Also known as: transferable interests · economic interest
Written by attorneys · grounded in primary & secondary sources — see below
A partner's or member's economic rights in a partnership or limited liability company consisting solely of the right to receive distributions. The holder of a transferable interest obtains no management rights or partner status and the transfer leaves the transferor with all other rights and duties of ownership.
Talia Torres sits as judge in a contract dispute involving Twin Rivers Bank. Her spouse owns a substantial block of the bank's shares that will increase in value if the bank prevails. Because the judge knows of this personal economic interest in a party, the rule requires her to recuse herself and the judgment must be vacated.
Tristan Thompson sells his entire partnership interest in a manufacturing venture to Talon Security. The sale conveys only the transferable interest consisting of the right to future distributions. Tristan remains a partner with management rights while Talon receives distributions only.
Select any source to read its text and confirm it supports the definition.
Triumph Manufacturing winds up after creditors are paid. The remaining surplus goes first to members who still hold unreturned capital contributions through their transferable interests. Any excess is then divided among all holders of transferable interests in proportion to their pre-dissolution distribution rights.
Tyrone Tran presides over a class action while he himself is plaintiff in identical pending cases. A favorable ruling will increase the settlement value of his own claims. The direct personal economic interest in the outcome violates due process and requires the judgment to be vacated.
Tara Tran obtains a money judgment against partner Thaddeus Tran. On application the court enters a charging order against Thaddeus's transferable interest. The partnership must pay all future distributions that would have gone to Thaddeus directly to Tara until the judgment is satisfied.
Tracy Torres, a director of Terra Financial, learns of a cellular license opportunity. At the time she evaluates the opportunity the company's plans to acquire it remain wholly speculative. The court therefore finds no corporate interest or expectancy that would bar her personal purchase of the license.
The transferee receives only the economic right to distributions that the transferor partner or member would have received. The transferee obtains no management rights, no right to inspect books, and no partner or member status unless separately admitted by consent of the other owners.
No. A charging order creates a lien only on the transferable interest and directs the entity to pay distributions to the creditor. The debtor retains all management rights and partner status. The creditor cannot force dissolution or exercise voting power.
Yes. The default rule permits a partner to transfer the economic rights portion of the interest unilaterally. The transfer does not admit the transferee as a partner and the transferor retains all non-economic rights and duties.
The statute requires that surplus first satisfy unreturned contributions reflected in transferable interests, subject to any charging order. Remaining surplus is then allocated among all holders of transferable interests in proportion to their pre-dissolution distribution rights.
…and perquisites of holding a director’s office or a motive to strengthen collective power prevails over a stockholder-director’s economic interest. Even the shareholder-plaintiffs in this case agree with the legal proposition Unitrin advocates on appeal: stockholders are presumed to act in their own best economic interests when they…