsection (a) upon one (1) of the
following:
(1) Financial statements prepared on the basis of accounting
practices and principles that are reasonable under the
circumstances.
(2) A fair valuation of assets and liabilities or other reasonable
method approved by the members or managers, if any.
(c) Except as provided in subsection (e), the effect of a distribution
under subsection (a) is measured as of:
(1) the date the distribution is authorized if the payment occurs
not more than one hundred twenty (120) days after the date of
authorization; or
(2) the date the payment is made if it occurs more than one
hundred twenty (120) days after the date of authorization.
(d) A limited liability company's indebtedness to a member incurred
by reason of an obligation to make a distribution in accordance with
this section is at parity with the limited liability company's
indebtedness to its general unsecured creditors, except to the extent
subordinated by agreement.
(e) 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 subsection (b).
(f) 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.