§ 4-38-105 — Operating agreement - Scope, function, and limitations

(a) Except as otherwise provided in subsections (e) and (f), the operating agreement governs the following: (1) relations among the members as members and between the members and the limited liability company; (2) relations between the members and any manager or managers, and the rights and duties under this chapter of a person in the capacity of manager; (3) the activities and affairs of the limited liability company and the conduct of such activities and affairs, including without limitation the requisite votes or consents from members and any managers required under this chapter; and (4) the means and conditions for amending the operating agreement, including without limitation the votes or consents required from members and any managers with respect to any matters under this chapter. (b) Except as provided in subsections (e) and (f), the operating agreement may vary the terms and provisions of this chapter. (c) For purposes of this chapter, activities include without limitation all business and financial matters. (d) To the extent the operating agreement does not provide for a matter described in subsection (a), this chapter governs the matter. (e) An operating agreement may not: (1) vary the law applicable under § 4-38-104 ; (2) vary a limited liability company's capacity under § 4-38-109 to sue and be sued in its own name; (3) vary any requirement, procedure, or other provision of this chapter pertaining to: (A) registered agents under the Model Registered Agents Act, § 4-20-101 et seq.; or (B) the Secretary of State, including provisions pertaining to records authorized or required to be delivered to the Secretary of State for filing under this chapter; (4) vary the provisions of § 4-38-204 ; (5) alter or eliminate the duty of loyalty or the duty of care, except as otherwise provided in subsection (f); (6) eliminate the contractual obligation of good faith and fair dealing under § 4-38-409(d) , but the operating agreement may prescribe the standards, if not manifestly unreasonable, by which the performance of the obligation is to be measured; (7) relieve or exonerate a person from liability for conduct involving bad faith, willful or intentional misconduct, or knowing violation of law; (8) unreasonably restrict the duties and rights under § 4-38-410 , but the operating agreement may impose reasonable restrictions on the availability and use of information obtained under that section and may define appropriate remedies, including liquidated damages, for a breach of any reasonable restriction on use; (9) vary the causes of dissolution specified in § 4-38-701(a)(4) ; (10) vary the requirement to wind up the company's activities and affairs as specified in § 4-38-702(a), (b)(1), and (e) ; (11) unreasonably restrict the right of a member to maintain an action under § 4-38-801 et seq.; (12) vary the provisions of § 4-38-805 , but the operating agreement may provide that the company may not have a special litigation committee; (13) vary the right of a member to approve a merger, interest exchange, conversion, or domestication under § 4-38-1023(a)(2) , § 4-38-1033(a)(2) , § 4-38-1043(a)(2) , or § 4-38-1053(a)(2) ; (14) vary the required contents of a plan of merger under § 4-38-1022(a) , plan of interest exchange under § 4-38-1032(a) , plan of conversion under § 4-38-1042(a) , or plan of domestication under § 4-38-1052(a) ; or (15) except as otherwise provided in § 4-38-106 and § 4-38-107(b) , restrict the rights under this chapter of a person other than a member or manager. (f) Subject to subsection (e)(7), without limiting other terms that may be included in an operating agreement, the following rules apply: (1) The operating agreement may: (A) specify the method by which a specific act or transaction that would otherwise violate the duty of loyalty may be authorized or ratified by one or more disinterested and independent persons after full disclosure of all material facts; and (B) alter the prohibition in § 4-38-405(a)(2) so that the prohibition requires only that the company's total assets not be less than the sum of its total liabilities. (2) To the extent the operating agreement of a member-managed limited liability company expressly relieves a member of a responsibility that the member otherwise would have under this chapter and imposes the responsibility on one or more other members, the agreement also may eliminate or limit any fiduciary duty of the member relieved of the responsibility which would have pertained to the responsibility. (3) If not manifestly unreasonable, the operating agreement may: (A) alter or eliminate the aspects of the duty of loyalty stated in § 4-38-409(b) and (i) ; (B) identify specific types or categories of activities that do not violate the duty of loyalty; (C) alter the duty of care, but may not authorize conduct involving bad faith, willful or intentional misconduct, or knowing violation of law; and (D) alter or eliminate any other fiduciary duty. (g) The court shall decide as a matter of law whether a term of an operating agreement is manifestly unreasonable under subsection (e)(6) or (f)(3). The court: (1) shall make its determination as of the time the challenged term became part of the operating agreement and by considering only circumstances existing at that time; and (2) may invalidate the term only if, in light of the purposes, activities, and affairs of the limited liability company, it is readily apparent that: (A) the objective of the term is unreasonable; or (B) the term is an unreasonable means to achieve the term's objective.

Legislative History

Added by Act 2021, No. 1041,§ 26, eff. 7/28/2021.