(1)  A member of a member-managed limited liability company owes to the limited liability company and, subject to Subsection 48-3a-801(1), the other members the duties of loyalty and care stated in Subsections (2) and (3).

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Terms Used In Utah Code 48-3a-409

  • 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.
  • Manager: means a person that under the operating agreement of a manager-managed limited liability company is responsible, alone or in concert with others, for performing the management functions stated in Subsection 48-3a-407(3). See Utah Code 48-3a-102
  • Manager-managed limited liability company: means a limited liability company that qualifies under Subsection 48-3a-407(1). See Utah Code 48-3a-102
  • Member: means a person that:
(a) has become a member of a limited liability company under Section 48-3a-401 or was a member in a company when the company became subject to this chapter under Section 48-3a-1405; and
(b) has not dissociated under Section 48-3a-602. See Utah Code 48-3a-102
  • Member-managed limited liability company: means a limited liability company that is not a manager-managed limited liability company. See Utah Code 48-3a-102
  • 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.
  • Operating agreement: means the agreement, whether or not referred to as an operating agreement and whether oral, implied, in a record, or in any combination thereof, of all the members of a limited liability company, including a sole member, concerning the matters described in Subsection 48-3a-112(1). See Utah Code 48-3a-102
  • Person: means an individual, business corporation, nonprofit corporation, partnership, limited partnership, limited liability company, limited cooperative association, unincorporated nonprofit association, statutory trust, business trust, common-law business trust, estate, trust, association, joint venture, public corporation, government or governmental subdivision, agency, or instrumentality, or any other legal or commercial entity. See Utah Code 48-3a-102
  • Property: means all property, whether real, personal, or mixed or tangible or intangible, or any right or interest therein. See Utah Code 48-3a-102
  • 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 limited liability company and to hold as trustee for it any property, profit, or benefit derived by the member:

    (i)  in the conduct or winding up of the limited liability company’s activities and affairs;

    (ii)  from a use by the member of the limited liability company’s property; or

    (iii)  from the appropriation of a limited liability company opportunity;

    (b)  to refrain from dealing with the limited liability company in the conduct or winding up of the limited liability company’s activities and affairs as or on behalf of a person having an interest adverse to the limited liability company; and

    (c)  to refrain from competing with the limited liability company in the conduct of the company’s activities and affairs before the dissolution of the limited liability company.

    (3)  The duty of care of a member of a member-managed limited liability company in the conduct or winding up of the limited liability company’s activities and affairs is to refrain from engaging in grossly negligent or reckless conduct, intentional misconduct, or a knowing violation of law.

    (4)  A member 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.

    (5)  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.

    (6)  All 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)  It is a defense to a claim under Subsection (2)(b) and any comparable claim in equity or at common law that the transaction was fair to the limited liability company.

    (8)  If, as permitted by Subsection (6) or (9)(f) or the operating agreement, a member enters into a transaction with the limited liability company which otherwise would be prohibited by Subsection (2)(b), the member’s rights and obligations arising from the transaction are the same as those of a person that is not a member.

    (9)  In a manager-managed limited liability company, the following rules apply:

    (a)  Subsections (1), (2), (3), and (7) apply to the manager or managers and not the members.

    (b)  The duty stated under Subsection (2)(c) continues until winding up is completed.

    (c)  Subsection (4) applies to managers and members.

    (d)  Subsection (5) applies only to members.

    (e)  The power to ratify under Subsection (6) applies only to the members.

    (f)  Subject to Subsection (4), a member does not have any duty to the limited liability company or to any other member solely by reason of being a member.

    Enacted by Chapter 412, 2013 General Session

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