Bill Text: FL H0253 | 2011 | Regular Session | Engrossed

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Bill Title: Limited Liability Companies

Spectrum: Slight Partisan Bill (Republican 5-1-1)

Status: (Engrossed - Dead) 2011-05-02 - Ordered enrolled -HJ 1162 [H0253 Detail]

Download: Florida-2011-H0253-Engrossed.html

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CS/HB 253

1	A bill to be entitled
2	An act relating to limited liability companies; amending
3	s. 608.433, F.S.; providing that a charging order against
4	a member's limited liability company interest is the sole
5	and exclusive remedy available to enforce a judgment
6	creditor's unsatisfied judgment against a member or
7	member's assignee; providing an exception for enforcing a
8	judgment creditor's unsatisfied judgment against a
9	judgment debtor or assignee of the judgment debtor of a
10	single-member limited liability company under certain
11	circumstances; providing that, in the case of a
12	multimember limited liability company, certain remedies
13	are unavailable to a judgment creditor attempting to
14	satisfy a judgment; prohibiting a court from ordering such
15	remedies; providing construction relating to secured
16	creditor rights, specified principles of law and equity,
17	and continuing enforcement jurisdiction of the court;
18	providing legislative intent; providing for retroactive
19	application; providing an effective date.
20
21	WHEREAS, on June 24, 2010, the Florida Supreme Court held
22	in Olmstead v. Federal Trade Commission (No. SC08-1009),
23	reported at 44 So.3d 76, 2010-1 Trade Cases P 77,079, 35 Fla. L.
24	Weekly S357, that a charging order is not the exclusive remedy
25	available to a creditor holding a judgment against the sole
26	member of a Florida single-member limited liability company
27	(LLC), and
28	WHEREAS, a charging order represents a lien entitling a
29	judgment creditor to receive distributions from the LLC or the
30	partnership that otherwise would be payable to the member or
31	partner who is the judgment debtor, and
32	WHEREAS, the dissenting members of the Court in Olmstead
33	expressed a concern that the majority's holding is not limited
34	to a single-member LLC and a desire that the Legislature clarify
35	the law in this area, and
36	WHEREAS, the Legislature finds that the uncertainty of the
37	breadth of the Court's holding in Olmstead may persuade
38	businesses and investors located in Florida to organize LLCs
39	under the law in other jurisdictions where a charging order is
40	the exclusive remedy available to a judgment creditor of a
41	member of a multimember LLC, and
42	WHEREAS, the Legislature further finds it necessary to
43	amend s. 608.433, Florida Statutes, to remediate the potential
44	effect of the holding in Olmstead and to clarify that the
45	current law does not extend to a member of a multimember LLC
46	organized under Florida law and to provide procedures for
47	application of the holding in Olmstead to a member of a single-
48	member LLC organized under Florida law, NOW, THEREFORE,
49
50	Be It Enacted by the Legislature of the State of Florida:
51
52	Section 1.  Section 608.433, Florida Statutes, is amended
53	to read:
54	608.433  Right of assignee to become member.-
55	(1)  Unless otherwise provided in the articles of
56	organization or operating agreement, an assignee of a limited
57	liability company interest may become a member only if all
58	members other than the member assigning the interest consent.
59	(2)  An assignee who has become a member has, to the extent
60	assigned, the rights and powers, and is subject to the
61	restrictions and liabilities, of the assigning member under the
62	articles of organization, the operating agreement, and this
63	chapter. An assignee who becomes a member also is liable for the
64	obligations of the assignee's assignor to make and return
65	contributions as provided in s. 608.4211 and wrongful
66	distributions as provided in s. 608.428. However, the assignee
67	is not obligated for liabilities which are unknown to the
68	assignee at the time the assignee became a member and which
69	could not be ascertained from the articles of organization or
70	the operating agreement.
71	(3)  If an assignee of a limited liability company interest
72	becomes a member, the assignor is not released from liability to
73	the limited liability company under s. ss. 608.4211, s.
74	608.4228, or s. and 608.426.
75	(4)(a)  On application to a court of competent jurisdiction
76	by any judgment creditor of a member or a member's assignee, the
77	court may enter a charging order against the limited liability
78	company interest of the judgment debtor or assignee rights for
79	charge the limited liability company membership interest of the
80	member with payment of the unsatisfied amount of the judgment
81	plus with interest.
82	(b)  A charging order constitutes a lien on the judgment
83	debtor's limited liability company interest or assignee rights.
84	Under a charging order To the extent so charged, the judgment
85	creditor has only the rights of an assignee of a limited
86	liability company interest to receive any distribution or
87	distributions to which the judgment debtor would otherwise have
88	been entitled from the limited liability company, to the extent
89	of the judgment, including such interest.
90	(c)  This chapter does not deprive any member or member's
91	assignee of the benefit of any exemption law laws applicable to
92	the member's limited liability company interest or the
93	assignee's rights to distributions from the limited liability
94	company.
95	(5)  Except as provided in subsections (6) and (7), a
96	charging order is the sole and exclusive remedy by which a
97	judgment creditor of a member or member's assignee may satisfy a
98	judgment from the judgment debtor's interest in a limited
99	liability company or rights to distributions from the limited
100	liability company.
101	(6)  In the case of a limited liability company having only
102	one member, if a judgment creditor of a member or member's
103	assignee establishes to the satisfaction of a court of competent
104	jurisdiction that distributions under a charging order will not
105	satisfy the judgment within a reasonable time, a charging order
106	is not the sole and exclusive remedy by which the judgment
107	creditor may satisfy the judgment against a judgment debtor who
108	is the sole member of a limited liability company or the
109	assignee of the sole member, and upon such showing, the court
110	may order the sale of that interest in the limited liability
111	company pursuant to a foreclosure sale. A judgment creditor may
112	make a showing to the court that distributions under a charging
113	order will not satisfy the judgment within a reasonable time at
114	any time after the entry of the judgment and may do so at the
115	same time that the judgment creditor applies for the entry of a
116	charging order.
117	(7)  In the case of a limited liability company having only
118	one member, if the court orders foreclosure sale of a judgment
119	debtor's interest in the limited liability company or of a
120	charging order lien against the sole member of the limited
121	liability company pursuant to subsection (6):
122	(a)  The purchaser at the court-ordered foreclosure sale
123	obtains the member's entire limited liability company interest,
124	not merely the rights of an assignee;
125	(b)  The purchaser at the sale becomes the member of the
126	limited liability company; and
127	(c)  The person whose limited liability company interest is
128	sold pursuant to the foreclosure sale or is the subject of the
129	foreclosed charging order ceases to be a member of the limited
130	liability company.
131	(8)  In the case of a limited liability company having more
132	than one member, the remedy of foreclosure on a judgment
133	debtor's interest in such limited liability company or against
134	rights to distribution from such limited liability company is
135	not available to a judgment creditor attempting to satisfy the
136	judgment and may not be ordered by a court.
137	(9)  Nothing in this section shall limit:
138	(a)  The rights of a creditor that has been granted a
139	consensual security interest in a limited liability company
140	interest to pursue the remedies available to such secured
141	creditor under other law applicable to secured creditors;
142	(b)  The principles of law and equity which affect
143	fraudulent transfers;
144	(c)  The availability of the equitable principles of alter
145	ego, equitable lien, or constructive trust, or other equitable
146	principles not inconsistent with this section; or
147	(d)  The continuing jurisdiction of the court to enforce
148	its charging order in a manner consistent with this section.
149	Section 2.  The amendment to s. 608.433, Florida Statutes,
150	made by this act is intended by the Legislature to be clarifying
151	and remedial in nature and shall apply retroactively.
152	Section 3.  This act shall take effect upon becoming a law.

CODING: Words stricken are deletions; words underlined are additions.