2023 District of Columbia Code › Title 29 - Business Organizations. [Enacted title] › Chapter 8 - Limited Liability Companies › Subchapter IV - Relations of Members to Each Other and to Limited Liability Company › § 29–804.09. Standards of conduct for members and managers

§ 29–804.09. Standards of conduct for members and managers.
(a) A member of a member-managed limited liability company owes to the company and, subject to § 29-808.01(b), the other members the duties of loyalty and care stated in subsections (b) and (c) of this section.
(b) The duty of loyalty of a member in a member-managed limited liability company shall include the duties to:
(1) Account to the company and to hold as trustee for it any property, profit, or benefit derived by the member:
(A) In the conduct or winding up of the company’s activities and affairs;
(B) From a use by the member of the company’s property; or
(C) From the appropriation of a limited liability company opportunity;
(2) Refrain from dealing with the company in the conduct or winding up of the company’s activities and affairs as or on behalf of a person having an interest adverse to the company; and
(3) Refrain from competing with the company in the conduct of the company’s activities and affairs before the dissolution of the company.
(c) The duty of care of a member of a member-managed limited liability company in the conduct or winding up of the company’s activities and affairs requires the member to refrain from engaging in grossly negligent or reckless conduct, willful or intentional misconduct, or a knowing violation of law.
(d) A member in a member-managed limited liability company or a manager-managed limited liability company shall discharge the duties and obligations under this chapter or under the operating agreement and exercise any rights consistently with the contractual obligation of good faith and fair dealing.
(e) It shall be a defense to a claim under subsection (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.
(f) All of 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) A member does not violate a duty or obligation under this chapter or under the operating agreement solely because the member’s conduct furthers the member’s own interest.
(h) If, as permitted by subsection (f) of this section or the operating agreement, a member enters into a transaction with the limited liability company which otherwise would be prohibited by subsection (b)(2) of this section, the member’s rights and obligations arising from the transaction are the same as those of a person that is not a member.
(i) In a manager-managed limited liability company, the following rules apply:
(1) Subsections (a), (b), (c), and (e) of this section shall apply to the managers and not the members.
(2) The duty stated under subsection (b)(3) of this section shall continue until winding up is completed.
(3) Subsection (d) of this section shall apply to the members and managers.
(4) Subsections (f) and (g) of this section shall apply only to the members.
(5) A member shall not have any fiduciary duty to the company or to any other member solely by reason of being a member.
(July 2, 2011, D.C. Law 18-378, § 2, 58 DCR 1720; Mar. 5, 2013, D.C. Law 19-210, § 2(h)(5)(H), 59 DCR 13171.)
Section References
This section is referenced in § 29-801.07, § 29-804.06, § 29-804.08, § 29-806.02, and § 29-806.03.
Effect of Amendments
The 2013 amendment by D.C. Law 19-210 deleted “fiduciary” preceding “duties” in (a); substituted “activities and affairs” for “activities” in (b); rewrote (c); substituted “duties and obligations” for “duties” in (d); redesignated former (g) as present (i); in present (i)(4) substituted “Subsections (f) and (g)” for “Subsection (f)”; and added present (g) and (h).
Editor's Notes
Uniform Law: This section is based on § 409 of the Uniform Limited Company Act (2006 Act).
Application of Law 19-210: Section 7 of D.C. Law 19-210 provided that the act shall apply as of January 1, 2012.