Kentucky Statutes 275.003 – Construction of chapter
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(1) It shall be the policy of the General Assembly through this chapter to give maximum effect to the principles of freedom of contract and the enforceability of operating agreements. Unless displaced by particular provisions of this chapter, the principles of law and equity shall supplement this chapter. Although this chapter is in derogation of common law, the rules of construction that require strict construction of statutes which are in derogation of common law shall not apply to its provisions. This chapter shall not be construed to impair the obligations of any contract existing when this chapter, or any amendment of it, becomes effective, nor to affect any action or proceeding begun or right accrued before the chapter or amendment takes effect.
(2) A written operating agreement may provide that the limited liability company interest of any member who fails to make any contribution that the member is obligated to make or who otherwise violates an obligation undertaken in the operating agreement shall be subject to specified penalties for, or specified consequences, such failure. Such penalty or consequence may take the form of:
(a) Reducing or eliminating the defaulting member’s proportionate interest in the limited liability company;
(b) Subordinating the member’s interest to that of nondefaulting members; (c) A forced sale of that limited liability company interest;
(d) Forfeiture of his or her limited liability company interest;
(e) The lending by other members of the amount necessary to meet the defaulting member’s commitment;
(f) A fixing of the value of his or her limited liability company interest by appraisal or by formula and redemption or sale of the limited liability company interest at such; or
(g) Other penalty or consequence.
(3) A written operating agreement may provide rights to any person, including a person who is not a member or not otherwise a party to the operating agreement, to the extent set forth therein.
(4) Except to the extent set forth in a written operating agreement, a limited liability company is bound by and a party to the operating agreement.
(5) Action validly taken pursuant to one (1) provision of this chapter shall not be deemed invalid solely because it is identical or similar in substance to an action that could have been taken pursuant to some other provision of this chapter but fails to satisfy one (1) or more requirements prescribed by such other provision.
(6) No member or other person shall have a vested property right resulting from any provision of the operating agreement which may not be modified by its amendment or as otherwise permitted by law.
(7) Each member and manager and any other party to an operating agreement shall discharge all duties and exercise all rights consistently with the obligation of good faith and fair dealing. The obligation of good faith and fair dealing may not be
eliminated in the operating agreement, but it may prescribe the standards by which the performance of the obligation is to be measured provided the standards are not manifestly unreasonable.
(8) To the extent the articles of organization and the operating agreement do not otherwise provide, the Kentucky Limited Liability Company Act shall govern relations among the limited liability company, the members, the managers, and the assignees.
Effective: July 12, 2012
History: Amended 2012 Ky. Acts ch. 81, sec. 104, effective July 12, 2012. — Amended
2010 Ky. Acts ch. 133, sec. 28, effective July 15, 2010. — Created 1994 Ky. Acts ch.
389, sec. 92, effective July 15, 1994.
(2) A written operating agreement may provide that the limited liability company interest of any member who fails to make any contribution that the member is obligated to make or who otherwise violates an obligation undertaken in the operating agreement shall be subject to specified penalties for, or specified consequences, such failure. Such penalty or consequence may take the form of:
Terms Used In Kentucky Statutes 275.003
- Action: includes all proceedings in any court of this state. See Kentucky Statutes 446.010
- Amendment: A proposal to alter the text of a pending bill or other measure by striking out some of it, by inserting new language, or both. Before an amendment becomes part of the measure, thelegislature must agree to it.
- Appraisal: A determination of property value.
- 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.
- Company: may extend and be applied to any corporation, company, person, partnership, joint stock company, or association. See Kentucky Statutes 446.010
- Contract: A legal written agreement that becomes binding when signed.
- interest in the limited liability company: means the interest that may be issued in accordance with KRS §. See Kentucky Statutes 275.015
- managers: means , with respect to a limited liability company that has set forth in its articles of organization that it is to be managed by managers, the person or persons designated in accordance with KRS §. See Kentucky Statutes 275.015
- members: means a person or persons who have been admitted to membership in a limited liability company as provided in KRS §. See Kentucky Statutes 275.015
- 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 any agreement, written or oral, among all of the members, as to the conduct of the business and affairs of a limited liability company. See Kentucky Statutes 275.015
- Person: means an individual, a partnership, a domestic or foreign limited liability company, a trust, an estate, an association, a corporation, or any other legal entity. See Kentucky Statutes 275.015
- Proceeding: means civil suit and criminal, administrative, and investigative action. See Kentucky Statutes 275.015
(a) Reducing or eliminating the defaulting member’s proportionate interest in the limited liability company;
(b) Subordinating the member’s interest to that of nondefaulting members; (c) A forced sale of that limited liability company interest;
(d) Forfeiture of his or her limited liability company interest;
(e) The lending by other members of the amount necessary to meet the defaulting member’s commitment;
(f) A fixing of the value of his or her limited liability company interest by appraisal or by formula and redemption or sale of the limited liability company interest at such; or
(g) Other penalty or consequence.
(3) A written operating agreement may provide rights to any person, including a person who is not a member or not otherwise a party to the operating agreement, to the extent set forth therein.
(4) Except to the extent set forth in a written operating agreement, a limited liability company is bound by and a party to the operating agreement.
(5) Action validly taken pursuant to one (1) provision of this chapter shall not be deemed invalid solely because it is identical or similar in substance to an action that could have been taken pursuant to some other provision of this chapter but fails to satisfy one (1) or more requirements prescribed by such other provision.
(6) No member or other person shall have a vested property right resulting from any provision of the operating agreement which may not be modified by its amendment or as otherwise permitted by law.
(7) Each member and manager and any other party to an operating agreement shall discharge all duties and exercise all rights consistently with the obligation of good faith and fair dealing. The obligation of good faith and fair dealing may not be
eliminated in the operating agreement, but it may prescribe the standards by which the performance of the obligation is to be measured provided the standards are not manifestly unreasonable.
(8) To the extent the articles of organization and the operating agreement do not otherwise provide, the Kentucky Limited Liability Company Act shall govern relations among the limited liability company, the members, the managers, and the assignees.
Effective: July 12, 2012
History: Amended 2012 Ky. Acts ch. 81, sec. 104, effective July 12, 2012. — Amended
2010 Ky. Acts ch. 133, sec. 28, effective July 15, 2010. — Created 1994 Ky. Acts ch.
389, sec. 92, effective July 15, 1994.