Delaware – Limited Liability Company Act – Finance

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§ 18-501. | § 18-502. | § 18-503. | § 18-504. | § 18-505.

Commerce and Trade

SUBTITLE II

Other Laws Relating to Commerce and Trade

CHAPTER 18. LIMITED LIABILITY COMPANY ACT

Subchapter V. Finance

§ 18-501. Form of contribution.

The contribution of a member to a limited
liability company may be in cash, property or services rendered, or a
promissory note or other obligation to contribute cash or property or
to perform services. (68 Del. Laws, c. 434, § 1.)

§ 18-502. Liability for contribution.

(a) Except as provided in a limited
liability company agreement, a member is obligated to a limited
liability company to perform any promise to contribute cash or property
or to perform services, even if the member is unable to perform because
of death, disability or any other reason. If a member does not make the
required contribution of property or services, the member is obligated
at the option of the limited liability company to contribute cash equal
to that portion of the agreed value (as stated in the records of the
limited liability company) of the contribution that has not been made.
The foregoing option shall be in addition to, and not in lieu of, any
other rights, including the right to specific performance, that the
limited liability company may have against such member under the
limited liability company agreement or applicable law.

(b) Unless otherwise provided in a
limited liability company agreement, the obligation of a member to make
a contribution or return money or other property paid or distributed in
violation of this chapter may be compromised only by consent of all the
members. Notwithstanding the compromise, a creditor of a limited
liability company who extends credit, after the entering into of a
limited liability company agreement or an amendment thereto which, in
either case, reflects the obligation, and before the amendment thereof
to reflect the compromise, may enforce the original obligation to the
extent that, in extending credit, the creditor reasonably relied on the
obligation of a member to make a contribution or return. A conditional
obligation of a member to make a contribution or return money or other
property to a limited liability company may not be enforced unless the
conditions of the obligation have been satisfied or waived as to or by
such member. Conditional obligations include contributions payable upon
a discretionary call of a limited liability company prior to the time
the call occurs.

(c) A limited liability company agreement
may provide that the interest of any member who fails to make any
contribution that the member is obligated to make shall be subject to
specified penalties for, or specified consequences of, such failure.
Such penalty or consequence may take the form of reducing or
eliminating the defaulting member’s proportionate interest in a limited
liability company, subordinating the member’s limited liability company
interest to that of nondefaulting members, a forced sale of that
limited liability company interest, forfeiture of the defaulting
member’s limited liability company interest, the lending by other
members of the amount necessary to meet the defaulting member’s
commitment, a fixing of the value of the defaulting member’s limited
liability company interest by appraisal or by formula and redemption or
sale of the limited liability company interest at such value, or other
penalty or consequence. (68 Del. Laws, c. 434, § 1; 70 Del. Laws, c.
186, § 1.)

§ 18-503. Allocation of profits and losses.

The profits and losses of a limited
liability company shall be allocated among the members, and among
classes or groups of members, in the manner provided in a limited
liability company agreement. If the limited liability company agreement
does not so provide, profits and losses shall be allocated on the basis
of the agreed value (as stated in the records of the limited liability
company) of the contributions made by each member to the extent they
have been received by the limited liability company and have not been
returned. (68 Del. Laws, c. 434, § 1.)

§ 18-504. Allocation of distributions.

Distributions of cash or other assets of
a limited liability company shall be allocated among the members, and
among classes or groups of members, in the manner provided in a limited
liability company agreement. If the limited liability company agreement
does not so provide, distributions shall be made on the basis of the
agreed value (as stated in the records of the limited liability
company) of the contributions made by each member to the extent they
have been received by the limited liability company and have not been
returned. (68 Del. Laws, c. 434, § 1.)

§ 18-505. Defense of usury not available.

No obligation of a member or manager of a
limited liability company to the limited liability company arising
under the limited liability company agreement or a separate agreement
or writing, and no note, instrument or other writing evidencing any
such obligation of a member or manager, shall be subject to the defense
of usury, and no member or manager shall interpose the defense of usury
with respect to any such obligation in any action. (69 Del. Laws, c.
260, § 26.)

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