Iowa Code 489.409 – Standards of conduct for members and managers
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1. A member of a member-managed limited liability company owes to the company and, subject to section 489.801, subsection 2, the other members the fiduciary duties of loyalty and care stated in subsections 2 and 3.
Terms Used In Iowa Code 489.409
- 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.
- Fiduciary: A trustee, executor, or administrator.
- following: when used by way of reference to a chapter or other part of a statute mean the next preceding or next following chapter or other part. See Iowa Code 4.1
- 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 section 489. See Iowa Code 489.102
- Manager-managed limited liability company: means a limited liability company that qualifies under section 489. See Iowa Code 489.102
- Member: means a person for whom all of the following are true:a. See Iowa Code 489.102
- Member-managed limited liability company: means a limited liability company that is not a manager-managed limited liability company. See Iowa Code 489.102
- 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 section 489. See Iowa Code 489.102
- Person: includes a protected series, however denominated, of an entity if the protected series is established under law that limits, or limits if conditions specified under law are satisfied, the ability of a creditor of the entity or of any other protected series of the entity to satisfy a claim from assets of the protected series. See Iowa Code 489.102
- Property: means all property, whether real, personal, or mixed or tangible or intangible, or any right or interest therein. See Iowa Code 489.102
- Trustee: A person or institution holding and administering property in trust.
2. The fiduciary duty of loyalty of a member in a member-managed limited liability company includes all of the following 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 regarding any of the following:(1) In the conduct or winding up of the limited liability company’s activities and affairs.(2) From a use by the member of the limited liability company’s property.(3) 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 company’s activities and affairs as or on behalf of a person having an interest adverse to the company.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 company.3. 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 is to refrain from engaging in grossly negligent or reckless conduct, willful or intentional misconduct, or 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, paragraph “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 subsection 9, paragraph “f”, or the operating agreement, a member enters into a transaction with the limited liability company which otherwise would be prohibited by subsection 2, paragraph “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, all of 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, paragraph “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 may be exercised only by 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.