Stricken language would be deleted from and underlined language would be added to present law.
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State of Arkansas As Engrossed: H2/9/23 1
94th General Assembly A Bill 2
Regular Session, 2023 HOUSE BILL 1020 3
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By: Representative Maddox 5
By: Senator Hill 6
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For An Act To Be Entitled 8
AN ACT TO AMEND THE UNIFORM LIMITED LIAB ILITY COMPANY 9
ACT; TO REVISE CHARG ING ORDERS UNDER THE UNIFORM 10
LIMITED LIABILITY CO MPANY ACT; AND FOR O THER 11
PURPOSES. 12
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Subtitle 15
TO AMEND THE UNIFORM LIMITED LIABILITY 16
COMPANY ACT; AND TO REVISE CHARGING 17
ORDERS UNDER THE UNIFORM LIMITED 18
LIABILITY COMPANY ACT. 19
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BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF ARKANSAS: 22
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SECTION 1. Arkansas Code § 4 -38-107(b), concerning the obligations of 24
a limited liability company to third parties under the Uniform Limited 25
Liability Company Act, is amended to read as follows: 26
(b) The obligations of a limited liability company and its members to 27
a person in the person's capacity as a transferee or a person dissociated as 28
a member are governed by the operating agreement. Subject only to a court 29
order issued under § 4-38-503(b)(2) to effectuate a charging order, an An 30
amendment to the operating agreement made after a person becomes a transferee 31
or is dissociated as a member: 32
(1) is effective with regard to any debt, obligation, or other 33
liability of the limited liability company or its members to the person in 34
the person's capacity as a transferee or person dissociated as a member; and 35
(2) is not effective to the extent the amendment imposes a new 36 As Engrossed: H2/9/23 HB1020
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debt, obligation, or other liability on the transferee or person dissociated 1
as a member. 2
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SECTION 2. Arkansas Code § 4 -38-502(a), concerning the transfer of 4
transferable interest under the Uniform Limited Liability Company Act, is 5
amended to read as follows: 6
(a) Subject to § 4-38-503(f), a A transfer, in whole or in part, of a 7
transferable interest: 8
(1) is permissible; 9
(2) does not by itself cause a person's dissociation as a member 10
or a dissolution and winding up of the limited liability company's activities 11
and affairs; and 12
(3) subject to § 4-38-504, does not entitle the transferee to: 13
(A) participate in the management or conduct of the 14
company's activities and affairs; or 15
(B) except as otherwise provided in subsection (c), have 16
access to records or other information concerning the company's activities 17
and affairs. 18
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SECTION 3. Arkansas Code § 4 -38-502(g), concerning the rights of a 20
transferor of a transferable interest under the Uniform Limited Liability 21
Company Act, is amended to read as follows: 22
(g) Except as otherwise provided in § 4-38-602(5)(B), if If a member 23
transfers a transferable interest, the transferor retains the rights of a 24
member other than the transferable interest transferred and retains all the 25
duties and obligations of a member. 26
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SECTION 4. Arkansas Code § 4 -38-503 is amended to read as follows: 28
4-38-503. Charging order. 29
(a) On application to a court of competent jurisdiction by a judgment 30
creditor of a member or transferee, a the court may enter a charging order 31
against the transferable interest of the judgment debtor for charge the 32
member's interest with payment of the unsatisfied amount of the judgment with 33
interest. Except as otherwise provided in subsection (f), a charging order 34
constitutes a lien on a judgment debtor's transferable interest and requires 35
the limited liability company to pay over to the person to which the charging 36 As Engrossed: H2/9/23 HB1020
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order was issued any distribution that otherwise would be paid to the 1
judgment debtor To the extent so charged, the judgment creditor has only the 2
rights of an assignee of the member's interest. 3
(b) To the extent necessary to effectuate the collection of 4
distributions pursuant to a charging order in effect under subsection (a), 5
the court may: 6
(1) appoint a receiver of the distributions subject to the 7
charging order, with the power to make all inquiries the judgment debtor 8
might have made; and 9
(2) make all other orders necessary to give effect to the 10
charging order. 11
(c) Upon a showing that distributions under a charging order will not 12
pay the judgment debt within a reasonable time, the court may foreclose the 13
lien and order the sale of the transferable interest. Except as otherwise 14
provided in subsection (f), the purchaser at the foreclosure sale obtains 15
only the transferable interest, does not thereby become a member, and is 16
subject to § 4-38-502. 17
(d) At any time before foreclosure under subsection (c), the member or 18
transferee whose transferable interest is subject to a charging order under 19
subsection (a) may extinguish the charging order by satisfying the judgment 20
and filing a certified copy of the satisfaction with the court that issued 21
the charging order. 22
(e) At any time before foreclosure under subsection (c), a limited 23
liability company or one or more members whose transferable interests are not 24
subject to the charging order may pay to the judgment creditor the full 25
amount due under the judgment and thereby succeed to the rights of the 26
judgment creditor, including the charging order. 27
(f) If a court orders foreclosure of a charging order lien against the 28
sole member of a limited liability company: 29
(1) the court shall confirm the sale; 30
(2) the purchaser at the sale obtains the member's entire 31
interest, not only the member's transferable interest; 32
(3) the purchaser thereby becomes a member; and 33
(4) the person whose interest was subject to the foreclosed 34
charging order is dissociated as a member. 35
(g) This chapter does not deprive any member or transferee of the 36 As Engrossed: H2/9/23 HB1020
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benefit of any exemption law applicable to the transferable interest of the 1
member or transferee. 2
(h) This section: 3
(1)(A) provides Provides the exclusive remedy by which a person 4
seeking in the capacity of judgment creditor of a member or an assignee of a 5
member to enforce a judgment against a member or transferee may satisfy the a 6
judgment from the judgment debtor's transferable interest out of the member's 7
interest of the judgment debtor, whether or not the limited liability company 8
has one (1) member or more than one (1) member. 9
(B)(i) Other remedies, including without limitation 10
foreclosure on the member's interest or a court order for directions, 11
accounts, and inquiries that the debtor or member might have made, are not 12
available to the judgment creditor attempting to satisfy the judgment out of 13
the judgment debtor's interest in the limited liability company. 14
(ii) A court shall not order any other remedy; 15
(2) Does not deprive a member of the benefit of any exemption 16
applicable to his or her interest; and 17
(3) Does not supersede any written agreement between a member 18
and a creditor if the written agreement does not conflict with the limited 19
liability company's certificate of organization or operating agreement. 20
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SECTION 5. Arkansas Code § 4 -38-602(3), concerning a foreclosure sale 22
as an event causing dissociation under the Uniform Limited Liability Company 23
Act, is repealed. 24
(3) the person's entire interest is transferred in a foreclosure 25
sale under § 4-38-503(f); 26
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SECTION 6. Arkansas Code § 4-38-602(5), concerning expulsion of a 28
member if a charging order has not been foreclosed under the Uniform Limited 29
Liability Company Act, is amended to read as follows: 30
(5) the person is expelled as a member by the affirmative vote 31
or consent of all the other members if: 32
(A) it is unlawful to carry on the limited liability 33
company's activities and affairs with the person as a member; 34
(B) there has been a transfer of all the person's 35
transferable interest in the company, other than: 36 As Engrossed: H2/9/23 HB1020
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(i) a transfer for security purposes; or 1
(ii) a charging order in effect under § 4-38-503 2
which has not been foreclosed; 3
(C) the person is an entity and: 4
(i) the company notifies the person that it will be 5
expelled as a member because the person has filed a statement of dissolution 6
or the equivalent, the person has been administratively dissolved, the 7
person's charter or the equivalent has been revoked, or the person's right to 8
conduct business has been suspended by the person's jurisdiction of 9
formation; and 10
(ii) not later than 90 ninety (90) days after the 11
notification, the statement of dissolution or the equivalent has not been 12
withdrawn, rescinded, or revoked, the person has not been reinstated, or the 13
person's charter or the equivalent or right to conduct business has not been 14
reinstated; or 15
(D) the person is an unincorporated entity that has been 16
dissolved and whose activities and affairs are being wound up; 17
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/s/Maddox 19
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