(1) The only fiduciary duties a member owes to a member-managed limited liability company and its other members are the duty of loyalty and the duty of care set forth in subsections (2) and (3) of this section.
(2) A member’s duty of loyalty to a member-managed limited liability company and its other members includes the following:
(a) To account to the limited liability company and hold for it any property, profit or benefit derived by the member in the conduct and winding up of the limited liability company’s business or derived from a use by the member of limited liability company property, including the appropriation of a limited liability company opportunity;
(b) Except as provided in subsections (5) and (6) of this section, to refrain from dealing with the limited liability company in a manner adverse to the limited liability company and to refrain from representing a person with an interest adverse to the limited liability company, in the conduct or winding up of the limited liability company’s business; and
(c) To refrain from competing with the limited liability company in the conduct of the business of the limited liability company before the dissolution of the limited liability company.
(3) A member’s duty of care to a member-managed limited liability company and the other members in the conduct and winding up of the business of the limited liability company is limited to refraining from engaging in grossly negligent or reckless conduct, intentional misconduct or a knowing violation of law.
(4) A member shall discharge the duties to a member-managed limited liability company and the other members under this chapter or under any operating agreement of the limited liability company and exercise any rights consistent with the obligation of good faith and fair dealing.
(5) A member of a member-managed limited liability company does not violate a duty or obligation under this chapter or under any operating agreement of the limited liability company merely because the member’s conduct furthers the member’s own interest.
(6) A member of a member-managed limited liability company may lend money to or transact other business with the limited liability company, provided that any loan or transaction between the member and the limited liability company must be:
(a) Fair to the limited liability company;
(b) Authorized by an operating agreement; or
(c) Authorized or ratified by a majority of the disinterested members or by a number or percentage of members specified in the operating agreement after full disclosure of all material facts.
(7) Loans and other transactions between a member-managed limited liability company and a member are binding on the parties in the same manner as transactions between the limited liability company and persons who are not members, subject to other applicable law.
(8) This section also applies to a person who is not a member and who is winding up the limited liability company’s business.
(9) In a manager-managed limited liability company:
(a) A member who is not also a manager owes no duties to the limited liability company or the other members solely by reason of being a member;
(b) A manager is held to the same standards of conduct prescribed for members in subsections (2) to (8) of this section;
(c) A member who, pursuant to an operating agreement, exercises some or all of the rights of a manager in the management and conduct of the limited liability company’s business is held to the standards of conduct described in subsections (2) to (8) of this section to the extent that the member exercises the managerial authority vested in a manager by this chapter; and
(d) A manager is relieved of liability imposed by law for violation of the standards prescribed by this section to the extent, if any, of the managerial authority delegated to the members who are not also managers by an operating agreement.
(10) The articles of organization or an operating agreement of a limited liability company may not:
(a) Eliminate completely the duty of loyalty under subsection (2) of this section, but the articles of organization or an operating agreement may:
(A) Identify specific types or categories of activities that do not violate the duty of loyalty, if not unconscionable; and
(B) Specify the number or percentage of members, whether interested or disinterested, or 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.
(b) Unreasonably reduce the duty of care under subsection (3) of this section.
(c) Eliminate completely the obligation of good faith and fair dealing under subsection (4) of this section, but the articles of organization or an operating agreement may determine the standards by which performance of the obligation of good faith and fair dealing is to be measured, if the standards are not unconscionable.
(11) For the purposes of subsection (10)(a) of this section, specific types or categories of activities that may be identified as not violating the duty of loyalty include, but are not limited to:
(a) Competing with the limited liability company in the conduct of the business of the limited liability company before the dissolution of the limited liability company; and
(b) Entering into or engaging in, for a member’s own account, an investment, business, transaction or activity that is similar to the investments, businesses, transactions or activities of the limited liability company without:
(A) First offering the limited liability company or the other members an opportunity to participate in the investment, business, transaction or activity; or
(B) Having any obligation to account to the limited liability company or the other members for the investment, business, transaction or activity or the profits from the investment, business, transaction or activity. [1993 c.173 §33; 1999 c.86 §8; 2001 c.315 §23]
Section: Previous 63.117 63.121 63.130 63.135 63.140 63.145 63.150 63.155 63.160 63.165 63.170 63.175 63.180 63.185 63.195 NextLast modified: August 7, 2008