CHAPTER 5. FINANCE
IC 23-18-5
Chapter 5. Finance
IC 23-18-5-1
Promises to contribute property or services; enforceability
Sec. 1. (a) A promise by a member to make a contribution to thelimited liability company is not enforceable unless the promise iswritten and signed by the member.
(b) Except as otherwise provided in a written operatingagreement, a member is obligated to the limited liability company toperform any enforceable promise to contribute cash or property or toperform services, even if the member is unable to perform for anyreason, including death and disability.
(c) If a member does not make the required contribution ofproperty or services, the member is obligated, at the option of thelimited liability company, to contribute cash equal to the value ofthat portion of the contribution that has not been made. This optionis in addition to and not in lieu of any other rights, including the rightto specific performance, that the limited liability company may haveagainst the member under the operating agreement or applicable law.
As added by P.L.8-1993, SEC.301.
IC 23-18-5-2
Obligation to make capital contribution or other payment;compromise; effect; remedies or consequences of nonpayment
Sec. 2. (a) The obligation of a member to make a capitalcontribution or return money or other property paid or distributed inviolation of this article may be compromised only:
(1) in compliance with a written operating agreement; or
(2) if a written operating agreement does not so provide, withthe unanimous consent of the members.
(b) Any compromise does not affect the rights, if any, of anycreditor of a limited liability company who, before the compromise,extends credit or acts in reliance on the obligation after the membersigns a writing that reflects the obligation.
(c) An operating agreement may provide that a member who failsto make a capital contribution or other payment that the member isrequired to make is subject to specified remedies for or specifiedconsequences of the failure. The remedy or consequence may includethe following form:
(1) Reducing the defaulting member's interest in the limitedliability company.
(2) Subordinating the defaulting member's interest in the limitedliability company to that of nondefaulting members.
(3) A forced sale of the defaulting member's interest in thelimited liability company.
(4) Forfeiture of the defaulting member's interest in the limitedliability company.
(5) A loan by the nondefaulting members of the amountnecessary to meet the commitment. (6) A determination of the value of the member's interest in thelimited liability company by appraisal or by formula andredemption and sale of the defaulting member's interest in thelimited liability company at that value.
As added by P.L.8-1993, SEC.301.
IC 23-18-5-3
Allocation of profits and losses
Sec. 3. Unless otherwise provided in the operating agreement,profits and losses must be allocated on the basis of the agreed value,as stated in the records of the limited liability company, of thecontributions made by each member to the extent the contributionshave been received by the limited liability company and notpreviously returned.
As added by P.L.8-1993, SEC.301.
IC 23-18-5-4
Shared distributions of cash or other assets
Sec. 4. Except as provided in section 5 or 5.1 of this chapter andIC 23-18-9-6, distributions of cash or other assets of a limitedliability company must be shared among the members and amongclasses of members in the manner provided in the operatingagreement. If the operating agreement does not provide otherwise,distributions must be allocated on the basis of the agreed value, asstated in the records of the limited liability company, of thecontributions made by each member to the extent the contributionshave been received by the limited liability company and notpreviously returned. A member is entitled to receive distributionsdescribed in this section from a limited liability company to theextent and at the times or upon the happening of the events specifiedin the operating agreement or at the times determined by themembers or managers, if any, voting under IC 23-18-4-3.
As added by P.L.8-1993, SEC.301. Amended by P.L.269-1999,SEC.3.
IC 23-18-5-5
Dissociation; companies existing on or before June 30, 1999
Sec. 5. (a) Unless otherwise provided in a written operatingagreement, a limited liability company existing under this article onor before June 30, 1999, is governed by this section.
(b) Upon the occurrence of an event of dissociation underIC 23-18-6-5 that does not cause dissolution, a dissociating memberis entitled to receive:
(1) any distribution that the member is entitled to under thisarticle or the operating agreement; and
(2) unless otherwise provided in the operating agreement,within a reasonable time after dissociation, the fair value of themember's interest in the limited liability company as of the dateof dissociation based on the member's right to share indistributions from the limited liability company, less a
distribution received under subdivision (1).
As added by P.L.8-1993, SEC.301. Amended by P.L.269-1999,SEC.4; P.L.130-2006, SEC.29.
IC 23-18-5-5.1
Dissociation; companies formed after June 30, 1999
Sec. 5.1. (a) A limited liability company formed under this articleafter June 30, 1999, is governed by this section.
(b) Upon the occurrence of an event of dissociation underIC 23-18-6-5, a dissociating member is entitled to receive:
(1) any distribution that the member is entitled to under thisarticle or the operating agreement; and
(2) unless otherwise provided in the operating agreement,within a reasonable time after dissociation, the fair value of themember's interest in the limited liability company as of the dateof dissociation based on the member's right to share indistributions from the limited liability company, less adistribution received under subdivision (1).
As added by P.L.269-1999, SEC.5. Amended by P.L.130-2006,SEC.30.
IC 23-18-5-6
Distributions
Sec. 6. (a) A distribution may not be made if after giving effect tothe distribution:
(1) the limited liability company would not be able to pay itsdebts as the debts become due in the usual course of business;or
(2) the limited liability company's total assets would be lessthan the sum of its total liabilities plus, unless the operatingagreement permits otherwise, the amount that would be neededif the affairs of the limited liability company were to be woundup at the time of the distribution to satisfy any preferentialrights that are superior to the rights of members receiving thedistribution.
(b) The limited liability company may base a determination thata distribution is not prohibited under subsection (a) upon one (1) ofthe following:
(1) Financial statements prepared on the basis of accountingpractices and principles that are reasonable under thecircumstances.
(2) A fair valuation of assets and liabilities or other reasonablemethod approved by the members or managers, if any.
(c) Except as provided in subsection (e), the effect of adistribution under subsection (a) is measured as of:
(1) the date the distribution is authorized if the payment occursnot more than one hundred twenty (120) days after the date ofauthorization; or
(2) the date the payment is made if it occurs more than onehundred twenty (120) days after the date of authorization. (d) A limited liability company's indebtedness to a memberincurred by reason of an obligation to make a distribution inaccordance with this section is at parity with the limited liabilitycompany's indebtedness to its general unsecured creditors, except tothe extent subordinated by agreement.
(e) If terms of the indebtedness provide that payment of principaland interest is to be made only if and to the extent that payment of adistribution to members could then be made under this section,indebtedness of a limited liability company, including indebtednessissued as a distribution, is not a liability for purposes ofdeterminations made under subsection (b).
(f) If the indebtedness is issued as a distribution, each payment ofprincipal or interest on the indebtedness is treated as a distribution,the effect of which is measured on the date the payment is actuallymade.
As added by P.L.8-1993, SEC.301.
IC 23-18-5-7
Unlawful distributions; liability
Sec. 7. (a) A member or manager who votes for or assents to adistribution in violation of the operating agreement or section 6 ofthis chapter is personally liable to the limited liability company forthe amount of the distribution that exceeds the amount that couldhave been distributed without violating the operating agreement orsection 6 of this chapter or if it is established that the member ormanager did not act in compliance with section 6 of this chapter.
(b) Each member or manager held liable under subsection (a) foran unlawful distribution is entitled to contribution from thefollowing:
(1) Each other member or manager who could be held liableunder subsection (a) for the unlawful distribution.
(2) Each member for the amount the member received knowingthat the distribution was made in violation of the operatingagreement or section 6 of this chapter.
(c) A proceeding under this section is barred unless it iscommenced not more than two (2) years after the date on which theeffect of the distribution is measured under section 6 of this chapter.
As added by P.L.8-1993, SEC.301.
IC 23-18-5-8
Distributions in kind
Sec. 8. (a) Except as provided in the operating agreement, amember, regardless of the nature of the member's contribution, doesnot have a right to demand and receive a distribution from a limitedliability company in a form other than cash.
(b) Except as provided in the operating agreement, a member maynot be compelled to accept a distribution in kind from a limitedliability company to the extent that the member's percentage interestin the assets being distributed in kind exceeds the percentage ofdistributions that the member is entitled to receive under section 4 of
this chapter.
As added by P.L.8-1993, SEC.301.
IC 23-18-5-9
Status of member entitled to receive distribution
Sec. 9. At the time a member becomes entitled to receive adistribution, the member has the status of and is entitled to allremedies available to a creditor of the limited liability company withrespect to the distribution.
As added by P.L.8-1993, SEC.301.