[§428-406]  Limitations on distributions. 
(a)  A distribution may not be made if:



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



(2)  The company's total assets would be less than the
sum of its total liabilities plus the amount that would be needed, if the
company were to be dissolved, wound up, and terminated at the time of the
distribution, to satisfy the preferential rights upon dissolution, winding up,
and termination of members whose preferential rights are superior to those
receiving the distribution.



(b)  A limited liability company may base a
determination that a distribution is not prohibited under subsection (a) on
financial statements prepared on the basis of accounting practices and
principles that are reasonable under the circumstances or on a fair valuation
or other method that is reasonable under the circumstances.



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



(1)  In the case of distribution by purchase,
redemption, or other acquisition of a distributional interest in a limited
liability company, as of the date money or other property is transferred or
debt incurred by the company; and



(2)  In all other cases, as of the date the:



(A)  Distribution is authorized if the payment
occurs within one hundred twenty days after the date of authorization; or



(B)  Payment is made if it occurs more than one
hundred twenty days after the date of authorization.



(d)  A limited liability company's indebtedness
to a member incurred by reason of a distribution made in accordance with this
section is at parity with the company's indebtedness to its general unsecured
creditors.



(e)  Indebtedness of a limited liability
company, including indebtedness issued in connection with or as part of a
distribution, is not considered a liability for purposes of determinations
under subsection (a) if its terms provide that payment of principal and
interest is made only if and to the extent that payment of a distribution to
members could then be made under this section.  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 made. [L 1996, c 92, pt of §1]