Vermont § 4056 - Limitations on distributions

§ 4056. Limitations on distributions

• (a) A distribution shall 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) of this section on financial statements prepared on the basis
  of: (1) generally accepted accounting practices and principles; (2) a fair valuation; or (3) another method that is reasonable under the circumstances. (c) Except as otherwise provided in subsection (e) of this section, the effect of a distribution
  under subsection (a) of this section 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 120 days after the date of
  authorization; or (B) payment is made if it occurs more than 120 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) of this section if its terms provide that payment of principal
  and interest are 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 and not the
  issuance of the indebtedness is treated as a distribution, the effect of which is
  measured on the date the payment is made. (Added 2015, No. 17, § 2.)