§ 489.105 — Operating agreement — scope, function, and limitations

Iowa § 489.105

• Jurisdiction: Iowa
• Title XII: BUSINESS ENTITIES
• Ch. 489: UNIFORM LIMITED LIABILITY COMPANY ACT

Text

1. Except as otherwise provided in subsections 3 and 4, the operating agreement governs
all of the following:
a. Relations among the members as members and between the members and the limited
liability company.
b. The rights and duties under this chapter of a person in the capacity of manager.
c. The activities and affairs of the company and the conduct of those activities and affairs.
d. The means and conditions for amending the operating agreement.
2. To the extent the operating agreement does not provide for a matter described in
subsection 1, this chapter governs the matter.
3. An operating agreement shall not do any of the following:
a. Vary the law applicable under section 489.104.
b. Vary a limited liability company’s capacity under section 489.109 to sue and be sued in
its own name.
c. Vary any requirement, procedure, or other provision of this chapter pertaining to any
of the following:
(1) Registered agents.
(2) 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.
d. Vary the provisions of section 489.204.
e. Alter or eliminate the duty of loyalty or the duty of care, except as otherwise provided
in subsection 4.
f. Eliminatethecontractualobligationofgoodfaithandfairdealingundersection489.409,
subsection 4, but the operating agreement may prescribe the standards, if not manifestly
unreasonable, by which the performance of the obligation is to be measured.
g. Relieve or exonerate a person from liability for conduct except as provided in
subsection 6.
h. Unreasonably restrict the duties and rights under section 489.410, 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.
i. Vary the causes of dissolution specified in section 489.701, subsection 1, paragraph “d”.
j. Vary the requirement to wind up the limited liability company’s activities and affairs as
specified in section 489.702, subsection 1; subsection 2, paragraph “a”; and subsection 5.
k. Unreasonably restrict the right of a member to maintain an action under subchapter
VIII.
l. Vary the provisions of section 489.805, but the operating agreement may provide that
the limited liability company shall not have a special litigation committee.
m. Vary the right of a member to approve a merger, interest exchange, conversion,
or domestication under section 489.1023, subsection 1, paragraph “b”; section 489.1033,
subsection 1, paragraph “b”; section 489.1043, subsection 1, paragraph “b”; or section
489.1053, subsection 1, paragraph “b”.
n. Vary the required contents of a plan of merger under section 489.1022, subsection 1;
plan of interest exchange under section 489.1032, subsection 1; plan of conversion under
section 489.1042, subsection 1; or plan of domestication under section 489.1052, subsection
1.
o. Except as otherwise provided in sections 489.106 and 489.107, subsection 2, restrict the
rights under this chapter of a person other than a member or manager.
4. Subject to subsection 3, paragraph “g”, without limiting other terms that may be
included in an operating agreement, all the following rules apply:
a. The operating agreement may do all of the following:

(1) Specify the method by which a specific act or transaction that would otherwise violate
thedutyofloyaltymaybeauthorizedorratifiedbyoneormoredisinterestedandindependent
persons after full disclosure of all material facts.
(2) Alter the prohibition in section 489.405, subsection 1, paragraph “b”, so that the
prohibition requires only that the limited liability company’s total assets not be less than the
sum of its total liabilities.
b. 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.
c. If not manifestly unreasonable, the operating agreement may do all of the following:
(1) Alter or eliminate the aspects of the duty of loyalty stated in section 489.409,
subsections 2 and 9.
(2) Identify specific types or categories of activities that do not violate the duty of loyalty.
(3) Alter the duty of care, but may not authorize conduct involving bad faith, willful or
intentional misconduct, or knowing violation of law.
(4) Alter or eliminate any other fiduciary duty.
5. The court shall decide as a matter of law whether a term of an operating agreement is
manifestly unreasonable under subsection 3, paragraph “f”, or subsection 4, paragraph “c”.
All of the following shall apply:
a. The court 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.
b. The court may invalidate the term only if, in light of the purposes, activities, and affairs
of the limited liability company, it is readily apparent that any of the following apply:
(1) The objective of the term is unreasonable.
(2) The term is an unreasonable means to achieve the term’s objective.
6. An operating agreement may alter or eliminate the indemnification for a member or
manager provided by section 489.408, subsection 1, and may eliminate or limit a member’s or
manager’s liability to the limited liability company and members for money damages, except
for any of the following:
a. A breach of the duty of loyalty.
b. A financial benefit received by the member or manager to which the member or
manager is not entitled.
c. A breach of a duty under section 489.406.
d. Intentional infliction of harm on the company or a member.
e. An intentional violation of criminal law.