CHAPTER 4. RIGHTS AND DUTIES OF MEMBERS AND MANAGERS
IC 23-18-4
Chapter 4. Rights and Duties of Members and Managers
IC 23-18-4-1
Authority of members or managers
Sec. 1. (a) Unless the articles of organization provide for a
manager or managers, management of the business or affairs of the
limited liability company is vested in the members. Subject to any
provisions in the operating agreement or this article restricting or
enlarging the management rights and duties of any person or group
or class of persons, the members have the right and authority to
manage the affairs and make all decisions of the limited liability
company.
(b) If the articles of organization provide for a manager or
managers, except to the extent that the operating agreement reserves
the authority to any members or class or group of members, the
manager or managers have the authority to manage the business or
affairs of the limited liability company. Unless otherwise provided
in a written operating agreement, a manager or managers:
(1) must be designated, appointed, elected, removed, or
replaced by a vote, approval, or consent of a majority in interest
of the members;
(2) do not need to be members of the limited liability company
or natural persons; and
(3) unless they have been earlier removed or have earlier
resigned, shall act as managers until their successors have been
elected and qualified.
As added by P.L.8-1993, SEC.301.
IC 23-18-4-2
Acts and omissions liability; trustee for personal benefits derived
through company; duties of member in company providing for
manager
Sec. 2. (a) Unless otherwise provided in a written operating
agreement, a member or manager is not liable for damages to the
limited liability company or to the members of the limited liability
company for any action taken or failure to act on behalf of the
limited liability company, unless the act or omission constitutes
willful misconduct or recklessness.
(b) Unless otherwise provided in a written operating agreement,
each member and manager must account to the limited liability
company and hold as trustee for it any profit or benefit derived by the
manager or member without the consent of a majority of the
disinterested managers or members or other persons participating in
the management of the business or affairs of the limited liability
company from:
(1) a transaction connected with the conduct or winding up of
the limited liability company; or
(2) any use by the manager or member of the limited liability
company's property, including confidential or proprietary
information of the limited liability company or other matters
entrusted to the manager or member because of the manager's
or member's status as manager or member.
(c) Unless otherwise provided in a written operating agreement,
a member of a limited liability company in which the articles of
organization provide for a manager or managers and who is not a
manager has no duties to the limited liability company or to the other
members solely by reason of acting in the capacity as a member.
As added by P.L.8-1993, SEC.301.
IC 23-18-4-3
Affirmative vote, approval, or consent; requirements
Sec. 3. (a) Unless the articles of organization provide for a
manager or managers, and except as otherwise provided in a written
operating agreement or this article and subject to subsection (c), the
affirmative vote, approval, or consent of a majority in interest of the
members is required to decide a matter connected with the business
or affairs of the limited liability company.
(b) If the articles of organization provide for more than one (1)
manager and except as provided otherwise in a written operating
agreement or this article, the affirmative vote, approval, or consent
of a majority of the managers shall be required to decide any matter
that requires the approval of the managers.
(c) Except as provided otherwise in a written operating agreement,
the affirmative vote, approval, or consent of all members is required
to do the following:
(1) Amend the operating agreement.
(2) Authorize a manager, a member, or another person to do an
act on behalf of the limited liability company that contravenes
the operating agreement, including a written provision of the
operating agreement that expressly limits the purpose, business,
affairs, or conduct of the limited liability company.
As added by P.L.8-1993, SEC.301.
IC 23-18-4-4
Written operating agreement
Sec. 4. A written operating agreement may do the following:
(1) Eliminate or limit the personal liability of a member or
manager for monetary damages for breach of a duty provided
for in section 2(a) of this chapter.
(2) Provide for indemnification of a member or manager for
judgments, settlements, penalties, fines, or expenses incurred in
a proceeding to which a person is a party because the person is
or was a member or manager.
As added by P.L.8-1993, SEC.301.
IC 23-18-4-5
Operating agreements; objectives
Sec. 5. Members may enter into an operating agreement to
regulate or establish any aspect of the affairs of the limited liability
company or the relations of the members and managers, if any,
including provisions establishing the following:
(1) The manner in which the business and affairs of the limited
liability company shall be managed, controlled, and operated,
which may include the granting of exclusive authority to
manage, control, and operate the limited liability company to
managers who are not members.
(2) The manner in which the members will share in
distributions of the assets and the profits or losses of the limited
liability company.
(3) The rights of members to assign all or a portion of their
interests in the limited liability company.
(4) Classes or groups of at least one (1) member having certain
relative rights, powers, and duties, including voting rights, and
may provide for the future creation, in the manner provided in
the operating agreement, of additional classes or groups of
members having certain relative rights, powers, or duties,
including voting rights, expressed either in the operating
agreement or at the time the classes or groups are created,
including rights, powers, or duties senior to those of at least one
(1) existing class or group of members.
(5) Classes or groups of at least one (1) manager having certain
relative rights, powers, and duties, including voting rights, and
may provide for the future creation, in the manner provided in
the operating agreement, of additional classes or groups of
managers having certain relative rights, powers, or duties,
including voting rights, expressed either in the operating
agreement or at the time the classes or groups are created,
including rights, powers, or duties senior to those of at least one
(1) existing class or group of managers.
(6) The circumstances in which an assignee of a member's
interest may be admitted as a member of the limited liability
company.
(7) The procedure for the following:
(A) The right to have a member's interest in the limited
liability company evidenced by a certificate issued by the
limited liability company.
(B) Assignment, pledge, or transfer of an interest
represented by the certificate.
(C) Any other provisions dealing with the certificate.
(8) The method by which the operating agreement may be
amended.
As added by P.L.8-1993, SEC.301.
IC 23-18-4-6
Initial operating agreement; amendments; power of attorney
Sec. 6. (a) The initial operating agreement must be agreed to by
all persons who are members at the time the initial agreement is
accepted.
(b) An amendment to an oral operating agreement must be
approved by the unanimous consent of all members.
(c) An amendment to a written operating agreement must be in
writing and must, unless otherwise provided in the operating
agreement before the amendment, be approved by the unanimous
consent of all members.
(d) A copy of any written amendment to an operating agreement
must be delivered to each member who did not consent to the
amendment and to each assignee who has not been admitted as a
member.
(e) A person may sign articles of organization, an operating
agreement, or an amendment to articles of organization or an
operating agreement as an attorney in fact. A power of attorney
relating to the signing of a document under this subsection by an
attorney in fact may but is not required to be:
(1) sworn to, verified, or acknowledged;
(2) signed in the presence of a notary public;
(3) filed with the secretary of state; or
(4) included in another written agreement.
However, the power of attorney must be retained in the records of the
limited liability company.
As added by P.L.8-1993, SEC.301. Amended by P.L.130-2006,
SEC.27.
IC 23-18-4-7
Enforcement of operating agreement; injunctive or other relief
Sec. 7. (a) A court may enforce an operating agreement by
injunction or by granting other relief that the court in its discretion
determines to be fair and appropriate in the circumstances.
(b) As an alternative to injunctive or other equitable relief, when
the provisions under IC 23-18-9-2 are applicable, the court may order
dissolution of the limited liability company.
As added by P.L.8-1993, SEC.301.
IC 23-18-4-8
Records; inspection; full disclosure; omissions
Sec. 8. (a) A limited liability company must keep at its principal
office the following records and information:
(1) A list with the full name and last known mailing address of
each member and manager, if any, of the limited liability
company from the date of organization.
(2) A copy of the articles of organization and all amendments.
(3) Copies of the limited liability company's federal, state, and
local income tax returns and financial statements, if any, for the
three (3) most recent years, or if the returns and statements were
not prepared, copies of the information and statements provided
to or that should have been provided to the members to enable
them to prepare their federal, state, and local tax returns for the
same period.
(4) Copies of any written operating agreements and all
amendments and copies of any written operating agreements no
longer in effect.
(5) Unless otherwise set forth in a written operating agreement,
a writing setting out the following:
(A) The amount of cash, if any, and a statement of the
agreed value of other property or services contributed by
each member and the times at which or events upon the
happening of which any additional contributions agreed to
be made by each member are to be made.
(B) The events, if any, upon the happening of which the
limited liability company is to be dissolved and its affairs
wound up.
(C) Other writings, if any, required by the operating
agreement.
(b) A member may, at the member's own expense, inspect and
copy the limited liability company records described in subsection
(a) where the records are located during ordinary business hours if
the member gives the limited liability company written notice of the
member's request at least five (5) business days before the date on
which the member wishes to inspect and copy the records.
(c) Unless greater rights of access to records or other information
are provided in a written operating agreement, members or managers,
if any, shall give to the extent the circumstances allow just,
reasonable, true, and full information of all things affecting the
members to any member or to the legal representative of any
deceased member or of any member under legal disability upon
reasonable demand for any purpose reasonably related to a member's
interest as a member of the limited liability company.
(d) If a limited liability company is managed by one (1) or more
managers, a member or the legal representative of a deceased
member or a member under a legal disability may obtain information
under subsection (c) only if:
(1) the member makes the request at least five (5) business days
before the date on which the member wishes to obtain the
information;
(2) the member makes the request in good faith and for a proper
purpose;
(3) the member describes with reasonable particularity the
member's purpose and the information that the member wishes
to obtain; and
(4) the information is directly connected to the member's
purpose.
(e) Failure of the limited liability company to keep or maintain the
records or information required by this section is not grounds for
imposing liability on any member for the debts and obligations of the
limited liability company.
As added by P.L.8-1993, SEC.301. Amended by P.L.130-2006,
SEC.28; P.L.1-2007, SEC.163.
IC 23-18-4-9
Managerial omissions; penalties or consequences
Sec. 9. If set forth in writing, an operating agreement may provide
that:
(1) a manager who fails to perform and comply with the terms
and conditions of the operating agreement is subject to penalties
or consequences specified in the operating agreement; and
(2) at the time or upon the happening of events specified in the
operating agreement, a manager is subject to penalties or
consequences specified in the operating agreement.
As added by P.L.8-1993, SEC.301.
IC 23-18-4-10
Good faith reliance on records by members or managers; liability
Sec. 10. A member or manager of a limited liability company is
not liable when relying in good faith upon the records of the limited
liability company and on the information, opinions, reports, or
statements presented to the limited liability company by its other
managers, members, agents, or employees, or by any other person,
concerning matters the member or manager reasonably believes are
within the other person's professional or expert competence and who
has been selected with reasonable care by or on behalf of the limited
liability company, including information, opinions, reports, or
statements concerning the value and amount of the assets, liabilities,
profits, or losses of the limited liability company or other facts
pertinent to the existence and amount of assets from which
distributions to members might properly be paid.
As added by P.L.8-1993, SEC.301.
IC 23-18-4-11
Resignation of manager
Sec. 11. (a) A manager may resign as a manager of a limited
liability company at the time or upon the happening of events
specified in an operating agreement and in accordance with the
operating agreement.
(b) A written operating agreement may provide that a manager
does not have the right to resign as a manager of a limited liability
company. Notwithstanding any provision in an operating agreement
to the contrary, a manager may resign as a manager of a limited
liability company at any time by giving written notice to the
members and other managers. If the resignation of a manager violates
the operating agreement, in addition to any remedies otherwise
available under applicable law, a limited liability company may
recover from the resigning manager damages for breach of the
operating agreement and offset the damages against the amount
payable to the resigning manager.
As added by P.L.8-1993, SEC.301.
IC 23-18-4-12
Business between company and member or manager
Sec. 12. Except when prohibited in a written operating agreement,
a member or manager may lend money to and transact other business
with the limited liability company and, subject to other applicable
law, has the same rights and obligations with respect to the
transaction as a person who is not a member or manager.
As added by P.L.8-1993, SEC.301.