(a) A limited liability partnership shall not make a distribution to a partner to the extent that at the time of the distribution, after giving effect to the distribution, all liabilities of the limited liability partnership, other than liabilities to partners on account of their transferable interests and liabilities for which the recourse of creditors is limited to specific property of the limited liability partnership, exceed the fair value of the assets of the limited liability partnership, except that the fair value of the property that is subject to a liability for which recourse of creditors is limited shall be included in the assets of the limited liability partnership only to the extent that the fair value of the property exceeds that liability.

Attorney's Note

Under the Alabama Code, punishments for crimes depend on the classification. In the case of this section:
ClassPrisonFine
Violationup to 30 daysup to $200
For details, see Ala. Code § 13A-5-7
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Terms Used In Alabama Code 10A-8A-4.09

  • Assets: (1) The property comprising the estate of a deceased person, or (2) the property in a trust account.
  • Liabilities: The aggregate of all debts and other legal obligations of a particular person or legal entity.
  • Obligation: An order placed, contract awarded, service received, or similar transaction during a given period that will require payments during the same or a future period.
  • Partnership: A voluntary contract between two or more persons to pool some or all of their assets into a business, with the agreement that there will be a proportional sharing of profits and losses.
  • property: includes both real and personal property. See Alabama Code 1-1-1
  • Recourse: An arrangement in which a bank retains, in form or in substance, any credit risk directly or indirectly associated with an asset it has sold (in accordance with generally accepted accounting principles) that exceeds a pro rata share of the bank's claim on the asset. If a bank has no claim on an asset it has sold, then the retention of any credit risk is recourse. Source: FDIC
(b) A partner who consents to a distribution in violation of subsection (a) or the partnership agreement, and who knew at the time of the distribution that the distribution violated subsection (a) or the partnership agreement, shall be liable to the limited liability partnership for the amount of that distribution.
(c) A partner who receives a distribution in violation of subsection (a) or the partnership agreement, and who knew at the time of the distribution that the distribution violated subsection (a) or the partnership agreement, shall be liable to the limited liability partnership for the amount of the distribution received by that partner. A partner who receives a distribution in violation of subsection (a) or the partnership agreement, and who did not know at the time of the distribution that the distribution violated subsection (a) or the partnership agreement, shall not be liable for the amount of the distribution received by that partner.
(d) Except as provided in subsection (e), this section shall not affect any obligation or liability of a partner under other applicable law for the amount of a distribution.
(e) An action under this section or other applicable law is barred if not commenced within two years after the distribution.
(f) For purposes of subsection (a), “distribution” does not include amounts constituting reasonable compensation for present or past services or reasonable payments made in the ordinary course of the limited liability partnership’s business or not for profit activity under a bona fide retirement plan or other benefits program.
(g) This section shall not apply to distributions made in accordance with Section 10A-8A-8.09.
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