CHAPTER 44 - UNIFORM LIMITED LIABILITY COMPANY ACT OF 1996

SOUTH CAROLINA STATUTES AND CODES

CHAPTER 44 - UNIFORM LIMITED LIABILITY COMPANY ACT OF 1996

Title 33 - Corporations, Partnerships and Associations

CHAPTER 44.

UNIFORM LIMITED LIABILITY COMPANY ACT OF 1996

ARTICLE 1.

GENERAL PROVISIONS

SECTION 33-44-101. Definitions.

In this chapter:

(1) "Articles of organization" means initial, amended, and restated articles of organization, and articles of merger. In the case of a foreign limited liability company, the term includes all records serving a similar function required to be filed in the Office of the Secretary of State or other official having custody of company records in the State or country under whose law it is organized.

(2) "At-will company" means a limited liability company other than a term company.

(3) "Business" includes every trade, occupation, profession, and other lawful purpose, whether or not carried on for profit.

(4) "Debtor in bankruptcy" means a person who is the subject of an order for relief under Title 11 of the United States Code or a comparable order under a successor statute of general application or a comparable order under federal, state, or foreign law governing insolvency.

(5) "Distribution" means a transfer of money, property, or other benefit from a limited liability company to a member in the member's capacity as a member or to a transferee of the member's distributional interest.

(6) "Distributional interest" means all of a member's interest in distributions by the limited liability company.

(7) "Entity" means a person other than an individual.

(8) "Foreign limited liability company" means an unincorporated entity organized under laws other than the laws of this State which afford limited liability to its owners comparable to the liability under Section 33-44-303 and is not required to obtain a certificate of authority to transact business under any law of this State other than this chapter.

(9) "Limited liability company" means a limited liability company organized under this chapter.

(10) "Manager" means a person, whether or not a member of a manager-managed company, who is vested with authority under Section 33-44-301.

(11) "Manager-managed company" means a limited liability company which is so designated in its articles of organization.

(12) "Member-managed company" means a limited liability company other than a manager-managed company.

(13) "Operating agreement" means the agreement under Section 33-44-103 concerning the relations among the members, managers, and limited liability company. The term includes amendments to the agreement.

(14) "Person" means an individual, corporation, business trust, estate, trust, partnership, limited liability company, association, joint venture, government, governmental subdivision, agency, or instrumentality, or any other legal or commercial entity.

(15) "Principal office" means the office, whether or not in this State, where the principal executive office of a domestic or foreign limited liability company is located.

(16) "Record" means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form.

(17) "Sign" means to identify a record by means of a signature, mark, or other symbol, with intent to authenticate it.

(18) "State" means a state of the United States, the District of Columbia, the Commonwealth of Puerto Rico, or any territory or insular possession subject to the jurisdiction of the United States.

(19) "Term company" means a limited liability company in which its members have agreed to remain members until the expiration of a term specified in the articles of organization.

(20) "Transfer" includes an assignment, conveyance, deed, bill of sale, lease, mortgage, security interest, encumbrance, and gift.

SECTION 33-44-102. Knowledge and notice.

(a) A person knows a fact if the person has actual knowledge of it.

(b) A person has notice of a fact if the person:

(1) knows the fact;

(2) has received a notification of the fact; or

(3) has reason to know the fact exists from all of the facts known to the person at the time in question.

(c) A person notifies or gives a notification of a fact to another by taking steps reasonably required to inform the other person in ordinary course, whether or not the other person knows the fact.

(d) A person receives a notification when the notification:

(1) comes to the person's attention; or

(2) is duly delivered at the person's place of business or at any other place held out by the person as a place for receiving communications.

(e) An entity knows, has notice, or receives a notification of a fact for purposes of a particular transaction when the individual conducting the transaction for the entity knows, has notice, or receives a notification of the fact, or in any event when the fact would have been brought to the individual's attention had the entity exercised reasonable diligence. An entity exercises reasonable diligence if it maintains reasonable routines for communicating significant information to the individual conducting the transaction for the entity and there is reasonable compliance with the routines. Reasonable diligence does not require an individual acting for the entity to communicate information unless the communication is part of the individual's regular duties or the individual has reason to know of the transaction and that the transaction would be materially affected by the information.

SECTION 33-44-103. Effect of operating agreement; nonwaivable provisions.

(a) Except as otherwise provided in subsection (b), all members of a limited liability company may enter into an operating agreement, which need not be in writing, to regulate the affairs of the company and the conduct of its business, and to govern relations among the members, managers, and company. To the extent the operating agreement does not otherwise provide, this chapter governs relations among the members, managers, and company.

(b) The operating agreement may not:

(1) unreasonably restrict a right to information or access to records under Section 33-44-408;

(2) eliminate the duty of loyalty under Section 33-44-409(b) or 33-44-603(b)(3), but the agreement may:

(i) identify specific types or categories of activities that do not violate the duty of loyalty, if not manifestly unreasonable; and

(ii) specify the number or percentage of members or disinterested managers that may authorize or ratify, after full disclosure of all material facts, a specific act or transaction that otherwise would violate the duty of loyalty;

(3) unreasonably reduce the duty of care under Section 33-44-409(c) or 33-44-603(b)(3);

(4) eliminate the obligation of good faith and fair dealing under Section 33-44-409(d), but the operating agreement may determine the standards by which the performance of the obligation is to be measured, if the standards are not manifestly unreasonable;

(5) vary the right to expel a member in an event specified in Section 33-44-601(6);

(6) vary the requirement to wind up the limited liability company's business in a case specified in Section 33-44-801(3) or (4); or

(7) restrict rights of a person, other than a manager, member, and transferee of a member's distributional interest, under this chapter.

SECTION 33-44-104. Supplemental principles of law.

(a) Unless displaced by particular provisions of this chapter, the principles of law and equity supplement this chapter.

(b) If an obligation to pay interest arises under this chapter and the rate is not specified, the rate is that specified in Section 34-31-20.

SECTION 33-44-105. Name.

(a) The name of a limited liability company must contain "limited liability company" or "limited company" or the abbreviation "L.L.C.", "LLC", "L.C.", or "LC". "Limited" may be abbreviated as "Ltd.", and "company" may be abbreviated as "Co.".

(b) Except as authorized by subsections (c) and (d), the name of a limited liability company must be distinguishable upon the records of the Secretary of State from:

(1) the name of any corporation, limited partnership, or company incorporated, organized or authorized to transact business, in this State;

(2) a name reserved or registered under Section 33-44-106 or 33-44-107;

(3) a fictitious name approved under Section 33-44-1005 for a foreign company authorized to transact business in this State because its real name is unavailable.

(c) A limited liability company may apply to the Secretary of State for authorization to use a name that is not distinguishable upon the records of the Secretary of State from one or more of the names described in subsection (b). The Secretary of State shall authorize use of the name applied for if:

(1) the present user, registrant, or owner of a reserved name consents to the use in a record and submits an undertaking in form satisfactory to the Secretary of State to change the name to a name that is distinguishable upon the records of the Secretary of State from the name applied for; or

(2) the applicant delivers to the Secretary of State a certified copy of the final judgment of a court of competent jurisdiction establishing the applicant's right to use the name applied for in this State.

(d) A limited liability company may use the name, including a fictitious name, of another domestic or foreign company which is used in this State if the other company is organized or authorized to transact business in this State and the company proposing to use the name has:

(1) merged with the other company;

(2) been formed by reorganization with the other company; or

(3) acquired substantially all of the assets, including the name, of the other company.

SECTION 33-44-106. Reserved name.

(a) A person may reserve the exclusive use of the name of a limited liability company, including a fictitious name for a foreign company whose name is not available, by delivering an application to the Secretary of State for filing. The application must set forth the name and address of the applicant and the name proposed to be reserved. If the Secretary of State finds that the name applied for is available, it must be reserved for the applicant's exclusive use for a nonrenewable one hundred twenty-day period.

(b) The owner of a name reserved for a limited liability company may transfer the reservation to another person by delivering to the Secretary of State a signed notice of the transfer which states the name and address of the transferee.

SECTION 33-44-107. Registered name.

(a) A foreign limited liability company may register its name subject to the requirements of Section 33-44-1005, if the name is distinguishable upon the records of the Secretary of State from names that are not available under Section 33-44-105(b).

(b) A foreign limited liability company registers its name, or its name with any addition required by Section 33-44-1005, by delivering to the Secretary of State for filing an application:

(1) setting forth its name, or its name with any addition required by Section 33-44-1005, the State or country and date of its organization, and a brief description of the nature of the business in which it is engaged; and

(2) accompanied by a certificate of existence, or a record of similar import, from the State or country of organization.

(c) A foreign limited liability company whose registration is effective may renew it for successive years by delivering for filing in the office of the Secretary of State a renewal application complying with subsection (b) between October first and December thirty-first of the preceding year. The renewal application renews the registration for the following calendar year.

(d) A foreign limited liability company whose registration is effective may qualify as a foreign company under its name or consent in writing to the use of its name by a limited liability company later organized under this chapter or by another foreign company later authorized to transact business in this State. The registered name terminates when the limited liability company is organized or the foreign company qualifies or consents to the qualification of another foreign company under the registered name.

SECTION 33-44-108. Designated office and agent for service of process.

(a) A limited liability company and a foreign limited liability company authorized to do business in this State shall designate and continuously maintain in this State:

(1) an office, which need not be a place of business in this State; and

(2) an agent and street address of the agent for service of process on the company.

(b) An agent must be an individual resident of this State, a domestic corporation, another limited liability company, or a foreign corporation or foreign company authorized to do business in this State.

SECTION 33-44-109. Change of designated office or agent for service of process.

A limited liability company may change its designated office or agent for service of process by delivering to the Secretary of State for filing a statement of change which sets forth:

(1) the name of the company;

(2) the street address of its current designated office;

(3) if the current designated office is to be changed, the street address of the new designated office;

(4) the name and address of its current agent for service of process; and

(5) if the current agent for service of process or street address of that agent is to be changed, the new address or the name and street address of the new agent for service of process.

SECTION 33-44-110. Resignation of agent for service of process.

(a) An agent for service of process of a limited liability company may resign by delivering to the Secretary of State for filing a record of the statement of resignation.

(b) After filing a statement of resignation, the Secretary of State shall mail a copy to the designated office and another copy to the limited liability company at its principal office.

(c) An agency is terminated on the thirty-first day after the statement is filed in the office of the Secretary of State.

SECTION 33-44-111. Service of process.

(a) An agent for service of process appointed by a limited liability company or a foreign limited liability company is an agent of the company for service of any process, notice, or demand required or permitted by law to be served upon the company.

(b) If a limited liability company or foreign limited liability company fails to appoint or maintain an agent for service of process in this State or the agent for service of process cannot with reasonable diligence be found at the agent's address, the Secretary of State is an agent of the company upon whom process, notice, or demand may be served.

(c) Service of any process, notice, or demand on the Secretary of State may be made by delivering to and leaving with the Secretary of State, or a clerk in the limited liability company department of the Secretary of State's office duplicate copies of the process, notice, or demand. If the process, notice, or demand is served on the Secretary of State, the Secretary of State shall forward one of the copies by registered or certified mail, return receipt requested, to the company at its designated office. Service is effected under this subsection at the earliest of:

(1) the date the company receives the process, notice, or demand;

(2) the date shown on the return receipt, if signed on behalf of the company; or

(3) five days after its deposit in the mail, if mailed postpaid and correctly addressed.

(d) The Secretary of State shall keep a record of all processes, notices, and demands served pursuant to this section and record the time of and the action taken regarding the service.

(e) This section does not affect the right to serve process, notice, or demand in any manner otherwise provided by law.

SECTION 33-44-112. Nature of business and powers.

(a) A limited liability company may be organized under this chapter for any lawful purpose, subject to any law of this State governing or regulating business.

(b) Unless its articles of organization provide otherwise, a limited liability company has the same powers as an individual to do all things necessary or convenient to carry on its business or affairs, including power to:

(1) sue and be sued, and defend in its name;

(2) purchase, receive, lease, or otherwise acquire, and own, hold, improve, use, and otherwise deal with real or personal property, or any legal or equitable interest in property, wherever located;

(3) sell, convey, mortgage, grant a security interest in, lease, exchange, and otherwise encumber or dispose of all or any part of its property;

(4) purchase, receive, subscribe for, or otherwise acquire, own, hold, vote, use, sell, mortgage, lend, grant a security interest in, or otherwise dispose of and deal in and with, shares or other interests in or obligations of any other entity;

(5) make contracts and guarantees, incur liabilities, borrow money, issue its notes, bonds, and other obligations, which may be convertible into or include the option to purchase other securities of the limited liability company, and secure any of its obligations by a mortgage on or a security interest in any of its property, franchises, or income;

(6) lend money, invest and reinvest its funds, and receive and hold real and personal property as security for repayment;

(7) be a promoter, partner, member, associate, or manager of any partnership, joint venture, trust, or other entity;

(8) conduct its business, locate offices, and exercise the powers granted by this chapter within or without this State;

(9) select managers and appoint officers, employees, and agents of the limited liability company, define their duties, fix their compensation, and lend them money and credit;

(10) pay pensions and establish pension plans, pension trusts, profit sharing plans, bonus plans, option plans, and benefit or incentive plans for any or all of its current or former members, managers, officers, employees, and agents;

(11) make donations for the public welfare or for charitable, scientific, or educational purposes; and

(12) make payments or donations, or do any other act, not inconsistent with law, that furthers the business of the limited liability company.

ARTICLE 2.

ORGANIZATION

SECTION 33-44-201. Limited liability company as legal entity.

Except as provided in Section 12-2-25 for single-member limited liability companies, a limited liability company is a legal entity distinct from its members.

SECTION 33-44-202. Organization.

(a) One or more persons may organize a limited liability company, consisting of one or more members, by delivering articles of organization to the office of the Secretary of State for filing.

(b) Unless a delayed effective date is specified, the existence of a limited liability company begins when the articles of organization are filed.

(c) The filing of the articles of organization by the Secretary of State is conclusive proof that the organizers satisfied all conditions precedent to the creation of a limited liability company.

SECTION 33-44-203. Articles of organization.

(a) Articles of organization of a limited liability company must set forth:

(1) the name of the company;

(2) the address of the initial designated office;

(3) the name and street address of the initial agent for service of process;

(4) the name and address of each organizer;

(5) whether the company is to be a term company and, if so, the term specified;

(6) whether the company is to be manager-managed, and, if so, the name and address of each initial manager; and

(7) whether one or more of the members of the company are to be liable for its debts and obligations under Section 33-44-303(c).

(b) Articles of organization of a limited liability company may set forth:

(1) provisions permitted to be set forth in an operating agreement; or

(2) other matters not inconsistent with law.

(c) Articles of organization of a limited liability company may not vary the nonwaivable provisions of Section 33-44-103(b). As to all other matters, if any provision of an operating agreement is inconsistent with the articles of organization:

(1) the operating agreement controls as to managers, members, and members' transferees; and

(2) the articles of organization control as to persons, other than managers, members, and their transferees, who reasonably rely on the articles to their detriment.

SECTION 33-44-204. Amendment or restatement of articles of organization.

(a) Articles of organization of a limited liability company may be amended at any time by delivering articles of amendment to the Secretary of State for filing. The articles of amendment must set forth the:

(1) name of the limited liability company;

(2) date of filing of the articles of organization; and

(3) amendment to the articles.

(b) A limited liability company may restate its articles of organization at any time. Restated articles of organization must be signed and filed in the same manner as articles of amendment. Restated articles of organization must be designated as such in the heading and state in the heading or in an introductory paragraph the limited liability company's present name and, if it has been changed, all of its former names and the date of the filing of its initial articles of organization.

SECTION 33-44-205. Signing of records.

(a) Except as otherwise provided in this chapter, a record to be filed by or on behalf of a limited liability company in the office of the Secretary of State must be signed in the name of the company by a:

(1) manager of a manager-managed company;

(2) member of a member-managed company;

(3) person organizing the company, if the company has not been formed; or

(4) fiduciary, if the company is in the hands of a receiver, trustee, or other court-appointed fiduciary.

(b) A record signed under subsection (a) must state adjacent to the signature the name and capacity of the signer.

(c) Any person may sign a record to be filed under subsection (a) by an attorney-in-fact. Powers of attorney relating to the signing of records to be filed under subsection (a) by an attorney-in-fact need not be filed in the office of the Secretary of State as evidence of authority by the person filing but must be retained by the company.

SECTION 33-44-206. Filing in Office of Secretary of State.

(a) Articles of organization or any other record authorized to be filed under this chapter must be in a medium permitted by the Secretary of State and must be delivered to the office of the Secretary of State. Unless the Secretary of State determines that a record fails to comply as to form with the filing requirements of this chapter, and if all filing fees have been paid, the Secretary of State shall file the record and send a receipt for the record and the fees to the limited liability company or its representative.

(b) Upon request and payment of a fee, the Secretary of State shall send to the requester a certified copy of the requested record.

(c) Except as otherwise provided in subsection (d) and Section 33-44-207(c), a record accepted for filing by the Secretary of State is effective:

(1) at the time of filing on the date it is filed, as evidenced by the Secretary of State's date and time endorsement on the original record; or

(2) at the time specified in the record as its effective time on the date it is filed.

(d) A record may specify a delayed effective time and date, and if it does so the record becomes effective at the time and date specified. If a delayed effective date but no time is specified, the record is effective at the close of business on that date. If a delayed effective date is later than the ninetieth day after the record is filed, the record is effective on the ninetieth day.

SECTION 33-44-207. Correcting filed record.

(a) A limited liability company or foreign limited liability company may correct a record filed by the Secretary of State if the record contains a false or erroneous statement or was defectively signed.

(b) A record is corrected:

(1) by preparing articles of correction that:

(i) describe the record, including its filing date, or attach a copy of it to the articles of correction;

(ii) specify the incorrect statement and the reason it is incorrect or the manner in which the signing was defective; and

(iii) correct the incorrect statement or defective signing; and

(2) by delivering the corrected record to the Secretary of State for filing.

(c) Articles of correction are effective retroactively on the effective date of the record they correct except as to persons relying on the uncorrected record and adversely affected by the correction. As to those persons, articles of correction are effective when filed.

SECTION 33-44-208. Certificate of existence or authorization.

(a) A person may request the Secretary of State to furnish a certificate of existence for a limited liability company or a certificate of authorization for a foreign limited liability company.

(b) A certificate of existence for a limited liability company must include:

(1) the company's name;

(2) that it is duly organized under the laws of this State, the date of organization, whether its duration is at-will or for a specified term, and, if the latter, the period specified;

(3) if payment is reflected in the records of the Secretary of State and if nonpayment affects the existence of the company, that all fees, taxes, and penalties owed to this State have been paid;

(4) that articles of termination have not been filed; and

(5) other facts of record in the Office of the Secretary of State which may be requested by the applicant.

(1) the company's name used in this State;

(2) that it is authorized to transact business in this State;

(3) if payment is reflected in the records of the Secretary of State and if nonpayment affects the authorization of the company, that all fees, taxes, and penalties owed to this State have been paid;

(4) that a certificate of cancellation has not been filed; and

(5) other facts of record in the Office of the Secretary of State which may be requested by the applicant.

(d) Subject to any qualification stated in the certificate, a certificate of existence or authorization issued by the Secretary of State may be relied upon as conclusive evidence that the domestic or foreign limited liability company is in existence or is authorized to transact business in this State.

SECTION 33-44-209. Liability for false statement in filed record.

If a record authorized or required to be filed under this chapter contains a false statement, one who suffers loss by reliance on the statement may recover damages for the loss from a person who signed the record or caused another to sign it on the person's behalf and knew the statement to be false at the time the record was signed.

SECTION 33-44-210. Filing by judicial act.

If a person required by Section 33-44-205 to sign any record fails or refuses to do so, any other person who is adversely affected by the failure or refusal may petition the circuit court to direct the signing of the record. If the court finds that it is proper for the record to be signed and that a person so designated has failed or refused to sign the record, it shall order the Secretary of State to sign and file an appropriate record.

ARTICLE 3.

RELATIONS OF MEMBERS AND MANAGERS TO PERSONS DEALING WITH LIMITED LIABILITY COMPANY

SECTION 33-44-301. Agency of members and managers.

(a) Subject to subsections (b) and (c):

(1) Each member is an agent of the limited liability company for the purpose of its business, and an act of a member, including the signing of an instrument in the company's name, for apparently carrying on in the ordinary course the company's business or business of the kind carried on by the company binds the company, unless the member had no authority to act for the company in the particular matter and the person with whom the member was dealing knew or had notice that the member lacked authority.

(2) An act of a member which is not apparently for carrying on in the ordinary course the company's business or business of the kind carried on by the company binds the company only if the act was authorized by the other members.

(b) Subject to subsection (c), in a manager-managed company:

(1) A member is not an agent of the company for the purpose of its business solely by reason of being a member. Each manager is an agent of the company for the purpose of its business, and an act of a manager, including the signing of an instrument in the company's name, for apparently carrying on in the ordinary course the company's business or business of the kind carried on by the company binds the company, unless the manager had no authority to act for the company in the particular matter and the person with whom the manager was dealing knew or had notice that the manager lacked authority.

(2) An act of a manager which is not apparently for carrying on in the ordinary course the company's business or business of the kind carried on by the company binds the company only if the act was authorized under Section 33-44-404.

(c) Unless the articles of organization limit their authority, any member of a member-managed company or manager of a manager-managed company may sign and deliver any instrument transferring or affecting the company's interest in real property. The instrument is conclusive in favor of a person who gives value without knowledge of the lack of the authority of the person signing and delivering the instrument.

SECTION 33-44-302. Limited liability company liable for member's or manager's actionable conduct.

A limited liability company is liable for loss or injury caused to a person, or for a penalty incurred, as a result of a wrongful act or omission, or other actionable conduct, of a member or manager acting in the ordinary course of business of the company or with authority of the company.

SECTION 33-44-303. Liability of members and managers.

(a) Except as otherwise provided in subsection (c), the debts, obligations, and liabilities of a limited liability company, whether arising in contract, tort, or otherwise, are solely the debts, obligations, and liabilities of the company. A member or manager is not personally liable for a debt, obligation, or liability of the company solely by reason of being or acting as a member or manager.

(b) The failure of a limited liability company to observe the usual company formalities or requirements relating to the exercise of its company powers or management of its business is not a ground for imposing personal liability on the members or managers for liabilities of the company.

(c) All or specified members of a limited liability company are liable in their capacity as members for all or specified debts, obligations, or liabilities of the company if:

(1) a provision to that effect is contained in the articles of organization; and

(2) a member so liable has consented in writing to the adoption of the provision or to be bound by the provision.

ARTICLE 4.

RELATIONS OF MEMBERS TO EACH OTHER AND TO LIMITED LIABILITY COMPANY

SECTION 33-44-401. Form of contribution.

A contribution of a member of a limited liability company may consist of tangible or intangible property or other benefit to the company, including money, promissory notes, services performed, or other agreements to contribute cash or property, or contracts for services to be performed.

SECTION 33-44-402. Member's liability for contributions.

(a) A member's obligation to contribute money, property, or other benefit to, or to perform services for, a limited liability company is not excused by the member's death, disability, or other inability to perform personally. If a member does not make the required contribution of property or services, the member is obligated at the option of the company to contribute money equal to the value of that portion of the stated contribution which has not been made.

(b) A creditor of a limited liability company who extends credit or otherwise acts in reliance on an obligation described in subsection (a), and without notice of any compromise under Section 33-44-404(c)(5), may enforce the original obligation.

SECTION 33-44-403. Member's and manager's rights to payments and reimbursement.

(a) A limited liability company shall reimburse a member or manager for payments made and indemnify a member or manager for liabilities incurred by the member or manager in the ordinary course of the business of the company or for the preservation of its business or property.

(b) A limited liability company shall reimburse a member for an advance to the company beyond the amount of contribution the member agreed to make.

(c) A payment or advance made by a member which gives rise to an obligation of a limited liability company under subsection (a) or (b) constitutes a loan to the company upon which interest accrues from the date of the payment or advance.

(d) A member is not entitled to remuneration for services performed for a limited liability company, except for reasonable compensation for services rendered in winding up the business of the company.

SECTION 33-44-404. Management of limited liability company.

(a) In a member-managed company:

(1) each member has equal rights in the management and conduct of the company's business; and

(2) except as otherwise provided in subsection (c), any matter relating to the business of the company may be decided by a majority of the members.

(b) In a manager-managed company:

(1) each manager has equal rights in the management and conduct of the company's business;

(2) except as otherwise provided in subsection (c), any matter relating to the business of the company may be exclusively decided by the manager or, if there is more than one manager, by a majority of the managers; and

(3) a manager:

(i) must be designated, appointed, elected, removed, or replaced by a vote, approval, or consent of a majority of the members; and

(ii) holds office until a successor has been elected and qualified, unless the manager sooner resigns or is removed.

(1) the amendment of the operating agreement under Section 33-44-103;

(2) the authorization or ratification of acts or transactions under Section 33-44-103(b)(2)(ii) which would otherwise violate the duty of loyalty;

(3) an amendment to the articles of organization under Section 33-44-204;

(4) the compromise of an obligation to make a contribution under Section 33-44-402(b);

(5) the compromise, as among members, of an obligation of a member to make a contribution or return money or other property paid or distributed in violation of this chapter;

(6) the making of interim distributions under Section 33-44-405(a), including the redemption of an interest;

(7) the admission of a new member;

(8) the use of the company's property to redeem an interest subject to a charging order;

(9) the consent to dissolve the company pursuant to Section 33-44-801(2);

(10) a waiver of the right to have the company's business wound up and the company terminated under Section 33-44-802(b);

(11) the consent of members to merge with another entity under Section 33-44-904(c)(1); and

(12) the sale, lease, exchange, or other disposal of all, or substantially all, of the company's property with or without goodwill.

(d) action requiring the consent of members or managers under this chapter may be taken without a meeting.

(e) A member or manager may appoint a proxy to vote or otherwise act for the member or manager by signing an appointment instrument, either personally or by the member's or manager's attorney-in-fact.

SECTION 33-44-405. Sharing of and right to distributions.

(a) Any distributions made by a limited liability company before its dissolution and winding up must be in equal shares.

(b) A member has no right to receive, and may not be required to accept, a distribution in kind.

(c) If a member becomes entitled to receive a distribution, the member has the status of, and is entitled to all remedies available to, a creditor of the limited liability company with respect to the distribution.

SECTION 33-44-406. Limitations on distributions.

(a) A distribution may not be made if:

(1) the limited liability company would not be able to pay its debts as they become due in the ordinary course of business; or

(2) the company's total assets would be less than the sum of its total liabilities plus the amount that would be needed, if the company were to be dissolved, wound up, and terminated at the time of the distribution, to satisfy the preferential rights upon dissolution, winding up, and termination of members whose preferential rights are superior to those receiving the distribution.

(b) A limited liability company may base a determination that a distribution is not prohibited under subsection (a) on financial statements prepared on the basis of accounting practices and principles that are reasonable in the circumstances or on a fair valuation or other method that is reasonable in the circumstances.

(1) in the case of distribution by purchase, redemption, or other acquisition of a distributional interest in a limited liability company, as of the date money or other property is transferred or debt incurred by the company; and

(2) in all other cases, as of the date the:

(i) distribution is authorized if the payment occurs within one hundred twenty days after the date of authorization; or

(ii) payment is made if it occurs more than one hundred twenty days after the date of authorization.

(d) A limited liability company's indebtedness to a member incurred by reason of a distribution made in accordance with this section is at parity with the company's indebtedness to its general, unsecured creditors.

(e) Indebtedness of a limited liability company, including indebtedness issued in connection with or as part of a distribution, is not considered a liability for purposes of determinations under subsection (a) if its terms provide that payment of principal and interest are made only if and to the extent that payment of a distribution to members could then be made under this section. If the indebtedness is issued as a distribution, each payment of principal or interest on the indebtedness is treated as a distribution, the effect of which is measured on the date the payment is made.

SECTION 33-44-407. Liability for unlawful distributions.

(a) A member of a member-managed company or a member or manager of a manager-managed company who votes for or assents to a distribution made in violation of Section 33-44-406, the articles of organization, or the operating agreement is personally liable to the company for the amount of the distribution which exceeds the amount that could have been distributed without violating Section 33-44-406, the articles of organization, or the operating agreement if it is established that the member or manager did not perform the member's or manager's duties in compliance with Section 33-44-409.

(b) A member of a manager-managed company who knew a distribution was made in violation of Section 33-44-406, the articles of organization, or the operating agreement is personally liable to the company, but only to the extent that the distribution received by the member exceeded the amount that could have been properly paid under Section 33-44-406.

(1) other members or managers who voted for or assented to the distribution in violation of subsection (a) and may compel contribution from them; and

(2) members who received a distribution in violation of subsection (b) and may compel contribution from the member in the amount received in violation of subsection (b).

(d) A proceeding under this section is barred unless it is commenced within two years after the distribution.

SECTION 33-44-408. Member's right to information.

(a) A limited liability company shall provide members and their agents and attorneys access to its records, if any, at the company's principal office or other reasonable locations specified in the operating agreement. The company shall provide former members and their agents and attorneys access for proper purposes to records pertaining to the period during which they were members. The right of access provides the opportunity to inspect and copy records during ordinary business hours. The company may impose a reasonable charge, limited to the costs of labor and material, for copies of records furnished.

(b) A limited liability company shall furnish to a member, and to the legal representative of a deceased member or member under legal disability:

(1) without demand, information concerning the company's business or affairs reasonably required for the proper exercise of the member's rights and performance of the member's duties under the operating agreement or this chapter; and

(2) on demand, other information concerning the company's business or affairs, except to the extent the demand or the information demanded is unreasonable or otherwise improper under the circumstances.

(c) A member has the right upon written demand given to the limited liability company to obtain at the company's expense a copy of any written operating agreement.

SECTION 33-44-409. General standards of member's and manager's conduct.

(a) The only fiduciary duties a member owes to a member-managed company and its other members are the duty of loyalty and the duty of care imposed by subsections (b) and (c).

(b) A member's duty of loyalty to a member-managed company and its other members is limited to the following:

(1) to account to the company and to hold as trustee for it any property, profit, or benefit derived by the member in the conduct or winding up of the company's business or derived from a use by the member of the company's property, including the appropriation of a company's opportunity;

(2) to refrain from dealing with the company in the conduct or winding up of the company's business as or on behalf of a party having an interest adverse to the company; and

(3) to refrain from competing with the company in the conduct of the company's business before the dissolution of the company.

(c) A member's duty of care to a member-managed company and its other members in the conduct of and winding up of the company's business is limited to refraining from engaging in grossly negligent or reckless conduct, intentional misconduct, or a knowing violation of law.

(d) A member shall discharge the duties to a member-managed company and its other members under this chapter or under the operating agreement and exercise any rights consistently with the obligation of good faith and fair dealing.

(e) A member of a member-managed company does not violate a duty or obligation under this chapter or under the operating agreement merely because the member's conduct furthers the member's own interest.

(f) A member of a member-managed company may lend money to and transact other business with the company. 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) This section applies to a person winding up the limited liability company's business as the personal or legal representative of the last surviving member as if the person were a member.

(h) In a manager-managed company:

(1) a member who is not also a manager owes no duties to the company or to the other members solely by reason of being a member;

(2) a manager is held to the same standards of conduct prescribed for members in subsections (b) through (f);

(3) a member who pursuant to the operating agreement exercises some or all of the rights of a manager in the management and conduct of the company's business is held to the standards of conduct in subsections (b) through (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) through (f) to the extent of the managerial authority delegated to the members by the operating agreement.

SECTION 33-44-410. Actions by members.

(a) A member or manager may maintain an action against a limited liability company or another member or manager for legal or equitable relief, with or without an accounting as to the company's business, to enforce:

(1) the member's rights under the operating agreement;

(2) the member's rights under this chapter; and

(3) the rights that otherwise protect the interests of the member, including rights and interests arising independently of the member's relationship to the company.

(b) The accrual, and any time limited for the assertion, of a right of action for a remedy under this section is governed by other law. A right to an accounting upon a dissolution and winding up does not revive a claim barred by law.

SECTION 33-44-411. Continuation of term company after expiration of specified term.

(a) If a term company is continued after the expiration of the specified term, the rights and duties of the members and managers remain the same as they were at the expiration of the term except to the extent inconsistent with rights and duties of members and managers of an at-will company.

(b) If the members in a member-managed company or the managers in a manager-managed company continue the business without any winding up of the business of the company, it continues as an at-will company.

ARTICLE 5.

TRANSFEREES AND CREDITORS OF MEMBER

SECTION 33-44-501. Member's distributional interest.

(a) A member is not a co-owner of, and has no transferable interest in, property of a limited liability company.

(b) A distributional interest in a limited liability company is personal property and, subject to Sections 33-44-502 and 33-44-503, may be transferred in whole or in part.

(c) An operating agreement may provide that a distributional interest may be evidenced by a certificate of the interest issued by the limited liability company and, subject to Section 33-44-503, may also provide for the transfer of any interest represented by the certificate.

SECTION 33-44-502. Transfer of distributional interest.

A transfer of a distributional interest does not entitle the transferee to become or to exercise any rights of a member. A transfer entitles the transferee to receive, to the extent transferred, only the distributions to which the transferor would be entitled.

SECTION 33-44-503. Rights of transferee.

(a) A transferee of a distributional interest may become a member of a limited liability company if and to the extent that the transferor gives the transferee the right in accordance with authority described in the operating agreement or all other members consent.

(b) A transferee who has become a member, to the extent transferred, has the rights and powers, and is subject to the restrictions and liabilities, of a member under the operating agreement of a limited liability company and this chapter. A transferee who becomes a member also is liable for the transferor member's obligations to make contributions under Section 33-44-402 and for obligations under Section 33-44-407 to return unlawful distributions, but the transferee is not obligated for the transferor member's liabilities unknown to the transferee at the time the transferee becomes a member.

(c) Whether or not a transferee of a distributional interest becomes a member under subsection (a), the transferor is not released from liability to the limited liability company under the operating agreement or this chapter.

(d) A transferee who does not become a member is not entitled to participate in the management or conduct of the limited liability company's business, require access to information concerning the company's transactions, or inspect or copy any of the company's records.

(e) A transferee who does not become a member shall:

(1) receive, in accordance with the transfer, distributions to which the transferor would otherwise be entitled;

(2) receive, upon dissolution, and winding up of the limited liability company's business:

(i) in accordance with the transfer, the net amount otherwise distributable to the transferor;

(ii) a statement of account only from the date of the latest statement of account agreed to by all the members;

(3) seek under Section 33-44-801(5) a judicial determination that it is equitable to dissolve and wind up the company's business.

(f) A limited liability company need not give effect to a transfer until it has notice of the transfer.

SECTION 33-44-504. Rights of creditor.

(a) On application by a judgment creditor of a member of a limited liability company or of a member's transferee, a court having jurisdiction may charge the distributional interest of the judgment debtor to satisfy the judgment. The court may appoint a receiver of the share of the distributions due or to become due to the judgment debtor and make all other orders, directions, accounts, and inquiries the judgment debtor might have made or which the circumstances may require to give effect to the charging order.

(b) A charging order constitutes a lien on the judgment debtor's distributional interest. The court may order a foreclosure of a lien on a distributional interest subject to the charging order at any time. A purchaser at the foreclosure sale has the rights of a transferee.

(c) At any time before foreclosure, a distributional interest in a limited liability company which is charged may be redeemed:

(1) by the judgment debtor;

(2) with property other than the company's property, by one or more of the other members; or

(3) with the company's property, but only if permitted by the operating agreement.

(d) This chapter does not affect a member's right under exemption laws with respect to the member's distributional interest in a limited liability company.

(e) This section provides the exclusive remedy by which a judgment creditor of a member or a transferee may satisfy a judgment out of the judgment debtor's distributional interest in a limited liability company.

ARTICLE 6.

MEMBER'S DISSOCIATION

SECTION 33-44-601. Events causing member's dissociation.

A member is dissociated from a limited liability company upon the occurrence of any of the following events:

(1) the company's having notice of the member's express will to withdraw upon the date of notice or on a later date specified by the member;

(2) an event agreed to in the operating agreement as causing the member's dissociation;

(3) upon transfer of all of a member's distributional interest, other than a transfer for security purposes or a court order charging the member's distributional interest which has not been foreclosed;

(4) the member's expulsion pursuant to the operating agreement;

(5) the member's expulsion by unanimous vote of the other members if:

(i) it is unlawful to carry on the company's business with the member;

(ii) there has been a transfer of substantially all of the member's distributional interest, other than a transfer for security purposes or a court order charging the member's distributional interest which has not been foreclosed;

(iii) within ninety days after the company notifies a corporate member that it will be expelled because it has filed a certificate of dissolution or the equivalent, its charter has been revoked, or its right to conduct business has been suspended by the jurisdiction of its incorporation, the member fails to obtain a revocation of the certificate of dissolution or a reinstatement of its charter or its right to conduct business; or

(iv) a partnership or a limited liability company that is a member has been dissolved and its business is being wound up;

(6) on application by the company or another member, the member's expulsion by judicial determination because the member:

(i) engaged in wrongful conduct that adversely and materially affected the company's business;

(ii) wilfully or persistently committed a material breach of the operating agreement or of a duty owed to the company or the other members under Section 33-44-409; or

(iii) engaged in conduct relating to the company's business which makes it not reasonably practicable to carry on the business with the member;

(7) the member's:

(i) becoming a debtor in bankruptcy;

(ii) executing an assignment for the benefit of creditors;

(iii) seeking, consenting to, or acquiescing in the appointment of a trustee, receiver, or liquidator of the member or of all or substantially all of the member's property; or

(iv) failing, within ninety days after the appointment, to have vacated or stayed the appointment of a trustee, receiver, or liquidator of the member or of all or substantially all of the member's property obtained without the member's consent or acquiescence, or failing within ninety days after the expiration of a stay to have the appointment vacated;

(8) in the case of a member who is an individual:

(i) the member's death;

(ii) the appointment of a guardian or general conservator for the member; or

(iii) a judicial determination that the member has otherwise become incapable of performing the member's duties under the operating agreement;

(9) in the case of a member that is a trust or is acting as a member by virtue of being a trustee of a trust, distribution of the trust's entire rights to receive distributions from the company, but not merely by reason of the substitution of a successor trustee;

(10) in the case of a member that is an estate or is acting as a member by virtue of being a personal representative of an estate, distribution of the estate's entire rights to receive distributions from the company, but not merely the substitution of a successor personal representative; or

(11) termination of the existence of a member if the member is not an individual, estate, or trust other than a business trust.

SECTION 33-44-602. Member's power to dissociate; wrongful dissociation.

(a) Unless otherwise provided in the operating agreement, a member has the power to dissociate from a limited liability company at any time, rightfully or wrongfully, by express will pursuant to Section 33-44-601(1).

(b) If the operating agreement has not eliminated a member's power to dissociate, the member's dissociation from a limited liability company is wrongful only if:

(1) it is in breach of an express provision of the agreement; or

(2) before the expiration of the specified term of a term company:

(i) the member withdraws by express will;

(ii) the member is expelled by judicial determination under Section 33-44-601(6);

(iii) the member is dissociated by becoming a debtor in bankruptcy; or

(iv) in the case of a member who is not an individual, trust other than a business trust, or estate, the member is expelled or otherwise dissociated because it wilfully dissolved or terminated its existence.

(c) A member who wrongfully dissociates from a limited liability company is liable to the company and to the other members for damages caused by the dissociation. The liability is in addition to any other obligation of the member to the company or to the other members.

(d) If a limited liability company does not dissolve and wind up its business as a result of a member's wrongful dissociation under subsection (b), damages sustained by the company for the wrongful dissociation must be offset against distributions otherwise due the member after the dissociation.

SECTION 33-44-603. Effect of member's dissociation.

Upon a member's dissociation:

(1) in an at-will company, the company must cause the dissociated member's distributional interest to be purchased under Article 7;

(2) in a term company, if the company:

(a) dissolves and winds up its business on or before the expiration of its specified term, Article 8 applies to determine the dissociated member's rights to distributions;

(b) does not dissolve and wind up its business on or before the expiration of its specified term, the company must cause the dissociated member's distributional interest to be purchased under Article 7 on the date of the expiration of the term specified at the time of the member's dissociation;

(3) the member's right to participate in the management and conduct of the company's business terminates, except as otherwise provided in Section 33-44-803, and the member ceases to be a member and is treated the same as a transferee of a member;

(4) the member's duty of loyalty under Section 33-44-409(b)(3) terminates; and

(5) the member's duty of loyalty under Section 33-44-409(b)(1) and (2) and duty of care under Section 33-44-409(c) continue only with regard to matters arising and events occurring before the member's dissociation, unless the member participates in winding up the company's business pursuant to Section 33-44-803.

ARTICLE 7.

MEMBER'S DISSOCIATION WHEN BUSINESS NOT WOUND UP

SECTION 33-44-701. Company purchase of distributional interest.

(a) A limited liability company shall purchase a distributional interest of a:

(1) member of an at-will company for its fair value determined as of the date of the member's dissociation if the member's dissociation does not result in a dissolution and winding up of the company's business under Section 33-44-801; or

(2) member of a term company for its fair value determined as of the date of the expiration of the specified term that existed on the date of the member's dissociation if the expiration of the specified term does not result in a dissolution and winding up of the company's business under Section 33-44-801.

(b) A limited liability company must deliver a purchase offer to the dissociated member whose distributional interest is entitled to be purchased not later than thirty days after the date determined under subsection (a). The purchase offer must be accompanied by:

(1) a statement of the company's assets and liabilities as of the date determined under subsection (a);

(2) the latest available balance sheet and income statement, if any; and

(3) an explanation of how the estimated amount of the payment was calculated.

(c) If the price and other terms of a purchase of a distributional interest are fixed or are to be determined by the operating agreement, the price and terms fixed or determined govern the purchase unless the purchaser defaults. If a default occurs, the dissociated member is entitled to commence a proceeding to have the company dissolved pursuant to Section 33-44-801(4)(d).

(d) If an agreement to purchase the distributional interest is not made within one hundred twenty days after the date determined under subsection (a), the dissociated member, within another one hundred twenty days, may commence a proceeding against the limited liability company to enforce the purchase. The company at its expense shall notify in writing all of the remaining members and any other person the court directs of the commencement of the proceeding. The jurisdiction of the court in which the proceeding is commenced under this subsection is plenary and exclusive.

(e) The court shall determine the fair value of the distributional interest in accordance with the standards set forth in Section 33-44-702 together with the terms for the purchase. Upon making these determinations, the court shall order the limited liability company to purchase or cause the purchase of the interest.

(f) Damages for wrongful dissociation under Section 33-44-602(b), and all other amounts owing, whether or not currently due, from the dissociated member to a limited liability company, must be offset against the purchase price.

SECTION 33-44-702. Court action to determine fair value of distributional interest.

(a) In an action brought to determine the fair value of a distributional interest in a limited liability company, the court shall:

(1) determine the fair value of the interest, considering among other relevant evidence the going concern value of the company, any agreement among some or all of the members fixing the price or specifying a formula for determining value of distributional interests for any other purpose, the recommendations of any appraiser appointed by the court, and any legal constraints on the company's ability to purchase the interest;

(2) specify the terms of the purchase including, if appropriate, terms for installment payments, subordination of the purchase obligation to the rights of the company's other creditors, security for a deferred purchase price, and a covenant not to compete or other restriction on a dissociated member; and

(3) require the dissociated member to deliver an assignment of the interest to the purchaser upon receipt of the purchase price or the first installment of the purchase price.

(b) After the dissociated member delivers the assignment, the dissociated member has no further claim against the company, its members, officers, or managers, if any, other than a claim to any unpaid balance of the purchase price and a claim under any agreement with the company or the remaining members that is not terminated by the court.

(c) If the purchase is not completed in accordance with the specified terms, the company is to be dissolved upon application under Section 33-44-801(b)(5)(iv). If a limited liability company is so dissolved, the dissociated member has the same rights and priorities in the company's assets as if the sale had not been ordered.

(d) If the court finds that a party to the proceeding acted arbitrarily, vexatiously, or not in good faith, it may award one or more other parties their reasonable expenses, including attorney's fees and the expenses of appraisers or other experts, incurred in the proceeding. The finding may be based on the company's failure to make an offer to pay or to comply with Section 33-44-701(b).

(e) Interest must be paid on the amount awarded from the date determined under Section 33-44-701(a) to the date of payment.

SECTION 33-44-703. Dissociated member's power to bind limited liability company.

For two years after a member dissociates without the dissociation resulting in a dissolution and winding up of a limited liability company's business, the company, including a surviving company under Article 9, is bound by an act of the dissociated member which would have bound the company under Section 33-44-301 before dissociation only if at the time of entering into the transaction the other party:

(1) reasonably believed that the dissociated member was then a member;

(2) did