Arkansas 2023 Regular Session

Arkansas House Bill HB1020 Compare Versions

Version 1 (Old)

Version 2 (New)

Old	New		Differences
1	1		Stricken language would be deleted from and underlined language would be added to present law.
2		-	Act 795 of the Regular Session
3	2		ANS040 04-04-2023 13:25:56 ANS040
4	3
5	4		State of Arkansas As Engrossed: H2/9/23 S4/4/23 1
6	5		94th General Assembly A Bill 2
7	6		Regular Session, 2023 HOUSE BILL 1020 3
8	7		4
9	8		By: Representative Maddox 5
10	9		By: Senator C. Penzo 6
11	10		7
12	11		For An Act To Be Entitled 8
13	12		AN ACT TO AMEND THE UNIFORM LIMITED LIAB ILITY COMPANY 9
14	13		ACT; TO REVISE CHARG ING ORDERS UNDER THE UNIFORM 10
15	14		LIMITED LIABILITY CO MPANY ACT; AND FOR O THER 11
16	15		PURPOSES. 12
17	16		13
18	17		14
19	18		Subtitle 15
20	19		TO AMEND THE UNIFORM LIMITED LIABILITY 16
21	20		COMPANY ACT; AND TO REVISE CHARGING 17
22	21		ORDERS UNDER THE UNIFORM LIMITED 18
23	22		LIABILITY COMPANY ACT. 19
24	23		20
25	24		21
26	25		BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF ARKANSAS: 22
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29	28		SECTION 1. Arkansas Code § 4 -38-502(a), concerning the transfer of 25
30	29		transferable interest under the Uniform Limited Liability Company Act, is 26
31	30		amended to read as follows: 27
32	31		(a) Subject to § 4-38-503(f), a A transfer, in whole or in part, of a 28
33	32		transferable interest: 29
34	33		(1) is permissible; 30
35	34		(2) does not by itself cause a person's dissociation as a member 31
36	35		or a dissolution and winding up of the limited liability company's activities 32
37	36		and affairs; and 33
38	37		(3) subject to § 4-38-504, does not entitle the transferee to: 34
39	38		(A) participate in the management or conduct of the 35
40	39		company's activities and affairs; or 36 As Engrossed: H2/9/23 S4/4/23 HB1020
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45	44		(B) except as otherwise provided in subsection (c), have 1
46	45		access to records or other information concerning the company's activities 2
47	46		and affairs. 3
48	47		4
49	48		SECTION 2. Arkansas Code § 4 -38-503 is amended to read as follows: 5
50	49		4-38-503. Charging order. 6
51	50		(a) On application to a court of competent jurisdiction by a judgment 7
52	51		creditor of a member or transferee, a the court may enter a charging order 8
53	52		against the transferable interest of the judgment debtor for charge the 9
54	53		transferable interest with payment of the unsatisfied amount of the judgment 10
55	54		with interest. Except as otherwise provided in subsection (f), a A charging 11
56	55		order constitutes a lien on a judgment debtor's transferable interest and 12
57	56		requires the limited liability company to pay over to the person to which the 13
58	57		charging order was issued any distribution that otherwise would be paid to 14
59	58		the judgment creditor. 15
60	59		(b) To the extent necessary to effectuate the collection of 16
61	60		distributions pursuant to a charging order in effect under subsection (a), 17
62	61		the court may: 18
63	62		(1) appoint a receiver of the distributions subject to the 19
64	63		charging order, with the power to make all inquiries the judgment debtor 20
65	64		might have made; and 21
66	65		(2) make all other orders necessary to give effect to the 22
67	66		charging order. 23
68	67		(c) Upon a showing that distributions under a charging order will not 24
69	68		pay the judgment debt within a reasonable time, the court may foreclose the 25
70	69		lien and order the sale of the transferable interest. Except as otherwise 26
71	70		provided in subsection (f), the purchaser at the foreclosure sale obtains 27
72	71		only the transferable interest, does not thereby become a member, and is 28
73	72		subject to § 4-38-502. 29
74	73		(d) At any time before foreclosure under subsection (c), the member or 30
75	74		transferee whose transferable interest is subject to a charging order under 31
76	75		subsection (a) may extinguish the charging order by satisfying the judgment 32
77	76		and filing a certified copy of the satisfaction with the court that issued 33
78	77		the charging order. 34
79	78		(e) At any time before foreclosure under subsection (c), a limited 35
80	79		liability company or one or more members whose transferable interests are not 36 As Engrossed: H2/9/23 S4/4/23 HB1020
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85	84		subject to the charging order may pay to the judgment creditor the full 1
86	85		amount due under the judgment and thereby succeed to the rights of the 2
87	86		judgment creditor, including the charging order. 3
88	87		(f) If a court orders foreclosure of a charging order lien against the 4
89	88		sole member of a limited liability company: 5
90	89		(1) the court shall confirm the sale; 6
91	90		(2) the purchaser at the sale obtains the member's entire 7
92	91		interest, not only the member's transferable interest; 8
93	92		(3) the purchaser thereby becomes a member; and 9
94	93		(4) the person whose interest was subject to the foreclosed 10
95	94		charging order is dissociated as a member. 11
96	95		(g) This chapter does not deprive any member or transferee of the 12
97	96		benefit of any exemption law applicable to the transferable interest of the 13
98	97		member or transferee. 14
99	98		(h) On application to a court of competent jurisdiction by a judgment 15
100	99		creditor of a member or transferee against whose transferable interest a 16
101	100		charging order was issued, and a showing to the satisfaction of the court 17
102	101		that one (1) or more members of the limited l iability company have engaged in 18
103	102		bad faith or intentional misconduct in managing the limited liability 19
104	103		company's operations or finances so as to reduce or eliminate distributions 20
105	104		to the judgment debtor, and thereby effectively defeat the charging order, 21
106	105		the court may foreclose the lien and order the sale of the judgment debtor's 22
107	106		transferrable interest. Except as otherwise provided in subsection (c), the 23
108	107		purchaser at the foreclosure sale obtains only the transferable interest, 24
109	108		does not thereby become a memb er, and is subject to § 4 -38-502. At any time 25
110	109		before foreclosure under this subsection (b), the member or transferee whose 26
111	110		transferable interest is subject to a charging order under subsection (a) may 27
112	111		extinguish the charging order by satisfying the judgme nt and filing a 28
113	112		certified copy of the satisfaction with the court that issued the charging 29
114	113		order. At any time before foreclosure under this subsection (b), a limited 30
115	114		liability company or one (1) or more members whose transferable interests are 31
116	115		not subject to the charging order may pay to the judgment creditor the full 32
117	116		amount due under the judgment and thereby succeed to the rights of the 33
118	117		judgment creditor, including the charging order. 34
119	118		(c) On application to a court of competent jurisdiction by a judgment 35
120	119		creditor of the sole member of a limited liability company against whose 36 As Engrossed: H2/9/23 S4/4/23 HB1020
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125	124		transferable interest a charging order was issued, and a showing to the 1
126	125		satisfaction of the court that that distributions under a charging order will 2
127	126		not pay the judgment debt within a reasonable time, the court may foreclose 3
128	127		the lien and order the sale of the transferable interest. If a court orders 4
129	128		foreclosure of a charging order lien against the sole member of a limited 5
130	129		liability company: 6
131	130		(1) the court shall confirm the sale; 7
132	131		(2) the purchaser at the sale obtains the member's entire 8
133	132		interest, not only the member's transferable interest; 9
134	133		(3) the purchaser thereby becomes a member; and 10
135	134		(4) the person whose interest was subject to the foreclosed 11
136	135		charging order is dissociat ed as a member. 12
137	136		(d) This section: 13
138	137		(1)(A) Shall not operate to invalidate any provision of any 14
139	138		written agreement between a member and a creditor, including without 15
140	139		limitation a security agreement, assignment, or other instrument giving the 16
141	140		creditor a security interest in, or assignment of, the transferable interest, 17
142	141		where a the time of the written agreement, security agreement, assignment, or 18
143	142		other instrument was executed by the member and the creditor, the member's 19
144	143		executing such written agreement, sec urity agreement, assignment, or other 20
145	144		instrument did not violate a provision of the limited liability company's 21
146	145		certificate of organization or operating agreement. 22
147	146		(B) Except as provided in subsection (c), the foreclosure 23
148	147		of a charging order does not g rant the creditor who receives the transferable 24
149	148		interest any rights in the transferable interest beyond the rights of a 25
150	149		transferee; 26
151	150		(2)(A) provides Provides the exclusive remedy by which a person 27
152	151		seeking in the capacity of judgment creditor of a member or a transferee of a 28
153	152		member to enforce a judgment against a member or transferee may satisfy the a 29
154	153		judgment from the judgment debtor's transferable interest out of the member's 30
155	154		interest in the limited liability company, where the limited liability 31
156	155		company has more than one (1) member. 32
157	156		(B)(i) In the case of a limited liability company with 33
158	157		more than one (1) member, other remedies, including without limitation 34
159	158		foreclosure on the member's interest, except as provided in subsection (b), 35
160	159		or a court order for directions, accounts, and inquiries that the debtor or 36 As Engrossed: H2/9/23 S4/4/23 HB1020
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165	164		member might have made, are not available to the judgment creditor attempting 1
166	165		to satisfy the judgment out of the judgment debtor's transferable interest in 2
167	166		the limited liability company; 3
168	167		(3) Does not deprive a member of the benefit of any exemption 4
169	168		applicable to his or her interest. 5
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171	170		/s/Maddox 7
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