-14- Here, in a worst case scenario, HBW is not a payor of last resort as to LCL’s recourse debt. In such a scenario, LCL defaults on the debt without any assets to repay any of the debt. LCL’s default, however, does not mean that the recourse creditor can simply turn to HBW to collect any part of the debt. HBW’s obligation under the DRO requires in part that HBW liquidate its interest in LCL, and LCL’s default on its payment of its recourse debt does not trigger a liquidation of HBW’s interest in LCL (or of LCL itself).6 Nor in a worst case scenario could LCL’s recourse creditor recover directly from HBW or compel a dissolution of LCL so as to force a liquidation of HBW’s interest in LCL. The revised operating agreement states that LCL shall be liquidated upon its “dissolution” and that dissolution occurs “only as provided by the Wyoming LLC Act.” Under that act, the dissolution of a limited liability company occurs only upon the happening of one of three events, none of which is the company’s default on the payment of a debt. See Wyo. Stat. Ann. sec. 6 Petitioner apparently assumes that in a worst case scenario HBW will liquidate its interest in LCL and then have a deficit capital account thus triggering the DRO. We disagree with the assumption. As stated herein, HBW’s liquidation of its interest in LCL is left up to HBW, and we do not assume that HBW on its own would liquidate its interest in LCL if it was detrimental for HBW to do so. In other words, as discussed below, LCL could not be made to liquidate by a creditor in any circumstance, not even by a creditor that forced LCL into receivership or bankruptcy.Page: Previous 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 NextLast modified: March 27, 2008