13.1-1035 - Restrictions on making distribution.
§ 13.1-1035. Restrictions on making distribution.
A. No distribution may be made by a limited liability company if, aftergiving effect to the distribution:
1. The limited liability company would not be able to pay its debts as theybecame due in the usual course of business; or
2. The limited liability company's total assets would be less than the sum ofits total liabilities plus, unless the articles of organization or anoperating agreement permits otherwise, the amount that would be needed, ifthe limited liability company were to be dissolved at the time of thedistribution, to satisfy the preferential rights upon dissolution of memberswhose preferential rights are superior to the rights of members receiving thedistribution.
B. The limited liability company may base a determination that a distributionis not prohibited under subsection A of this section either on:
1. Financial statements prepared on the basis of accounting practices andprinciples that are reasonable in the circumstances; or
2. A fair valuation or other method that is reasonable in the circumstances.
C. The effect of a distribution under subsection A of this section ismeasured as of (i) the date the distribution is authorized if the paymentoccurs within 120 days after the date of authorization or (ii) the date thepayment is made if it occurs more than 120 days after the date ofauthorization.
D. [Repealed.]
E. For the purposes of this section, the term "distribution" shall notinclude amounts constituting reasonable compensation for present or pastservices or reasonable payments made in the ordinary course of businesspursuant to a bona fide retirement plan or other benefits program.
F. This section shall not apply to distributions in liquidation under Article9 (§ 13.1-1046 et seq.) of this chapter.
(1991, c. 168; 1992, c. 574; 2001, c. 548; 2009, c. 763.)