2021 Charging Orders in Business Transactions

A charging order redirects a partner or LLC member’s distributions, if any, to a creditor. These court orders are frequently used when an LLC or partnership interest has been pledged to a creditor as collateral and the debtor is in default. Charging orders differ substantially from liens on corporate stock because charging orders do not allow the creditor to foreclose on the LLC or partnership interest but only claim distributions from the entity. The creditor does not succeed to any other rights of the LLC member – voting rights, management rights – and is totally dependent on the entity to make distributions. This program will provide you with a real-world guide to the uses and limitations of charging orders in transactions and tips on enhancing their effectiveness. 

• What does a creditor get with a charging order and what rights does the debtor retain?
• Impact of charging orders on the entity
• Enhancing the enforceability of charging orders
• Enforcement of one state’s charging order statute in another state
• Tax consequences of charging orders

Note: This material qualifies for self-study credit only. Pursuant to Regulation 15.04.5, a lawyer may receive up to six hours of self-study credit in a reporting year. Self-study programs do not qualify for GAL Certification, ethics, elimination of bias or Kansas credit.