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The Vermont Statutes Online
Title
11
:
Corporations, Partnerships and Associations
Chapter
025
:
LIMITED LIABILITY COMPANIES
Subchapter
004
:
RELATIONS OF MEMBERS TO EACH OTHER AND TO LIMITED LIABILITY COMPANY
§
4059. General standards of member's and manager's conduct
(a) 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 imposed by
subsections (b) and (c) of this section.
(b) A member's
duty of loyalty to a member-managed limited liability company and its other
members is limited to the following:
(1) to account
to the 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 company's business or
derived from a use by the member of the company's property, including the
appropriation of the company's opportunity;
(2) to refrain
from dealing with the company in the conduct or winding up of the company's
business as or on behalf of a party having an interest adverse to the company;
and
(3) to refrain
from competing with the company in the conduct of the company's business before
the dissolution of the company.
(c) A member's
duty of care to a member-managed limited liability company and its other
members in the conduct of and winding up of the company's business is limited
to refrain from engaging in grossly negligent or reckless conduct, or a knowing
violation of the law.
(d) A member
shall discharge the duties to a member-managed limited liability company and
its other members under this chapter or under the operating agreement and
exercise any rights consistently with the obligation of good faith and fair
dealing.
(e) A member of
a member-managed limited liability 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.
(f) All the
members of a member-managed limited liability company or a manager-managed
limited liability company may authorize or ratify, after full disclosure of all
material facts, a specific act or transaction that otherwise would violate the
duty of loyalty.
(g) It is a
defense to a claim under subdivision (b)(2) of this section and any comparable
claim in equity or at common law that the transaction was fair to the limited
liability company.
(h) 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 of the company as
if the person were a member.
(i) In a
manager-managed limited liability company:
(1) subsections
(a), (b), (c), and (g) of this section apply to the manager or managers and not
the members, and the duty stated in subdivision (b)(3) of this section
continues until winding up is completed;
(2) subsection
(d) of this section applies to managers and members;
(3) subsection
(e) of this section applies only to members;
(4) the power to
ratify under subsection (f) of this section applies only to members;
(5) subject to
subsection (d) of this section, a member does not have any duty to the company
or to the other members solely by reason of being a member;
(6) 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 (a), (b), (c), and (g) of this section to
the extent that the member exercises the managerial authority vested in a
manager by this chapter; and
(7) a manager is
relieved of liability imposed by law for violation of the standards prescribed
by subsections (a), (b), (c), and (g) of this section to the extent of the
managerial authority delegated to the members by the operating agreement.
(j) In
discharging his or her duties, a member or a manager is entitled to rely on
information, opinions, reports, or statements, including financial statements
and other financial data, if prepared or presented by:
(1) one or more
members, managers, officers, or employees of the company whom the member or
manager reasonably believes to be reliable and competent in the matter
presented;
(2) legal
counsel, public accountants, or other persons as to matters the member or
manager reasonably believes are within the person's professional or expert
competence; or
(3) a committee
of the members or managers of which the member or manager is not a member if
the member or manager reasonably believes the committee merits confidence.
(k) A member or
manager is not acting in good faith if he or she has knowledge concerning the
matter in question that makes reliance permitted by subsection (j) of this
section unwarranted.
( l )(1) A
member of a member-managed limited liability company or a manager of a
manager-managed limited liability company may lend money to and transact other
business with the company.
(2) As to each
loan or transaction, the rights and obligations of the member or manager, as
applicable, are the same as those of a person who is not a member or manager,
subject to other applicable law.
(m) A member or
manager is not liable for any action taken as a member or manager or any
failure to take any action, if the member or manager performed the duties of
his or her office in compliance with this section. (Added 2015, No. 17, § 2.)