(a)Fiduciary Duty of Members of Member-Managed LLC. Except as provided in the articles or operating agreement, every member of a member-managed LLC must account to the LLC for any benefit, and hold as trustee for it any profits derived by the member without the consent of the other members from any transaction connected with the formation, conduct, or liquidation of the LLC or from any use by the member of its property including, but not limited to, confidential or proprietary information of the LLC or other matters entrusted to the member as a result of such person‘s status as a member.
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Terms Used In Tennessee Code 48-240-102

  • Interest: means either or both of the following rights under the organic law of an unincorporated entity:
    (A) The right to receive distributions from the entity either in the ordinary course or upon liquidation. See Tennessee Code 48-11-201
  • LLC: means a limited liability company, organized under chapters 201-248 of this title. See Tennessee Code 48-202-101
  • Member: means a person reflected in the required records of an LLC as the owner of some governance rights of a membership interest of the LLC. See Tennessee Code 48-202-101
  • Member-managed: means an LLC organized pursuant to this title that has elected pursuant to §. See Tennessee Code 48-202-101
  • Operating agreement: means a written agreement described in §. See Tennessee Code 48-202-101
  • Person: includes individual and entity. See Tennessee Code 48-202-101
  • Property: includes both personal and real property. See Tennessee Code 1-3-105
  • Trustee: A person or institution holding and administering property in trust.
(b)Standard of Conduct. A member of a member-managed LLC shall discharge such member’s duties as a member, including all duties as a member of a committee:

(1) In good faith;
(2) With the care an ordinarily prudent person in a like position would exercise under similar circumstances; and
(3) In a manner the member reasonably believes to be in the best interest of the LLC.
(c)Reliance. A member of a member-managed LLC is entitled to rely on information, opinions, reports or statements, including financial statements and other financial data, if prepared or presented by:

(1) One (1) or more managers or employees of the LLC whom the member reasonably believes to be reliable and competent in the matters presented;
(2) Legal counsel, public accountants or other persons as to matters the member reasonably believes are within the person’s professional or expert competence; or
(3) A committee of the members of which such member is not a member, if the member reasonably believes the committee merits confidence.
(d)Good Faith Requirement. The member is not acting in good faith if the member has knowledge concerning the matter in question that makes reliance otherwise committed by subsection (c) unwarranted.
(e)Limitation of Liability for Action. A member is not liable for any action taken as a member, or any failure to take any action, if the member performed the duties of the position as a member in compliance with this section.
(f)Burden of Proof. A person alleging a violation of this section has the burden of proving the violation.
(g)Modification of Standard of Conduct in Articles or Operating Agreement. Notwithstanding anything to the contrary in this section, the articles or operating agreement may define the standard of conduct in a manner to reflect the understanding of the parties provided such definition is not manifestly unreasonable under the circumstances.
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