Delaware – Limited Liability Company Act – Assignment of Limited Liability Company Interests


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§ 18-701. | § 18-702. | § 18-703. | § 18-704. | § 18-705.

Commerce and Trade

SUBTITLE II

Other Laws Relating to Commerce and Trade

CHAPTER 18. LIMITED LIABILITY COMPANY ACT

Subchapter VII. Assignment of Limited Liability Company Interests

§ 18-701. Nature of limited liability company interest.

A limited liability company interest is
personal property. A member has no interest in specific limited
liability company property. (68 Del. Laws, c. 434, § 1.)

§ 18-702. Assignment of limited liability company interest.

(a) A limited liability company interest
is assignable in whole or in part except as provided in a limited
liability company agreement. The assignee of a member’s limited
liability company interest shall have no right to participate in the
management of the business and affairs of a limited liability company
except as provided in a limited liability company agreement and upon:

(1) The approval of all of the members of
the limited liability company other than the member assigning the
limited liability company interest; or

(2) Compliance with any procedure provided for in the limited liability company agreement.

(b) Unless otherwise provided in a limited liability company agreement:

(1) An assignment of a limited liability
company interest does not entitle the assignee to become or to exercise
any rights or powers of a member;

(2) An assignment of a limited liability
company interest entitles the assignee to share in such profits and
losses, to receive such distribution or distributions, and to receive
such allocation of income, gain, loss, deduction, or credit or similar
item to which the assignor was entitled, to the extent assigned; and

(3) A member ceases to be a member and to
have the power to exercise any rights or powers of a member upon
assignment of all of the member’s limited liability company interest.
Unless otherwise provided in a limited liability company agreement, the
pledge of, or granting of a security interest, lien or other
encumbrance in or against, any or all of the limited liability company
interest of a member shall not cause the member to cease to be a member
or to have the power to exercise any rights or powers of a member.

(c) Unless otherwise provided in a
limited liability company agreement, a member’s interest in a limited
liability company may be evidenced by a certificate of limited
liability company interest issued by the limited liability company. A
limited liability company agreement may provide for the assignment or
transfer of any limited liability company interest represented by such
a certificate and make other provisions with respect to such
certificates. A limited liability company shall not have the power to
issue a certificate of limited liability company interest in bearer
form.

(d) Unless otherwise provided in a
limited liability company agreement and except to the extent assumed by
agreement, until an assignee of a limited liability company interest
becomes a member, the assignee shall have no liability as a member
solely as a result of the assignment.

(e) Unless otherwise provided in the
limited liability company agreement, a limited liability company may
acquire, by purchase, redemption or otherwise, any limited liability
company interest or other interest of a member or manager in the
limited liability company. Unless otherwise provided in the limited
liability company agreement, any such interest so acquired by the
limited liability company shall be deemed canceled. (68 Del. Laws, c.
434, § 1; 69 Del. Laws, c. 260, §§ 30, 31; 70 Del. Laws, c. 186, § 1;
70 Del. Laws, c. 360, § 14; 73 Del. Laws, c. 83, § 18; 76 Del. Laws, c.
105, § 31.)

§ 18-703. Member’s limited liability company interest subject to charging order.

(a) On application by a judgment creditor
of a member or of a member’s assignee, a court having jurisdiction may
charge the limited liability company interest of the judgment debtor to
satisfy the judgment. To the extent so charged, the judgment creditor
has only the right to receive any distribution or distributions to
which the judgment debtor would otherwise have been entitled in respect
of such limited liability company interest.

(b) A charging order constitutes a lien on the judgment debtor’s limited liability company interest.

(c) This chapter does not deprive a
member or member’s assignee of a right under exemption laws with
respect to the judgment debtor’s limited liability company interest.

(d) The entry of a charging order is the
exclusive remedy by which a judgment creditor of a member or of a
member’s assignee may satisfy a judgment out of the judgment debtor’s
limited liability company interest.

(e) No creditor of a member or of a
member’s assignee shall have any right to obtain possession of, or
otherwise exercise legal or equitable remedies with respect to, the
property of the limited liability company.

(f) The Court of Chancery shall have
jurisdiction to hear and determine any matter relating to any such
charging order. (68 Del. Laws, c. 434, § 1; 70 Del. Laws, c. 186, § 1;
72 Del. Laws, c. 389, § 24; 75 Del. Laws, c. 51, §§ 9-15.)

§ 18-704. Right of assignee to become member.

(a) An assignee of a limited liability
company interest may become a member as provided in a limited liability
company agreement and upon:

(1) The approval of all of the members of
the limited liability company other than the member assigning limited
liability company interest; or

(2) Compliance with any procedure provided for in the limited liability company agreement.

(b) An assignee who has become a member
has, to the extent assigned, the rights and powers, and is subject to
the restrictions and liabilities, of a member under a limited liability
company agreement and this chapter. Notwithstanding the foregoing,
unless otherwise provided in a limited liability company agreement, an
assignee who becomes a member is liable for the obligations of the
assignor to make contributions as provided in § 18-502 of this title,
but shall not be liable for the obligations of the assignor under
subchapter VI of this chapter. However, the assignee is not obligated
for liabilities, including the obligations of the assignor to make
contributions as provided in § 18-502 of this title, unknown to the
assignee at the time the assignee became a member and which could not
be ascertained from a limited liability company agreement.

(c) Whether or not an assignee of a
limited liability company interest becomes a member, the assignor is
not released from liability to a limited liability company under
subchapters V and VI of this chapter. (68 Del. Laws, c. 434, § 1; 70
Del. Laws, c. 186, § 1.)

§ 18-705. Powers of estate of deceased or incompetent member.

If a member who is an individual dies or
a court of competent jurisdiction adjudges the member to be incompetent
to manage the member’s person or property, the member’s personal
representative may exercise all of the member’s rights for the purpose
of settling the member’s estate or administering the member’s property,
including any power under a limited liability company agreement of an
assignee to become a member. If a member is a corporation, trust or
other entity and is dissolved or terminated, the powers of that member
may be exercised by its personal representative. (68 Del. Laws, c. 434,
§ 1; 70 Del. Laws, c. 186, § 1; 71 Del. Laws, c. 77, § 29.)

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