Nevada Senate Bill 405, which was signed into law by the Governor on June 16, provides that a “charging order” is the exclusive remedy of a judgment creditor against interests in Nevada limited liability companies, limited partnerships and corporations. A charging order is an order entered by a court in favor of a judgment creditor that permits the creditor to attach to distributions made to the debtor from the business entity. The Nevada legislation expressly applies to single member entities, thus avoiding problems that have arisen in other states, most recently in Florida. The legislation also provides that no other “equitable remedies” are available. This means that doctrines such as reverse veil piercing, alter ego, constructive trust and resulting trust would generally not be available against the owner of an interest in a Nevada business entities. A statutory exception is made, however, for the application of the alter ego doctrine to a Nevada corporation. The strengthening of Nevada’s asset protection law in this regard may make Nevada a leading choice for formation of business entities in the months and years to come.
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Nevada passes restrictive “charging order” legislation to increase asset protection afforded by business entities – Nevada SB 405 (June 16, 2011)
- Proskauer Rose LLP
- Elaine Bucher, Albert W Gortz, George D Karibjanian, David Pratt, Mitchell M Gaswirth and Andrew M Katzenstein
- August 5 2011
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