Sec. 6. (a) A distribution may not be made if after giving effect to the distribution:

(1) the limited liability company would not be able to pay its debts as the debts become due in the usual course of business; or

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Terms Used In Indiana Code 23-18-5-6

  • 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.
(2) the limited liability company’s total assets would be less than the sum of its total liabilities plus, unless the operating agreement permits otherwise, the amount that would be needed if the affairs of the limited liability company were to be wound up at the time of the distribution to satisfy any preferential rights that are superior to the rights of members receiving the distribution.

     (b) The limited liability company may base a determination that a distribution is not prohibited under subsection (a) upon one (1) of the following:

(1) Financial statements prepared on the basis of accounting practices and principles that are reasonable under the circumstances.

(2) A fair valuation of assets and liabilities or other reasonable method approved by the members or managers, if any.

     (c) Except as provided in subsection (e), the effect of a distribution under subsection (a) is measured as of:

(1) the date the distribution is authorized if the payment occurs not more than one hundred twenty (120) days after the date of authorization; or

(2) the date the payment is made if it occurs more than one hundred twenty (120) days after the date of authorization.

     (d) A limited liability company’s indebtedness to a member incurred by reason of an obligation to make a distribution in accordance with this section is at parity with the limited liability company’s indebtedness to its general unsecured creditors, except to the extent subordinated by agreement.

     (e) If terms of the indebtedness provide that payment of principal and interest is to be made only if and to the extent that payment of a distribution to members could then be made under this section, indebtedness of a limited liability company, including indebtedness issued as a distribution, is not a liability for purposes of determinations made under subsection (b).

     (f) If the indebtedness is issued as a distribution, each payment of principal or interest on the indebtedness is treated as a distribution, the effect of which is measured on the date the payment is actually made.

As added by P.L.8-1993, SEC.301.

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