A limited liability company may make distributions from a protected or registered series, but not if the series liabilities would exceed the fair value of its assets after the distribution.
Sec. 101.613. DISTRIBUTIONS. (a) A limited liability company may make a distribution with respect to a protected series or registered series. (b) A limited liability company may not make a distribution with respect to a protected series or registered series to a member if, immediately after making the distribution, the total amount of the liabilities of the protected series or registered series, other than liabilities described by Subsection (c), exceeds the fair value of the assets associated with the protected series or registered series. (c) For purposes of Subsection (b), the liabilities of a protected series or registered series do not include: (1) a liability to a member related to the member's membership interest associated with the protected series or registered series; or (2) except as provided by Subsection (e), a liability of the protected series or registered series for which the recourse of creditors is limited to specified property of the protected series or registered series. (d) For purposes of Subsection (b), the assets associated with a protected series or registered series include the fair value of property of the protected series or registered series subject to a liability for which recourse of creditors is limited to specified property of the protected series or registered series only if the fair value of that property exceeds the liability. (e) A member who receives a distribution from a protected series or registered series in violation of this section is not required to return the distribution to the protected series or registered series unless the member had knowledge of the violation. (f) This section may not be construed to affect the obligation of a member to return a distribution to the protected series or registered series under the company agreement, another agreement, or other state or federal law. (g) Section 101.206 does not apply to a distribution with respect to a protected series or registered series. (h) For purposes of this section, "distribution" does not include an amount constituting reasonable compensation for present or past services or a reasonable payment made in the ordinary course of business under a bona fide retirement plan or other benefits program. (i) For purposes of this subchapter, the determination of the amount of the liabilities or the value of the assets of a protected series or registered series may be based on: (1) financial statements of the protected series or registered series, which may include the financial statements of subsidiary entities of the protected series or registered series accounted for on a consolidated basis or on the equity method of accounting that: (A) present the financial condition of the protected series or registered series, and any subsidiary entity included in those financial statements, in accordance with generally accepted accounting principles or international financial reporting standards; or (B) have been prepared using the method of accounting used to file a federal income tax return for the protected series or registered series or using any other accounting practices or principles that are reasonable under the circumstances; (2) financial information, including condensed or summary financial statements, that is prepared on the same basis as financial statements described by Subdivision (1); (3) projections, forecasts, or other forward-looking information relating to the future economic performance, financial condition, or liquidity of the protected series or registered series that is reasonable under the circumstances; (4) a fair valuation or information from any other method that is reasonable under the circumstances; or (5) a combination of a statement, valuation, or information authorized by this subsection. (j) Subsection (i) does not apply to the computation of any tax imposed on a protected series or registered series under the laws of this state. (k) An action alleging a distribution is made in violation of this section must be commenced not later than the second anniversary of the date of the distribution. Added by Acts 2009, 81st Leg., R.S., Ch. 84 (S.B. 1442), Sec. 45, eff. September 1, 2009. Amended by: Acts 2021, 87th Leg., R.S., Ch. 43 (S.B. 1523), Sec. 1, eff. June 1, 2022.