North Dakota Code 10-32.1-13 – Operating agreement – Scope – Function – Limitations
1. Except as otherwise provided in subsections 2 and 3, the operating agreement governs:
Terms Used In North Dakota Code 10-32.1-13
- 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
- Damages: Money paid by defendants to successful plaintiffs in civil cases to compensate the plaintiffs for their injuries.
- Fiduciary: A trustee, executor, or administrator.
- Indemnification: In general, a collateral contract or assurance under which one person agrees to secure another person against either anticipated financial losses or potential adverse legal consequences. Source: FDIC
- 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.
- Organization: includes a foreign or domestic association, business trust, corporation, enterprise, estate, joint venture, limited liability company, limited liability partnership, limited partnership, partnership, trust, or any legal or commercial entity. See North Dakota Code 1-01-49
- Person: means an individual, organization, government, political subdivision, or government agency or instrumentality. See North Dakota Code 1-01-49
- Property: includes property, real and personal. See North Dakota Code 1-01-49
- Trustee: A person or institution holding and administering property in trust.
a. Relations among the members as members and between the members and the limited liability company; b. The rights and duties under this chapter of a person in the capacity of manager or governor; c. The activities of the company and the conduct of those activities; and
d. The means and conditions for amending the operating agreement.
2. To the extent the operating agreement does not otherwise provide for a matter described in subsection 1, this chapter governs the matter.
3. An operating agreement may not:
a. Vary the capacity of a limited liability company under section 10-32.1-08 to sue and be sued in its own name; b. Vary the law applicable under section 10-32.1-09; c. Vary the power of the court under section 10-32.1-22; d. Subject to subsections 4 through 7, eliminate the duty of loyalty, the duty of care, or any other fiduciary duty; e. Subject to subsections 4 through 7, eliminate the contractual obligation of good faith and fair dealing under subsection 4 of section 10-32.1-41; f. Unreasonably restrict the duties and rights stated in section 10-32.1-42; g. Vary the power of a court to decree dissolution in the circumstances specified in subdivisions d and e of subsection 1 of section 10-32.1-50; h. Vary the requirement to wind up the business of a limited liability company as specified in subsection 1 and subdivision a of subsection 2 of section 10-32.1-51; i. Unreasonably restrict the right of a member to maintain an action under section 10-32.1-33 through 10-32.1-38; j. Restrict the right to approve a merger, conversion, or domestication under section 10-32.1-71 to a member that will have personal liability with respect to a surviving, converted, or domesticated organization; or
k. Except as otherwise provided in subsection 2 of section 10-32.1-15, restrict the rights under this chapter of a person other than a member, manager, or governor.
4. If not manifestly unreasonable, and without limiting the terms that may be included in an operating agreement, the operating agreement may:
a. Restrict or eliminate the duty:
(1) As required in subdivision a of subsection 2 and in subsections 7 and 8 of section 10-32.1-41, to account to the limited liability 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, from a use by the member of the company’s property, or from the appropriation of a limited liability company opportunity; (2) As required in subdivision b of subsection 2 and in subsections 7 and 8 of section 10-32.1-41, 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) As required by subdivision c of subsection 2 and in subsections 7 and 8 of section 10-32.1-41, to refrain from competing with the company in the conduct of the business of the company before the dissolution of the company; b. Identify specific types or categories of activities that do not violate the duty of loyalty; c. Alter the duty of care, except to authorize intentional misconduct or knowing violation of law; d. Alter any other fiduciary duty, including eliminating particular aspects of that duty; and e. Prescribe the standards by which to measure the performance of the contractual obligation of good faith and fair dealing under subsection 4 of section 10-32.1-41.
5. The operating agreement may specify the method by which a specific act or transaction that would otherwise violate the duty of loyalty may be authorized or ratified by one or more disinterested and independent persons after full disclosure of all material facts.
6. To the extent the operating agreement of a member-managed limited liability company expressly relieves a member of a responsibility that the member would otherwise have under this chapter and imposes the responsibility on one or more other members, the operating agreement may, to the benefit of the member that the operating agreement relieves of the responsibility, also eliminate or limit any fiduciary duty that would have pertained to the responsibility.
7. The operating agreement may alter or eliminate the indemnification for a member, manager, or governor provided by subsection 2 of section 10-32.1-40, and may eliminate or limit the liability of a member, manager, or governor to the limited liability company and members for money damages, except for:
a. Breach of the duty of loyalty; b. A financial benefit received by the member or manager to which the member or manager is not entitled; c. A breach of a duty under section 10-32.1-32; d. Intentional infliction of harm on the company or a member; or e. An intentional violation of criminal law.
8. The court shall decide any claim under subsection 4 that a term of an operating agreement is manifestly unreasonable. The court:
a. Shall make its determination as of the time the challenged term became part of the operating agreement and by considering only circumstances existing at that time; and
b. May invalidate the term only if, in light of the purposes and activities of the limited liability company, it is readily apparent that:
(1) The objective of the term is unreasonable; or
(2) The term is an unreasonable means to achieve the objective of the provision.