Corporations, Associations, and Partnerships

The Rhode Island Limited Liability Company Act

SECTION 7-16-31

§ 7-16-31 Restrictions on making distributions.

(a) No distribution may be made to a member if, after giving effect to the distribution:

(1) The limited liability company would not be able to pay its debts as they become due in the usual course of business; or

(2) The limited liability company's total assets would be less than the sum of its total liabilities plus, unless the operating agreement provides otherwise, the amount that would be needed, if the limited liability company were to be dissolved at the time of the distribution, to satisfy the preferential rights of other members upon dissolution which are superior to the rights of the member receiving the distribution.

(b) The limited liability company may base a determination that a distribution is not prohibited under subsection (a) on:

(1) Financial statements prepared on the basis of accounting practices and principles that are reasonable under the circumstances; or

(2) A fair valuation or other method that is reasonable under the circumstances.

(c) The effect of a distribution under subsection (a) is measured as of:

(1) The date the distribution is authorized if the payment occurs within one hundred and twenty (120) days after the date of authorization; or

(2) The date payment is made if it occurs more than one hundred and twenty (120) days after the date of authorization.

History of Section.
(P.L. 1992, ch. 280, § 1.)