Code of Alabama
Article 4 - Relations of Members to Each Other and to the Limited Liability Company.
Section 10A-5A-4.06 - Limitation on Distributions and Liability for Improper Distributions.

(a)(1) A limited liability company shall not make a distribution to a member to the extent that at the time of the distribution, after giving effect to the distribution, all liabilities of the limited liability company, other than liabilities to members on account of their transferable interests and liabilities for which the recourse of creditors is limited to specific property of the limited liability company, exceed the fair value of the assets of the limited liability company, except that the fair value of the property that is subject to a liability for which recourse of creditors is limited shall be included in the assets of the limited liability company only to the extent that the fair value of the property exceeds that liability.
(2) A member who receives a distribution in violation of subsection (a)(1) or the limited liability company agreement, and who knew at the time of the distribution that the distribution violated subsection (a)(1) or the limited liability company agreement, shall be liable to the limited liability company for the amount of the distribution received by that member. A member who receives a distribution in violation of subsection (a)(1) or the limited liability company agreement, and who did not know at the time of the distribution that the distribution violated subsection (a)(1) or the limited liability company agreement, shall not be liable for the amount of the distribution.
(b)(1) A series shall not make a distribution to a member associated with the series to the extent that at the time of the distribution, after giving effect to the distribution, all liabilities of the series, other than liabilities to members associated with the series on account of their transferable interests and liabilities for which the recourse of creditors is limited to specific property of the series, exceed the fair value of the assets of the series, except that the fair value of the property that is subject to a liability for which recourse of creditors is limited shall be included in the assets of the series only to the extent that the fair value of the property exceeds that liability.
(2) A member associated with a series who receives a distribution in violation of subsection (b)(1) or the limited liability company agreement, and who knew at the time of the distribution that the distribution violated subsection (b)(1) or the limited liability company agreement, shall be liable to that series for the amount of the distribution received by that member. A member associated with a series who receives a distribution in violation of subsection (b)(1) or the limited liability company agreement, and who did not know at the time of the distribution that the distribution violated subsection (b)(1) or the limited liability company agreement, shall not be liable for the amount of the distribution.
(3) Subsection (a) shall not apply to a distribution made by a series.
(c) Except as provided in subsection (d), this section shall not affect any obligation or liability of a member under other applicable law for the amount of a distribution.
(d) An action under this section or other applicable law is barred if not commenced within two years after the distribution.
(e) For purposes of Sections 10A-5A-4.06(a) and 10A-5A-4.06(b), distribution does not include amounts constituting reasonable compensation for present or past services or reasonable payments made in the ordinary course of the limited liability company's activities and affairs under a bona fide retirement plan or other benefits program.
(f) This section shall not apply to distributions made in accordance with Section 10A-5A-7.06 or Section 10A-5A-11.14.

Structure Code of Alabama