2011 Vermont Code
Title 11 Corporations, Partnerships and Associations
Chapter 21 LIMITED LIABILITY COMPANIES
§ 3059 General standards of member's and manager's conduct

§ 3059. 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 business shall be to act in good faith, with the care an ordinary prudent person in a like position would exercise under similar circumstances and in a manner the member reasonably believes to be in the best interests of the limited liability company.

(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) A member of a member-managed limited liability company may lend money to and transact other business with the company. As to each loan or transaction, the rights and obligations of the member are the same as those of a person who is not a member, subject to other applicable law.

(g) 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.

(h) In a manager-managed limited liability company:

(1) a member who is not also a manager owes no duties to the company or to the other members solely by reason of being a member;

(2) a manager is held to the same standards of conduct prescribed for members in subsections (b) through (f) of this section;

(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 (b) through (f) of this section to the extent that the member exercises the managerial authority vested in a manager by this chapter; and

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

(i) In discharging his or her duties a member-manager 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 member-managers, managers, officers or employees of the company whom the member-manager 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-manager or manager reasonably believes are within the person's professional or expert competence; or

(3) A committee of the member-managers or managers of which the member-manager or manager is not a member if the member-manager or manager reasonably believes the committee merits confidence.

(j) A member-manager or manager is not acting in good faith if he or she has knowledge concerning the matter if the matter in question that makes reliance permitted by subsection (i) unwarranted.

(k) A member-manager or manager is not liable for any action taken as a member-manager or manager or any failure to take any action, if the member-manager or manager performed the duties of his or her office in compliance with this section. (Added 1995, No. 179 (Adj. Sess.), { 4.)