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Committee adopts amendment to clarify charging‑order foreclosure for LLC membership liens
Summary
The Senate Insurance & Commerce Committee approved an agreed amendment to Senate Bill 319 to make explicit that a creditor holding a perfected lien against an LLC member's membership interest may foreclose on that lien; the bill as amended was then advanced from committee.
Representative John Maddox (R., District 86) presented an agreed amendment to Senate Bill 319 and said the change was made at the request of bankers who raised concerns about the original language. "It just makes it very clear that if a bank has a perfected lien against a membership interest of an LLC, then they can foreclose upon that lien," Maddox told the committee.
The amendment was described as narrow and technical. Maddox and other proponents said the change aligns Arkansas law with similar language used in Texas and is intended to prevent confusion under which a creditor could acquire management rights in an LLC after foreclosing on a member's interest. In committee questions, Senator Mark Johnson asked for a definition of "hypothecation" used in the amendment; Maddox described it as a pledge of property or interest to secure a debt.
After no one signed up to speak for or against the bill as amended, Senator Missy Irvin moved that the committee report the bill favorably as amended; Senator Matt McKee seconded the motion. The committee approved the motion by voice vote and advanced SB 319 as amended.
Discussion versus action: committee debate focused on the legal effect of charging orders and whether creditors could obtain membership rights; the committee enacted the agreed technical amendment and voted to advance the bill. No roll‑call tally was taken in the transcript excerpt; the committee recorded approval by voice vote.
