Abstract

http://ssrn.com/abstract=948917
 


 



Foreclosure and Dissolution Rights of a Member's Creditors: No Cause for Alarm


Thomas E. Rutledge


Stoll Keenon Ogden PLLC

Carter G. Bishop


Suffolk University Law School

Thomas Geu


University of South Dakota Law School


Property and Probate, Vol. 21, No. 3, p. 35, May/June 2007
Suffolk University Law School Research Paper No. 07-18

Abstract:     
A recent article in this journal raised the spectre that a judgment creditor of a member of a limited liability company (LLC) might apply for and obtain a charging order; then or later persuade the court to order foreclosure on the membership interest subject to the charging order before the charging order is redeemed; be the successful bidder at the foreclosure sale; thereby become a transferee; thereafter petition for involuntary judicial dissolution of the LLC; and finally persuade the court that involuntary dissolution (with its attendant consequences to a potentially successful business, its other members, employees, and creditors) is warranted. If successful, the judicial dissolution threat would either force a sale of the entity's assets or require the other members to purchase the interest from the foreclosure and purchasing creditor at an inflated price elevated by the dissolution threat. Either event would be highly disruptive to the successful continuation of the LLC's business and, if realistic, represent a serious impediment to the use of the LLC entity form. Moreover, the eventuality of judicial dissolution would represent a serious threat to "asset protection" goals of using an entity's separate existence to insulate personal assets from the reach of that member's creditors.

Number of Pages in PDF File: 9

Keywords: limited liability company, LLC, dissolution, foreclosure, charging order

JEL Classification: M10, K12, K19, K20, K29

Accepted Paper Series


Download This Paper

Date posted: December 4, 2006 ; Last revised: February 1, 2010

Suggested Citation

Rutledge, Thomas E. and Bishop, Carter G. and Geu, Thomas, Foreclosure and Dissolution Rights of a Member's Creditors: No Cause for Alarm. Property and Probate, Vol. 21, No. 3, p. 35, May/June 2007; Suffolk University Law School Research Paper No. 07-18. Available at SSRN: http://ssrn.com/abstract=948917

Contact Information

Thomas E. Rutledge
Stoll Keenon Ogden PLLC ( email )
2000 PNC Plaza
500 West Jefferson Street
Louisville, KY 40202-2828
United States
HOME PAGE: http://skofirm.com
Carter G. Bishop (Contact Author)
Suffolk University Law School ( email )
120 Tremont Street
Boston, MA 02108-4977
United States
617-573-8534 (Phone)

Thomas Geu
University of South Dakota Law School ( email )
414 E. Clark Street
Vermillion, SD 57069
United States
Feedback to SSRN


Paper statistics
Abstract Views: 2,196
Downloads: 252
Download Rank: 68,409

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo5 in 0.266 seconds