Blogs

Enabling the Representative LLC Manager to "Represent," Part 3

01.14.15

Provisions in an LLC Agreement, of course, will normally be the result of negotiations between or among the LLC's members. A designating member should anticipate that other members will desire some balance between a manager's conduct for the benefit of the LLC and its members as a whole and the manager's conduct for the sole or primary benefit of the designating member.

Nevertheless, it is worth asking: What provisions might be proposed to facilitate the desired arrangement to achieve, to the greatest extent, the principal purposes of the designating member and provide the greatest protection to the representative manager? It appears that those possible provisions include the following:

  • Disclosure of the desired relationship between the designating member and the representative manager, and express consent to that relationship by all of the other LLC's members - The key to a court's recognition of the arrangement as fair or proper, even though it involves a departure from standards otherwise imposed by law, is that the arrangement is an essential part of the contractual relationship of the LLC's members, expressly consented to by them.
  • An express statement that the provisions supersede, or take precedence over, any fiduciary duties or relationship imposed on the designated or representative manager by law - Courts applying Delaware law have stated that, to be effective, any departure from the "default" fiduciary duties must be "clear" or "explicit" and "unambiguous." The provisions in the LLC Agreement should include statements to the effect that (a) the representative manager does not have, or is not subject to, the fiduciary duties imposed by law and (b) those fiduciary duties are replaced by the standard of conduct or the duties imposed only by the LLC Agreement (to include the rights briefly described in the succeeding post). Also, the provisions in the LLC Agreement regarding the standard of care for, and the limitations on liability of, managers should correspond to or be consistent with the contractual duties that are imposed on the representative manager.

Additional possible provisions will be described in the final post.

The publications contained in this site do not constitute legal advice. Legal advice can only be given with knowledge of the client's specific facts. By putting these publications on our website we do not intend to create a lawyer-client relationship with the user. Materials may not reflect the most current legal developments, verdicts or settlements. This information should in no way be taken as an indication of future results.

Search Tips:

You may use the wildcard symbol (*) as a root expander.  A search for "anti*" will find not only "anti", but also "anti-trust", "antique", etc.

Entering two terms together in a search field will behave as though an "OR" is being used.  For example, entering "Antique Motorcars" as a Client Name search will find results with either word in the Client Name.

Operators

AND and OR may be used in a search.  Note: they must be capitalized, e.g., "Project AND Finance." 

The + and - sign operators may be used.  The + sign indicates that the term immediately following is required, while the - sign indicates to omit results that contain that term. E.g., "+real -estate" says results must have "real" but not "estate".

To perform an exact phrase search, surround your search phrase with quotation marks.  For example, "Project Finance".

Searches are not case sensitive.

back to top