Transferees and Creditors of Member

V.S.A. tit. 11, ch. 25, subch. 5

in effect

11 V.S.A. § 4071 Member’s distributional interest

4071. Member’s distributional interest (a) A distributional interest in a limited liability company is personal property and, subject to sections 4072 and 4073 of this title, may be transferred in whole or in part. (b) An operating agreement may provide that a distributional interest may be evidenced by a certificate of the interest issued by the limited liability company and, subject to section 4073 of this title, may also provide for the transfer of any interest represented by the certificate by a transfer of the certificate. Added 2015, No. 17, § 2.

11 V.S.A. § 4072 Transfer of distributional interest

4072. Transfer of distributional interest (a) A transfer, in whole or in part, of a distributional interest: (1) is permissible; (2) does not by itself cause a member’s dissociation or a dissolution and winding up of the company’s activities; and (3) subject to section 4075 of this title, does not entitle the transferee to: (A) become or to exercise any rights of a member: (B) participate in the management or conduct of the company’s activities; or (C) except as otherwise provided in subsection 4073(d) of this title, have access to records or other information concerning the company’s activities. (b) A transfer of a distributional interest entitles the transferee to receive, in accordance with the transfer, the distributions to which the transferor would otherwise be entitled with respect to the interest. (c) Except as otherwise provided in subdivision 4081(4)(B) of this title, if a member transfers a distributional interest, the transferor retains the rights of a member other than the distributional interest transferred and retains all duties and obligations of a member. (d) A transfer of a distributional interest in violation of a restriction on transfer contained in the operating agreement is ineffective if the intended transferee has knowledge or notice of the restriction at the time of transfer. Added 2015, No. 17, § 2.

11 V.S.A. § 4073 Rights of transferee

4073. Rights of transferee (a) A transferee of a distributional interest may become a member of a limited liability company if and to the extent that all other members consent. (b)(1) A transferee who has become a member has the rights and powers, and is subject to the restrictions and liabilities, of a member under the operating agreement and this chapter to the extent of the membership interest transferred. (2) A transferee who becomes a member also is liable for the transferor member’s obligations to make contributions under section 4053 of this title and for obligations under section 4057 of this title to return unlawful distributions, but the transferee is not obligated for the transferor member’s liabilities unknown to the transferee at the time the transferee becomes a member and which could not be ascertained from the articles of organization or the operating agreement made available to the transferee, and is not personally liable for any obligation of the limited liability company incurred before the transferee’s admission as a member. (c) Whether or not a transferee of a distributional interest becomes a member under subsection (a) of this section, the transferor retains all duties and obligations of a member and is not released from liability to the limited liability company and the other members under the operating agreement or this chapter unless all other members consent. (d) A transferee who does not become a member is not entitled to participate in the management or conduct of the limited liability company’s business or affairs, require access to information concerning the company’s transactions, or inspect or copy any of the company’s books and other records, except that in a dissolution and winding up of a limited liability company, a transferee is entitled to an account of the company’s transactions only from the date of dissolution. (e) A transferee who does not become a member is entitled to: (1) receive, in accordance with the transfer, distributions to which the transferor would otherwise be entitled; (2) receive, upon dissolution and winding up of the limited liability company’s business: (A) in accordance with the transfer, the net amount otherwise distributable to the transferor; and (B) a statement of account only from the date of the latest statement of account agreed to by all the members. (f) A limited liability company need not give effect to a transfer or a transferee’s rights under this section until it has notice of the transfer. Added 2015, No. 17, § 2.

11 V.S.A. § 4074 Charging order

4074. Charging order (a)(1) On application by a judgment creditor of a member or transferee, a court may enter a charging order against the distributional interest of the judgment debtor for the unsatisfied amount of the judgment. (2) Except as provided in subsection (f) of this section, a charging order constitutes a lien on a judgment debtor’s distributional interest and requires the limited liability company to pay over to the person to which the charging order was issued any distribution that would otherwise be paid to the judgment debtor. (b) To the extent necessary to effectuate the collection of distributions pursuant to a charging order in effect under subsection (a) of this section, the court may: (1) appoint a receiver of the distributions subject to the charging order, with the power to make all inquiries the judgment debtor might have made; and (2) make all other orders necessary to give effect to the charging order. (c)(1) Upon a showing that distributions under a charging order will not pay the judgment debt within a reasonable time, the court may foreclose the lien and order the sale of the distributional interest. (2) Except as provided in subsection (f) of this section, the purchaser at the foreclosure sale obtains only the distributional interest, does not thereby become a member, and is subject to section 4073 of this title. (d) At any time before foreclosure under subsection (c) of this section, the member or transferee whose distributional interest is subject to a charging order under subsection (a) of this section may extinguish the charging order by satisfying the judgment and filing a certified copy of the satisfaction with the court that issued the charging order. (e) At any time before foreclosure under subsection (c) of this section, a limited liability company or one or more members whose distributional interests are not subject to the charging order may pay to the judgment creditor the full amount due under the judgment and thereby succeed to the rights of the judgment creditor, including the charging order. (f) This section does not deprive any member or transferee of the benefit of any exemption laws applicable to the member’s or transferee’s distributional interest. (g) If a court orders foreclosure of a charging order lien against the sole member of a limited liability company: (1) the court shall confirm the sale; (2) the purchaser at the sale obtains the member’s entire interest, not only the member’s transferable interest; (3) the purchaser thereby becomes a member; and (4) the person whose interest was subject to the foreclosed charging order is dissociated as a member. (h) This section provides the exclusive remedy by which a person, who in the capacity of a judgment creditor seeks to enforce a judgment against a member or transferee, may satisfy the judgment from the judgment debtor’s distributional interest. Added 2015, No. 17, § 2.

11 V.S.A. § 4075 Power of estate of deceased member

4075. Power of estate of deceased member If a member who is an individual dies, the member’s legal representative may exercise the rights of a transferee under section 4073 of this title, and, for purposes of settling the estate, the member’s legal representative may exercise the rights the deceased member had under section 4058 of this title. Added 2015, No. 17, § 2.

Source: Vermont General Assembly (legislature.vermont.gov)URL: https://legislature.vermont.gov/statutes/chapter/11/025Fetched: 10/21/2026