                                 CODE OF VIRGINIA

RESTRICTIONS ON MAKING DISTRIBUTION (§ 13.1-1035)

A. No distribution may be made by a limited liability company if, after giving
effect to the distribution:

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

   2. The limited liability company&#8217;s total assets would be less than the
   sum of its total liabilities plus, unless the articles of organization or an
   operating agreement permits 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 upon dissolution of members
   whose preferential rights are superior to the rights of members receiving the
   distribution.

B. The limited liability company may base a determination that a distribution is
not prohibited under subsection A of this section either on:

   1. Financial statements prepared on the basis of accounting practices and
   principles that are reasonable in the circumstances; or

   2. A fair valuation or other method that is reasonable in the circumstances.

C. The effect of a distribution under subsection A of this section is measured
as of (i) the date the distribution is authorized if the payment occurs within
120 days after the date of authorization or (ii) the date the payment is made if
it occurs more than 120 days after the date of authorization.

D. [Repealed.]

E. For the purposes of this section, the term &#8220;distribution&#8221; shall
not include amounts constituting reasonable compensation for present or past
services or reasonable payments made in the ordinary course of business pursuant
to a bona fide retirement plan or other benefits program.

F. This section shall not apply to distributions in liquidation under Article 9
(&#xA7; 13.1-1046 et seq.) of this chapter.

HISTORY: 1991, c. 168; 1992, c. 574; 2001, c. 548; 2009, c. 763.