North Dakota Code 10-32.1-41 – Standards of conduct for members, managers, and governors
1. A member of a member-managed limited liability company owes to the company and, subject to subsection 2 of section 10-32.1-33, the other members the fiduciary duties of loyalty and care stated in subsections 2 and 3.
Terms Used In North Dakota Code 10-32.1-41
- 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.
- following: when used by way of reference to a chapter or other part of a statute means the next preceding or next following chapter or other part. See North Dakota Code 1-01-49
- 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: 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
- Rule: includes regulation. See North Dakota Code 1-01-49
- Trustee: A person or institution holding and administering property in trust.
2. The duty of loyalty of a member in a member-managed limited liability company includes the duties:
a. To account to the company and to hold as trustee for it any property, profit, or benefit derived by the member:
(1) In the conduct or winding up of the activities of the company; (2) From a use by the member of the property of the company; or
(3) From the appropriation of a limited liability company opportunity; b. To refrain from dealing with the company in the conduct or winding up of the activities of the company as or on behalf of a person having an interest adverse to the company; and
c. To refrain from competing with the company in the conduct of the activities of the company before the dissolution of the company.
3. Subject to the business judgment rule, the duty of care of a member of a member-managed limited liability company in the conduct and winding up of the activities of the company is to act with the care that a person in a like position would reasonably exercise under similar circumstances and in a manner the member reasonably believes to be in the best interests of the company. In discharging this duty, a member may rely in good faith on opinions, reports, statements, or other information provided by another person that the member reasonably believes is a competent and reliable source for the information.
4. A member in a limited liability company shall discharge the duties of the member and exercise any rights under this chapter or under the operating agreement consistently with the contractual obligation of good faith and fair dealing, including acting in a manner, in light of the operating agreement, that is honest, fair, and reasonable.
5. It is a defense to a claim under subdivision b of subsection 2, and any comparable claim in equity or at common law that the transaction was fair to the limited liability company.
6. 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.
7. In a manager-managed limited liability company, the following rules apply:
a. Subsections 1, 2, 3, and 5 apply to the manager or managers and not the members.
b. The duty stated under subdivision c of subsection 2 continues until winding up is completed.
c. Subsection 4 applies to the members and managers. d. Subsection 6 applies only to the members.
e. A member does not have any fiduciary duty to the company or to any other member solely by reason of being a member.
8. In a board-managed limited liability company, the following rules apply:
a. Subsections 1, 2, 3, and 5 apply to the governors and not the members.
b. The duty stated under subdivision c of subsection 2 continues until winding up is completed.
c. Subsection 4 applies to the members and governors. d. Subsection 6 applies only to the members.
e. A member does not have any fiduciary duty to the company or to any other member solely by reason of being a member.