New Jersey Statutes 42:2C-39. Standards of conduct for members and managers
Terms Used In New Jersey Statutes 42:2C-39
- Appropriation: The provision of funds, through an annual appropriations act or a permanent law, for federal agencies to make payments out of the Treasury for specified purposes. The formal federal spending process consists of two sequential steps: authorization
- Common law: The legal system that originated in England and is now in use in the United States. It is based on judicial decisions rather than legislative action.
- Fiduciary: A trustee, executor, or administrator.
- Obligation: An order placed, contract awarded, service received, or similar transaction during a given period that will require payments during the same or a future period.
- person: includes corporations, companies, associations, societies, firms, partnerships and joint stock companies as well as individuals, unless restricted by the context to an individual as distinguished from a corporate entity or specifically restricted to one or some of the above enumerated synonyms and, when used to designate the owner of property which may be the subject of an offense, includes this State, the United States, any other State of the United States as defined infra and any foreign country or government lawfully owning or possessing property within this State. See New Jersey Statutes 1:1-2
- Trustee: A person or institution holding and administering property in trust.
a. A member of a member-managed limited liability company owes to the company and, subject to subsection b. of section 67 of this act, the other members, the duties of loyalty and care stated in subsections b. and c. of this section.
b. The fiduciary duty of loyalty of a member in a member-managed limited liability company includes the duties:
(1) to 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;
(b) from a use by the member of the company’s property; or
(c) from the appropriation of a company opportunity;
(2) to refrain from dealing with the company in the conduct or winding up of the company’s activities as or on behalf of a person having an interest adverse to the company; and
(3) to refrain from competing with the company in the conduct of the company’s activities before the dissolution of the company.
c. The duty of care of a member of a member-managed limited liability company in the conduct and winding up of the company’s activities is to refrain from engaging in grossly negligent or reckless conduct, intentional misconduct, or a knowing violation of law.
d. A member shall discharge the duties under this act or under the operating agreement and exercise any rights consistently with the contractual obligation of good faith and fair dealing.
e. A member does not violate a duty or obligation under this act or under the operating agreement merely because the member’s conduct furthers the member’s own interest.
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. It is a defense to a claim under paragraph (2) of subsection b. of this section and any comparable claim in equity or at common law that the transaction was fair to the limited liability company.
h. If, as permitted by subsection f. of this section or the operating agreement, a member enters into a transaction with the company that would otherwise be prohibited by paragraph (2) of subsection b. of this section, the member’s rights and obligations are the same as those of a person not a member.
i. In a manager-managed limited liability company, the following rules apply:
(1) Subsections a., b., c. and g. of this section apply to the manager or managers and not the members, and the duty stated under paragraph (3) of subsection b. of this section continues until winding up is completed.
(2) Subsections d. and e. of this section apply to the managers as well as the members and, subject to subsection d. of this section, a member does not have any duty to the company or any other member solely by reason of being a member.
(3) The power to ratify stated in subsection f. of this section pertains only to the members.
L.2012, c.50, s.39.