Nevada § 86.343 - Distributions: Prohibition; applicable determinations; liability of member for violation

§ 86.343. Distributions: Prohibition; applicable determinations; liability of member for violation

1. Except as otherwise provided in subsection 2, a distribution from a limited-liability

company must not be made if, after giving it effect: (a) The company would not be able to pay its debts as they become due in the usual

course of business; or (b) Except as otherwise specifically permitted by the articles of organization, the

total assets of the company would be less than the sum of its total liabilities. 2. A distribution from a series of the company must not be made if, after giving it

effect: (a) The company would not be able to pay the debts of the series from assets of the

series as debts of the series become due in the usual course of business; or (b) Except as otherwise specifically permitted by the articles of organization, the

total assets of the series would be less than the sum of the total liabilities of

the series. 3. The manager or managers or, if management of the company is not vested in a manager

or managers, the members, may base a determination that a distribution is not prohibited

pursuant to this section on: (a) Financial statements prepared on the basis of accounting practices that are reasonable

in the circumstances; (b) A fair valuation, including unrealized appreciation and depreciation; or (c) Any other method that is reasonable in the circumstances. 4. The effect of a distribution pursuant to this section must be measured: (a) In the case of a distribution by purchase, redemption or other acquisition by

the company of member's interests, as of the earlier of: (1) The date on which money or other property is transferred or debt incurred by the

company; or (2) The date on which the member ceases to be a member with respect to his or her

acquired interest. (b) In the case of any other distribution of indebtedness, as of the date on which

the indebtedness is distributed. (c) In all other cases, as of: (1) The date on which the distribution is authorized if the payment occurs within

120 days after the date of authorization; or (2) The date on which the payment is made if it occurs more than 120 days after the

date of authorization. 5. Indebtedness of the company, or a series of the company, including indebtedness

issued as a distribution, is not considered a liability for purposes of determinations

pursuant to this section if its terms provide that payment of principal and interest

are to be made only if and to the extent that payment of a distribution to the members

could then be made pursuant to this section. If the indebtedness is issued as a distribution, each payment of principal or interest

must be treated as a distribution, the effect of which must be measured as of the

date of payment. 6. Except as otherwise provided in subsection 7, a member who receives a distribution

in violation of this section is liable to the limited-liability company or the series,

as applicable, for the amount of the distribution. This subsection does not affect the validity of an obligation or liability of a

member created by an agreement or other applicable law for the amount of a distribution. 7. A member who receives a distribution from a limited-liability company or the series,

as applicable, in violation of this section is not liable to the limited-liability

company or such series, as applicable, and, in the event of its dissolution or insolvency,

to its creditors, or any of them, for the amount of the distribution after the expiration

of 3 years after the date of the distribution unless an action to recover the distribution

from the member is commenced before the expiration of the 3-year period following

the distribution. 8. Except as otherwise provided in the articles of organization or operating agreement,

the manager or managers or, if the management of the company is not vested in a manager

or managers, the members, may fix a record date for determining the members entitled

to a distribution authorized pursuant to this section. The record date must not precede the day on which it is fixed.