TEXAS BUSINESS ORGANIZATIONS CODE CHAPTER 101. LIMITED LIABILITY COMPANIES
BUSINESS ORGANIZATIONS CODE
TITLE 3. LIMITED LIABILITY COMPANIES
CHAPTER 101. LIMITED LIABILITY COMPANIES
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 101.001. DEFINITIONS. In this title:
(1) “Company agreement” means any agreement, written or oral, of the members concerning the affairs or the conduct of the business of a limited liability company. A company agreement of a limited liability company having only one member is not unenforceable because only one person is a party to the company agreement.
(2) “Foreign limited liability company” or “foreign company” means a limited liability company formed under the laws of a jurisdiction other than this state.
(3) “Limited liability company” or “company” means a domestic limited liability company subject to this title.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 101.002. APPLICABILITY OF OTHER LAWS. (a) Subject to Section 101.114, Sections 21.223, 21.224, 21.225, and 21.226 apply to a limited liability company and the company’s members, owners, assignees, affiliates, and subscribers.
(b) For purposes of the application of Subsection (a):
(1) a reference to “shares” includes “membership interests”;
(2) a reference to “holder,” “owner,” or “shareholder” includes a “member” and an “assignee”;
(3) a reference to “corporation” or “corporate” includes a “limited liability company”;
(4) a reference to “directors” includes “managers” of a manager-managed limited liability company and “members” of a member-managed limited liability company;
(5) a reference to “bylaws” includes “company agreement”; and
(6) the reference to “Sections 21.157-21.162” in Section 21.223(a)(1) refers to the provisions of Subchapter D of this chapter.
Added by Acts 2011, 82nd Leg., R.S., Ch. 25 (S.B. 323), Sec. 1, eff. September 1, 2011.
SUBCHAPTER B. FORMATION AND GOVERNING DOCUMENTS
Sec. 101.051. CERTAIN PROVISIONS CONTAINED IN CERTIFICATE OF FORMATION. (a) A provision that may be contained in the company agreement of a limited liability company may alternatively be included in the certificate of formation of the company as provided by Section 3.005(b).
(b) A reference in this title to the company agreement of a limited liability company includes any provision contained in the company’s certificate of formation instead of the company agreement as provided by Subsection (a).
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 101.0515. EXECUTION OF FILINGS. Unless otherwise provided by this title, a filing instrument of a limited liability company must be signed by an authorized officer, manager, or member of the limited liability company.
Added by Acts 2007, 80th Leg., R.S., Ch. 688 (H.B. 1737), Sec. 96, eff. September 1, 2007.
Sec. 101.052. COMPANY AGREEMENT. (a) Except as provided by Section 101.054, the company agreement of a limited liability company governs:
(1) the relations among members, managers, and officers of the company, assignees of membership interests in the company, and the company itself; and
(2) other internal affairs of the company.
(b) To the extent that the company agreement of a limited liability company does not otherwise provide, this title and the provisions of Title 1 applicable to a limited liability company govern the internal affairs of the company.
(c) Except as provided by Section 101.054, a provision of this title or Title 1 that is applicable to a limited liability company may be waived or modified in the company agreement of a limited liability company.
(d) The company agreement may contain any provisions for the regulation and management of the affairs of the limited liability company not inconsistent with law or the certificate of formation.
(e) A company agreement may provide rights to any person, including a person who is not a party to the company agreement, to the extent provided by the company agreement.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Amended by:
Acts 2013, 83rd Leg., R.S., Ch. 9 (S.B. 847), Sec. 5, eff. September 1, 2013.
Sec. 101.053. AMENDMENT OF COMPANY AGREEMENT. The company agreement of a limited liability company may be amended only if each member of the company consents to the amendment.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 101.054. WAIVER OR MODIFICATION OF CERTAIN STATUTORY PROVISIONS PROHIBITED; EXCEPTIONS. (a) Except as provided by this section, the following provisions may not be waived or modified in the company agreement of a limited liability company:
(1) this section;
(2) Section 101.101, 101.151, 101.206, 101.501, 101.602(b), or 101.613;
(3) Chapter 1, if the provision is used to interpret a provision or define a word or phrase contained in a section listed in this subsection;
(4) Chapter 2, except that Section 2.104(c)(2), 2.104(c)(3), or 2.113 may be waived or modified in the company agreement;
(5) Chapter 3, except that Subchapters C and E may be waived or modified in the company agreement; or
(6) Chapter 4, 5, 7, 10, 11, or 12, other than Section 11.056.
(b) A provision listed in Subsection (a) may be waived or modified in the company agreement if the provision that is waived or modified authorizes the limited liability company to waive or modify the provision in the company’s governing documents.
(c) A provision listed in Subsection (a) may be modified in the company agreement if the provision that is modified specifies:
(1) the person or group of persons entitled to approve a modification; or
(2) the vote or other method by which a modification is required to be approved.
(d) A provision in this title or in that part of Title 1 applicable to a limited liability company that grants a right to a person, other than a member, manager, officer, or assignee of a membership interest in a limited liability company, may be waived or modified in the company agreement of the company only if the person consents to the waiver or modification.
(e) The company agreement may not unreasonably restrict a person’s right of access to records and information under Section 101.502.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Amended by:
Acts 2007, 80th Leg., R.S., Ch. 688 (H.B. 1737), Sec. 97, eff. September 1, 2007.
Acts 2009, 81st Leg., R.S., Ch. 84 (S.B. 1442), Sec. 38, eff. September 1, 2009.
Acts 2011, 82nd Leg., R.S., Ch. 139 (S.B. 748), Sec. 34, eff. September 1, 2011.
SUBCHAPTER C. MEMBERSHIP
Sec. 101.101. MEMBERS REQUIRED. (a) A limited liability company may have one or more members. Except as provided by this section, a limited liability company must have at least one member.
(b) A limited liability company that has managers is not required to have any members during a reasonable period between the date the company is formed and the date the first member is admitted to the company.
(c) A limited liability company is not required to have any members during the period between the date the continued membership of the last remaining member of the company is terminated and the date the agreement to continue the company described by Section 11.056 is executed.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 101.102. QUALIFICATION FOR MEMBERSHIP. (a) A person may be a member of or acquire a membership interest in a limited liability company unless the person lacks capacity apart from this code.
(b) A person is not required, as a condition to becoming a member of or acquiring a membership interest in a limited liability company, to:
(1) make a contribution to the company;
(2) otherwise pay cash or transfer property to the company; or
(3) assume an obligation to make a contribution or otherwise pay cash or transfer property to the company.
(c) If one or more persons own a membership interest in a limited liability company, the company agreement may provide for a person to be admitted to the company as a member without acquiring a membership interest in the company.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Amended by:
Acts 2005, 79th Leg., Ch. 64 (H.B. 1319), Sec. 71, eff. January 1, 2006.
Sec. 101.103. EFFECTIVE DATE OF MEMBERSHIP. (a) In connection with the formation of a company, a person becomes a member of the company on the date the company is formed if the person is named as an initial member in the company’s certificate of formation.
(b) In connection with the formation of a company, a person being admitted as a member of the company but not named as an initial member in the company’s certificate of formation becomes a member of the company on the latest of:
(1) the date the company is formed;
(2) the date stated in the company’s records as the date the person becomes a member of the company; or
(3) if the company’s records do not state a date described by Subdivision (2), the date the person’s admission to the company is first reflected in the company’s records.
(c) A person who, after the formation of a limited liability company, acquires directly or is assigned a membership interest in the company or is admitted as a member of the company without acquiring a membership interest becomes a member of the company on approval or consent of all of the company’s members.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Amended by:
Acts 2005, 79th Leg., Ch. 64 (H.B. 1319), Sec. 72, eff. January 1, 2006.
Sec. 101.104. CLASSES OR GROUPS OF MEMBERS OR MEMBERSHIP INTERESTS. (a) The company agreement of a limited liability company may:
(1) establish within the company classes or groups of one or more members or membership interests each of which has certain expressed relative rights, powers, and duties, including voting rights; and
(2) provide for the manner of establishing within the company additional classes or groups of one or more members or membership interests each of which has certain expressed relative rights, powers, and duties, including voting rights.
(b) The rights, powers, and duties of a class or group of members or membership interests described by Subsection (a)(2) may be stated in the company agreement or stated at the time the class or group is established.
(c) If the company agreement of a limited liability company does not provide for the manner of establishing classes or groups of members or membership interests under Subsection (a)(2), additional classes or groups of members or membership interests may be established only by the adoption of an amendment to the company agreement.
(d) The rights, powers, or duties of any class or group of members or membership interests of a limited liability company may be senior to the rights, powers, or duties of any other class or group of members or membership interests in the company, including a previously established class or group.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 101.105. ISSUANCE OF MEMBERSHIP INTERESTS AFTER FORMATION OF COMPANY. A limited liability company, after the formation of the company, may:
(1) issue membership interests in the company to any person with the approval of all of the members of the company; and
(2) if the issuance of a membership interest requires the establishment of a new class or group of members or membership interests, establish a new class or group as provided by Sections 101.104(a)(2), (b), and (c).
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 101.106. NATURE OF MEMBERSHIP INTEREST. (a) A membership interest in a limited liability company is personal property.
(a-1) A membership interest may be community property under applicable law.
(a-2) A member’s right to participate in the management and conduct of the business of the limited liability company is not community property.
(b) A member of a limited liability company or an assignee of a membership interest in a limited liability company does not have an interest in any specific property of the company.
(c) Sections 9.406 and 9.408, Business & Commerce Code, do not apply to a membership interest in a limited liability company, including the rights, powers, and interests arising under the company’s certificate of formation or company agreement or under this code. To the extent of any conflict between this subsection and Section 9.406 or 9.408, Business & Commerce Code, this subsection controls. It is the express intent of this subsection to permit the enforcement, as a contract among the members of a limited liability company, of any provision of a company agreement that would otherwise be ineffective under Section 9.406 or 9.408, Business & Commerce Code.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Amended by:
Acts 2009, 81st Leg., R.S., Ch. 84 (S.B. 1442), Sec. 39, eff. September 1, 2009.
Acts 2011, 82nd Leg., R.S., Ch. 139 (S.B. 748), Sec. 35, eff. September 1, 2011.
Sec. 101.107. WITHDRAWAL OR EXPULSION OF MEMBER PROHIBITED. A member of a limited liability company may not withdraw or be expelled from the company.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 101.108. ASSIGNMENT OF MEMBERSHIP INTEREST. (a) A membership interest in a limited liability company may be wholly or partly assigned.
(b) An assignment of a membership interest in a limited liability company:
(1) is not an event requiring the winding up of the company; and
(2) does not entitle the assignee to:
(A) participate in the management and affairs of the company;
(B) become a member of the company; or
(C) exercise any rights of a member of the company.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 101.109. RIGHTS AND DUTIES OF ASSIGNEE OF MEMBERSHIP INTEREST BEFORE MEMBERSHIP. (a) A person who is assigned a membership interest in a limited liability company is entitled to:
(1) receive any allocation of income, gain, loss, deduction, credit, or a similar item that the assignor is entitled to receive to the extent the allocation of the item is assigned;
(2) receive any distribution the assignor is entitled to receive to the extent the distribution is assigned;
(3) require, for any proper purpose, reasonable information or a reasonable account of the transactions of the company; and
(4) make, for any proper purpose, reasonable inspections of the books and records of the company.
(b) An assignee of a membership interest in a limited liability company is entitled to become a member of the company on the approval of all of the company’s members.
(c) An assignee of a membership interest in a limited liability company is not liable as a member of the company until the assignee becomes a member of the company.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 101.110. RIGHTS AND LIABILITIES OF ASSIGNEE OF MEMBERSHIP INTEREST AFTER BECOMING MEMBER. (a) An assignee of a membership interest in a limited liability company, after becoming a member of the company, is:
(1) entitled, to the extent assigned, to the same rights and powers granted or provided to a member of the company by the company agreement or this code;
(2) subject to the same restrictions and liabilities placed or imposed on a member of the company by the company agreement or this code; and
(3) except as provided by Subsection (b), liable for the assignor’s obligation to make contributions to the company.
(b) An assignee of a membership interest in a limited liability company, after becoming a member of the company, is not obligated for a liability of the assignor that:
(1) the assignee did not have knowledge of on the date the assignee became a member of the company; and
(2) could not be ascertained from the company agreement.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 101.111. RIGHTS AND DUTIES OF ASSIGNOR OF MEMBERSHIP INTEREST. (a) An assignor of a membership interest in a limited liability company continues to be a member of the company and is entitled to exercise any unassigned rights or powers of a member of the company until the assignee becomes a member of the company.
(b) An assignor of a membership interest in a limited liability company is not released from the assignor’s liability to the company, regardless of whether the assignee of the membership interest becomes a member of the company.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 101.1115. EFFECT OF DEATH OR DIVORCE ON MEMBERSHIP INTEREST. (a) For purposes of this code:
(1) on the divorce of a member, the member’s spouse, to the extent of the spouse’s membership interest, if any, is an assignee of the membership interest;
(2) on the death of a member, the member’s surviving spouse, if any, and an heir, devisee, personal representative, or other successor of the member, to the extent of their respective membership interest, are assignees of the membership interest; and
(3) on the death of a member’s spouse, an heir, devisee, personal representative, or other successor of the spouse, other than the member, to the extent of their respective membership interest, if any, is an assignee of the membership interest.
(b) This chapter does not impair an agreement for the purchase or sale of a membership interest at any time, including on the death or divorce of an owner of the membership interest.
Added by Acts 2011, 82nd Leg., R.S., Ch. 139 (S.B. 748), Sec. 36, eff. September 1, 2011.
Sec. 101.112. MEMBER’S MEMBERSHIP INTEREST SUBJECT TO CHARGING ORDER. (a) On application by a judgment creditor of a member of a limited liability company or of any other owner of a membership interest in a limited liability company, a court having jurisdiction may charge the membership interest of the judgment debtor to satisfy the judgment.
(b) If a court charges a membership interest with payment of a judgment as provided by Subsection (a), the judgment creditor has only the right to receive any distribution to which the judgment debtor would otherwise be entitled in respect of the membership interest.
(c) A charging order constitutes a lien on the judgment debtor’s membership interest. The charging order lien may not be foreclosed on under this code or any other law.
(d) The entry of a charging order is the exclusive remedy by which a judgment creditor of a member or of any other owner of a membership interest may satisfy a judgment out of the judgment debtor’s membership interest.
(e) This section may not be construed to deprive a member of a limited liability company or any other owner of a membership interest in a limited liability company of the benefit of any exemption laws applicable to the membership interest of the member or owner.
(f) A creditor of a member or of any other owner of a membership interest does not have the right to obtain possession of, or otherwise exercise legal or equitable remedies with respect to, the property of the limited liability company.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Amended by:
Acts 2007, 80th Leg., R.S., Ch. 688 (H.B. 1737), Sec. 98, eff. September 1, 2007.
Acts 2009, 81st Leg., R.S., Ch. 84 (S.B. 1442), Sec. 40, eff. September 1, 2009.
Sec. 101.113. PARTIES TO ACTIONS. A member of a limited liability company may be named as a party in an action by or against the limited liability company only if the action is brought to enforce the member’s right against or liability to the company.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 101.114. LIABILITY FOR OBLIGATIONS. Except as and to the extent the company agreement specifically provides otherwise, a member or manager is not liable for a debt, obligation, or liability of a limited liability company, including a debt, obligation, or liability under a judgment, decree, or order of a court.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
SUBCHAPTER D. CONTRIBUTIONS
Sec. 101.151. REQUIREMENTS FOR ENFORCEABLE PROMISE. A promise to make a contribution or otherwise pay cash or transfer property to a limited liability company is enforceable only if the promise is:
(1) in writing; and
(2) signed by the person making the promise.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 101.152. ENFORCEABLE PROMISE NOT AFFECTED BY CHANGE IN CIRCUMSTANCES. A member of a limited liability company is obligated to perform an enforceable promise to make a contribution or otherwise pay cash or transfer property to the company without regard to the death, disability, or other change in circumstances of the member.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 101.153. FAILURE TO PERFORM ENFORCEABLE PROMISE; CONSEQUENCES. (a) A member of a limited liability company, or the member’s legal representative or successor, who does not perform an enforceable promise to make a contribution, including a previously made contribution, or to otherwise pay cash or transfer property to the company, is obligated, at the request of the company, to pay in cash the agreed value of the contribution, as stated in the company agreement or the company’s records required under Sections 3.151 and 101.501, less:
(1) any amount already paid for the contribution; and
(2) the value of any property already transferred.
(b) The company agreement of a limited liability company may provide that the membership interest of a member who fails to perform an enforceable promise to make a payment of cash or transfer property to the company, whether as a contribution or in connection with a contribution already made, may be:
(1) reduced;
(2) subordinated to other membership interests of nondefaulting members;
(3) redeemed or sold at a value determined by appraisal or other formula; or
(4) made the subject of:
(A) a forced sale;
(B) forfeiture;
(C) a loan from other members of the company in an amount necessary to satisfy the enforceable promise; or
(D) another penalty or consequence.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 101.154. CONSENT REQUIRED TO RELEASE ENFORCEABLE OBLIGATION. The obligation of a member of a limited liability company, or of the member’s legal representative or successor, to make a contribution or otherwise pay cash or transfer property to the company, or to return cash or property to the company paid or distributed to the member in violation of this code or the company agreement, may be released or settled only by consent of each member of the company.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 101.155. CREDITOR’S RIGHT TO ENFORCE CERTAIN OBLIGATIONS. A creditor of a limited liability company who extends credit or otherwise acts in reasonable reliance on an enforceable obligation of a member of the company that is released or settled as provided by Section 101.154 may enforce the original obligation if the obligation is stated in a document that is:
(1) signed by the member; and
(2) not amended or canceled to evidence the release or settlement of the obligation.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 101.156. REQUIREMENTS TO ENFORCE CONDITIONAL OBLIGATION. (a) An obligation of a member of a limited liability company that is subject to a condition may be enforced by the company or a creditor described by Section 101.155 only if the condition is satisfied or waived by or with respect to the member.
(b) A conditional obligation of a member of a limited liability company under this section includes a contribution payable on a discretionary call of the limited liability company before the time the call occurs.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
SUBCHAPTER E. ALLOCATIONS AND DISTRIBUTIONS
Sec. 101.201. ALLOCATION OF PROFITS AND LOSSES. The profits and losses of a limited liability company shall be allocated to each member of the company on the basis of the agreed value of the contributions made by each member, as stated in the company’s records required under Section 101.501.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Amended by:
Acts 2005, 79th Leg., Ch. 64 (H.B. 1319), Sec. 73, eff. January 1, 2006.
Sec. 101.202. DISTRIBUTION IN KIND. A member of a limited liability company is entitled to receive or demand a distribution from the company only in the form of cash, regardless of the form of the member’s contribution to the company.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 101.203. SHARING OF DISTRIBUTIONS. Distributions of cash and other assets of a limited liability company shall be made to each member of the company according to the agreed value of the member’s contribution to the company as stated in the company’s records required under Sections 3.151 and 101.501.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 101.204. INTERIM DISTRIBUTIONS. A member of a limited liability company, before the winding up of the company, is not entitled to receive and may not demand a distribution from the company until the company’s governing authority declares a distribution to:
(1) each member of the company; or
(2) a class or group of members that includes the member.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 101.205. DISTRIBUTION ON WITHDRAWAL. A member of a limited liability company who validly exercises the member’s right to withdraw from the company granted under the company agreement is entitled to receive, within a reasonable time after the date of withdrawal, the fair value of the member’s interest in the company as determined as of the date of withdrawal.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 101.206. PROHIBITED DISTRIBUTION; DUTY TO RETURN. (a) Unless the distribution is made in compliance with Chapter 11, a limited liability company may not make a distribution to a member of the company if, immediately after making the distribution, the company’s total liabilities, other than liabilities described by Subsection (b), exceed the fair value of the company’s total assets.
(b) For purposes of Subsection (a), the liabilities of a limited liability company do not include:
(1) a liability related to the member’s membership interest; or
(2) except as provided by Subsection (c), a liability for which the recourse of creditors is limited to specified property of the company.
(c) For purposes of Subsection (a), the assets of a limited liability company include the fair value of property subject to a liability for which recourse of creditors is limited to specified property of the company only if the fair value of that property exceeds the liability.
(d) A member of a limited liability company who receives a distribution from the company in violation of this section is not required to return the distribution to the company unless the member had knowledge of the violation.
(e) This section may not be construed to affect the obligation of a member of a limited liability company to return a distribution to the company under the company agreement or other state or federal law.
(f) For purposes of this section, “distribution” does not include an amount constituting reasonable compensation for present or past services or a reasonable payment made in the ordinary course of business under a bona fide retirement plan or other benefits program.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Amended by:
Acts 2009, 81st Leg., R.S., Ch. 84 (S.B. 1442), Sec. 41, eff. September 1, 2009.
Sec. 101.207. CREDITOR STATUS WITH RESPECT TO DISTRIBUTION. Subject to Sections 11.053 and 101.206, when a member of a limited liability company is entitled to receive a distribution from the company, the member, with respect to the distribution, has the same status as a creditor of the company and is entitled to any remedy available to a creditor of the company.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 101.208. RECORD DATE. A company agreement may establish or provide for the establishment of a record date with respect to allocations and distributions.
Added by Acts 2009, 81st Leg., R.S., Ch. 84 (S.B. 1442), Sec. 42, eff. September 1, 2009.
SUBCHAPTER F. MANAGEMENT
Sec. 101.251. GOVERNING AUTHORITY. The governing authority of a limited liability company consists of:
(1) the managers of the company, if the company’s certificate of formation states that the company will have one or more managers; or
(2) the members of the company, if the company’s certificate of formation states that the company will not have managers.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Amended by:
Acts 2009, 81st Leg., R.S., Ch. 84 (S.B. 1442), Sec. 43, eff. September 1, 2009.
Sec. 101.252. MANAGEMENT BY GOVERNING AUTHORITY. The governing authority of a limited liability company shall manage the business and affairs of the company as provided by:
(1) the company agreement; and
(2) this title and the provisions of Title 1 applicable to a limited liability company to the extent that the company agreement does not provide for the management of the company.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 101.253. DESIGNATION OF COMMITTEES; DELEGATION OF AUTHORITY. (a) The governing authority of a limited liability company by resolution may designate:
(1) one or more committees of the governing authority consisting of one or more governing persons of the company; and
(2) subject to any limitation imposed by the governing authority, a governing person to serve as an alternate member of a committee designated under Subdivision (1) at a committee meeting from which a member of the committee is absent or disqualified.
(b) A committee of the governing authority of a limited liability company may exercise the authority of the governing authority as provided by the resolution designating the committee.
(c) The designation of a committee under this section does not relieve the governing authority of any responsibility imposed by law.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 101.254. DESIGNATION OF AGENTS; BINDING ACTS. (a) Except as provided by this title and Title 1, each governing person of a limited liability company and each officer of a limited liability company vested with actual or apparent authority by the governing authority of the company is an agent of the company for purposes of carrying out the company’s business.
(b) An act committed by an agent of a limited liability company described by Subsection (a) for the purpose of apparently carrying out the ordinary course of business of the company, including the execution of an instrument, document, mortgage, or conveyance in the name of the company, binds the company unless:
(1) the agent does not have actual authority to act for the company; and
(2) the person with whom the agent is dealing has knowledge of the agent’s lack of actual authority.
(c) An act committed by an agent of a limited liability company described by Subsection (a) that is not apparently for carrying out the ordinary course of business of the company binds the company only if the act is authorized in accordance with this title.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Amended by:
Acts 2011, 82nd Leg., R.S., Ch. 139 (S.B. 748), Sec. 37, eff. September 1, 2011.
Sec. 101.255. CONTRACTS OR TRANSACTIONS INVOLVING INTERESTED GOVERNING PERSONS OR OFFICERS. (a) This section applies to a contract or transaction between a limited liability company and:
(1) one or more governing persons or officers, or one or more affiliates or associates of one or more governing persons or officers, of the company; or
(2) an entity or other organization in which one or more governing persons or officers, or one or more affiliates or associates of one or more governing persons or officers, of the company:
(A) is a managerial official; or
(B) has a financial interest.
(b) An otherwise valid and enforceable contract or transaction described by Subsection (a) is valid and enforceable, and is not void or voidable, notwithstanding any relationship or interest described by Subsection (a), if any one of the following conditions is satisfied:
(1) the material facts as to the relationship or interest described by Subsection (a) and as to the contract or transaction are disclosed to or known by:
(A) the company’s governing authority or a committee of the governing authority and the governing authority or committee in good faith authorizes the contract or transaction by the approval of the majority of the disinterested governing persons or committee members, regardless of whether the disinterested governing persons or committee members constitute a quorum; or
(B) the members of the company, and the members in good faith approve the contract or transaction by vote of the members; or
(2) the contract or transaction is fair to the company when the contract or transaction is authorized, approved, or ratified by the governing authority, a committee of the governing authority, or the members of the company.
(c) Common or interested governing persons of a limited liability company may be included in determining the presence of a quorum at a meeting of the company’s governing authority or of a committee of the governing authority that authorizes the contract or transaction.
(d) A person who has the relationship or interest described by Subsection (a) may:
(1) be present at or participate in and, if the person is a governing person or committee member, may vote at a meeting of the governing authority or of a committee of the governing authority that authorizes the contract or transaction; or
(2) sign, in the person’s capacity as a governing person or committee member, a written consent of the governing persons or committee members to authorize the contract or transaction.
(e) If at least one of the conditions of Subsection (b) is satisfied, neither the company nor any of the company’s members will have a cause of action against any of the persons described by Subsection (a) for breach of duty with respect to the making, authorization, or performance of the contract or transaction because the person had the relationship or interest described by Subsection (a) or took any of the actions authorized by Subsection (d).
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Amended by:
Acts 2009, 81st Leg., R.S., Ch. 84 (S.B. 1442), Sec. 44, eff. September 1, 2009.
Acts 2011, 82nd Leg., R.S., Ch. 139 (S.B. 748), Sec. 38, eff. September 1, 2011.
SUBCHAPTER G. MANAGERS
Sec. 101.301. APPLICABILITY OF SUBCHAPTER. This subchapter applies only to a limited liability company that has one or more managers.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 101.302. NUMBER AND QUALIFICATIONS. (a) The managers of a limited liability company may consist of one or more persons.
(b) Except as provided by Subsection (c), the number of managers of a limited liability company consists of the number of initial managers listed in the company’s certificate of formation.
(c) The number of managers of a limited liability company may be increased or decreased by amendment to, or as provided by, the company agreement, except that a decrease in the number of managers may not shorten the term of an incumbent manager.
(d) A manager of a limited liability company is not required to be a:
(1) resident of this state; or
(2) member of the company.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 101.303. TERM. A manager of a limited liability company serves:
(1) for the term, if any, for which the manager is elected and until the manager’s successor is elected; or
(2) until the earlier resignation, removal, or death of the manager.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 101.304. REMOVAL. Subject to Section 101.306(a), a manager of a limited liability company may be removed, with or without cause, at a meeting of the company’s members called for that purpose.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 101.305. MANAGER VACANCY. (a) Subject to Section 101.306(b), a vacancy in the position of a manager of a limited liability company may be filled by:
(1) the affirmative vote of the majority of the remaining managers of the company, without regard to whether the remaining managers constitute a quorum; or
(2) if the vacancy is a result of an increase in the number of managers, an election at an annual or special meeting of the company’s members called for that purpose.
(b) A person elected to fill a vacancy in the position of a manager serves for the unexpired term of the person’s predecessor.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 101.306. REMOVAL AND REPLACEMENT OF MANAGER ELECTED BY CLASS OR GROUP. (a) If a class or group of the members of a limited liability company is entitled by the company agreement of the company to elect one or more managers of the company, a manager may be removed from office only by the class or group that elected the manager.
(b) A vacancy in the position of a manager elected as provided by Subsection (a) may be filled only by:
(1) a majority vote of the managers serving on the date the vacancy occurs who were elected by the class or group of members; or
(2) a majority vote of the members of the class or group.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 101.307. METHODS OF CLASSIFYING MANAGERS. Other methods of classifying managers of a limited liability company, including providing for managers who serve for staggered terms of office or terms that are not uniform, may be established in the company agreement.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
SUBCHAPTER H. MEETINGS AND VOTING
This section was amended by the 84th Legislature. Pending publication of the current statutes, see S.B. 859, 84th Legislature, Regular Session, for amendments affecting this section.
Sec. 101.351. APPLICABILITY OF SUBCHAPTER. This subchapter applies only to a meeting of and voting by:
(1) the governing authority of a limited liability company;
(2) the members of a limited liability company if the members do not constitute the governing authority of the company; and
(3) a committee of the governing authority of a limited liability company.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 101.352. GENERAL NOTICE REQUIREMENTS. (a) Except as provided by Subsection (b), notice of a regular or special meeting of the governing authority or members of a limited liability company, or a committee of the company’s governing authority, shall be given in writing to each governing person, member, or committee member, as appropriate, and as provided by Section 6.051.
(b) If the members of a limited liability company do not constitute the governing authority of the company, notice of a meeting of members required by Subsection (a) shall be given by or at the direction of the governing authority not later than the 10th day or earlier than the 60th day before the date of the meeting. Notice of a meeting required under this subsection must state the business to be transacted at the meeting or the purpose of the meeting if:
(1) the meeting is a special meeting; or
(2) a purpose of the meeting is to consider a matter described by Section 101.356.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Amended by:
Acts 2007, 80th Leg., R.S., Ch. 688 (H.B. 1737), Sec. 99, eff. September 1, 2007.
Sec. 101.353. QUORUM. A majority of all of the governing persons, members, or committee members of a limited liability company constitutes a quorum for the purpose of transacting business at a meeting of the governing authority, members, or committee of the company, as appropriate.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 101.354. EQUAL VOTING RIGHTS. Each governing person, member, or committee member of a limited liability company has an equal vote at a meeting of the governing authority, members, or committee of the company, as appropriate.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 101.355. ACT OF GOVERNING AUTHORITY, MEMBERS, OR COMMITTEE. Except as provided by this title or Title 1, the affirmative vote of the majority of the governing persons, members, or committee members of a limited liability company present at a meeting at which a quorum is present constitutes an act of the governing authority, members, or committee of the company, as appropriate.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 101.356. VOTES REQUIRED TO APPROVE CERTAIN ACTIONS. (a) Except as provided in this section or any other section in this title, an action of a limited liability company may be approved by the company’s governing authority as provided by Section 101.355.
(b) Except as provided by Subsection (c), (d), or (e) or any other section in this title, an action of a limited liability company not apparently for carrying out the ordinary course of business of the company must be approved by the affirmative vote of the majority of all of the company’s governing persons.
(c) Except as provided by Subsection (d) or (e) or any other section in this title, a fundamental business transaction of a limited liability company, or an action that would make it impossible for a limited liability company to carry out the ordinary business of the company, must be approved by the affirmative vote of the majority of all of the company’s members.
(d) Except as provided by Subsection (e) or any other section of this title, the company’s members must approve by an affirmative vote of all the members:
(1) an amendment to the certificate of formation of a limited liability company; or
(2) a restated certificate of formation that contains an amendment to the certificate of formation of a limited liability company.
(e) A requirement that an action of a limited liability company must be approved by the company’s members does not apply during the period prescribed by Section 101.101(b).
(f) Approval of a restated certificate of formation by a limited liability company’s members is required only if the restated certificate contains an amendment.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Amended by:
Acts 2005, 79th Leg., Ch. 64 (H.B. 1319), Sec. 74, eff. January 1, 2006.
Sec. 101.357. MANNER OF VOTING. (a) A member of a limited liability company may vote:
(1) in person; or
(2) by a proxy executed in writing by the member.
(b) A manager or committee member of a limited liability company may vote:
(1) in person; or
(2) if authorized by the company agreement, by a proxy executed in writing by the manager or committee member, as appropriate.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Amended by:
Acts 2011, 82nd Leg., R.S., Ch. 139 (S.B. 748), Sec. 39, eff. September 1, 2011.
Sec. 101.358. ACTION BY LESS THAN UNANIMOUS WRITTEN CONSENT. (a) This section applies only to an action required or authorized to be taken at an annual or special meeting of the governing authority, the members, or a committee of the governing authority of a limited liability company under this title, Title 1, or the governing documents of the company.
(b) Notwithstanding Sections 6.201 and 6.202, an action may be taken without holding a meeting, providing notice, or taking a vote if a written consent or consents stating the action to be taken is signed by the number of governing persons, members, or committee members of a limited liability company, as appropriate, necessary to have at least the minimum number of votes that would be necessary to take the action at a meeting at which each governing person, member, or committee member, as appropriate, entitled to vote on the action is present and votes.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 101.359. EFFECTIVE ACTION BY MEMBERS OR MANAGERS WITH OR WITHOUT MEETING. Members or managers of a limited liability company may take action at a meeting of the members or managers or without a meeting in any manner permitted by this title, Title 1, or the governing documents of the company. Unless otherwise provided by the governing documents, an action is effective if it is taken:
(1) by an affirmative vote of those persons having at least the minimum number of votes that would be necessary to take the action at a meeting at which each member or manager, as appropriate, entitled to vote on the action is present and votes; or
(2) with the consent of each member of the limited liability company, which may be established by:
(A) the member’s failure to object to the action in a timely manner, if the member has full knowledge of the action;
(B) consent to the action in writing signed by the member; or
(C) any other means reasonably evidencing consent.
Added by Acts 2005, 79th Leg., Ch. 64 (H.B. 1319), Sec. 75, eff. January 1, 2006.
SUBCHAPTER I. MODIFICATION OF DUTIES; INDEMNIFICATION
Sec. 101.401. EXPANSION OR RESTRICTION OF DUTIES AND LIABILITIES. The company agreement of a limited liability company may expand or restrict any duties, including fiduciary duties, and related liabilities that a member, manager, officer, or other person has to the company or to a member or manager of the company.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 101.402. PERMISSIVE INDEMNIFICATION, ADVANCEMENT OF EXPENSES, AND INSURANCE OR OTHER ARRANGEMENTS. (a) A limited liability company may:
(1) indemnify a person;
(2) pay in advance or reimburse expenses incurred by a person; and
(3) purchase or procure or establish and maintain insurance or another arrangement to indemnify or hold harmless a person.
(b) In this section, “person” includes a member, manager, or officer of a limited liability company or an assignee of a membership interest in the company.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
SUBCHAPTER J. DERIVATIVE PROCEEDINGS
Sec. 101.451. DEFINITIONS. In this subchapter:
(1) “Derivative proceeding” means a civil suit in the right of a domestic limited liability company or, to the extent provided by Section 101.462, in the right of a foreign limited liability company.
(2) “Member” includes a person who beneficially owns a membership interest through a voting trust or a nominee on the person’s behalf.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 101.452. STANDING TO BRING PROCEEDING. A member may not institute or maintain a derivative proceeding unless:
(1) the member:
(A) was a member of the limited liability company at the time of the act or omission complained of; or
(B) became a member by operation of law from a person that was a member at the time of the act or omission complained of; and
(2) the member fairly and adequately represents the interests of the limited liability company in enforcing the right of the limited liability company.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 101.453. DEMAND. (a) A member may not institute a derivative proceeding until the 91st day after the date a written demand is filed with the limited liability company stating with particularity the act, omission, or other matter that is the subject of the claim or challenge and requesting that the limited liability company take suitable action.
(b) The waiting period required by Subsection (a) before a derivative proceeding may be instituted is not required if:
(1) the member has been previously notified that the demand has been rejected by the limited liability company;
(2) the limited liability company is suffering irreparable injury; or
(3) irreparable injury to the limited liability company would result by waiting for the expiration of the 90-day period.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 101.454. DETERMINATION BY GOVERNING OR INDEPENDENT PERSONS. (a) The determination of how to proceed on allegations made in a demand or petition relating to a derivative proceeding must be made by an affirmative vote of the majority of:
(1) the independent and disinterested governing persons present at a meeting of the governing authority at which interested governing persons are not present at the time of the vote if the independent and disinterested governing persons constitute a quorum of the governing authority;
(2) a committee consisting of two or more independent and disinterested governing persons appointed by the majority of one or more independent and disinterested governing persons present at a meeting of the governing authority, regardless of whether the independent and disinterested governing persons constitute a quorum of the governing authority; or
(3) a panel of one or more independent and disinterested persons appointed by the court on a motion by the limited liability company listing the names of the persons to be appointed and stating that, to the best of the limited liability company’s knowledge, the persons to be appointed are disinterested and qualified to make the determinations contemplated by Section 101.458.
(b) The court shall appoint a panel under Subsection (a)(3) if the court finds that the persons recommended by the limited liability company are independent and disinterested and are otherwise qualified with respect to expertise, experience, independent judgment, and other factors considered appropriate by the court under the circumstances to make the determinations. A person appointed by the court to a panel under this section may not be held liable to the limited liability company or the limited liability company’s members for an action taken or omission made by the person in that capacity, except for acts or omissions constituting fraud or wilful misconduct.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 101.455. STAY OF PROCEEDING. (a) If the domestic or foreign limited liability company that is the subject of a derivative proceeding commences an inquiry into the allegations made in a demand or petition and the person or group of persons described by Section 101.454 is conducting an active review of the allegations in good faith, the court shall stay a derivative proceeding until the review is completed and a determination is made by the person or group regarding what further action, if any, should be taken.
(b) To obtain a stay, the domestic or foreign limited liability company shall provide the court with a written statement agreeing to advise the court and the member making the demand of the determination promptly on the completion of the review of the matter. A stay, on motion, may be reviewed every 60 days for the continued necessity of the stay.
(c) If the review and determination made by the person or group is not completed before the 61st day after the date on which the court orders the stay, the stay may be renewed for one or more additional 60-day periods if the domestic or foreign limited liability company provides the court and the member with a written statement of the status of the review and the reasons why a continued extension of the stay is necessary.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 101.456. DISCOVERY. (a) If a domestic or foreign limited liability company proposes to dismiss a derivative proceeding under Section 101.458, discovery by a member after the filing of the derivative proceeding in accordance with this subchapter shall be limited to:
(1) facts relating to whether the person or group of persons described by Section 101.458 is independent and disinterested;
(2) the good faith of the inquiry and review by the person or group; and
(3) the reasonableness of the procedures followed by the person or group in conducting the review.
(b) Discovery described by Subsection (a) may not be expanded to include a fact or substantive matter regarding the act, omission, or other matter that is the subject matter of the derivative proceeding. The scope of discovery may be expanded if the court determines after notice and hearing that a good faith review of the allegations for purposes of Section 101.458 has not been made by an independent and disinterested person or group in accordance with that section.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 101.457. TOLLING OF STATUTE OF LIMITATIONS. A written demand filed with the limited liability company under Section 101.453 tolls the statute of limitations on the claim on which demand is made until the earlier of:
(1) the 91st day after the date of the demand; or
(2) the 31st day after the date the limited liability company advises the member that the demand has been rejected or the review has been completed.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 101.458. DISMISSAL OF DERIVATIVE PROCEEDING. (a) A court shall dismiss a derivative proceeding on a motion by the limited liability company if the person or group of persons described by Section 101.454 determines in good faith, after conducting a reasonable inquiry and based on factors the person or group considers appropriate under the circumstances, that continuation of the derivative proceeding is not in the best interests of the limited liability company.
(b) In determining whether the requirements of Subsection (a) have been met, the burden of proof shall be on:
(1) the plaintiff member if:
(A) the majority of the governing authority consists of independent and disinterested persons at the time the determination is made;
(B) the determination is made by a panel of one or more independent and disinterested persons appointed under Section 101.454(a)(3); or
(C) the limited liability company presents prima facie evidence that demonstrates that the persons appointed under Section 101.454(a)(2) are independent and disinterested; or
(2) the limited liability company in any other circumstance.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 101.459. ALLEGATIONS IF DEMAND REJECTED. If a derivative proceeding is instituted after a demand is rejected, the petition must allege with particularity facts that establish that the rejection was not made in accordance with the requirements of Sections 101.454 and 101.458.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 101.460. DISCONTINUANCE OR SETTLEMENT. (a) A derivative proceeding may not be discontinued or settled without court approval.
(b) The court shall direct that notice be given to the affected members if the court determines that a proposed discontinuance or settlement may substantially affect the interests of other members.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 101.461. PAYMENT OF EXPENSES. (a) In this section, “expenses” means reasonable expenses incurred by a party in a derivative proceeding, including:
(1) attorney’s fees;
(2) costs of pursuing an investigation of the matter that was the subject of the derivative proceeding; or
(3) expenses for which the domestic or foreign limited liability company may be required to indemnify another person.
(b) On termination of a derivative proceeding, the court may order:
(1) the domestic or foreign limited liability company to pay the expenses the plaintiff incurred in the proceeding if the court finds the proceeding has resulted in a substantial benefit to the domestic or foreign limited liability company;
(2) the plaintiff to pay the expenses the domestic or foreign limited liability company or other defendant incurred in investigating and defending the proceeding if the court finds the proceeding has been instituted or maintained without reasonable cause or for an improper purpose; or
(3) a party to pay the expenses incurred by another party relating to the filing of a pleading, motion, or other paper if the court finds the pleading, motion, or other paper:
(A) was not well grounded in fact after reasonable inquiry;
(B) was not warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law; or
(C) was interposed for an improper purpose, such as to harass, cause unnecessary delay, or cause a needless increase in the cost of litigation.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 101.462. APPLICATION TO FOREIGN LIMITED LIABILITY COMPANIES. (a) In a derivative proceeding brought in the right of a foreign limited liability company, the matters covered by this subchapter are governed by the laws of the jurisdiction of organization of the foreign limited liability company, except for Sections 101.455, 101.460, and 101.461, which are procedural provisions and do not relate to the internal affairs of the foreign limited liability company.
(b) In the case of matters relating to a foreign limited liability company under Section 101.454, a reference to a person or group of persons described by that section refers to a person or group entitled under the laws of the jurisdiction of organization of the foreign limited liability company to review and dispose of a derivative proceeding. The standard of review of a decision made by the person or group to dismiss the derivative proceeding shall be governed by the laws of the jurisdiction of organization of the foreign limited liability company.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 101.463. CLOSELY HELD LIMITED LIABILITY COMPANY. (a) In this section, “closely held limited liability company” means a limited liability company that has:
(1) fewer than 35 members; and
(2) no membership interests listed on a national securities exchange or regularly quoted in an over-the-counter market by one or more members of a national securities association.
(b) Sections 101.452-101.459 do not apply to a closely held limited liability company.
(c) If justice requires:
(1) a derivative proceeding brought by a member of a closely held limited liability company may be treated by a court as a direct action brought by the member for the member’s own benefit; and
(2) a recovery in a direct or derivative proceeding by a member may be paid directly to the plaintiff or to the limited liability company if necessary to protect the interests of creditors or other members of the limited liability company.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Amended by:
Acts 2007, 80th Leg., R.S., Ch. 688 (H.B. 1737), Sec. 100, eff. September 1, 2007.
SUBCHAPTER K. SUPPLEMENTAL RECORDKEEPING REQUIREMENTS
Sec. 101.501. SUPPLEMENTAL RECORDS REQUIRED FOR LIMITED LIABILITY COMPANIES. (a) In addition to the books and records required to be kept under Section 3.151, a limited liability company shall keep at its principal office in the United States, or make available to a person at its principal office in the United States not later than the fifth day after the date the person submits a written request to examine the books and records of the company under Section 3.152(a) or 101.502:
(1) a current list that states:
(A) the percentage or other interest in the limited liability company owned by each member; and
(B) if one or more classes or groups of membership interests are established in or under the certificate of formation or company agreement, the names of the members of each specified class or group;
(2) a copy of the company’s federal, state, and local tax information or income tax returns for each of the six preceding tax years;
(3) a copy of the company’s certificate of formation, including any amendments to or restatements of the certificate of formation;
(4) if the company agreement is in writing, a copy of the company agreement, including any amendments to or restatements of the company agreement;
(5) an executed copy of any powers of attorney;
(6) a copy of any document that establishes a class or group of members of the company as provided by the company agreement; and
(7) except as provided by Subsection (b), a written statement of:
(A) the amount of a cash contribution and a description and statement of the agreed value of any other contribution made or agreed to be made by each member;
(B) the dates any additional contributions are to be made by a member;
(C) any event the occurrence of which requires a member to make additional contributions;
(D) any event the occurrence of which requires the winding up of the company; and
(E) the date each member became a member of the company.
(b) A limited liability company is not required to keep or make available at its principal office in the United States a written statement of the information required by Subsection (a)(7) if that information is stated in a written company agreement.
(c) A limited liability company shall keep at its registered office located in this state and make available to a member of the company on reasonable request the street address of the company’s principal office in the United States in which the records required by this section and Section 3.151 are maintained or made available.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Amended by:
Acts 2007, 80th Leg., R.S., Ch. 688 (H.B. 1737), Sec. 101, eff. September 1, 2007.
Sec. 101.502. RIGHT TO EXAMINE RECORDS AND CERTAIN OTHER INFORMATION. (a) A member of a limited liability company or an assignee of a membership interest in a limited liability company, or a representative of the member or assignee, on written request and for a proper purpose, may examine and copy at any reasonable time and at the member’s or assignee’s expense:
(1) records required under Sections 3.151 and 101.501; and
(2) other information regarding the business, affairs, and financial condition of the company that is reasonable for the person to examine and copy.
(b) A limited liability company shall provide to a member of the company or an assignee of a membership interest in the company, on written request by the member or assignee sent to the company’s principal office in the United States or, if different, the person and address designated in the company agreement, a free copy of:
(1) the company’s certificate of formation, including any amendments to or restatements of the certificate of formation;
(2) if in writing, the company agreement, including any amendments to or restatements of the company agreement; and
(3) any tax returns described by Section 101.501(a)(2).
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
SUBCHAPTER L. SUPPLEMENTAL WINDING UP AND TERMINATION PROVISIONS
Sec. 101.551. PERSONS ELIGIBLE TO WIND UP COMPANY. After an event requiring the winding up of a limited liability company unless a revocation as provided by Section 11.151 or a cancellation as provided by Section 11.152 occurs, the winding up of the company must be carried out by:
(1) the company’s governing authority or one or more persons, including a governing person, designated by the governing authority, the members, or the governing documents;
(2) if the event requiring the winding up of the company is the termination of the continued membership of the last remaining member of the company, the legal representative or successor of the last remaining member or one or more persons designated by the legal representative or successor; or
(3) a person appointed by the court to carry out the winding up of the company under Section 11.054, 11.405, 11.409, or 11.410.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Sec. 101.552. APPROVAL OF VOLUNTARY WINDING UP, REVOCATION, CANCELLATION, OR REINSTATEMENT. (a) A majority vote of all of the members of a limited liability company or, if the limited liability company has no members, a majority vote of all of the managers of the company is required to approve:
(1) a voluntary winding up of the company under Chapter 11;
(2) a revocation of a voluntary decision to wind up the company under Section 11.151; or
(3) a reinstatement of a terminated company under Section 11.202.
(b) The consent of all of the members of the limited liability company is required to approve a cancellation under Section 11.152 of an event requiring winding up specified in Section 11.051(1) or (3).
(c) An event requiring winding up specified in Section 11.056 may be canceled in accordance with Section 11.152(a) if the legal representative or successor of the last remaining member of the domestic limited liability company agrees to:
(1) cancel the event requiring winding up and continue the company; and
(2) become a member of the company effective as of the date of termination of the membership of the last remaining member of the company, or designate another person who agrees to become a member of the company effective as of the date of the termination.
Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
Amended by:
Acts 2007, 80th Leg., R.S., Ch. 688 (H.B. 1737), Sec. 102, eff. September 1, 2007.
SUBCHAPTER M. SERIES LIMITED LIABILITY COMPANY
Sec. 101.601. SERIES OF MEMBERS, MANAGERS, MEMBERSHIP INTERESTS, OR ASSETS. (a) A company agreement may establish or provide for the establishment of one or more designated series of members, managers, membership interests, or assets that:
(1) has separate rights, powers, or duties with respect to specified property or obligations of the limited liability company or profits and losses associated with specified property or obligations; or
(2) has a separate business purpose or investment objective.
(b) A series established in accordance with Subsection (a) may carry on any business, purpose, or activity, whether or not for profit, that is not prohibited by Section 2.003.
Added by Acts 2009, 81st Leg., R.S., Ch. 84 (S.B. 1442), Sec. 45, eff. September 1, 2009.
Sec. 101.602. ENFORCEABILITY OF OBLIGATIONS AND EXPENSES OF SERIES AGAINST ASSETS. (a) Notwithstanding any other provision of this chapter or any other law, but subject to Subsection (b) and any other provision of this subchapter:
(1) the debts, liabilities, obligations, and expenses incurred, contracted for, or otherwise existing with respect to a particular series shall be enforceable against the assets of that series only, and shall not be enforceable against the assets of the limited liability company generally or any other series; and
(2) none of the debts, liabilities, obligations, and expenses incurred, contracted for, or otherwise existing with respect to the limited liability company generally or any other series shall be enforceable against the assets of a particular series.
(b) Subsection (a) applies only if:
(1) the records maintained for that particular series account for the assets associated with that series separately from the other assets of the company or any other series;
(2) the company agreement contains a statement to the effect of the limitations provided in Subsection (a); and
(3) the company’s certificate of formation contains a notice of the limitations provided in Subsection (a).
Added by Acts 2009, 81st Leg., R.S., Ch. 84 (S.B. 1442), Sec. 45, eff. September 1, 2009.
Sec. 101.603. ASSETS OF SERIES. (a) Assets associated with a series may be held directly or indirectly, including being held in the name of the series, in the name of the limited liability company, through a nominee, or otherwise.
(b) If the records of a series are maintained in a manner so that the assets of the series can be reasonably identified by specific listing, category, type, quantity, or computational or allocational formula or procedure, including a percentage or share of any assets, or by any other method in which the identity of the assets can be objectively determined, the records are considered to satisfy the requirements of Section 101.602(b)(1).
Added by Acts 2009, 81st Leg., R.S., Ch. 84 (S.B. 1442), Sec. 45, eff. September 1, 2009.
Sec. 101.604. NOTICE OF LIMITATION ON LIABILITIES OF SERIES. Notice of the limitation on liabilities of a series required by Section 101.602 that is contained in a certificate of formation filed with the secretary of state satisfies the requirements of Section 101.602(b)(3), regardless of whether:
(1) the limited liability company has established any series under this subchapter when the notice is contained in the certificate of formation; and
(2) the notice makes a reference to a specific series of the limited liability company.
Added by Acts 2009, 81st Leg., R.S., Ch. 84 (S.B. 1442), Sec. 45, eff. September 1, 2009.
Sec. 101.605. GENERAL POWERS OF SERIES. A series established under this subchapter has the power and capacity, in the series’ own name, to:
(1) sue and be sued;
(2) contract;
(3) acquire, sell, and hold title to assets of the series, including real property, personal property, and intangible property;
(4) grant liens and security interests in assets of the series; and
(5) exercise any power or privilege as necessary or appropriate to the conduct, promotion, or attainment of the business, purposes, or activities of the series.
Added by Acts 2009, 81st Leg., R.S., Ch. 84 (S.B. 1442), Sec. 45, eff. September 1, 2009.
Amended by:
Acts 2013, 83rd Leg., R.S., Ch. 9 (S.B. 847), Sec. 6, eff. September 1, 2013.
Sec. 101.606. LIABILITY OF MEMBER OR MANAGER FOR OBLIGATIONS; DUTIES. (a) Except as and to the extent the company agreement specifically provides otherwise, a member or manager associated with a series or a member or manager of the company is not liable for a debt, obligation, or liability of a series, including a debt, obligation, or liability under a judgment, decree, or court order.
(b) The company agreement may expand or restrict any duties, including fiduciary duties, and related liabilities that a member, manager, officer, or other person associated with a series has to:
(1) the series or the company;
(2) a member or manager associated with the series; or
(3) a member or manager of the company.
Added by Acts 2009, 81st Leg., R.S., Ch. 84 (S.B. 1442), Sec. 45, eff. September 1, 2009.
Sec. 101.607. CLASS OR GROUP OF MEMBERS OR MANAGERS. (a) The company agreement may:
(1) establish classes or groups of one or more members or managers associated with a series each of which has certain express relative rights, powers, and duties, including voting rights; and
(2) provide for the manner of establishing additional classes or groups of one or more members or managers associated with the series each of which has certain express rights, powers, and duties, including providing for voting rights and rights, powers, and duties senior to existing classes and groups of members or managers associated with the series.
(b) The company agreement may provide for the taking of an action, including the amendment of the company agreement, without the vote or approval of any member or manager or class or group of members or managers, to create under the provisions of the company agreement a class or group of the series of membership interests that was not previously outstanding.
(c) The company agreement may provide that:
(1) all or certain identified members or managers or a specified class or group of the members or managers associated with a series have the right to vote on any matter separately or with all or any class or group of the members or managers associated with the series;
(2) any member or class or group of members associated with a series has no voting rights; and
(3) voting by members or managers associated with a series is on a per capita, number, financial interest, class, group, or any other basis.
Added by Acts 2009, 81st Leg., R.S., Ch. 84 (S.B. 1442), Sec. 45, eff. September 1, 2009.
Sec. 101.608. GOVERNING AUTHORITY. (a) Notwithstanding any conflicting provision of the certificate of formation of a limited liability company, the governing authority of a series consists of the managers or members associated with the series as provided in the company agreement.
(b) If the company agreement does not provide for the governing authority of the series, the governing authority of the series consists of:
(1) the managers associated with the series, if the company’s certificate of formation states that the company will have one or more managers; or
(2) the members associated with the series, if the company’s certificate of formation states that the company will not have managers.
Added by Acts 2009, 81st Leg., R.S., Ch. 84 (S.B. 1442), Sec. 45, eff. September 1, 2009.
Sec. 101.609. APPLICABILITY OF OTHER PROVISIONS OF CHAPTER OR TITLE 1; SYNONYMOUS TERMS. (a) To the extent not inconsistent with this subchapter, this chapter applies to a series and its associated members and managers.
(b) For purposes of the application of any other provision of this chapter to a provision of this subchapter, and as the context requires:
(1) a reference to “limited liability company” or “company” means the “series”;
(2) a reference to “member” means “member associated with the series”; and
(3) a reference to “manager” means “manager associated with the series.”
(c) To the extent not inconsistent with this subchapter, a series and the governing persons and officers associated with the series have the powers and rights provided by Subchapters C and D, Chapter 3, and Subchapter F, Chapter 10. For purposes of those provisions, and as the context requires:
(1) a reference to “entity,” “domestic entity,” or “filing entity” includes the “series”;
(2) a reference to “governing person” includes “governing person associated with the series”;
(3) a reference to “governing authority” includes “governing authority associated with the series”; and
(4) a reference to “officer” includes “officer associated with the series.”
Added by Acts 2009, 81st Leg., R.S., Ch. 84 (S.B. 1442), Sec. 45, eff. September 1, 2009.
Amended by:
Acts 2013, 83rd Leg., R.S., Ch. 9 (S.B. 847), Sec. 7, eff. September 1, 2013.
Acts 2013, 83rd Leg., R.S., Ch. 9 (S.B. 847), Sec. 8, eff. September 1, 2013.
Sec. 101.610. EFFECT OF CERTAIN EVENT ON MANAGER OR MEMBER. (a) An event that under this chapter or the company agreement causes a manager to cease to be a manager with respect to a series does not, in and of itself, cause the manager to cease to be a manager of the limited liability company or with respect to any other series of the company.
(b) An event that under this chapter or the company agreement causes a member to cease to be associated with a series does not, in and of itself, cause the member to cease to be associated with any other series or terminate the continued membership of a member in the limited liability company or require the winding up of the series, regardless of whether the member was the last remaining member associated with the series.
Added by Acts 2009, 81st Leg., R.S., Ch. 84 (S.B. 1442), Sec. 45, eff. September 1, 2009.
Sec. 101.611. MEMBER STATUS WITH RESPECT TO DISTRIBUTION. (a) Subject to Sections 101.613, 101.617, 101.618, 101.619, and 101.620, when a member associated with a series established under this subchapter is entitled to receive a distribution with respect to the series, the member, with respect to the distribution, has the same status as a creditor of the series and is entitled to any remedy available to a creditor of the series.
(b) Section 101.206 does not apply to a distribution with respect to the series.
Added by Acts 2009, 81st Leg., R.S., Ch. 84 (S.B. 1442), Sec. 45, eff. September 1, 2009.
Amended by:
Acts 2011, 82nd Leg., R.S., Ch. 139 (S.B. 748), Sec. 40, eff. September 1, 2011.
Sec. 101.612. RECORD DATE FOR ALLOCATIONS AND DISTRIBUTIONS. A company agreement may establish or provide for the establishment of a record date for allocations and distributions with respect to a series.
Added by Acts 2009, 81st Leg., R.S., Ch. 84 (S.B. 1442), Sec. 45, eff. September 1, 2009.
Sec. 101.613. DISTRIBUTIONS. (a) A limited liability company may make a distribution with respect to a series.
(b) A limited liability company may not make a distribution with respect to a series to a member if, immediately after making the distribution, the total amount of the liabilities of the series, other than liabilities described by Subsection (c), exceeds the fair value of the assets associated with the series.
(c) For purposes of Subsection (b), the liabilities of a series do not include:
(1) a liability related to the member’s membership interest; or
(2) except as provided by Subsection (e), a liability of the series for which the recourse of creditors is limited to specified property of the series.
(d) For purposes of Subsection (b), the assets associated with a series include the fair value of property of the series subject to a liability for which recourse of creditors is limited to specified property of the series only if the fair value of that property exceeds the liability.
(e) A member who receives a distribution from a series in violation of this section is not required to return the distribution to the series unless the member had knowledge of the violation.
(f) This section may not be construed to affect the obligation of a member to return a distribution to the series under the company agreement or other state or federal law.
(g) Section 101.206 does not apply to a distribution with respect to a series.
(h) For purposes of this section, “distribution” does not include an amount constituting reasonable compensation for present or past services or a reasonable payment made in the ordinary course of business under a bona fide retirement plan or other benefits program.
Added by Acts 2009, 81st Leg., R.S., Ch. 84 (S.B. 1442), Sec. 45, eff. September 1, 2009.
Sec. 101.614. AUTHORITY TO WIND UP AND TERMINATE SERIES. Except to the extent otherwise provided in the company agreement and subject to Sections 101.617, 101.618, 101.619, and 101.620, a series and its business and affairs may be wound up and terminated without causing the winding up of the limited liability company.
Added by Acts 2009, 81st Leg., R.S., Ch. 84 (S.B. 1442), Sec. 45, eff. September 1, 2009.
Sec. 101.615. TERMINATION OF SERIES. (a) Except as otherwise provided by Sections 101.617, 101.618, 101.619, and 101.620, the series terminates on the completion of the winding up of the business and affairs of the series in accordance with Sections 101.617, 101.618, 101.619, and 101.620.
(b) The limited liability company shall provide notice of the termination of a series in the manner provided in the company agreement for notice of termination, if any.
(c) The termination of the series does not affect the limitation on liabilities of the series provided by Section 101.602.
Added by Acts 2009, 81st Leg., R.S., Ch. 84 (S.B. 1442), Sec. 45, eff. September 1, 2009.
Sec. 101.616. EVENT REQUIRING WINDING UP. Subject to Sections 101.617, 101.618, 101.619, and 101.620, the business and affairs of a series are required to be wound up:
(1) if the winding up of the limited liability company is required under Section 101.552(a) or Chapter 11; or
(2) on the earlier of:
(A) the time specified for winding up the series in the company agreement;
(B) the occurrence of an event specified with respect to the series in the company agreement;
(C) the occurrence of a majority vote of all of the members associated with the series approving the winding up of the series or, if there is more than one class or group of members associated with the series, a majority vote of the members of each class or group of members associated with the series approving the winding up of the series;
(D) if the series has no members, the occurrence of a majority vote of all of the managers associated with the series approving the winding up of the series or, if there is more than one class or group of managers associated with the series, a majority vote of the managers of each class or group of managers associated with the series approving the winding up of the series; or
(E) a determination by a court in accordance with Section 101.621.
Added by Acts 2009, 81st Leg., R.S., Ch. 84 (S.B. 1442), Sec. 45, eff. September 1, 2009.
Sec. 101.617. PROCEDURES FOR WINDING UP AND TERMINATION OF SERIES. (a) The following provisions apply to a series and the associated members and managers of the series:
(1) Subchapters A, G, H, and I, Chapter 11; and
(2) Subchapter B, Chapter 11, other than Sections 11.051, 11.056, 11.057, 11.058, and 11.059.
(b) For purposes of the application of Chapter 11 to a series and as the context requires:
(1) a reference to “domestic entity,” “filing entity,” or “entity” means the “series”;
(2) a reference to an “owner” means a “member associated with the series”;
(3) a reference to the “governing authority” or a “governing person” means the “governing authority associated with the series” or a “governing person associated with the series”; and
(4) a reference to “business,” “property,” “obligations,” or “liabilities” means the “business associated with the series,” “property associated with the series,” “obligations associated with the series,” or “liabilities associated with the series.”
(c) After the occurrence of an event requiring winding up of a series under Section 101.616, unless a revocation as provided by Section 101.618 or a cancellation as provided by Section 101.619 occurs, the winding up of the series must be carried out by:
(1) the governing authority of the series or one or more persons, including a governing person, designated by:
(A) the governing authority of the series;
(B) the members associated with the series; or
(C) the company agreement; or
(2) a person appointed by the court to carry out the winding up of the series under Section 11.054, 11.405, 11.409, or 11.410.
(d) An action taken in accordance with this section does not affect the limitation on liability of members and managers provided by Section 101.606.
Added by Acts 2009, 81st Leg., R.S., Ch. 84 (S.B. 1442), Sec. 45, eff. September 1, 2009.
Sec. 101.618. REVOCATION OF VOLUNTARY WINDING UP. Before the termination of the series takes effect, a voluntary decision to wind up the series under Section 101.616(2)(C) or (D) may be revoked by:
(1) a majority vote of all of the members associated with the series approving the revocation or, if there is more than one class or group of members associated with the series, a majority vote of the members of each class or group of members associated with the series approving the revocation; or
(2) if the series has no members, a majority vote of all the managers associated with the series approving the revocation or, if there is more than one class or group of managers associated with the series, a majority vote of the managers of each class or group of managers associated with the series approving the revocation.
Added by Acts 2009, 81st Leg., R.S., Ch. 84 (S.B. 1442), Sec. 45, eff. September 1, 2009.
Sec. 101.619. CANCELLATION OF EVENT REQUIRING WINDING UP. (a) Unless the cancellation is prohibited by the company agreement, an event requiring winding up of the series under Section 101.616(1) or (2) may be canceled by the consent of all of the members of the series before the termination of the series takes effect.
(b) In connection with the cancellation, the members must amend the company agreement to:
(1) eliminate or extend the time specified for the series if the event requiring winding up of the series occurred under Section 101.616(1); or
(2) eliminate or revise the event specified with respect to the series if the event requiring winding up of the series occurred under Section 101.616(2).
Added by Acts 2009, 81st Leg., R.S., Ch. 84 (S.B. 1442), Sec. 45, eff. September 1, 2009.
Sec. 101.620. CONTINUATION OF BUSINESS. The series may continue its business following the revocation under Section 101.618 or the cancellation under Section 101.619.
Added by Acts 2009, 81st Leg., R.S., Ch. 84 (S.B. 1442), Sec. 45, eff. September 1, 2009.
Sec. 101.621. WINDING UP BY COURT ORDER. A district court in the county in which the registered office or principal place of business in this state of a domestic limited liability company is located, on application by or for a member associated with the series, has jurisdiction to order the winding up and termination of a series if the court determines that it is not reasonably practicable to carry on the business of the series in conformity with the company agreement.
Added by Acts 2009, 81st Leg., R.S., Ch. 84 (S.B. 1442), Sec. 45, eff. September 1, 2009.
Sec. 101.622. SERIES NOT A SEPARATE DOMESTIC ENTITY OR ORGANIZATION. For purposes of this chapter and Title 1, a series has the rights, powers, and duties provided by this subchapter to the series but is not a separate domestic entity or organization.
Added by Acts 2013, 83rd Leg., R.S., Ch. 9 (S.B. 847), Sec. 9, eff. September 1, 2013.
Williams, McClure & Parmelee is dedicated to high quality legal representation of businesses and insurance companies in a variety of matters. We are experienced Texas civil litigation attorneys based in Fort Worth who know Texas courts and Texas law. For more information, please contact the law firm at 817-335-8800. The firm’s new office location is 5601 Bridge Street, Suite 300, Fort Worth, Texas 76112.
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