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2005 Texas Business Organizations Code CHAPTER 101. LIMITED LIABILITY COMPANIES
BUSINESS ORGANIZATION CODE TITLE 3. LIMITED LIABILITY COMPANIES CHAPTER 101. LIMITED LIABILITY COMPANIES SUBCHAPTER A. GENERAL PROVISIONS § 101.001. DEFINITIONS. In this title: (1) "Company agreement" means any agreement, written or oral, of the members concerning the affairs or the conduct of the business of a limited liability company. A company agreement of a limited liability company having only one member is not unenforceable because only one person is a party to the company agreement. (2) "Foreign limited liability company" or "foreign company" means a limited liability company formed under the laws of a jurisdiction other than this state. (3) "Limited liability company" or "company" means a domestic limited liability company subject to this title. Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.SUBCHAPTER B. FORMATION AND GOVERNING DOCUMENTS § 101.051. CERTAIN PROVISIONS CONTAINED IN CERTIFICATE OF FORMATION. (a) A provision that may be contained in the company agreement of a limited liability company may alternatively be included in the certificate of formation of the company as provided by Section 3.005(b). (b) A reference in this title to the company agreement of a limited liability company includes any provision contained in the company's certificate of formation instead of the company agreement as provided by Subsection (a). Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006. § 101.052. COMPANY AGREEMENT. (a) Except as provided by Section 101.054, the company agreement of a limited liability company governs: (1) the relations among members, managers, and officers of the company, assignees of membership interests in the company, and the company itself; and (2) other internal affairs of the company. (b) To the extent that the company agreement of a limited liability company does not otherwise provide, this title and the provisions of Title 1 applicable to a limited liability company govern the internal affairs of the company. (c) Except as provided by Section 101.054, a provision of this title or Title 1 that is applicable to a limited liability company may be waived or modified in the company agreement of a limited liability company. (d) The company agreement may contain any provisions for the regulation and management of the affairs of the limited liability company not inconsistent with law or the certificate of formation. Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006. § 101.053. AMENDMENT OF COMPANY AGREEMENT. The company agreement of a limited liability company may be amended only if each member of the company consents to the amendment. Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006. § 101.054. WAIVER OR MODIFICATION OF CERTAIN STATUTORY PROVISIONS PROHIBITED; EXCEPTIONS. (a) Except as provided by this section, the following provisions may not be waived or modified in the company agreement of a limited liability company: (1) this section; (2) Section 101.101(b), 101.206, 101.501, or 101.502; (3) Chapter 1, if the provision is used to interpret a provision or define a word or phrase contained in a section listed in this subsection; (4) Chapter 2, except that Section 2.104(c)(2), 2.104(c)(3), or 2.113 may be waived or modified in the company agreement; (5) Chapter 3, except that Subchapters C and E may be waived or modified in the company agreement; or (6) Chapter 4, 5, 7, 10, 11, or 12, other than Section 11.056. (b) A provision listed in Subsection (a) may be waived or modified in the company agreement if the provision that is waived or modified authorizes the limited liability company to waive or modify the provision in the company's governing documents. (c) A provision listed in Subsection (a) may be modified in the company agreement if the provision that is modified specifies: (1) the person or group of persons entitled to approve a modification; or (2) the vote or other method by which a modification is required to be approved. (d) A provision in this title or in that part of Title 1 applicable to a limited liability company that grants a right to a person, other than a member, manager, officer, or assignee of a membership interest in a limited liability company, may be waived or modified in the company agreement of the company only if the person consents to the waiver or modification. Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.SUBCHAPTER C. MEMBERSHIP § 101.101. MEMBERS REQUIRED. (a) A limited liability company may have one or more members. Except as provided by this section, a limited liability company must have at least one member. (b) A limited liability company that has managers is not required to have any members during a reasonable period between the date the company is formed and the date the first member is admitted to the company. (c) A limited liability company is not required to have any members during the period between the date the continued membership of the last remaining member of the company is terminated and the date the agreement to continue the company described by Section 11.056 is executed. Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006. § 101.102. QUALIFICATION FOR MEMBERSHIP. (a) A person may be a member of or acquire a membership interest in a limited liability company unless the person lacks capacity apart from this code. (b) A person is not required, as a condition to becoming a member of or acquiring a membership interest in a limited liability company, to: (1) make a contribution to the company; (2) otherwise pay cash or transfer property to the company; or (3) assume an obligation to make a contribution or otherwise pay cash or transfer property to the company. (c) If one or more persons own a membership interest in a limited liability company, the company agreement may provide for a person to be admitted to the company as a member without acquiring a membership interest in the company. Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006. Amended by Acts 2005, 79th Leg., ch. 64, § 71, eff. Jan. 1, 2006. § 101.103. EFFECTIVE DATE OF MEMBERSHIP. (a) In connection with the formation of a company, a person becomes a member of the company on the date the company is formed if the person is named as an initial member in the company's certificate of formation. (b) In connection with the formation of a company, a person being admitted as a member of the company but not named as an initial member in the company's certificate of formation becomes a member of the company on the latest of: (1) the date the company is formed; (2) the date stated in the company's records as the date the person becomes a member of the company; or (3) if the company's records do not state a date described by Subdivision (2), the date the person's admission to the company is first reflected in the company's records. (c) A person who, after the formation of a limited liability company, acquires directly or is assigned a membership interest in the company or is admitted as a member of the company without acquiring a membership interest becomes a member of the company on approval or consent of all of the company's members. Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006. Amended by Acts 2005, 79th Leg., ch. 64, § 72, eff. Jan. 1, 2006. § 101.104. CLASSES OR GROUPS OF MEMBERS OR MEMBERSHIP INTERESTS. (a) The company agreement of a limited liability company may: (1) establish within the company classes or groups of one or more members or membership interests each of which has certain expressed relative rights, powers, and duties, including voting rights; and (2) provide for the manner of establishing within the company additional classes or groups of one or more members or membership interests each of which has certain expressed relative rights, powers, and duties, including voting rights. (b) The rights, powers, and duties of a class or group of members or membership interests described by Subsection (a)(2) may be stated in the company agreement or stated at the time the class or group is established. (c) If the company agreement of a limited liability company does not provide for the manner of establishing classes or groups of members or membership interests under Subsection (a)(2), additional classes or groups of members or membership interests may be established only by the adoption of an amendment to the company agreement. (d) The rights, powers, or duties of any class or group of members or membership interests of a limited liability company may be senior to the rights, powers, or duties of any other class or group of members or membership interests in the company, including a previously established class or group. Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006. § 101.105. ISSUANCE OF MEMBERSHIP INTERESTS AFTER FORMATION OF COMPANY. A limited liability company, after the formation of the company, may: (1) issue membership interests in the company to any person with the approval of all of the members of the company; and (2) if the issuance of a membership interest requires the establishment of a new class or group of members or membership interests, establish a new class or group as provided by Sections 101.104(a)(2), (b), and (c). Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006. § 101.106. NATURE OF MEMBERSHIP INTEREST. (a) A membership interest in a limited liability company is personal property. (b) A member of a limited liability company or an assignee of a membership interest in a limited liability company does not have an interest in any specific property of the company. Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006. § 101.107. WITHDRAWAL OR EXPULSION OF MEMBER PROHIBITED. A member of a limited liability company may not withdraw or be expelled from the company. Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006. § 101.108. ASSIGNMENT OF MEMBERSHIP INTEREST. (a) A membership interest in a limited liability company may be wholly or partly assigned. (b) An assignment of a membership interest in a limited liability company: (1) is not an event requiring the winding up of the company; and (2) does not entitle the assignee to: (A) participate in the management and affairs of the company; (B) become a member of the company; or (C) exercise any rights of a member of the company. Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006. § 101.109. RIGHTS AND DUTIES OF ASSIGNEE OF MEMBERSHIP INTEREST BEFORE MEMBERSHIP. (a) A person who is assigned a membership interest in a limited liability company is entitled to: (1) receive any allocation of income, gain, loss, deduction, credit, or a similar item that the assignor is entitled to receive to the extent the allocation of the item is assigned; (2) receive any distribution the assignor is entitled to receive to the extent the distribution is assigned; (3) require, for any proper purpose, reasonable information or a reasonable account of the transactions of the company; and (4) make, for any proper purpose, reasonable inspections of the books and records of the company. (b) An assignee of a membership interest in a limited liability company is entitled to become a member of the company on the approval of all of the company's members. (c) An assignee of a membership interest in a limited liability company is not liable as a member of the company until the assignee becomes a member of the company. Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006. § 101.110. RIGHTS AND LIABILITIES OF ASSIGNEE OF MEMBERSHIP INTEREST AFTER BECOMING MEMBER. (a) An assignee of a membership interest in a limited liability company, after becoming a member of the company, is: (1) entitled, to the extent assigned, to the same rights and powers granted or provided to a member of the company by the company agreement or this code; (2) subject to the same restrictions and liabilities placed or imposed on a member of the company by the company agreement or this code; and (3) except as provided by Subsection (b), liable for the assignor's obligation to make contributions to the company. (b) An assignee of a membership interest in a limited liability company, after becoming a member of the company, is not obligated for a liability of the assignor that: (1) the assignee did not have knowledge of on the date the assignee became a member of the company; and (2) could not be ascertained from the company agreement. Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006. § 101.111. RIGHTS AND DUTIES OF ASSIGNOR OF MEMBERSHIP INTEREST. (a) An assignor of a membership interest in a limited liability company continues to be a member of the company and is entitled to exercise any unassigned rights or powers of a member of the company until the assignee becomes a member of the company. (b) An assignor of a membership interest in a limited liability company is not released from the assignor's liability to the company, regardless of whether the assignee of the membership interest becomes a member of the company. Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006. § 101.112. JUDGMENT CREDITOR; CHARGE OF MEMBERSHIP INTEREST. (a) On application by a judgment creditor of a member of a limited liability company or any other owner of a membership interest in a limited liability company, a court may charge the membership interest of the member or owner, as appropriate, with payment of the unsatisfied amount of the judgment. (b) If a court charges a membership interest with payment of a judgment as provided by Subsection (a), the judgment creditor has only the rights of an assignee of the membership interest. (c) This section may not be construed to deprive a member of a limited liability company or any other owner of a membership interest in a limited liability company of the benefit of any exemption laws applicable to the membership interest of the member or owner. Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006. § 101.113. PARTIES TO ACTIONS. A member of a limited liability company may be named as a party in an action by or against the limited liability company only if the action is brought to enforce the member's right against or liability to the company. Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006. § 101.114. LIABILITY FOR OBLIGATIONS. Except as and to the extent the company agreement specifically provides otherwise, a member or manager is not liable for a debt, obligation, or liability of a limited liability company, including a debt, obligation, or liability under a judgment, decree, or order of a court. Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.SUBCHAPTER D. CONTRIBUTIONS § 101.151. REQUIREMENTS FOR ENFORCEABLE PROMISE. A promise to make a contribution or otherwise pay cash or transfer property to a limited liability company is enforceable only if the promise is: (1) in writing; and (2) signed by the person making the promise. Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006. § 101.152. ENFORCEABLE PROMISE NOT AFFECTED BY CHANGE IN CIRCUMSTANCES. A member of a limited liability company is obligated to perform an enforceable promise to make a contribution or otherwise pay cash or transfer property to the company without regard to the death, disability, or other change in circumstances of the member. Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006. § 101.153. FAILURE TO PERFORM ENFORCEABLE PROMISE; CONSEQUENCES. (a) A member of a limited liability company, or the member's legal representative or successor, who does not perform an enforceable promise to make a contribution, including a previously made contribution, or to otherwise pay cash or transfer property to the company, is obligated, at the request of the company, to pay in cash the agreed value of the contribution, as stated in the company agreement or the company's records required under Sections 3.151 and 101.501, less: (1) any amount already paid for the contribution; and (2) the value of any property already transferred. (b) The company agreement of a limited liability company may provide that the membership interest of a member who fails to perform an enforceable promise to make a payment of cash or transfer property to the company, whether as a contribution or in connection with a contribution already made, may be: (1) reduced; (2) subordinated to other membership interests of nondefaulting members; (3) redeemed or sold at a value determined by appraisal or other formula; or (4) made the subject of: (A) a forced sale; (B) forfeiture; (C) a loan from other members of the company in an amount necessary to satisfy the enforceable promise; or (D) another penalty or consequence. Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006. § 101.154. CONSENT REQUIRED TO RELEASE ENFORCEABLE OBLIGATION. The obligation of a member of a limited liability company, or of the member's legal representative or successor, to make a contribution or otherwise pay cash or transfer property to the company, or to return cash or property to the company paid or distributed to the member in violation of this code or the company agreement, may be released or settled only by consent of each member of the company. Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006. § 101.155. CREDITOR'S RIGHT TO ENFORCE CERTAIN OBLIGATIONS. A creditor of a limited liability company who extends credit or otherwise acts in reasonable reliance on an enforceable obligation of a member of the company that is released or settled as provided by Section 101.154 may enforce the original obligation if the obligation is stated in a document that is: (1) signed by the member; and (2) not amended or canceled to evidence the release or settlement of the obligation. Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006. § 101.156. REQUIREMENTS TO ENFORCE CONDITIONAL OBLIGATION. (a) An obligation of a member of a limited liability company that is subject to a condition may be enforced by the company or a creditor described by Section 101.155 only if the condition is satisfied or waived by or with respect to the member. (b) A conditional obligation of a member of a limited liability company under this section includes a contribution payable on a discretionary call of the limited liability company before the time the call occurs. Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.SUBCHAPTER E. ALLOCATIONS AND DISTRIBUTIONS § 101.201. ALLOCATION OF PROFITS AND LOSSES. The profits and losses of a limited liability company shall be allocated to each member of the company on the basis of the agreed value of the contributions made by each member, as stated in the company's records required under Section 101.501. Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006. Amended by Acts 2005, 79th Leg., ch. 64, § 73, eff. Jan. 1, 2006. § 101.202. DISTRIBUTION IN KIND. A member of a limited liability company is entitled to receive or demand a distribution from the company only in the form of cash, regardless of the form of the member's contribution to the company. Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006. § 101.203. SHARING OF DISTRIBUTIONS. Distributions of cash and other assets of a limited liability company shall be made to each member of the company according to the agreed value of the member's contribution to the company as stated in the company's records required under Sections 3.151 and 101.501. Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006. § 101.204. INTERIM DISTRIBUTIONS. A member of a limited liability company, before the winding up of the company, is not entitled to receive and may not demand a distribution from the company until the company's governing authority declares a distribution to: (1) each member of the company; or (2) a class or group of members that includes the member. Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006. § 101.205. DISTRIBUTION ON WITHDRAWAL. A member of a limited liability company who validly exercises the member's right to withdraw from the company granted under the company agreement is entitled to receive, within a reasonable time after the date of withdrawal, the fair value of the member's interest in the company as determined as of the date of withdrawal. Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006. § 101.206. PROHIBITED DISTRIBUTION; DUTY TO RETURN. (a) A limited liability company may not make a distribution to a member of the company if, immediately after making the distribution, the company's total liabilities, other than liabilities described by Subsection (b), exceed the fair value of the company's total assets. (b) For purposes of Subsection (a), the liabilities of a limited liability company do not include: (1) a liability related to the member's membership interest; or (2) except as provided by Subsection (c), a liability for which the recourse of creditors is limited to specified property of the company. (c) For purposes of Subsection (a), the assets of a limited liability company include the fair value of property subject to a liability for which recourse of creditors is limited to specified property of the company only if the fair value of that property exceeds the liability. (d) A member of a limited liability company who receives a distribution from the company in violation of this section is required to return the distribution to the company if the member had knowledge of the violation. (e) This section may not be construed to affect the obligation of a member of a limited liability company to return a distribution to the company under the company agreement or other state or federal law. Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006. § 101.207. CREDITOR STATUS WITH RESPECT TO DISTRIBUTION. Subject to Sections 11.053 and 101.206, when a member of a limited liability company is entitled to receive a distribution from the company, the member, with respect to the distribution, has the same status as a creditor of the company and is entitled to any remedy available to a creditor of the company. Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.SUBCHAPTER F. MANAGEMENT § 101.251. MEMBERSHIP. The governing authority of a limited liability company consists of: (1) the managers of the company, if the company's certificate of formation states that the company will have one or more managers; or (2) the members of the company, if the company's certificate of formation states that the company will not have managers. Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006. § 101.252. MANAGEMENT BY GOVERNING AUTHORITY. The governing authority of a limited liability company shall manage the business and affairs of the company as provided by: (1) the company agreement; and (2) this title and the provisions of Title 1 applicable to a limited liability company to the extent that the company agreement does not provide for the management of the company. Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006. § 101.253. DESIGNATION OF COMMITTEES; DELEGATION OF AUTHORITY. (a) The governing authority of a limited liability company by resolution may designate: (1) one or more committees of the governing authority consisting of one or more governing persons of the company; and (2) subject to any limitation imposed by the governing authority, a governing person to serve as an alternate member of a committee designated under Subdivision (1) at a committee meeting from which a member of the committee is absent or disqualified. (b) A committee of the governing authority of a limited liability company may exercise the authority of the governing authority as provided by the resolution designating the committee. (c) The designation of a committee under this section does not relieve the governing authority of any responsibility imposed by law. Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006. § 101.254. DESIGNATION OF AGENTS; BINDING ACTS. (a) Except as provided by this title and Title 1, each governing person of a limited liability company and each officer or agent of a limited liability company vested with actual or apparent authority by the governing authority of the company is an agent of the company for purposes of carrying out the company's business. (b) An act committed by an agent of a limited liability company described by Subsection (a) for the purpose of apparently carrying out the ordinary course of business of the company, including the execution of an instrument, document, mortgage, or conveyance in the name of the company, binds the company unless: (1) the agent does not have actual authority to act for the company; and (2) the person with whom the agent is dealing has knowledge of the agent's lack of actual authority. (c) An act committed by an agent of a limited liability company described by Subsection (a) that is not apparently for carrying out the ordinary course of business of the company binds the company only if the act is authorized in accordance with this title. Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006. § 101.255. CONTRACTS OR TRANSACTIONS INVOLVING INTERESTED GOVERNING PERSONS OR OFFICERS. (a) This section applies only to a contract or transaction between a limited liability company and: (1) one or more of the company's governing persons or officers; or (2) an entity or other organization in which one or more of the company's governing persons or officers: (A) is a managerial official; or (B) has a financial interest. (b) An otherwise valid contract or transaction is valid notwithstanding that a governing person or officer of the company is present at or participates in the meeting of the governing authority, or of a committee of the governing person's authority, that authorizes the contract or transaction or votes to authorize the contract or transaction, if: (1) the material facts as to the relationship or interest and as to the contract or transaction are disclosed to or known by: (A) the company's governing authority or a committee of the governing authority and the governing authority or committee in good faith authorizes the contract or transaction by the affirmative vote of the majority of the disinterested governing persons or committee members, regardless of whether the disinterested governing persons or committee members constitute a quorum; or (B) the members of the company, and the members in good faith approve the contract or transaction by vote of the members; or (2) the contract or transaction is fair to the company when the contract or transaction is authorized, approved, or ratified by the governing authority, a committee of the governing authority, or the members of the company. (c) Common or interested governing persons of a limited liability company may be included in determining the presence of a quorum at a meeting of the company's governing authority or of a committee of the governing authority that authorizes the contract or transaction. Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.SUBCHAPTER G. MANAGERS § 101.301. APPLICABILITY OF SUBCHAPTER. This subchapter applies only to a limited liability company that has one or more managers. Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006. § 101.302. NUMBER AND QUALIFICATIONS. (a) The managers of a limited liability company may consist of one or more persons. (b) Except as provided by Subsection (c), the number of managers of a limited liability company consists of the number of initial managers listed in the company's certificate of formation. (c) The number of managers of a limited liability company may be increased or decreased by amendment to, or as provided by, the company agreement, except that a decrease in the number of managers may not shorten the term of an incumbent manager. (d) A manager of a limited liability company is not required to be a: (1) resident of this state; or (2) member of the company. Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006. § 101.303. TERM. A manager of a limited liability company serves: (1) for the term, if any, for which the manager is elected and until the manager's successor is elected; or (2) until the earlier resignation, removal, or death of the manager. Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006. § 101.304. REMOVAL. Subject to Section 101.306(a), a manager of a limited liability company may be removed, with or without cause, at a meeting of the company's members called for that purpose. Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006. § 101.305. MANAGER VACANCY. (a) Subject to Section 101.306(b), a vacancy in the position of a manager of a limited liability company may be filled by: (1) the affirmative vote of the majority of the remaining managers of the company, without regard to whether the remaining managers constitute a quorum; or (2) if the vacancy is a result of an increase in the number of managers, an election at an annual or special meeting of the company's members called for that purpose. (b) A person elected to fill a vacancy in the position of a manager serves for the unexpired term of the person's predecessor. Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006. § 101.306. REMOVAL AND REPLACEMENT OF MANAGER ELECTED BY CLASS OR GROUP. (a) If a class or group of the members of a limited liability company is entitled by the company agreement of the company to elect one or more managers of the company, a manager may be removed from office only by the class or group that elected the manager. (b) A vacancy in the position of a manager elected as provided by Subsection (a) may be filled only by: (1) a majority vote of the managers serving on the date the vacancy occurs who were elected by the class or group of members; or (2) a majority vote of the members of the class or group. Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006. § 101.307. METHODS OF CLASSIFYING MANAGERS. Other methods of classifying managers of a limited liability company, including providing for managers who serve for staggered terms of office or terms that are not uniform, may be established in the company agreement. Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.SUBCHAPTER H. MEETINGS AND VOTING § 101.351. APPLICABILITY OF SUBCHAPTER. This subchapter applies only to a meeting of and voting by: (1) the governing authority of a limited liability company; (2) the members of a limited liability company if the members do not constitute the governing authority of the company; and (3) a committee of the governing authority of a limited liability company. Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006. § 101.352. GENERAL NOTICE REQUIREMENTS. (a) Except as provided by Subsection (b), notice of a regular or special meeting of the governing authority or members of a limited liability company, or a committee of the company's governing authority, shall be given in writing to each governing person, member, or committee member, as appropriate, and as provided by Section 6.051. (b) If the members of a limited liability company do not constitute the governing authority of the company, notice required by Subsection (a) shall be given by or at the direction of the governing authority not later than the 10th day or earlier than the 60th day before the date of the meeting. Notice of a meeting required under this subsection must state the business to be transacted at the meeting or the purpose of the meeting if: (1) the meeting is a special meeting; or (2) a purpose of the meeting is to consider a matter described by Section 101.356. Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006. § 101.353. QUORUM. A majority of all of the governing persons, members, or committee members of a limited liability company constitutes a quorum for the purpose of transacting business at a meeting of the governing authority, members, or committee of the company, as appropriate. Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006. § 101.354. EQUAL VOTING RIGHTS. Each governing person, member, or committee member of a limited liability company has an equal vote at a meeting of the governing authority, members, or committee of the company, as appropriate. Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006. § 101.355. ACT OF GOVERNING AUTHORITY, MEMBERS, OR COMMITTEE. Except as provided by this title or Title 1, the affirmative vote of the majority of the governing persons, members, or committee members of a limited liability company present at a meeting at which a quorum is present constitutes an act of the governing authority, members, or committee of the company, as appropriate. Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006. § 101.356. VOTES REQUIRED TO APPROVE CERTAIN ACTIONS. (a) Except as provided in this section or any other section in this title, an action of a limited liability company may be approved by the company's governing authority as provided by Section 101.355. (b) Except as provided by Subsection (c), (d), or (e) or any other section in this title, an action of a limited liability company not apparently for carrying out the ordinary course of business of the company must be approved by the affirmative vote of the majority of all of the company's governing persons. (c) Except as provided by Subsection (d) or (e) or any other section in this title, a fundamental business transaction of a limited liability company, or an action that would make it impossible for a limited liability company to carry out the ordinary business of the company, must be approved by the affirmative vote of the majority of all of the company's members. (d) Except as provided by Subsection (e) or any other section of this title, the company's members must approve by an affirmative vote of all the members: (1) an amendment to the certificate of formation of a limited liability company; or (2) a restated certificate of formation that contains an amendment to the certificate of formation of a limited liability company. (e) A requirement that an action of a limited liability company must be approved by the company's members does not apply during the period prescribed by Section 101.101(b). (f) Approval of a restated certificate of formation by a limited liability company's members is required only if the restated certificate contains an amendment. Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006. Amended by Acts 2005, 79th Leg., ch. 64, § 74, eff. Jan. 1, 2006. § 101.357. MANNER OF VOTING. (a) A member of a limited liability company may vote: (1) in person; or (2) by a proxy executed in writing by the member. (b) A manager or committee member of a limited liability company, if authorized by the company agreement, may vote: (1) in person; or (2) by a proxy executed in writing by the manager or committee member, as appropriate. Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006. § 101.358. ACTION BY LESS THAN UNANIMOUS WRITTEN CONSENT. (a) This section applies only to an action required or authorized to be taken at an annual or special meeting of the governing authority, the members, or a committee of the governing authority of a limited liability company under this title, Title 1, or the governing documents of the company. (b) Notwithstanding Sections 6.201 and 6.202, an action may be taken without holding a meeting, providing notice, or taking a vote if a written consent or consents stating the action to be taken is signed by the number of governing persons, members, or committee members of a limited liability company, as appropriate, necessary to have at least the minimum number of votes that would be necessary to take the action at a meeting at which each governing person, member, or committee member, as appropriate, entitled to vote on the action is present and votes. Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006. § 101.359. EFFECTIVE ACTION BY MEMBERS OR MANAGERS WITH OR WITHOUT MEETING. Members or managers of a limited liability company may take action at a meeting of the members or managers or without a meeting in any manner permitted by this title, Title 1, or the governing documents of the company. Unless otherwise provided by the governing documents, an action is effective if it is taken: (1) by an affirmative vote of those persons having at least the minimum number of votes that would be necessary to take the action at a meeting at which each member or manager, as appropriate, entitled to vote on the action is present and votes; or (2) with the consent of each member of the limited liability company, which may be established by: (A) the member's failure to object to the action in a timely manner, if the member has full knowledge of the action; (B) consent to the action in writing signed by the member; or (C) any other means reasonably evidencing consent. Added by Acts 2005, 79th Leg., ch. 64, § 75, eff. Jan. 1, 2006.SUBCHAPTER I. MODIFICATION OF DUTIES; INDEMNIFICATION § 101.401. EXPANSION OR RESTRICTION OF DUTIES AND LIABILITIES. The company agreement of a limited liability company may expand or restrict any duties, including fiduciary duties, and related liabilities that a member, manager, officer, or other person has to the company or to a member or manager of the company. Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006. § 101.402. PERMISSIVE INDEMNIFICATION, ADVANCEMENT OF EXPENSES, AND INSURANCE OR OTHER ARRANGEMENTS. (a) A limited liability company may: (1) indemnify a person; (2) pay in advance or reimburse expenses incurred by a person; and (3) purchase or procure or establish and maintain insurance or another arrangement to indemnify or hold harmless a person. (b) In this section, "person" includes a member, manager, or officer of a limited liability company or an assignee of a membership interest in the company. Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.SUBCHAPTER J. DERIVATIVE PROCEEDINGS § 101.451. DEFINITIONS. In this subchapter: (1) "Derivative proceeding" means a civil suit in the right of a domestic limited liability company or, to the extent provided by Section 101.462, in the right of a foreign limited liability company. (2) "Member" includes a person who beneficially owns a membership interest through a voting trust or a nominee on the person's behalf. Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006. § 101.452. STANDING TO BRING PROCEEDING. A member may not institute or maintain a derivative proceeding unless: (1) the member: (A) was a member of the limited liability company at the time of the act or omission complained of; or (B) became a member by operation of law from a person that was a member at the time of the act or omission complained of; and (2) the member fairly and adequately represents the interests of the limited liability company in enforcing the right of the limited liability company. Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006. § 101.453. DEMAND. (a) A member may not institute a derivative proceeding until the 91st day after the date a written demand is filed with the limited liability company stating with particularity the act, omission, or other matter that is the subject of the claim or challenge and requesting that the limited liability company take suitable action. (b) The waiting period required by Subsection (a) before a derivative proceeding may be instituted is not required if: (1) the member has been previously notified that the demand has been rejected by the limited liability company; (2) the limited liability company is suffering irreparable injury; or (3) irreparable injury to the limited liability company would result by waiting for the expiration of the 90-day period. Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006. § 101.454. DETERMINATION BY GOVERNING OR INDEPENDENT PERSONS. (a) The determination of how to proceed on allegations made in a demand or petition relating to a derivative proceeding must be made by an affirmative vote of the majority of: (1) the independent and disinterested governing persons present at a meeting of the governing authority at which interested governing persons are not present at the time of the vote if the independent and disinterested governing persons constitute a quorum of the governing authority; (2) a committee consisting of two or more independent and disinterested governing persons appointed by the majority of one or more independent and disinterested governing persons present at a meeting of the governing authority, regardless of whether the independent and disinterested governing persons constitute a quorum of the governing authority; or (3) a panel of one or more independent and disinterested persons appointed by the court on a motion by the limited liability company listing the names of the persons to be appointed and stating that, to the best of the limited liability company's knowledge, the persons to be appointed are disinterested and qualified to make the determinations contemplated by Section 101.458. (b) The court shall appoint a panel under Subsection (a)(3) if the court finds that the persons recommended by the limited liability company are independent and disinterested and are otherwise qualified with respect to expertise, experience, independent judgment, and other factors considered appropriate by the court under the circumstances to make the determinations. A person appointed by the court to a panel under this section may not be held liable to the limited liability company or the limited liability company's members for an action taken or omission made by the person in that capacity, except for acts or omissions constituting fraud or wilful misconduct. Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006. § 101.455. STAY OF PROCEEDING. (a) If the domestic or foreign limited liability company that is the subject of a derivative proceeding commences an inquiry into the allegations made in a demand or petition and the person or group of persons described by Section 101.454 is conducting an active review of the allegations in good faith, the court shall stay a derivative proceeding until the review is completed and a determination is made by the person or group regarding what further action, if any, should be taken. (b) To obtain a stay, the domestic or foreign limited liability company shall provide the court with a written statement agreeing to advise the court and the member making the demand of the determination promptly on the completion of the review of the matter. A stay, on motion, may be reviewed every 60 days for the continued necessity of the stay. (c) If the review and determination made by the person or group is not completed before the 61st day after the date on which the court orders the stay, the stay may be renewed for one or more additional 60-day periods if the domestic or foreign limited liability company provides the court and the member with a written statement of the status of the review and the reasons why a continued extension of the stay is necessary. Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006. § 101.456. DISCOVERY. (a) If a domestic or foreign limited liability company proposes to dismiss a derivative proceeding under Section 101.458, discovery by a member after the filing of the derivative proceeding in accordance with this subchapter shall be limited to: (1) facts relating to whether the person or group of persons described by Section 101.458 is independent and disinterested; (2) the good faith of the inquiry and review by the person or group; and (3) the reasonableness of the procedures followed by the person or group in conducting the review. (b) Discovery described by Subsection (a) may not be expanded to include a fact or substantive matter regarding the act, omission, or other matter that is the subject matter of the derivative proceeding. The scope of discovery may be expanded if the court determines after notice and hearing that a good faith review of the allegations for purposes of Section 101.458 has not been made by an independent and disinterested person or group in accordance with that section. Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006. § 101.457. TOLLING OF STATUTE OF LIMITATIONS. A written demand filed with the limited liability company under Section 101.453 tolls the statute of limitations on the claim on which demand is made until the earlier of: (1) the 91st day after the date of the demand; or (2) the 31st day after the date the limited liability company advises the member that the demand has been rejected or the review has been completed. Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006. § 101.458. DISMISSAL OF DERIVATIVE PROCEEDING. (a) A court shall dismiss a derivative proceeding on a motion by the limited liability company if the person or group of persons described by Section 101.454 determines in good faith, after conducting a reasonable inquiry and based on factors the person or group considers appropriate under the circumstances, that continuation of the derivative proceeding is not in the best interests of the limited liability company. (b) In determining whether the requirements of Subsection (a) have been met, the burden of proof shall be on: (1) the plaintiff member if: (A) the majority of the governing authority consists of independent and disinterested persons at the time the determination is made; (B) the determination is made by a panel of one or more independent and disinterested persons appointed under Section 101.454(a)(3); or (C) the limited liability company presents prima facie evidence that demonstrates that the persons appointed under Section 101.454(a)(2) are independent and disinterested; or (2) the limited liability company in any other circumstance. Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006. § 101.459. ALLEGATIONS IF DEMAND REJECTED. If a derivative proceeding is instituted after a demand is rejected, the petition must allege with particularity facts that establish that the rejection was not made in accordance with the requirements of Sections 101.454 and 101.458. Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006. § 101.460. DISCONTINUANCE OR SETTLEMENT. (a) A derivative proceeding may not be discontinued or settled without court approval. (b) The court shall direct that notice be given to the affected members if the court determines that a proposed discontinuance or settlement may substantially affect the interests of other members. Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006. § 101.461. PAYMENT OF EXPENSES. (a) In this section, "expenses" means reasonable expenses incurred by a party in a derivative proceeding, including: (1) attorney's fees; (2) costs of pursuing an investigation of the matter that was the subject of the derivative proceeding; or (3) expenses for which the domestic or foreign limited liability company may be required to indemnify another person. (b) On termination of a derivative proceeding, the court may order: (1) the domestic or foreign limited liability company to pay the expenses the plaintiff incurred in the proceeding if the court finds the proceeding has resulted in a substantial benefit to the domestic or foreign limited liability company; (2) the plaintiff to pay the expenses the domestic or foreign limited liability company or other defendant incurred in investigating and defending the proceeding if the court finds the proceeding has been instituted or maintained without reasonable cause or for an improper purpose; or (3) a party to pay the expenses incurred by another party relating to the filing of a pleading, motion, or other paper if the court finds the pleading, motion, or other paper: (A) was not well grounded in fact after reasonable inquiry; (B) was not warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law; or (C) was interposed for an improper purpose, such as to harass, cause unnecessary delay, or cause a needless increase in the cost of litigation. Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006. § 101.462. APPLICATION TO FOREIGN LIMITED LIABILITY COMPANIES. (a) In a derivative proceeding brought in the right of a foreign limited liability company, the matters covered by this subchapter are governed by the laws of the jurisdiction of organization of the foreign limited liability company, except for Sections 101.455, 101.460, and 101.461, which are procedural provisions and do not relate to the internal affairs of the foreign limited liability company. (b) In the case of matters relating to a foreign limited liability company under Section 101.454, a reference to a person or group of persons described by that section refers to a person or group entitled under the laws of the jurisdiction of organization of the foreign limited liability company to review and dispose of a derivative proceeding. The standard of review of a decision made by the person or group to dismiss the derivative proceeding shall be governed by the laws of the jurisdiction of organization of the foreign limited liability company. Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006. § 101.463. CLOSELY HELD LIMITED LIABILITY COMPANY. (a) In this section, "closely held limited liability company" means a limited liability company that has: (1) fewer than 35 members; and (2) no membership interests listed on a national securities exchange or regularly quoted in an over-the-counter market by one or more members of a national securities association. (b) Subject to Subsection (c), Sections 101.452-101.459 do not apply to a closely held limited liability company. (c) If justice requires: (1) a derivative proceeding brought by a member of a closely held limited liability company may be treated by a court as a direct action brought by the member for the member's own benefit; and (2) a recovery in a direct or derivative proceeding by a member may be paid directly to the plaintiff or to the limited liability company if necessary to protect the interests of creditors or other members of the limited liability company. Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.SUBCHAPTER K. SUPPLEMENTAL RECORDKEEPING REQUIREMENTS § 101.501. SUPPLEMENTAL RECORDS REQUIRED FOR LIMITED LIABILITY COMPANIES. (a) In addition to the books and records required to be kept under Section 3.151, a limited liability company shall keep at its principal office in the United States, or make available to a person at its principal office in the United States not later than the fifth day after the date the person submits a written request to examine the books and records of the company under Section 3.152(a) or 101.502: (1) a current list of each member of a class or group of membership interests in the company; (2) a copy of the company's federal, state, and local tax information or income tax returns for each of the six preceding tax years; (3) a copy of the company's certificate of formation, including any amendments to or restatements of the certificate of formation; (4) if the company agreement is in writing, a copy of the company agreement, including any amendments to or restatements of the company agreement; (5) an executed copy of any powers of attorney; (6) a copy of any document that establishes a class or group of members of the company as provided by the company agreement; and (7) except as provided by Subsection (b), a written statement of: (A) the amount of a cash contribution and a description and statement of the agreed value of any other contribution made or agreed to be made by each member; (B) the dates any additional contributions are to be made by a member; (C) any event the occurrence of which requires a member to make additional contributions; (D) any event the occurrence of which requires the winding up of the company; and (E) the date each member became a member of the company. (b) A limited liability company is not required to keep or make available at its principal office in the United States a written statement of the information required by Subsection (a)(7) if that information is stated in the company agreement. (c) A limited liability company shall keep at its registered office located in this state and make available to a member of the company on reasonable request the street address of the company's principal office in the United States in which the records required by this section and Section 3.151 are maintained or made available. Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006. § 101.502. RIGHT TO EXAMINE RECORDS AND CERTAIN OTHER INFORMATION. (a) A member of a limited liability company or an assignee of a membership interest in a limited liability company, or a representative of the member or assignee, on written request and for a proper purpose, may examine and copy at any reasonable time and at the member's or assignee's expense: (1) records required under Sections 3.151 and 101.501; and (2) other information regarding the business, affairs, and financial condition of the company that is reasonable for the person to examine and copy. (b) A limited liability company shall provide to a member of the company or an assignee of a membership interest in the company, on written request by the member or assignee sent to the company's principal office in the United States or, if different, the person and address designated in the company agreement, a free copy of: (1) the company's certificate of formation, including any amendments to or restatements of the certificate of formation; (2) if in writing, the company agreement, including any amendments to or restatements of the company agreement; and (3) any tax returns described by Section 101.501(a)(2). Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.SUBCHAPTER L. SUPPLEMENTAL WINDING UP AND TERMINATION PROVISIONS § 101.551. PERSONS ELIGIBLE TO WIND UP COMPANY. After an event requiring the winding up of a limited liability company unless a revocation as provided by Section 11.151 or a cancellation as provided by Section 11.152 occurs, the winding up of the company must be carried out by: (1) the company's governing authority or one or more persons, including a governing person, designated by the governing authority, the members, or the governing documents; (2) if the event requiring the winding up of the company is the termination of the continued membership of the last remaining member of the company, the legal representative or successor of the last remaining member or one or more persons designated by the legal representative or successor; or (3) a person appointed by the court to carry out the winding up of the company under Section 11.054, 11.405, 11.409, or 11.410. Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006. § 101.552. APPROVAL OF VOLUNTARY WINDING UP, REVOCATION, CANCELLATION, OR REINSTATEMENT. A majority vote of all of the governing members of a limited liability company or, if the limited liability company has no members, a majority vote of all of the managers of the company is required to approve: (1) a voluntary winding up of the company under Chapter 11; (2) a revocation of a voluntary decision to wind up the company under Section 11.151; (3) a cancellation of an event requiring the winding up of the company under Section 11.152; or (4) a reinstatement of a terminated company under Section 11.202. Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
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