Code of Alabama - Title 10A: Alabama Business and Nonprofit Entities Code - Section 10A-5-3.03 - Agency power of members and managers; duties. REPEALED IN THE 2014 REGULAR SESSION BY ACT 2014-144 EFFECTIVE JANUARY 1, 2017

Section 10A-5-3.03 - Agency power of members and managers; duties. REPEALED IN THE 2014 REGULAR SESSION BY ACT 2014-144 EFFECTIVE JANUARY 1, 2017.

(a) Except as provided in subsection (b), every member is an agent of the limited liability company for the purpose of its business or affairs, and the act of any member, including, but not limited to, the execution in the name of the limited liability company of any instrument, for apparently carrying on in the usual way the business or affairs of the limited liability company binds the limited liability company, unless the member so acting has, in fact, no authority to act for the limited liability company in the particular matter and the person with whom the member is dealing has knowledge of the fact that the member has no such authority.

(b) If the certificate of formation provides that management of the limited liability company is vested in a manager or managers, both of the following conditions apply:

(1) No member, acting solely in the capacity as member, is an agent for the limited liability company.

(2) Every manager is an agent of the limited liability company for the purpose of its business or affairs, and the act of any manager, including, but not limited to, the execution in the name of the limited liability company of any instrument, for apparently carrying on in the usual way the business or affairs of the limited liability company binds the limited liability company, unless the manager so acting has, in fact, no authority to act for the limited liability company in the particular matter and the person with whom the manager is dealing has knowledge of the fact that the manager has no such authority.

(c) An act of a manager or a member which is not apparently for the carrying on in the usual way the business of the limited liability company does not bind the limited liability company unless authorized in accordance with the operating agreement at the time of the transaction or at any other time.

(d) No act of a manager or member in contravention of a restriction on authority shall bind the limited liability company to persons having knowledge of the restriction.

(e) In a limited liability company managed by its members under subsection (a) of Section 10A-5-4.01, the only fiduciary duties a member owes to the company or to its other members are the duty of loyalty and the duty of care imposed by subsections (f) through (g).

(f) A member's duty of loyalty to a member-managed limited liability company and its members is limited to each of the following:

(1) To account to the limited liability company and to hold as trustee for it any property, profit, or benefit derived by the member in the conduct or winding up of the limited liability company's business or derived from a use by the member of the limited liability company's property, including the appropriation of the limited liability company's opportunity.

(2) To refrain from dealing with the limited liability company in the conduct or winding up of the limited liability company's business as or on behalf of a party having an interest adverse to the limited liability company.

(3) To refrain from competing with the limited liability company in the conduct of the limited liability company's business before the dissolution of the limited liability company.

(g) A member's duty of care to a member-managed limited liability company and its other members in the conduct or winding up of the limited liability company's business is limited to refraining from engaging in grossly negligent or reckless conduct, intentional misconduct, or a knowing violation of law.

(h) A member shall discharge the duties to a member-managed company and its other members under this chapter and under the operating agreement and exercise any rights consistently with the obligation of good faith and fair dealing.

(i) A member of a member-managed company does not violate a duty or obligation under this chapter or under the operating agreement merely because the member's conduct furthers the member's own interest.

(j) This section applies to a person winding up the limited liability company's business as the personal or legal representative of the last surviving member as if the person were a member.

(k) If the management of a limited liability company is vested in a manager or managers pursuant to subsection (b) of Section 10A-5-4.01, each of the following applies:

(1) The only duty a member who is not also a manager owes to the company or to the other members solely by reason of being a member is to not disclose or otherwise use information described in Sections 10A-1-3.31 and 10A-5-2.06(a), whether or not obtained under the authority of Sections 10A-1-3.32 and 10A-5-2.06(b), to the detriment of the company or the other members.

(2) A manager is held to the same standards of conduct prescribed for members in subsections (f) through (i).

(3) A member who pursuant to the operating agreement exercises some or all of the rights of a manager in the management and conduct of the company's business is held to the standards of conduct in subsections (f) through (i) to the extent that the member exercises the managerial authority vested in a manager by this chapter.

(4) A manager is relieved of liability imposed by law for violation of the standards prescribed by subsections (f) through (i) to the extent of the managerial authority delegated to the members by the operating agreement.

(l) The governing documents may modify the duties contained in subsections (e) through (k), but may not provide for any of the following:

(1) Unreasonably restrict a right to information or access to records under Sections 10A-1-3.31, 10A-1-3.32, 10A-1-3.33, and 10A-5-2.06.

(2) Eliminate the duty of loyalty under subsection (f) of this section or under subsection (e) of Section 10A-5-6.06, but the governing documents of the limited liability company may provide for any of the following:

a. Identify types or categories of activities that do not violate the duty of loyalty.

b. Specify the number or percentage of members or percentage of membership interests or number or percentage of disinterested managers that may authorize or ratify, after full disclosure of all material facts, a specific act or transaction that otherwise would violate the duty of loyalty.

(3) Unreasonably reduce the duty of care under subsection (g) of this section or subsection (e) of Section 10A-5-6.06.

(4) Eliminate the obligation of good faith and fair dealing under subsection (h), but the operating agreement may determine the standards by which the performance of the obligation is to be measured, if the standards are not manifestly unreasonable.

(Acts 1993, No. 93-724, p. 1425, §21; Act 97-920, 1st Ex. Sess., p. 312, §1; §10-12-21; amended and renumbered by Act 2009-513, p. 967, §228.)

Last modified: May 3, 2021