Relating to a membership interest in a limited liability company subject to a charging order.
Impact
The enactment of SB 2314 will impact the Business Organizations Code in Texas, specifically Section 101.112. By codifying how charging orders apply to LLCs, the bill is poised to streamline legal processes and enhance the predictability for LLC members. This change will help in protecting the interests of both creditors and LLC members by providing a clear legal framework that governs the execution of charging orders. Furthermore, it may encourage the formation of new LLCs by providing greater assurances to potential business owners regarding the treatment of their interests.
Summary
Senate Bill 2314 addresses the treatment of membership interests in limited liability companies (LLCs) with respect to charging orders. The bill clarifies how charging orders will apply to both single-member and multiple-member limited liability companies. This amendment is intended to ensure that existing ambiguities in the law surrounding the applicability of charging orders to LLCs are resolved, providing clearer guidance for court proceedings regarding the seizure of membership interests in such entities.
Sentiment
The sentiment surrounding SB 2314 has been largely favorable, with the bill passing through both the Senate and the House with overwhelming support. During its committee discussions, no significant opposition was noted, indicating a general agreement among lawmakers regarding the necessity of clarifying Texas law on this matter. The positive reception suggests a recognition of the importance of protecting business interests while ensuring legal transparency in financial dealings related to LLCs.
Contention
While SB 2314 garnered significant bipartisan support, there may be underlying concerns related to the rights of LLC members versus creditor claims. Some members of the legal and business communities could argue that the strict application of charging orders may affect the operational integrity of LLCs, particularly in situations where creditors might seek to exert pressure. Nevertheless, these concerns did not translate into substantial opposition during the legislative process, reflecting a consensus on the need for clarity in the law.
Texas Constitutional Statutes Affected
Business Organizations Code
Chapter 1. Definitions And Other General Provisions
Prohibits an assignee of a membership interest in a limited liability company from actions causing dissolution of the limited liability company. (8/1/12)