Charging Orders in Business Transactions

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Description

A charging order redirects a partner or LLC member's distributions, if any, to a creditor. These court orders are frequently used when an LLC or partnership interest has been pledged to a creditor as collateral and the debtor is in default.

Charging orders differ substantially from liens on corporate stock because charging orders do not allow the creditor to foreclose on the LLC or partnership interest but only claim distributions from the entity. The creditor does not succeed to any other rights of the LLC member – voting rights, management rights – and is totally dependent on the entity to make distributions.

This program provides a real-world guide to the uses and limitations of charging orders in transactions and tips on enhancing their effectiveness.

What does a creditor get with a charging order and what rights does the debtor retain?
Impact of charging orders on the entity
Enhancing the enforceability of charging orders
Enforcement of one state's charging order statute in another state
Tax consequences of charging orders

Contributors

Daniel Kleinberger

Daniel Kleinberger is an Emeritus Professor of Law at Mitchell Hamline School of Law in St. Paul, MN, where his teaching and scholarship focused on business law. He has served as the reporter on many uniform laws in business law, including Series Unincorporated Entities and Limited Partnerships.

Before entering academic, he was an in-hose counsel at the 3m Corporation. He is the author of a leading treatise on LLCs and a popular student treatise on agency, partnerships, and LLCs.

Daniel earned his A.B. from Harvard University and his J.D. from Yale Law School.

Click here for more information about Daniel.
Steven O. Weise

Steven O. Weise is a partner in the Los Angeles office Proskauer Rose, LLP, where his practice encompasses all areas of commercial law. He has extensive experience in financings, particularly those secured by personal property. He also handles matters involving real property anti-deficiency laws, workouts, guarantees, sales of goods, letters of credit, commercial paper and checks, and investment securities. Mr. Weise formerly served as chair of the ABA Business Law Section. He has also served as a member of the Permanent Editorial Board of the UCC and as an Advisor to the UCC Code Article 9 Drafting Committee. Mr. Weise received his B.A. from Yale University and his J.D. from the University of California, Berkeley, Boalt Hall School of Law.

Click here for more information about Steven.

Thank you

Description

Contributors

Daniel Kleinberger

Steven O. Weise