71st OREGON LEGISLATIVE ASSEMBLY--2001 Regular Session
NOTE: Matter within { + braces and plus signs + } in an
amended section is new. Matter within { - braces and minus
signs - } is existing law to be omitted. New sections are within
{ + braces and plus signs + } .
LC 569
Senate Bill 117
Printed pursuant to Senate Interim Rule 213.28 by order of the
President of the Senate in conformance with presession filing
rules, indicating neither advocacy nor opposition on the part
of the President (at the request of Joint Interim Judiciary
Committee for Oregon State Bar)
SUMMARY
The following summary is not prepared by the sponsors of the
measure and is not a part of the body thereof subject to
consideration by the Legislative Assembly. It is an editor's
brief statement of the essential features of the measure as
introduced.
Specifies that articles of organization or operating agreement
of limited liability company may identify specific activities
that do not violate duty of loyalty owed company by members or
managers. Prescribes applicability provisions. Modifies filing
requirements of articles of organization for limited liability
companies managed by manager.
A BILL FOR AN ACT
Relating to limited liability companies; creating new provisions;
and amending ORS 63.047 and 63.155.
Be It Enacted by the People of the State of Oregon:
SECTION 1. ORS 63.155 is amended to read:
63.155. (1) The only fiduciary duties a member owes to a
member-managed limited liability company and its other members
are the duty of loyalty and the duty of care set forth in
subsections (2) and (3) of this section.
(2) A member's duty of loyalty to a member-managed limited
liability company and its other members includes the following:
(a) To account to the limited liability company and hold for it
any property, profit or benefit derived by the member in the
conduct and winding up of the limited liability company's
business or derived from a use by the member of limited liability
company property, including the appropriation of a limited
liability company opportunity;
(b) Except as provided in subsections (5) and (6) of this
section, to refrain from dealing with the limited liability
company in a manner adverse to the limited liability company and
to refrain from representing a person with an interest adverse to
the limited liability company, in the conduct or winding up of
the limited liability company's business; and
(c) To refrain from competing with the limited liability
company in the conduct of the business of the limited liability
company before the dissolution of the limited liability company.
(3) A member's duty of care to a member-managed limited
liability company and the other members in the conduct and
winding up of the business of the limited liability company is
limited to refraining from engaging in grossly negligent or
reckless conduct, intentional misconduct or a knowing violation
of law.
(4) A member shall discharge the duties to a member-managed
limited liability company and the other members under this
chapter or under any operating agreement of the limited liability
company and exercise any rights consistent with the obligation of
good faith and fair dealing.
(5) A member of a member-managed limited liability company does
not violate a duty or obligation under this chapter or under any
operating agreement of the limited liability company merely
because the member's conduct furthers the member's own interest.
(6) A member of a member-managed limited liability company may
lend money to or transact other business with the limited
liability company, provided that any loan or transaction between
the member and the limited liability company must be:
(a) Fair to the limited liability company;
(b) Authorized by an operating agreement; or
(c) Authorized or ratified by a majority of the disinterested
members or by a number or percentage of members specified in the
operating agreement after full disclosure of all material facts.
(7) Loans and other transactions between a member-managed
limited liability company and a member are binding on the parties
in the same manner as transactions between the limited liability
company and persons who are not members, subject to other
applicable law.
(8) This section also applies to a person who is not a member
and who is winding up the limited liability company's business.
(9) In a manager-managed limited liability company:
(a) A member who is not also a manager owes no duties to the
limited liability company or the other members solely by reason
of being a member;
(b) A manager is held to the same standards of conduct
prescribed for members in subsections (2) to (8) of this section;
(c) A member who, pursuant to an operating agreement, exercises
some or all of the rights of a manager in the management and
conduct of the limited liability company's business is held to
the standards of conduct described in subsections (2) to (8) of
this section to the extent that the member exercises the
managerial authority vested in a manager by this chapter; and
(d) A manager is relieved of liability imposed by law for
violation of the standards prescribed by this section to the
extent, if any, of the managerial authority delegated to the
members who are not also managers by an operating agreement.
{ - (10) An operating agreement may: - }
{ - (a) Identify types or categories of activities that do
not violate the duty of loyalty, if not unconscionable; and - }
{ - (b) Specify the number or percentage of members, whether
interested or disinterested, or disinterested managers that may
authorize or ratify, after full disclosure of all material facts,
a specific act or transaction that otherwise would violate the
duty of loyalty. - }
{ - (11) An operating agreement may not: - }
{ - (a) Eliminate the duty of loyalty under subsection (2) of
this section; - }
{ - (b) Unreasonably reduce the duty of care under subsection
(3) of this section; or - }
{ - (c) Eliminate the obligation of good faith and fair
dealing under subsection (4) of this section, but an operating
agreement may determine the standards by which the performance of
the obligation is to be measured, if the standards are not
unconscionable. - }
{ + (10) The articles of organization or an operating
agreement of a limited liability company may not:
(a) Eliminate completely the duty of loyalty, but the articles
of organization or an operating agreement may:
(A) Identify specific types or categories of activities that do
not violate the duty of loyalty, if not unconscionable; and
(B) Specify the number or percentage of members, whether
interested or disinterested, or disinterested managers that may
authorize or ratify, after full disclosure of all material facts,
a specific act or transaction that otherwise would violate the
duty of loyalty.
(b) Unreasonably reduce the duty of care.
(c) Eliminate completely the obligation of good faith and fair
dealing under subsection (4) of this section, but the articles of
organization or an operating agreement may determine the
standards by which performance of the obligation of good faith
and fair dealing is to be measured, if the standards are not
unconscionable.
(11) For the purposes of subsection (10)(a) of this section,
specific types or categories of activities that may be identified
as not violating the duty of loyalty include, but are not limited
to:
(a) Competing with the limited liability company in the conduct
of the business of the limited liability company before the
dissolution of the limited limited liability company; and
(b) Entering into or engaging in, for a member's own account,
an investment, business, transaction or activity that is similar
to the investments, businesses, transactions or activities of the
limited liability company without:
(A) First offering the limited liability company or the other
members an opportunity to participate in the investment,
business, transaction or activity; or
(B) Having any obligation to account to the limited liability
company or the other members for the investment, business,
transaction or activity or the profits from the investment,
business, transaction or activity. + }
SECTION 2. { + (1) On and after October 23, 1999, the
following apply to all limited liability companies:
(a) The amendments to ORS 63.001, 63.034, 63.047, 63.130,
63.140, 63.160, 63.165, 63.229, 63.235, 63.437, 63.441, 63.629,
63.707, 63.771, 63.784 and 63.787 by sections 1 to 5, 9 to 18 and
22, chapter 86, Oregon Laws 1999; and
(b) The repeal of ORS 63.135, 63.145 and 63.150 by section 23,
chapter 86, Oregon Laws 1999.
(2) Before January 1, 2005, ORS 63.155, as amended by section
8, chapter 86, Oregon Laws 1999, and section 1 of this 2001 Act,
governs only:
(a) Limited liability companies created on or after October 23,
1999; and
(b) Limited liability companies created before October 23,
1999, that elect, in the manner provided in the limited liability
company's operating agreement or by law for amending the
operating agreement, to be governed by ORS 63.155, as amended by
section 8, chapter 86, Oregon Laws 1999, and section 1 of this
2001 Act.
(3) On and after January 1, 2005, ORS 63.155, as amended by
section 8, chapter 86, Oregon Laws 1999, and section 1 of this
2001 Act, governs all limited liability companies.
(4) The amendments to ORS 63.155 by section 1 of this 2001 Act
are intended to clarify the meaning and application of ORS
63.155, as amended by section 8, chapter 86, Oregon Laws 1999,
and shall be effective as if enacted as part of section 8,
chapter 86, Oregon Laws 1999. + }
SECTION 3. { + Section 4 of this 2001 Act is added to and made
a part of ORS chapter 63. + }
SECTION 4. { + (1) All or part of this chapter may be amended
or repealed at any time and all domestic and foreign limited
liability companies subject to this chapter shall be governed by
the amendment or repeal.
(2) The amendment or repeal of a statute in this chapter does
not affect:
(a) The operation of the statute or any action taken under the
statute before its amendment or repeal;
(b) Any ratification, right, remedy, privilege, obligation or
liability acquired, accrued or incurred under the statute before
its amendment or repeal;
(c) Any violation of the statute, or any penalty, forfeiture or
punishment incurred because of the violation, before its
amendment or repeal; or
(d) Any proceeding, reorganization or dissolution commenced
under the statute before its amendment or repeal. The proceeding,
reorganization or dissolution may be completed in accordance with
the statute as if it had not been amended or repealed. + }
SECTION 5. ORS 63.047 is amended to read:
63.047. (1) The articles of organization shall set forth:
(a) The name of the limited liability company which satisfies
the requirements of ORS 63.094;
(b) The address, including street and number, and mailing
address, if different, of the limited liability company's initial
registered office and the name of its initial registered agent at
that office;
(c) A mailing address to which notices, as required by this
chapter, may be mailed until an address has been designated by
the limited liability company in its annual report;
(d) { - Whether the limited liability company is to be
member-managed or manager-managed, or shall specify whether the
limited liability company is to be managed by a manager or
managers - } { + If the limited liability company is to be
manager-managed, a statement that the limited liability company
will be manager-managed or a statement that the limited liability
company is to be managed by a manager or managers + };
(e) The name and address of each organizer;
(f) The latest date on which the limited liability company is
to dissolve or a statement that its existence is perpetual; and
(g) If a limited liability company is to render professional
service or services, as defined in ORS 58.015, the professional
service or services to be rendered through the limited liability
company.
(2) The articles of organization may set forth any other
provisions, not inconsistent with law, for the regulation of the
internal affairs of the limited liability company, including any
provision that is required or permitted to be included in any
operating agreement of the limited liability company under this
chapter.
(3) The articles of organization need not set forth any of the
powers enumerated in this chapter.
SECTION 6. { + The amendments to ORS 63.047 by section 5 of
this 2001 Act apply to articles of organization or amendments to
articles of organization filed on or after the effective date of
this 2001 Act. + }
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