It may come as a surprise that the charging order remedy under Iowa Code 489.503 is only available against domestic (Iowa) LLCs (the phrase "limited liability company" is limited by definition to domestic LLCs). Thus, if you have a judgment against a debtor who owns an interest in a Delaware LLC, that state is the proper forum to bring a charging order proceeding. Remember that the charging order directs the company to send its distributions to the creditor, it is not an action against the debtor/member.
There are some contrary opinions out there to the effect that if a state has jurisdiction over a foreign LLC it should be able to impose a charging order against it, but I don't see how you overcome the definitional challenge created by the Iowa Act.
This leads to some interesting asset protection planning. Of course it is an annoyance to a creditor to have to go to Delaware to collect on an Iowa judgment. But imagine the consternation of the creditor if the interest is in a Proprietary Limited Company in Australia. Happy New Year.
Comments