Pennsylvania § 8849.1 - Standards of conduct for members.

§ 8849.1. Standards of conduct for members.

(a) General rule.--A member of a member-managed limited liability company owes to the company and, subject to section 8881(b) (relating to direct action by member), the other members the duties of loyalty and care stated under subsections (b) and (c).

(b) Duty of loyalty.--The fiduciary duty of loyalty of a member in a member-managed limited liability company includes the duties:

(1) to account to the company and to hold as trustee for it any property, profit or benefit derived by the member:

(i) in the conduct or winding up of the company's activities and affairs;

(ii) from a use by the member of the company's property; or

(iii) from the appropriation of a company opportunity;

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

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

(c) Duty of care.--The duty of care of a member of a member-managed limited liability company in the conduct or winding up of the company's activities and affairs is to refrain from engaging in gross negligence, recklessness, willful misconduct or knowing violation of law.

(d) Good faith and fair dealing.--A member shall discharge the duties and obligations under this title or under the operating agreement and exercise any rights consistent with the contractual obligation of good faith and fair dealing.

(e) Self-serving conduct.--A member does not violate a duty or obligation under this title or under the operating agreement solely because the member's conduct furthers the member's own interest.

(f) Authorization or ratification.--All the members of a member-managed limited liability company may authorize or ratify, after disclosure of all material facts, a specific act or transaction that otherwise would violate the duty of loyalty of a member.

(g) Fairness as a defense.--It is a defense to a claim under subsection (b)(2) and any comparable claim in equity or at common law that the transaction was fair to the limited liability company at the time it is authorized or ratified under subsection (f).

(h) Rights and obligations in approved transaction.--If a member enters into a transaction with the limited liability company which otherwise would be prohibited under subsection (b)(2), and the transaction is authorized or ratified as provided under subsection (f) or the operating agreement, the member's rights and obligations arising from the transaction are the same as those of a person that is not a member.

(i) Duties of members in manager-managed company.--Subject to subsection (d), a member does not have any duty to a manager-managed limited liability company or to any other member of the company solely by reason of being or acting as a member.

(j) Exoneration.--The operating agreement may provide that a member in a member-managed limited liability company shall not be personally liable for monetary damages to the company or the other members for a breach of subsection (c), except that a member may not be exonerated for an act that constitutes recklessness, willful misconduct or a knowing violation of law.

(k) Cross reference.--See section 8815 (relating to contents of operating agreement).

Cross References. Section 8849.1 is referred to in sections 8815, 8845, 8846, 8848, 8861, 8863, 8895 of this title.