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Membership Interest Pledge Agreement for the United States

Membership Interest Pledge Agreement Template for United States

A Membership Interest Pledge Agreement is a legal document used in the United States to create a security interest in LLC membership interests. This agreement enables a member of an LLC to pledge their ownership interests as collateral for a loan or other obligation. The document is governed by state-specific LLC laws and the Uniform Commercial Code, particularly Article 9, and requires careful consideration of securities laws, tax implications, and bankruptcy provisions. It establishes the terms of the pledge, including rights and obligations of both parties, default provisions, and remedies.

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Membership Interest Pledge Agreement

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What is a Membership Interest Pledge Agreement?

The Membership Interest Pledge Agreement serves as a crucial document in secured transactions where LLC membership interests are used as collateral. This agreement is commonly used when members seek financing and need to provide security to lenders, or in complex business transactions requiring collateral support. The document must comply with U.S. federal and state laws, including UCC Article 9 and applicable securities regulations. It typically includes detailed provisions about the pledge arrangement, representations and warranties, voting rights, distributions, and enforcement mechanisms. The agreement is particularly important in protecting the pledgee's interests while preserving the pledgor's ability to maintain normal business operations until a default occurs.

What sections should be included in a Membership Interest Pledge Agreement?

1. Parties: Identification of pledgor and pledgee

2. Background: Context of the pledge arrangement and underlying obligations

3. Definitions: Key terms used throughout the agreement

4. Pledge and Security Interest: Core provisions establishing the pledge of membership interests

5. Representations and Warranties: Pledgor's statements regarding ownership and authority

6. Covenants: Ongoing obligations of the pledgor

7. Default and Remedies: Events of default and pledgee's rights upon default

8. Governing Law: Choice of law and jurisdiction

What sections are optional to include in a Membership Interest Pledge Agreement?

1. Voting Rights: Provisions regarding exercise of voting rights prior to default

2. Distributions: Treatment of distributions on pledged interests

3. Tax Provisions: Special tax treatment considerations

4. Registration Rights: Rights regarding registration of pledged interests

What schedules should be included in a Membership Interest Pledge Agreement?

1. Description of Pledged Interests: Detailed description of membership interests being pledged

2. Form of Transfer Power: Template for transferring interests upon default

3. Operating Agreement Excerpts: Relevant portions of LLC operating agreement affecting pledge

4. UCC Filing Information: Details required for UCC-1 financing statement

Authors

Alex Denne

Head of Growth (Open Source Law) @ tiktok成人版 | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Jurisdiction

United States

Document Type

Security Agreement

Cost

Free to use
Clauses






























Industries

Uniform Commercial Code (UCC): Primary focus on Article 9 governing secured transactions, including requirements for perfection and priority of security interests, and filing requirements for UCC-1 financing statements

Securities Laws: Including Securities Act of 1933, Securities Exchange Act of 1934, State Blue Sky laws, and regulations regarding transfer restrictions, particularly if membership interests are considered securities

State-Specific LLC Laws: Including state LLC statutes governing transfer of membership interests, operating agreement restrictions on transfers/pledges, and state requirements for perfecting security interests in LLC interests

Federal and State Tax Laws: Covering tax implications of pledge arrangements and IRS regulations regarding collateral

Bankruptcy Code: Addressing enforceability in bankruptcy, automatic stay provisions, and preference period considerations

State Contract Laws: Covering general contract formation requirements, enforceability provisions, and remedies upon default

State Uniform Fraudulent Transfer Acts: Including provisions regarding fraudulent conveyances and rights of creditors

Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks, 聽Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination, 聽Severance Pay, Governing Law, Entire Agreemen

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