Source: https://law.justia.com/codes/tennessee/2017/title-48/limited-liability-companies/chapter-249/part-4/section-48-249-403/
Timestamp: 2019-10-20 21:47:53
Document Index: 89327387

Matched Legal Cases: ['§ 48', 'art 4', '§ 48', '§ 48', '§ 48', '§ 48', '§ 48', '§ 48']

§ 48-249-403. General standards of conduct for members, managers, directors and officers. :: 2017 Tennessee Code :: US Codes and Statutes :: US Law :: Justia
Justia › US Law › US Codes and Statutes › Tennessee Code › 2017 Tennessee Code › Title 48 - Corporations and Associations › Limited Liability Companies › Chapter 249 - Tennessee Revised Limited Liability Company Act › Part 4 - Management › § 48-249-403. General standards of conduct for members, managers, directors and officers.
§ 48-249-403. General standards of conduct for members, managers, directors and officers.
Universal Citation: TN Code § 48-249-403 (2017)
(a) Member-managed LLC. The only fiduciary duties a member owes to a member-managed LLC and the LLC's other members and holders are the duty of loyalty and the duty of care imposed by subsections (b) and (c). A holder of financial rights owes no duties to the LLC, or to the other members or holders, solely by reason of being a holder of financial rights.
(b) Duty of loyalty. A member's duty of loyalty to a member-managed LLC and the LLC's other members and holders of financial rights is limited to the following:
(1) To account to the LLC and to hold as trustee for it any property, profit or benefit derived by the member in the conduct or winding up of the LLC's business, or derived from a use by the member of the LLC's property, including the appropriation of any opportunity of the LLC;
(2) Subject to § 48-249-404, to refrain from dealing with the LLC in the conduct or winding up of the LLC's business as, or on behalf of, a person having an interest adverse to the LLC; and
(3) To refrain from competing with the LLC in the conduct of the LLC's business before the termination of the LLC.
(c) Duty of care. A member's duty of care to a member-managed LLC, and the LLC's other members and holders of financial rights in the conduct of and winding up of the LLC's business, is limited to refraining from engaging in grossly negligent or reckless conduct, intentional misconduct or a knowing violation of law.
(d) Good faith and fair dealing. A member shall discharge the member's duties to a member-managed LLC and its other members and holders of financial rights under this chapter or under the LLC documents, and shall exercise any rights with respect to the LLC consistently with the obligation of good faith and fair dealing.
(e) Furtherance of member's own interest. A member of a member-managed LLC does not violate a duty or obligation under this chapter or under the LLC documents, merely because the member's conduct also furthers the member's own interest.
(g) Representative of surviving member. This section applies to a person winding up the LLC's business as the personal representative of the last surviving member, as if the person were a member.
(h) Manager-managed LLC. In a manager-managed LLC:
(1) A member owes no duties to the LLC, or to the other members or holders of financial rights, solely by reason of being a member;
(2) A manager is held to the same standards of conduct prescribed for members in subsections (b)-(f);
(3) A member that, under the LLC documents, exercises some or all of the rights of a manager in the management and conduct of the LLC's business is held to the standards of conduct prescribed for a member in subsections (b)-(f) 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)-(f) to the extent of the managerial authority delegated to the members by the LLC documents.
(i) Director-managed LLC. In a director-managed LLC:
(2) A member that, under the LLC documents, exercises some or all of the rights of a director in the management and conduct of the LLC's business is held to the standards of conduct prescribed for a director in this subsection (i), to the extent that the member exercises the managerial authority vested in a director by this chapter;
(3) A director is relieved of liability imposed by law for violation of the standards prescribed by this subsection (i), to the extent of the managerial authority of the director delegated to the members by the LLC documents; and
(4) A director shall discharge all duties as a director, including duties as a member of a committee of the board of directors of the LLC:
(C) In a manner the director reasonably believes to be in the best interests of the LLC.
(j) Officers. An officer of an LLC shall discharge all duties as an officer:
(3) In a manner the officer reasonably believes to be in the best interests of the LLC.
(k) Reliance on others. In discharging the duties described in this section, a member, manager, director or officer is entitled to rely on information, opinions, reports or statements, including financial statements and other financial data, if prepared or presented by:
(1) One (1) or more officers or employees of the LLC whom the member, manager, director or officer reasonably believes to be reliable and competent in the matters presented;
(2) Legal counsel, public accountants or other persons as to matters the member, manager, director or officer reasonably believes are within the person's professional or expert competence; or
(3) In the case of a director only, a committee of the board of directors of which the director is not a member, if the director reasonably believes the committee merits confidence.
(l) Unwarranted reliance. A member, manager, director or officer is not acting in good faith, if the member, manager, director or officer has knowledge concerning the matter in question that makes reliance otherwise permitted by subsection (k) unwarranted.
(m) Limitation on liability. A member, manager, director or officer is not liable for any action taken as a member, manager, director or officer, or any failure to take any action, if the member, manager, director or officer performs its duties in compliance with this section.
(n) Effect of delegation. Any officer, agent or employee who exercises some or all of the rights of a member, manager, or director, pursuant to a delegation of rights and power under § 48-249-401(e) is held to the same standards of conduct set forth in this section, for members, managers or directors, as applicable, to the extent that such officer, agent or employee exercises the delegated rights and powers. A member, manager or director is relieved of liability imposed by law for the standards prescribed in this section to the extent that such person's managerial authority is vested in an officer, agent or employee, pursuant to a delegation of rights and power under § 48-249-401(e).