Stricken language would be deleted from and underlined language would be added to present law.
Act 461 of the Regular Session
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State of Arkansas As Engrossed: S3/12/25 1
95th General Assembly A Bill 2
Regular Session, 2025 SENATE BILL 319 3
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By: Senator J. Boyd 5
By: Representative Maddox 6
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For An Act To Be Entitled 8
AN ACT TO AMEND THE UNIFORM LIMITED LIABILITY COMPANY 9
ACT; TO CLARIFY CHARGING ORDERS UNDER THE UNIFORM 10
LIMITED LIABILITY COMPANY ACT; AND FOR OTHER 11
PURPOSES. 12
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Subtitle 15
TO AMEND THE UNIFORM LIMITED LIABILITY 16
COMPANY ACT; AND TO CLARIFY 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: 21
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SECTION 1. Arkansas Code § 4 -38-503 is amended to read as follows: 23
4-38-503. Charging order. 24
(a) On application to a court of competent jurisdiction by a judgment 25
creditor of a member , or transferee, or any other owner of a membership 26
interest in a limited liability company , the a court having jurisdiction may 27
charge the transferable membership interest of the judgment debtor with 28
payment of the unsatisfied amount of the judgment with interest. A charging 29
order constitutes a lien on a judgment debtor's transferable interest and 30
requires the limited liability company to pay over to the person to which the 31
charging order was issued any distribution that otherwise would be paid to 32
the judgment creditor. 33
(b) On application to a court of competent jurisdiction by a judgment 34
creditor of a member or transferee against whose transferable interest a 35
charging order was issued, and a showing to the satisfaction of the court 36 As Engrossed: S3/12/25 SB319
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that one (1) or more members of the limited liability company have engaged in 1
bad faith or intentional misconduct in managing the limited liability 2
company's operations or finances so as to reduce or eliminate distributions 3
to the judgment debtor, and thereby effectively defeat the charging order, 4
the court may foreclose the lien and order the sale of the judgment debtor's 5
transferrable interest. Except as otherwise provided in subsection (c), the 6
purchaser at the foreclosure sale obtains only the transferable interest, 7
does not thereby become a member, and is subject to § 4 -38-502. At any time 8
before foreclosure under this subsection (b), the member or transferee whose 9
transferable interest is subject to a charging order under subsection (a) may 10
extinguish the charging order by satisfying the judgment and filing a 11
certified copy of the satisfaction with the court that issued the charging 12
order. At any time before foreclosure under this subsection (b), a limited 13
liability company or one (1) or more members whose transferable interests are 14
not subject to the charging order may pay to the judgment creditor the full 15
amount due under the judgment and thereby succeed to the rights of the 16
judgment creditor, including the charging order If a court charges a 17
membership interest with payment of a judgment as provided under subsection 18
(a) of this section, the judgment creditor has only the right to receive a 19
distribution to which the judgment debtor would otherwise be entitled in 20
respect of the membership interest . 21
(c)(1) On application to a court of competent jurisdiction by a 22
judgment creditor of the sole member of a limited liability company against 23
whose transferable interest a charging order was issued, and a showing to the 24
satisfaction of the court that distributions under a charging order will not 25
pay the judgment debt within a reasonable time, the court may foreclose the 26
lien and order the sale of the transferable interest. If a court orders 27
foreclosure of a charging order lien against the sole member of a limited 28
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 A charging order constitutes a lien 35
on the judgment debtor's membership interest . 36 As Engrossed: S3/12/25 SB319
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(2) The charging order lien shall not be foreclosed on under 1
this subchapter or any other law. 2
(d) This section: 3
(1)(A) Is specific to a lien created by a charging order; or 4
(2) Shall not: 5
(A) Apply to a creditor's secured lien created under the 6
Uniform Commercial Code; or 7
(B) operate Operate to invalidate any provision of any 8
written agreement between a member and a creditor, including without 9
limitation a security agreement, assignment, pledge, hypothecation, or other 10
instrument giving the creditor a security interest in, or assignment of, the 11
transferable interest, where at the time the written agreement, security 12
agreement, assignment, or other instrument was executed by the member and the 13
creditor, the member's executing such written agreement, security agreement, 14
assignment, or other instrument did not violate a provision of the limited 15
liability company's certificate of organization or operating agreement. 16
(B) Except as provided in subsection (c), the foreclosure of a 17
charging order does not grant the creditor who receives the transferable 18
interest any rights in the transferable interest beyond the rights of a 19
transferee; 20
(2)(A) Provides the exclusive remedy by which a judgment 21
creditor of a member or a transferee of a member may satisfy a judgment out 22
of the member's interest in the limited liability company, where the limited 23
liability company has more than one (1) member. 24
(B)(i) In the case of a limited liability company with 25
more than one (1) member, other remedies, including without limitation 26
foreclosure on the member's interest, except as provided in subsection (b), 27
or a court order for directions, accounts, and inquiries that the debtor or 28
member might have made, are not available to the judgment creditor attempting 29
to satisfy the judgment out of the judgment debtor's transferable interest in 30
the limited liability company; and 31
(3) Does not deprive a member of the benefit of any exemption 32
applicable to his or her interest. 33
(e) The entry of a charging order is the exclusive remedy by which a 34
judgment creditor of a member or of another owner of a membership interest 35
may satisfy a judgment out of the judgment debtor's membership interest. 36 As Engrossed: S3/12/25 SB319
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(f) This section shall not be construed to deprive a member of a 1
limited liability company or another owner of a membership interest in a 2
limited liability company of the benefit of an exemption applicable to the 3
membership interest of the member or owner. 4
(g) A creditor of a member or of another owner of a membership 5
interest does not have the right to obtain possession of or otherwise 6
exercise legal or equitable remedies with respect to the property of the 7
limited liability company. 8
(h) This section applies to: 9
(1) A single-member limited liability company; and 10
(2) A multiple-member limited liability company. 11
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/s/J. Boyd 13
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APPROVED: 4/3/25 16
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