45
Rights of Creditor against a member
(1)
In this section, Creditor means any person—
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(a)
in whose favour a judgment is issued or recognised by the Court against a member of a limited liability company; or
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(b)
who claims to have a general assignment of a member’s property whether arising from the intestacy of a member, the bankruptcy of a member or otherwise.
(2)
No membership rights, including any membership interest, and any distribution, return of capital or other payment to a member arising from that member’s membership rights, is capable of being seized, charged or levied upon or taken in execution by or under any form of judicial process or otherwise rendered available for the payment of a member’s debts or liabilities, nor may any membership rights, including any membership interest—
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(a)
pass under a general assignment of the member’s property; or
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(b)
become available for the payment of debts of a member under an intestacy; or
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(c)
pass to a trustee in bankruptcy upon the bankruptcy of a member.
(3)
A Creditor may apply to the Court for a charging order in respect of any membership interest held by member.
(4)
Subject to subsection (5) a charging order entitles the Creditor to receive any distributions, in relation to that membership interest, in lieu of the member, whether of income or capital, as and when made by the limited liability company.
(5)
For the purposes of assessing the sum which may be subject to, and recoverable pursuant to, a charging order the Court must disregard and exclude any amount which constitutes an award of exemplary, vindictive, retributory or punitive damages (by whatever name), or is an amount of damages arrived at by doubling, trebling or otherwise multiplying a sum assessed as compensation for loss or damage.
(6)
The charging order remedy given by this section is the sole and exclusive remedy available to a Creditor in respect of a member’s membership rights.
(7)
For the avoidance of doubt and without limiting the generality of subsection (6)—
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(a)
a charging order must not be construed to constitute a lien on a member’s interest in a limited liability company:
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(b)
the Creditor in whose favour a charging order is issued pursuant to this section does not thereby become an assignee of any membership interest or any part thereof, nor does that Creditor hold or be entitled to exercise any membership rights in relation to that interest:
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(c)
any member holding any membership interest subject to a charging order continues to exercise all his or her membership rights, and obligations in relation to those rights, in all respects as if the charging order had not been issued:
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(d)
subsection (6) applies whether the limited liability company has a single member or multiple members.
(8)
For the avoidance of doubt and without limiting the generality of subsection (6) and subsection (7), a person in whose favour a charging order has been issued has no right to—
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(a)
interfere in the manager’s management of the limited liability company including any sale of its assets; or
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(b)
liquidate or seize the assets of the limited liability company; or
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(c)
restrict the business of the limited liability company; or
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(d)
dissolve, or cause the dissolution of, the limited liability company.
(9)
Except as provided in subsection (10) no interlocutory order including any injunction, or interrogatories, may be issued, by the Court against a limited liability company in relation to a claim by a Creditor against a member.
(10)
An interim charging order may be made ex parte provided however any such order is effective for a term not exceeding 30 days from the date it is made. On application to the Court prior to the expiration date of an interim charging order the term of the charging order may be extended on notice for further periods not exceeding 30 days from the date the order is made.
(11)
For such period an interim charging order is in place any distributions made in respect of the membership interest subject to the interim charging order must be paid into the Court and used to satisfy or partially satisfy any debt owed to a Creditor in whose favour a charging order has been issued pursuant to this section, but otherwise must be paid out to the member entitled thereto.
(12)
Subject to subsection (10) in respect of an interim charging order a charging order is non-renewable and expires 5 years after the date of its making.
(13)
No foreign interlocutory order (including any injunction, or order for discovery or interrogatories) against a limited liability company relating to a claim by a Creditor against a member may be recognised or given effect by the Court.
(14)
Despite the provisions of any statute, or any rule of law to the contrary, no proceedings for or in relation to the enforcement or recognition of a judgment obtained in a jurisdiction other than the Cook Islands against a member’s membership rights or any part thereof, including a membership interest, may be in any way entertained, recognised or enforced by the Court to the extent the judgment purports to deprive a member of any membership rights or to charge, mortgage, levy, attach, assign or in any other way to affect that member’s enjoyment of those membership rights.
(15)
Any member may apply for the discharge of a charging order and the Court—
-
(a)
must discharge the charging order where it is satisfied the Creditor has been paid all sums payable under the charging order; and
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(b)
may discharge the charging order where it is satisfied the circumstances giving rise to the charging order have changed such that it is just and proper to discharge the charging order.
(16)
Where in any proceedings filed by a Creditor in the Court a valuation of a member’s membership interest may be relevant to the determination of any matter or issue before the Court—
-
(a)
the value attributable to that membership interest must for all purposes be the same as the value of the membership rights of that limited liability company to that member; and
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(b)
no regard is to be had to the restrictions contained in subsection (2).
(17)
Where a Creditor in whose favour a charging order has been issued pursuant to this section has received a distribution payable to the member whose membership interest has been charged, and an order is made for repayment of that distribution to the limited liability company, the Creditor and not the member is liable to make that payment to the limited liability company in the same proportion the repayment required bears to the amount of the distribution the Creditor received.
(18)
Nothing in this section affects the limited liability company’s ability to make calls upon its members where its operating agreement so provides and for the limited liability company to meet that call from a distribution otherwise payable to a member.