(a) Member-managed LLC. The only fiduciary duties a member owes to a member-managed LLC and the LLC’s other members and holders are the duty of loyalty and the duty of care imposed by subsections (b) and (c). A holder of financial rights owes no duties to the LLC, or to the other members or holders, solely by reason of being a holder of financial rights.
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Terms Used In Tennessee Code 48-249-403

  • 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
  • board of directors: means the governing board of a corporation, whether denominated the board of directors or otherwise, except that no person or group of persons is the board of directors because of powers delegated to that person or group pursuant to §. See Tennessee Code 48-51-201
  • Business: means every trade, occupation, profession, investment activity, and other lawful purpose for gain or the preservation of assets, whether or not carried on for profit. See Tennessee Code 48-249-102
  • Director: means an individual who is vested with authority as a director under §. See Tennessee Code 48-249-102
  • Director-managed LLC: means an LLC that is so designated in its articles. See Tennessee Code 48-249-102
  • Directors: means natural persons, designated in the charter or bylaws or elected or appointed by the incorporators, and their successors and natural persons elected or appointed to act as members of the board, irrespective of the names or titles by which such persons are described. See Tennessee Code 48-51-201
  • Employee: includes an officer but not a director. See Tennessee Code 48-11-201
  • Fiduciary: A trustee, executor, or administrator.
  • Financial rights: means a member's or holder's rights to:
    (A) Share in profits and losses, as provided in §. See Tennessee Code 48-249-102
  • holder: means a person, other than a member, owning any financial rights in an LLC. See Tennessee Code 48-249-102
  • 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
  • LLC documents: means either, or both:
    (A) An LLC's articles. See Tennessee Code 48-249-102
  • Manager: means a person who is vested with authority as a manager under §. See Tennessee Code 48-249-102
  • Member: means a person that has been admitted to an LLC as a member, as provided in §. See Tennessee Code 48-249-102
  • Member-managed: means an LLC organized pursuant to this title that has elected pursuant to §. See Tennessee Code 48-202-101
  • 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.
  • Officer: means an individual, who is vested with authority as an officer under §. See Tennessee Code 48-249-102
  • Person: means an individual or an entity. See Tennessee Code 48-249-102
  • Personal representative: means , as to an individual, the executor, administrator, guardian, conservator, trustee or other legal representative of the individual, and, as to an entity, the legal representative or successor of the entity. See Tennessee Code 48-249-102
  • Property: includes both personal and real property. See Tennessee Code 1-3-105
  • Representative: means , as to a foreign LLC, a director, manager, officer, employee or other agent of a foreign LLC. See Tennessee Code 48-249-102
  • Termination: means the end of an LLC's existence as a legal entity and occurs when the articles of termination are filed with the secretary of state under §. See Tennessee Code 48-202-101
  • Trustee: A person or institution holding and administering property in trust.
(b)Duty of loyalty. A member’s duty of loyalty to a member-managed LLC and the LLC’s other members and holders of financial rights is limited to the following:

(1) To account to the LLC and to hold as trustee for it any property, profit or benefit derived by the member in the conduct or winding up of the LLC’s business, or derived from a use by the member of the LLC’s property, including the appropriation of any opportunity of the LLC;
(2) Subject to § 48-249-404, to refrain from dealing with the LLC in the conduct or winding up of the LLC’s business as, or on behalf of, a person having an interest adverse to the LLC; and
(3) To refrain from competing with the LLC in the conduct of the LLC’s business before the termination of the LLC.
(c)Duty of care. A member’s duty of care to a member-managed LLC, and the LLC’s other members and holders of financial rights in the conduct of and winding up of the LLC’s business, is limited to refraining from engaging in grossly negligent or reckless conduct, intentional misconduct or a knowing violation of law.
(d)Good faith and fair dealing. A member shall discharge the member’s duties to a member-managed LLC and its other members and holders of financial rights under this chapter or under the LLC documents, and shall exercise any rights with respect to the LLC consistently with the obligation of good faith and fair dealing.
(e)Furtherance of member’s own interest. A member of a member-managed LLC does not violate a duty or obligation under this chapter or under the LLC documents, merely because the member’s conduct also furthers the member’s own interest.
(f)Dealings with LLC. A member of a member-managed LLC may lend money to and transact other business with the LLC. As to each loan or transaction, the rights and obligations of the member are the same as those of a person who is not a member, subject to other applicable law.
(g) Representative of surviving member. This section applies to a person winding up the LLC’s business as the personal representative of the last surviving member, as if the person were a member.
(h)Manager-managed LLC. In a manager-managed LLC:

(1) A member owes no duties to the LLC, or to the other members or holders of financial rights, solely by reason of being a member;
(2) A manager is held to the same standards of conduct prescribed for members in subsections (b)-(f);
(3) A member that, under the LLC documents, exercises some or all of the rights of a manager in the management and conduct of the LLC’s business is held to the standards of conduct prescribed for a member in subsections (b)-(f) to the extent that the member exercises the managerial authority vested in a manager by this chapter; and
(4) A manager is relieved of liability imposed by law for violation of the standards prescribed by subsections (b)-(f) to the extent of the managerial authority delegated to the members by the LLC documents.
(i) Director-managed LLC. In a director-managed LLC:

(1) A member owes no duties to the LLC, or to the other members or holders of financial rights, solely by reason of being a member;
(2) A member that, under the LLC documents, exercises some or all of the rights of a director in the management and conduct of the LLC’s business is held to the standards of conduct prescribed for a director in this subsection (i), to the extent that the member exercises the managerial authority vested in a director by this chapter;
(3) A director is relieved of liability imposed by law for violation of the standards prescribed by this subsection (i), to the extent of the managerial authority of the director delegated to the members by the LLC documents; and
(4) A director shall discharge all duties as a director, including duties as a member of a committee of the board of directors of the LLC:

(A) In good faith;
(B) With the care an ordinarily prudent person in a like position would exercise under similar circumstances; and
(C) In a manner the director reasonably believes to be in the best interests of the LLC.
(j)Officers. An officer of an LLC shall discharge all duties as an officer:

(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 officer reasonably believes to be in the best interests of the LLC.
(k)Reliance on others. In discharging the duties described in this section, a member, manager, director or officer 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 officers or employees of the LLC whom the member, manager, director or officer reasonably believes to be reliable and competent in the matters presented;
(2) Legal counsel, public accountants or other persons as to matters the member, manager, director or officer reasonably believes are within the person’s professional or expert competence; or
(3) In the case of a director only, a committee of the board of directors of which the director is not a member, if the director reasonably believes the committee merits confidence.
(l) Unwarranted reliance. A member, manager, director or officer is not acting in good faith, if the member, manager, director or officer has knowledge concerning the matter in question that makes reliance otherwise permitted by subsection (k) unwarranted.
(m)Limitation on liability. A member, manager, director or officer is not liable for any action taken as a member, manager, director or officer, or any failure to take any action, if the member, manager, director or officer performs its duties in compliance with this section.
(n)Effect of delegation. Any officer, agent or employee who exercises some or all of the rights of a member, manager, or director, pursuant to a delegation of rights and power under § 48-249-401(e) is held to the same standards of conduct set forth in this section, for members, managers or directors, as applicable, to the extent that such officer, agent or employee exercises the delegated rights and powers. A member, manager or director is relieved of liability imposed by law for the standards prescribed in this section to the extent that such person’s managerial authority is vested in an officer, agent or employee, pursuant to a delegation of rights and power under § 48-249-401(e).
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