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 amanager or managers, management of the business or affairs of thelimited liability company is vested in the members. Subject to anyprovisions in the operating agreement or this article restricting orenlarging the management rights and duties of any person or groupor class of persons, the members have the right and authority tomanage the affairs and make all decisions of the limited liabilitycompany.
(b) If the articles of organization provide for a manager ormanagers, except to the extent that the operating agreement reservesthe authority to any members or class or group of members, themanager or managers have the authority to manage the business oraffairs of the limited liability company. Unless otherwise providedin a written operating agreement, a manager or managers:
(1) must be designated, appointed, elected, removed, orreplaced by a vote, approval, or consent of a majority in interestof the members;
(2) do not need to be members of the limited liability companyor natural persons; and
(3) unless they have been earlier removed or have earlierresigned, shall act as managers until their successors have beenelected and qualified.
As added by P.L.8-1993, SEC.301.
IC 23-18-4-2
Acts and omissions liability; trustee for personal benefits derivedthrough company; duties of member in company providing formanager
Sec. 2. (a) Unless otherwise provided in a written operatingagreement, a member or manager is not liable for damages to thelimited liability company or to the members of the limited liabilitycompany for any action taken or failure to act on behalf of thelimited liability company, unless the act or omission constituteswillful misconduct or recklessness.
(b) Unless otherwise provided in a written operating agreement,each member and manager must account to the limited liabilitycompany and hold as trustee for it any profit or benefit derived by themanager or member without the consent of a majority of thedisinterested managers or members or other persons participating inthe management of the business or affairs of the limited liabilitycompany from:
(1) a transaction connected with the conduct or winding up ofthe limited liability company; or
(2) any use by the manager or member of the limited liabilitycompany's property, including confidential or proprietary
information of the limited liability company or other mattersentrusted to the manager or member because of the manager'sor 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 oforganization provide for a manager or managers and who is not amanager has no duties to the limited liability company or to the othermembers 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 amanager or managers, and except as otherwise provided in a writtenoperating agreement or this article and subject to subsection (c), theaffirmative vote, approval, or consent of a majority in interest of themembers is required to decide a matter connected with the businessor 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 operatingagreement or this article, the affirmative vote, approval, or consentof a majority of the managers shall be required to decide any matterthat 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 requiredto do the following:
(1) Amend the operating agreement.
(2) Authorize a manager, a member, or another person to do anact on behalf of the limited liability company that contravenesthe operating agreement, including a written provision of theoperating 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 ormanager for monetary damages for breach of a duty providedfor in section 2(a) of this chapter.
(2) Provide for indemnification of a member or manager forjudgments, settlements, penalties, fines, or expenses incurred ina proceeding to which a person is a party because the person isor 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 toregulate 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 limitedliability company shall be managed, controlled, and operated,which may include the granting of exclusive authority tomanage, control, and operate the limited liability company tomanagers who are not members.
(2) The manner in which the members will share indistributions of the assets and the profits or losses of the limitedliability company.
(3) The rights of members to assign all or a portion of theirinterests in the limited liability company.
(4) Classes or groups of at least one (1) member having certainrelative rights, powers, and duties, including voting rights, andmay provide for the future creation, in the manner provided inthe operating agreement, of additional classes or groups ofmembers having certain relative rights, powers, or duties,including voting rights, expressed either in the operatingagreement 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 certainrelative rights, powers, and duties, including voting rights, andmay provide for the future creation, in the manner provided inthe operating agreement, of additional classes or groups ofmanagers having certain relative rights, powers, or duties,including voting rights, expressed either in the operatingagreement 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'sinterest may be admitted as a member of the limited liabilitycompany.
(7) The procedure for the following:
(A) The right to have a member's interest in the limitedliability company evidenced by a certificate issued by thelimited liability company.
(B) Assignment, pledge, or transfer of an interestrepresented by the certificate.
(C) Any other provisions dealing with the certificate.
(8) The method by which the operating agreement may beamended.
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 byall persons who are members at the time the initial agreement isaccepted.
(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 inwriting and must, unless otherwise provided in the operatingagreement before the amendment, be approved by the unanimousconsent of all members.
(d) A copy of any written amendment to an operating agreementmust be delivered to each member who did not consent to theamendment and to each assignee who has not been admitted as amember.
(e) A person may sign articles of organization, an operatingagreement, or an amendment to articles of organization or anoperating agreement as an attorney in fact. A power of attorneyrelating to the signing of a document under this subsection by anattorney 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 thelimited 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 byinjunction or by granting other relief that the court in its discretiondetermines to be fair and appropriate in the circumstances.
(b) As an alternative to injunctive or other equitable relief, whenthe provisions under IC 23-18-9-2 are applicable, the court may orderdissolution 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 principaloffice the following records and information:
(1) A list with the full name and last known mailing address ofeach member and manager, if any, of the limited liabilitycompany 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, andlocal income tax returns and financial statements, if any, for thethree (3) most recent years, or if the returns and statements werenot prepared, copies of the information and statements providedto or that should have been provided to the members to enablethem to prepare their federal, state, and local tax returns for thesame period.
(4) Copies of any written operating agreements and allamendments 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 theagreed value of other property or services contributed byeach member and the times at which or events upon thehappening of which any additional contributions agreed tobe made by each member are to be made.
(B) The events, if any, upon the happening of which thelimited liability company is to be dissolved and its affairswound up.
(C) Other writings, if any, required by the operatingagreement.
(b) A member may, at the member's own expense, inspect andcopy the limited liability company records described in subsection(a) where the records are located during ordinary business hours ifthe member gives the limited liability company written notice of themember's request at least five (5) business days before the date onwhich the member wishes to inspect and copy the records.
(c) Unless greater rights of access to records or other informationare 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 themembers to any member or to the legal representative of anydeceased member or of any member under legal disability uponreasonable demand for any purpose reasonably related to a member'sinterest as a member of the limited liability company.
(d) If a limited liability company is managed by one (1) or moremanagers, a member or the legal representative of a deceasedmember or a member under a legal disability may obtain informationunder subsection (c) only if:
(1) the member makes the request at least five (5) business daysbefore the date on which the member wishes to obtain theinformation;
(2) the member makes the request in good faith and for a properpurpose;
(3) the member describes with reasonable particularity themember's purpose and the information that the member wishesto obtain; and
(4) the information is directly connected to the member'spurpose.
(e) Failure of the limited liability company to keep or maintain therecords or information required by this section is not grounds forimposing liability on any member for the debts and obligations of thelimited 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 providethat:
(1) a manager who fails to perform and comply with the termsand conditions of the operating agreement is subject to penaltiesor consequences specified in the operating agreement; and
(2) at the time or upon the happening of events specified in theoperating agreement, a manager is subject to penalties orconsequences 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 isnot liable when relying in good faith upon the records of the limitedliability company and on the information, opinions, reports, orstatements presented to the limited liability company by its othermanagers, members, agents, or employees, or by any other person,concerning matters the member or manager reasonably believes arewithin the other person's professional or expert competence and whohas been selected with reasonable care by or on behalf of the limitedliability company, including information, opinions, reports, orstatements concerning the value and amount of the assets, liabilities,profits, or losses of the limited liability company or other factspertinent to the existence and amount of assets from whichdistributions 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 limitedliability company at the time or upon the happening of eventsspecified in an operating agreement and in accordance with theoperating agreement.
(b) A written operating agreement may provide that a managerdoes not have the right to resign as a manager of a limited liabilitycompany. Notwithstanding any provision in an operating agreementto the contrary, a manager may resign as a manager of a limitedliability company at any time by giving written notice to themembers and other managers. If the resignation of a manager violatesthe operating agreement, in addition to any remedies otherwiseavailable under applicable law, a limited liability company mayrecover from the resigning manager damages for breach of theoperating agreement and offset the damages against the amountpayable 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 applicablelaw, has the same rights and obligations with respect to thetransaction as a person who is not a member or manager.
As added by P.L.8-1993, SEC.301.