Charging orders cannot grant managerial rights in an LLC
Mar. 5, 2012The Dickinson Law Newsroom
Charging orders cannot grant managerial rights in an LLC

The Nevada Supreme Court ruled in Weddell v. H2O, Inc., 128 Nev. Adv. Op. #9, (Nev. March 1, 2012) that a judgment creditor is like an assignee of a membership interest.  The creditor is entitled to only the share of the distributions the member would otherwise have received.  The managerial interest of the debtor remains with the debtor. 

This case is a good reminder that the charging order is limited to satisfaction of a judgment by petitioning a court to charge the member’s interest with the amount of the judgment. In essence, a charging order is similar to a garnishment; it directs the LLC to make distributions to the creditor that it would have made to the member. It does not permit a judgment creditor of a member to affect the management of the LLC or reach its assets. 

This article was first published online at Ward on Iowa Limited Liability Company Law.

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