§ 10A-5A-4.08 — Duties of Persons with Direction and Oversight

Alabama § 10A-5A-4.08

• Jurisdiction: Alabama
• Title 10A: Alabama Business and Nonprofit Entities Code
• Ch. 5A: Alabama Limited Liability Company Law of 2014
• Art. 4: Relations of Members to Each Other and to the Limited Liability Company

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(a)(1) The duties a person who has the authority to direct and oversee the activities and affairs of a limited liability company owes to the limited liability company and to the members of the limited liability company include the duty of loyalty and the duty of care as described in subsections (b) and (d)(1).
(2) The duties a person who has the authority to direct and oversee the activities and affairs of a series of a limited liability company owes to that series and the members associated with that series include the duty of loyalty and the duty of care as described in subsections (c) and (d)(2).
(b) The duty of loyalty of a person described in subsection (a)(1) to a limited liability company and its members includes each of the following:
(1) To account to the limited liability company and to hold as trustee for it any property, profit, or benefit derived by that person in the conduct or winding up of the limited liability company’s activities and affairs or derived from a use by that person of the limited liability company’s property, including the appropriation of the limited liability company’s opportunity.
(2) 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 party having an interest adverse to the limited liability company.
(3) To refrain from competing with the limited liability company in the conduct of the limited liability company’s activities and affairs before the dissolution of the limited liability company.
(c) The duty of loyalty of a person described in subsection (a)(2) to a series of a limited liability company and the members associated with that series includes each of the following:
(1) To account to the series and to hold as trustee for it any property, profit, or benefit derived by that person in the conduct or winding up of the series’ activities and affairs or derived from a use by that person of the series’ property, including the appropriation of the series’ opportunity.
(2) To refrain from dealing with the series in the conduct or winding up of the series’ activities and affairs as or on behalf of a party having an interest adverse to the series.
(3) To refrain from competing with the series in the conduct of the series’ activities and affairs before the dissolution of the series.
(d)(1) The duty of care of a person described in subsection (a)(1) to a limited liability company and its members in the conduct or winding up of the limited liability company’s activities and affairs includes refraining from engaging in grossly negligent or reckless conduct, intentional misconduct, or a knowing violation of law.
(2) The duty of care of a person described in subsection (a)(2) to a series of a limited liability company and the members associated with that series in the conduct or winding up of that series’ activities and affairs includes refraining from engaging in grossly negligent or reckless conduct, intentional misconduct, or a knowing violation of law.
(e)(1) A person described in subsection (a)(1) shall discharge the duties to a limited liability company and its members under this chapter and under the limited liability company agreement and exercise any rights consistently with the implied contractual covenant of good faith and fair dealing.
(2) A person described in subsection (a)(2) shall discharge the duties to a series of a limited liability company and the members associated with that series under this chapter and under the limited liability company agreement and exercise any rights consistently with the implied contractual covenant of good faith and fair dealing.
(f) A person described in subsection (a) does not violate a duty or obligation under this chapter or under the limited liability company agreement merely because that person’s conduct furthers that person’s own interest.
(g)(1) Other than the implied contractual covenant of good faith and fair dealing, the only duty a member who does not have the authority to direct and oversee the activities and affairs of a limited liability company owes to a limited liability company or to the other members solely by reason of being a member is to not disclose or otherwise use information of the limited liability company to the detriment of the limited liability company or the other members.
(2) Other than the implied contractual covenant of good faith and fair dealing, the only duty a member associated with a series who does not have the authority to direct and oversee the activities and affairs of that series owes to that series or to the other members associated with that series solely by reason of being a member associated with that series is to not disclose or otherwise use information of that series to the detriment of that series or the other members associated with that series.
(h) When the authority of a person to direct and oversee the activities and affairs of a limited liability company is terminated, each of the following applies:
(1) Except as provided in subsection (h)(2), the person’s duties terminate.
(2) The person’s duties continue only with regard to matters arising and events occurring before the termination of the person’s authority.
(i) When the authority of a person to direct and oversee the activities and affairs of a series of a limited liability company is terminated, each of the following applies:
(1) Except as provided in subsection (i)(2), the person’s duties terminate.
(2) The person’s duties continue only with regard to matters arising and events occurring before the termination of the person’s authority.

Legislative History

(Act 2014-144, p. 265, §1.)