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ULLCA 503(b)(1) Receiver

Receiver Code ULLCASection503b1Receiver



503(b)

To the extent necessary to effectuate the collection of distributions pursuant to a charging order in effect under subsection (a), the court may:

(1) appoint a receiver of the distributions subject to the charging order, with the power to make all inquiries the judgment debtor might have made, and

(2) make all other orders necessary to give effect to the charging order.



Reporter's Comment to Subsection (b).

Paragraph (2) refers to "other orders" rather than "additional orders."
Therefore, given appropriate circumstances, a court may invoke Paragraph (1), Paragraph (2), or both.

Reporter's Comment to Subsection (b)(1).

The receiver contemplated here is emphatically not a receiver for the limited liability company, but rather a receiver for the distributions subject to the charging order.
The principal advantage provided by this paragraph is an expanded right to information.
However, that right goes no further than "the extent necessary to effectuate the collections of distributions pursuant to a charging order."
For a correctly narrow reading of this provision, see Wells Fargo Bank, Nat. Ass'n v. Continuous Control Solutions, Inc., No. 11-1285, 2012 WL 3195759 (Iowa Ct. App. Aug. 8, 2012).

JayNote

As the comment states, the receiver appointed under ¶ (b) is not, negative, a receiver for the LLC itself, but instead is only a receiver for the distributions, and for the creditor the main tactical advantage to such a receiver is for informational rights.
Example: Creditor holds a judgment against debtor, who has disappeared or is recalcitrant. Normally, the creditor would obtain information about distributions from the debtor, but the court may appoint a receiver to obtain this information in the debtor's place.
Creditors routinely use this provision, quite appropriately, to have a "limited purpose receiver" appointed by the court with these powers only to enforce the charging order, but then work to expand the receiver's portfolio over matters to eventually become a general-purpose receiver for the debtor's estate generally.

For a deeper dive into charging order and receiver issues click here

The legal landscape governing the satisfaction of judgment debts through charging orders and receiverships reflects a tension between creditor collection rights and the preservation of an entity’s internal governance. A charging order serves as the primary, and often exclusive, statutory remedy against a debtor partner or member’s interest, functioning as a lien that entitles the creditor to economic distributions without conferring management or participation rights. Receivers are typically appointed as an extraordinary, ancillary remedy to effectuate these orders, though the scope of their authority diverges based on jurisdiction and entity form. In state courts, receiver powers are generally restricted to the collection of distributions, especially in the LLC context where management interference is statutorily barred. Conversely, receivers in partnership cases may exercise broader rights, including the capacity to petition for judicial dissolution. Federal courts, applying Rule 66 and federal equitable principles, often claim more expansive authority to appoint general receivers whose powers exceed state statutory limits, particularly where a debtor has demonstrated an intent to frustrate collection. While state statutes often label charging orders as the sole remedy, courts acknowledge exceptions like foreclosure of the charged interest or reverse veil-piercing in instances of fraud or where the debtor maintains absolute control over distributions. Recent appellate decisions emphasize a persistent shift toward utilizing broader equitable powers in federal forums to overcome sophisticated asset protection structures while respecting the fundamental distinction between economic rights and entity management.

RECEIVER OPINIONS