Assignment of a Membership Interest or Governance Rights

Checkout our iOS App for a better way to browser and research.

  1. Transfer of Membership Interests Restricted.  A member may assign the member's full membership interest only by assigning all of the member's governance rights coupled with an assignment to the same assignee of all the member's financial rights. A member's governance rights are assignable only as provided in this section. A member or holder of a financial right has no power to assign all or any part of the member's membership interest or financial rights, except as provided in § 48-218-101 and this section.
  2. Consents Required.
    1. Except as otherwise provided in the articles or the operating agreement, a member may, without the consent of any other member, assign governance rights to another member.
      1. Except as provided in subdivisions (b)(2)(B) and (C), any other assignment of any governance rights is effective only if all the members, other than the member seeking to make the assignment, approve the assignment by unanimous consent or if the articles or operating agreement so permit, if the assignment is approved in accordance with § 48-232-102. The consent of a member may be evidenced in any manner specified in the articles or operating agreement, but in the absence of such specification, consent shall be evidenced by a written instrument, dated and signed by such person. The giving of consent is at the discretion of the consenting party and may be unreasonably withheld.
      2. If the articles or operating agreement so provide, the governors who are members may approve, by a majority or greater in number of the nonassigning governors who are members, the assignment of governance rights to a nonmember. In the event there are no nonassigning governors who are members, the assignment must be approved by unanimous consent of the governors or, if the articles or operating agreement so permit, the assignment shall be approved by at least a majority vote of the members exclusive of the member seeking to make the assignment.
      3. Pursuant to § 48-232-102(a), if permitted in the articles or operating agreement, the governance rights associated with membership interests or classes of membership interests may be assigned without the consent of the members or the governors who are members.
  3. Effect on Membership.  When an assignment of governance rights is effective under subsection (b):
    1. The assignee becomes a member, if not already a member;
    2. If the assignor does not retain any governance rights, the assignor ceases to be a member, and the consent required under subsection (b), shall, if applicable, also constitute the consent to avoid dissolution that would otherwise result under § 48-245-101(a)(5); and
    3. An assignee who has become a member has, to the extent assigned, the rights and powers and is subject to the restrictions and liabilities, of a member under the articles, any operating agreement and chapters 201-248 of this title.
  4. Effect on Liability for Contributions and Illegal Distributions.  When an assignment is effective under subsection (a):
    1. The assignee is liable for any obligations of the assignor under § 48-232-101 existing at the time of transfer, except to the extent that, at the time the assignee became a member, the liability was unknown to the assignee, and could not be ascertained from the required records of the LLC;
    2. Notwithstanding subdivision (d)(1), the assignee shall not be liable for the obligations of the assignor under § 48-237-101; and
    3. The assignor is not released from liability to the LLC for obligations of the assignor existing at the time of transfer under §§ 48-232-101 and 48-237-101.
  5. Pledge of Membership Interest.  Unless otherwise provided in the articles or an operating agreement, the pledge of, or granting of a security interest, lien or other encumbrance in or against, any or all of the membership interest of a member is not an assignment and shall not cause the member to cease to be a member or to cease to have the power to exercise any rights or powers of a member.
  6. Consequences of Ineffective Assignment.  If any purported or attempted assignment of governance rights is ineffective for failure to obtain the consent required in subsection (b):
    1. The purported or attempted assignment is ineffective in its entirety; and
    2. Any assignment of financial rights that accompanied the purported or attempted assignment of governance rights is void.


Download our app to see the most-to-date content.