SB566: Bill Text

SB566,389,12 1. The date money or other property is transferred or debt is incurred by the limited liability company.

SB566,389,14 2. The date the person entitled to the distribution ceases to own the interest or right being acquired by the company in return for the distribution.

SB566,389,16 (b) In the case of any distribution of indebtedness other than one under par. (a), as of the date the indebtedness is distributed.

SB566,389,17 (c) In all cases other than those under par. (a) or (b), as of the following:

SB566,389,19 1. The date the distribution is authorized, if the payment occurs not later than 120 days after that date.

SB566,389,21 2. The date the payment is made, if the payment occurs more than 120 days after the distribution is authorized.

SB566,389,25 (4) A limited liability company's indebtedness to a member or transferee incurred by reason of a distribution made in accordance with this section is at parity with the company's indebtedness to its general, unsecured creditors, except to the extent subordinated by agreement.

SB566,390,7 (5) A limited liability company's indebtedness, including indebtedness issued as a distribution, is not a liability for purposes of sub. (1) if the terms of the indebtedness provide that payment of principal and interest is made only if and to the extent that payment of a distribution could then be made under this section. If the indebtedness is issued as a distribution, each payment of principal or interest is treated as a distribution, the effect of which is measured on the date the payment is made.

SB566,390,10 (6) In measuring the effect of a distribution under s. 183.0707, the liabilities of a dissolved limited liability company do not include any claim that has been disposed of under s. 183.0704, 183.0705, or 183.0706.

SB566,390,17 183.0406 Liability for improper distributions. (1) Except as otherwise provided in sub. (2), if a member of a member-managed limited liability company or manager of a manager-managed limited liability company consents to a distribution made in violation of s. 183.0405 and in consenting to the distribution fails to comply with s. 183.0409, the member or manager is personally liable to the company for the amount of the distribution which exceeds the amount that could have been distributed without the violation of s. 183.0405.

SB566,390,23 (2) To the extent a written operating agreement of a member-managed limited liability company relieves a member of the authority and responsibility to consent to distributions and imposes that authority and responsibility on one or more other members, the liability stated in sub. (1) applies to the other members and not the member that the written operating agreement relieves of the authority and responsibility.

SB566,391,2 (3) A person that receives a distribution knowing that the distribution violated s. 183.0405 is personally liable to the limited liability company but only to the extent that the distribution received by the person exceeded the amount that could have been properly paid under s. 183.0405.

SB566,391,4 (4) A person against which an action is commenced because the person is liable under sub. (1) may do any of the following:

SB566,391,6 (a) Implead any other person that is subject to liability under sub. (1) and seek to enforce a right of contribution from the person.

SB566,391,9 (b) Implead any person that is subject to liability under sub. (3) and seek to enforce a right of contribution from the person in the amount of the liability under sub. (3).

SB566,391,11 (5) An action under this section is barred unless commenced not later than 2 years after the distribution.

SB566,391,14 183.0407 Management of limited liability company. (1) A limited liability company is a member-managed limited liability company unless a written operating agreement provides any of the following or includes words of similar import:

SB566,391,15 (a) That the company is or will be “manager-managed."

SB566,391,16 (b) That the company is or will be “managed by managers."

SB566,391,17 (c) That management of the company is or will be “vested in managers."

SB566,391,19 (2) In a member-managed limited liability company, all of the following rules apply:

SB566,391,21 (a) Except as expressly provided in this chapter, the management and conduct of the company are vested in the members.

SB566,392,2 (b) Each member has rights in the management and conduct of the company's activities and affairs proportional to the value of the contributions made by each such member, as stated in the records required to be kept under s. 183.0402 (2), or, in the case of a company treated as a partnership for tax purposes, the partnership capital account of each such member.

SB566,392,4 (c) A difference arising among members as to a matter not described in par. (d) may be decided by a majority of the members' transferable interests.

SB566,392,6 (d) Except as otherwise provided in this chapter, the affirmative vote or consent of all members is required to do any of the following:

SB566,392,7 1. Amend the articles of organization.

SB566,392,8 2. Issue a transferable interest in the limited liability company to any person.

SB566,392,10 3. Allow the limited liability company to accept any additional contribution from a member.

SB566,392,12 4. Allow a partial redemption of a transferable interest in the limited liability company.

SB566,392,13 5. Value the contributions of members under s. 183.0402 (2).

SB566,392,15 6. Approve a merger, interest exchange, conversion, or domestication under subch. X.

SB566,392,20 7. Authorize a manager, member, or other person to do any act on behalf of the limited liability company that contravenes an operating agreement, including any provision of the operating agreement that expressly limits the purpose or business of the limited liability company or the conduct of the business of the limited liability company.

SB566,392,22 (e) The operating agreement may be amended only with the consent of all members.

SB566,392,24 (3) In a manager-managed limited liability company, all of the following rules apply:

SB566,393,3 (a) Except as expressly provided in this chapter, any matter relating to the activities and affairs of the company is decided exclusively by the manager, or, if there is more than one manager, by a majority of the managers.

SB566,393,5 (b) Each manager has equal rights in the management and conduct of the company's activities and affairs.

SB566,393,7 (c) The affirmative vote or consent of all members is required to do any of the following:

SB566,393,10 1. Sell, lease, exchange, or otherwise dispose of all or substantially all of the company's property, with or without the goodwill, outside the ordinary course of the company's activities.

SB566,393,12 2. Approve a merger, interest exchange, conversion, or domestication under subch. X.

SB566,393,13 3. Undertake any activity described in sub. (2) (d).

SB566,393,14 4. Amend the operating agreement.

SB566,393,20 (d) A manager may be chosen at any time by the affirmative vote or consent of a majority of the members' transferable interests and remains a manager until a successor has been chosen, unless the manager at an earlier time resigns, is removed, or dies, or, in the case of a manager that is not an individual, terminates. A manager may be removed at any time by the consent of a majority of the members' transferable interests without notice or cause.

SB566,393,24 (e) A person need not be a member to be a manager, but the dissociation of a member that is also a manager removes the person as a manager. If a person that is both a manager and a member ceases to be a manager, that cessation does not by itself dissociate the person as a member.

SB566,394,3 (f) A person's ceasing to be a manager does not discharge any debt, obligation, or other liability to the limited liability company or members which the person incurred while a manager.

SB566,394,18 (4) Unless otherwise provided in a written operating agreement, an action requiring the vote or consent of members under this chapter may be taken without a meeting if all of such members consent to the action, and a member may appoint a proxy or other agent to consent or otherwise act for the member by signing an appointing record, personally or by the member's agent. The consent shall be evidenced by one or more written consents describing the action, signed by each of such members, and delivered to the limited liability company for inclusion in the limited liability company records. Unless otherwise provided in a written operating agreement, if a person, whether or not then a member, so consenting directs, whether through instruction to a proxy or other agent, that such consent will be effective at a future time, including a time determined upon the happening of an event, then the person shall be deemed to have consented as a member at this future time so long as the person is then a member and did not revoke the consent prior to that time. Any such consent shall be revocable prior to its becoming effective, unless the written consent provides otherwise.

SB566,394,22 (5) The dissolution of a limited liability company does not affect the applicability of this section. However, a person that wrongfully causes dissolution of the company loses the right to participate in management as a member and a manager.

SB566,394,24 (8) This chapter does not entitle a member to remuneration for services performed for a member-managed limited liability company.

SB566,395,6 183.0408 Reimbursement; indemnification; advancement; and insurance. (1) A limited liability company shall reimburse a member of a member-managed company or the manager of a manager-managed company for any payment made by the member or manager in the course of the member's or manager's activities on behalf of the company, if the member or manager complied with ss. 183.0405, 183.0407, and 183.0409 in making the payment.

SB566,395,11 (2) A limited liability company shall indemnify and hold harmless a person with respect to any claim or demand against the person and any debt, obligation, or other liability incurred by the person by reason of the person's former or present capacity as a member or manager, if the claim, demand, debt, obligation, or other liability does not arise from the person's breach of s. 183.0405, 183.0407, or 183.0409.

SB566,395,17 (3) In the ordinary course of its activities and affairs, a limited liability company may advance reasonable expenses, including attorney fees and costs, incurred by a person in connection with a claim or demand against the person by reason of the person's former or present capacity as a member or manager, if the person promises to repay the company if the person ultimately is determined not to be entitled to be indemnified under sub. (2).

SB566,395,22 (4) A limited liability company may purchase and maintain insurance on behalf of a member or manager against liability asserted against or incurred by the member or manager in that capacity or arising from that status even if, under s. 183.0105 (3) (g), the operating agreement could not eliminate or limit the person's liability to the company for the conduct giving rise to the liability.

SB566,396,2 183.0409 Standards of conduct for members and managers. (1) A member of a member-managed limited liability company owes to the company and, subject to s. 183.0801, the other members the fiduciary duties of loyalty and care stated in subs. (2) and (3).

SB566,396,4 (2) The duty of loyalty of a member in a member-managed limited liability company includes all of the following duties:

SB566,396,6 (a) The duty to account to the company and hold as trustee for it any property, profit, or benefit derived by the member in or from any of the following:

SB566,396,7 1. The conduct or winding up of the company's activities and affairs.

SB566,396,8 2. A use by the member of the company's property.

SB566,396,9 3. The appropriation of a limited liability company opportunity.

SB566,396,12 (b) The duty to refrain from dealing with the company in the conduct or winding up of the company's activities and affairs as or on behalf of a person having an interest adverse to the company.

SB566,396,14 (c) The duty to refrain from competing with the company in the conduct of the company's activities and affairs before the dissolution of the company.

SB566,396,18 (3) The duty of care of a member of a member-managed limited liability company in the conduct or winding up of the company's activities and affairs is to refrain from engaging in conduct for which relief or exoneration from liability is not permitted under s. 183.0105 (3) (g).

SB566,396,21 (4) A member shall discharge the duties and obligations under this chapter and under the operating agreement and exercise any rights consistently with the contractual obligation of good faith and fair dealing.

SB566,396,24 (5) A member does not violate a duty or obligation under this chapter or under the operating agreement solely because the member's conduct furthers the member's own interest.

SB566,397,5 (6) All the members of a member-managed limited liability company or a manager-managed limited liability company may authorize or ratify, after full disclosure of all material facts, a specific act or transaction that otherwise would violate the duty of loyalty and this authorization or ratification precludes a claim for breach of the duty of loyalty for the act or transaction by such members.

SB566,397,8 (7) It is a defense to a claim under sub. (2) (b) and any comparable claim in equity or at common law that the transaction was fair to the limited liability company.

SB566,397,12 (8) If, as permitted by sub. (6) or (9) (e) or the operating agreement, a member enters into a transaction with the limited liability company which otherwise would be prohibited by sub. (2) (b), the member's rights and obligations arising from the transaction are the same as those of a person that is not a member.

SB566,397,13 (9) In a manager-managed limited liability company, the following rules apply:

SB566,397,15 (a) Subsections (1), (2), (3), and (7) apply to the manager or managers and not the members.

SB566,397,16 (b) The duty stated under sub. (2) (c) continues until winding up is completed.

SB566,397,17 (c) Subsection (4) applies to managers and members.

SB566,397,18 (d) Subsection (5) applies only to members.

SB566,397,19 (e) The power to ratify under sub. (6) applies only to the members.

SB566,397,21 (f) Subject to sub. (4), a member does not have any duty to the company or to any other member solely by reason of being a member.

SB566,397,24 183.0410 Rights to information of member, manager, and person dissociated as member. (1) In a member-managed limited liability company, the following rules apply:

SB566,398,5 (a) On reasonable notice, a member may inspect and copy during regular business hours, at a reasonable location specified by the company, any record maintained by the company regarding the company's activities, affairs, financial condition, and other circumstances, to the extent the information is material to the member's rights and duties under the operating agreement or this chapter.

SB566,398,6 (b) The company shall furnish to each member all of the following:

SB566,398,12 1. Without demand, any information concerning the company's activities, affairs, financial condition, and other circumstances which the company knows and is material to the proper exercise of the member's rights and duties under the operating agreement or this chapter, except to the extent the company can establish that it reasonably believes the member already knows or has notice of the information.

SB566,398,16 2. On demand, any other information concerning the company's activities, affairs, financial condition, and other circumstances, except to the extent the demand or the information demanded is unreasonable or otherwise improper under the circumstances.

SB566,398,18 (c) The duty to furnish information under par. (b) also applies to each member to the extent the member knows any of the information described in par. (b).

SB566,398,19 (2) In a manager-managed limited liability company, the following rules apply:

SB566,398,21 (a) The informational rights stated in sub. (1) and the duty stated in sub. (1) (c) apply to the managers and not the members.

SB566,398,25 (b) During regular business hours and at a reasonable location specified by the company, a member may obtain from the company and inspect and copy information regarding the company's activities, affairs, financial condition, and other circumstances of the company as is reasonable if all of the following apply:

SB566,399,2 1. The member seeks the information for a purpose material to the member's interest as a member.

SB566,399,5 2. The member makes a demand in a record received by the company, describing with reasonable particularity the information sought and the purpose for seeking the information.

SB566,399,6 3. The information sought is directly connected to the member's purpose.

SB566,399,9 (c) Not later than 10 days after receiving a demand pursuant to par. (b) 2., the company shall inform, in a record, the member that made the demand of all of the following:

SB566,399,11 1. What information the company will provide in response to the demand and when and where the company will provide the information.

SB566,399,13 2. The company's reasons for declining, if the company declines to provide any demanded information.

SB566,399,18 (d) Whenever this chapter or an operating agreement provides for a member to vote on or give or withhold consent to a matter, before the vote is cast or consent is given or withheld, the company shall, without demand, provide the member with all information that is known to the company and that is material to the member's decision.

SB566,399,22 (3) Subject to sub. (8), on 10 days' demand made in a record received by a limited liability company, a person dissociated as a member may have access to the information to which the person was entitled while a member if all of the following apply: