-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 Next
Last modified: March 27, 2008