Iowa Code 489.406 – Liability for improper distributions
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1. Except as otherwise provided in subsection 2, if a member of a member-managed limited liability company or a manager of a manager-managed limited liability company consents to a distribution made in violation of section 489.405 and in consenting to the distribution fails to comply with section 489.409, the member or manager is personally liable to the company for the amount of the distribution which exceeds the amount that could have been distributed without the violation of section 489.405.
Terms Used In Iowa Code 489.406
- Distribution: includes all of the following:(1) A redemption or other purchase by a limited liability company of a transferable interest. See Iowa Code 489.102
- following: when used by way of reference to a chapter or other part of a statute mean the next preceding or next following chapter or other part. See Iowa Code 4.1
- Manager: means a person that under the operating agreement of a manager-managed limited liability company is responsible, alone or in concert with others, for performing the management functions stated in section 489. See Iowa Code 489.102
- Manager-managed limited liability company: means a limited liability company that qualifies under section 489. See Iowa Code 489.102
- Member: means a person for whom all of the following are true:
a. See Iowa Code 489.102- Member-managed limited liability company: means a limited liability company that is not a manager-managed limited liability company. See Iowa Code 489.102
- Operating agreement: means the agreement, whether or not referred to as an operating agreement and whether oral, implied, in a record, or in any combination thereof, of all the members of a limited liability company, including a sole member, concerning the matters described in section 489. See Iowa Code 489.102
- Person: includes a protected series, however denominated, of an entity if the protected series is established under law that limits, or limits if conditions specified under law are satisfied, the ability of a creditor of the entity or of any other protected series of the entity to satisfy a claim from assets of the protected series. See Iowa Code 489.102
- right of contribution: means property or a benefit described in section 489. See Iowa Code 489.102
2. To the extent the operating agreement of a member-managed limited liability company expressly relieves a member of the authority and responsibility to consent to distributions and imposes that authority and responsibility on one or more other members, the liability stated in subsection 1 applies to the other members and not the member that the operating agreement relieves of the authority and responsibility.3. A person that receives a distribution knowing that the distribution violated section 489.405 is personally liable to the limited liability company but only to the extent that the distribution received by the person exceeded the amount that could have been properly paid under section 489.405.4. A person against which an action is commenced because the person is liable under subsection 1 may do all of the following:a. Implead any other person that is liable under subsection 1 and seek to enforce a right of contribution from the person.b. Implead any person that received a distribution in violation of subsection 3 and seek to enforce a right of contribution from the person in the amount the person received in violation of subsection 3.5. An action under this section is barred unless commenced not later than two years after the distribution.