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§4059. General standards of member's and manager's conduct


Published: 2015

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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.)