2015 Vermont Statutes
Title 11 - Corporations, Partnerships and Associations
Chapter 25 - Limited Liability Companies
Subchapter 4: RELATIONS OF MEMBERS TO EACH OTHER AND TO LIMITED LIABILITY COMPANY
§ 4059 General standards of member's and manager's conduct
§ 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.)
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