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LCL’s capital an assignment in which HBW transferred to LCL all
of HBW’s rights, title, and interest in its leases, subject to
existing loans.
Section 4.2 of LCL’s operating agreement stated that “No
Member shall be liable as such for the liabilities of the
Company.” On March 28, 2001, the LCL operating agreement was
amended and restated in its entirety (revised LCL operating
agreement), effective retroactively to January 1, 2000. The
revised LCL operating agreement is construed under Wyoming law,
and only the parties who signed the revised LCL operating
agreement (and their successors in interest) have any rights or
remedies under that agreement. The revised LCL operating
agreement stated that neither HBW nor HCC was required to make
any additional capital contribution to LCL. The revised LCL
operating agreement also stated:
7.7 Deficit Capital Account Restoration. If any
Partner has a deficit Capital Account following the
liquidation of his, her or its interest in the
partnership, then he, she or it shall restore the
amount of such deficit balance to the Partnership by
the end of such taxable year or, if later, within 90
days after the date of such liquidation, for payment to
creditors or distribution to Partners with positive
capital account balances.
In 2000 and 2001, neither HBW nor HCC liquidated its
interest in LCL. Nor at those times did either member have a
deficit in its LCL capital account.
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