Colorado § 7-80-404 - Duties of members and managers.

§ 7-80-404. Duties of members and managers.

(1) In addition to the duties established elsewhere in this article, the duties that each member in a limited liability company in which management is vested in the members and that each manager owes to the limited liability company include the duties to:

(a) Account to the limited liability company and hold as trustee for it any property, profit, or benefit derived by the member or manager in the conduct or winding up of the limited liability company business or derived from a use by the member or manager of property of the limited liability company, including the appropriation of an opportunity of the limited liability company;

(b) Refrain from dealing with the limited liability company in the conduct or winding up of the limited liability company business as or on behalf of a party having an interest adverse to the limited liability company; and

(c) Refrain from competing with the limited liability company in the conduct of the limited liability company business before the dissolution of the limited liability company.

(d) (Deleted by amendment, L. 2006, p. 857, § 24, effective July 1, 2006.)

(2) Each member in a limited liability company, the articles of organization of which provide that management is vested in the members, and each manager owes to the limited liability company a duty of care in the conduct and winding up of the business of the limited liability company, which shall be limited to refraining from engaging in grossly negligent or reckless conduct, intentional misconduct, or a knowing violation of law.

(3) Each member and each manager shall discharge the member's or manager's duties to the limited liability company and exercise any rights consistently with the contractual obligation of good faith and fair dealing.

(4) A member in a limited liability company, the articles of organization of which provide that management is vested in the members, or a manager does not violate a duty or obligation to the limited liability company solely because the member's or manager's conduct furthers the member's or manager's own interest.

(5) A member or a manager may lend money to, and transact other business with, the limited liability company, and as to each loan or transaction the rights and obligations of the member or manager may be exercised or performed in the same manner as those of a person who is not a member or manager, subject to other applicable law.

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

Source: L. 2004: Entire part R&RE, p. 939, § 6, effective July 1. L. 2006: Entire section amended, p. 857, § 24, effective July 1. L. 2016: (6) added, (HB 16-1329), ch. 242, p. 989, § 4, effective August 10.

Editor's note: This section is similar to former § 7-80-406 as it existed prior to 2004.

ANNOTATION

Law reviews. For article, "No Paper Required: Business Entity Legislation Makes Life Easier for Business Lawyers", see 33 Colo. Law. 11 (June 2004).

An attorney who continues to represent a client in an existing case after a law firm dissolves does so on the firm's behalf, thus any income received by a member from winding up unfinished business belongs to the dissolved firm, and any attempt by the member to convert the business solely to his or her own business violated the duty owed to the dissolved firm. LaFond v. Sweeney, 2012 COA 27, 345 P.3d 932, aff'd, 2015 CO 3, 343 P.3d 939.

Any profit from a contingency fee agreement case belongs to an LLC, not the member or manager in charge of winding up the case. These profits must be distributed in accordance with the LLC's profit sharing agreement that existed at the time the LLC dissolved. LaFond v. Sweeney, 2015 CO 3, 343 P.3d 939.

A winding-up member or manager is not entitled to additional compensation for his or her post-dissolution work. LaFond v. Sweeney, 2015 CO 3, 343 P.3d 939.

A contingency fee agreement is an executory contract and therefore the business of an LLC. LaFond v. Sweeney, 2015 CO 3, 343 P.3d 939.