What Fiduciary Duty of Loyalty Does a Manager or Member Owe an LLC?
The Fiduciary Duty of Loyalty and Managers/Members of an LLC
Under the Florida Revised LLC Act, each manager of a manager-managed LLC and member of a member-managed LLC owes a fiduciary duty of loyalty to the LLC and its members. See Fla. Stat. 605.04091(1).
The Fiduciary Duty of Loyalty
The fiduciary duty of loyalty imposes the following duties upon a manager in a manager-managed LLC and a member in a member-managed LLC:
- Accounting to the LLC and hosting as trustee for the LLC, its property, profit or benefit derived from the manager or member (a) in the conduct or winding up the LLC’s affairs, (b) from the use of the LLC’s property, or (c) from the appropriation of a business opportunity for the LLC;
- Refraining from dealing with the LLC in the conduct or winding up of the LLC’s affairs as, or on behalf of, a person having an interest adverse to the LLC; and
- Refraining from competing with the LLC in the conduct of the LLC’s affairs before dissolution of the LLC.
See Fla. Stat. 605.04091(2).
Likewise, a manager in a manager-managed LLC, and a member in a member-managed LLC, are required to perform their duties of loyalty consistent with their obligations of good faith and fair dealing. See Fla. Stat. 605.04091(4).
What are the limits to a manager or member’s duty of loyalty?
First, a manager or member does not violate his or her duty of loyalty solely because his or her conduct furthers his or her own interest. See Fla. Stat. 604.04091(5). Second, in performing his or her duty, the manager or member is entitled to rely on information, opinions, reports or statements, including financial statements and data, if it was presented or prepared by: (a) one or more members or employees and it is reasonably believed to be reliable and competent; (b) legal counsel, public accountants, or others as to areas reasonably believed to be within the person’s professional or expert competence; or (c) a committee of managers or members of which the impacted manager or member is not a participant, if it is reasonably believed the committee instills confidence. See Fla. Stat. 604.04091(6).
A manager or member also may consider factors that he or she considers relevant including the long-term interests and prospects of the LLC and the legal, social and economic impact of any action on the employees, suppliers and customers on the LLC and the community or society. See Fla. Stat. 604.04091(8).
If you know any of a manager in a manager-managed LLC or a member in a member-managed LLC who is breaching his or her duty of loyalty to the LLC or other members, contact attorney Adam Rabin, who is a board-certified specialist in business litigation, for a free consultation at 561-659-7878.