In July of 2007, Nevada became the first jurisdiction to extend charging order protection to corporate stock. Now, nearly four-and-a-half years later, Nevada has once again expanded its charging order laws—this time, to single member limited liability companies (SMLLCs).
Section 69 of SB 405, amending NRS 86.401, specifies that the charging order is the “exclusive remedy” by which a creditor of a member “may satisfy a judgment out of the member’s interest…whether the limited-liability company has one member or more than one member.” SB 405 was passed in the wake of decisions creating doubt about the asset protection efficacy of SMLLCs such as Olmstead and Albright. As attorney Steve Oshins (http://www.oshins.com/), who was instrumental in the drafting of the part of SB 405 regarding SMLLC charging order protection, explained in an interview with this blog: “After reading the Olmstead case in early 2010 and seeing where the trend in the law was heading, I felt that it was time to clarify Nevada’s charging order laws to continue to enhance them and keep Nevada ahead of the rest of the pack.”
In addition to indicating that the charging order is the exclusive remedy available to the judgment creditor, Section 69 of SB 405 also provides that no equitable remedies can apply. Indeed, the bill explicitly states that “[n]o other remedy, including, without limitation, foreclosure on the member’s interest,…is available to the judgment creditor…and no other remedy may be
ordered by a court.”
SB 405 was not the lone piece of significant legislation concerning asset protection that became effective on the first of October. SB 221, signed June 4, 2011, enhances Nevada’s asset protection laws even further by:
- including a tacking provision that enables the trustee of an asset protection trust established in a less attractive jurisdiction to move the trust to Nevada and take advantage of the short two-year statute of limitations without restarting the clock;
- expanding the types of trusts that may provide asset protection;
- limiting the liability of the trustee of a spendthrift trust;
- and providing that, in order for a creditor to bring a claim against a transfer of property to a Nevada self-settled spendthrift trust, a creditor needs to prove “by clear and convincing evidence” that the transfer was fraudulent or violates a legal obligation owed to the creditor.
For a more in-depth discussion of SB 221, please see here.