BUSINESS ORGANIZATIONS CODE
TITLE 3. LIMITED LIABILITY COMPANIES
CHAPTER 101. LIMITED LIABILITY COMPANIES
SUBCHAPTER A. GENERAL PROVISIONS
§ 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, § 1, eff. Jan. 1, 2006.
SUBCHAPTER B. FORMATION AND GOVERNING DOCUMENTS
§ 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, § 1, eff. Jan. 1, 2006.
§ 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.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 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, § 1, eff. Jan. 1, 2006.
§ 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(b), 101.206, 101.501, or 101.502;
(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.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
SUBCHAPTER C. MEMBERSHIP
§ 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, § 1, eff. Jan. 1, 2006.
§ 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.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 101.103. EFFECTIVE DATE OF MEMBERSHIP. (a) A person
who acquires a membership interest in a limited liability company
in connection with the formation of the company 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) A person who acquires a membership interest in a limited
liability company during the formation of the company but who is 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 becomes a member of the company on approval or consent
of all of the company's members.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 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, § 1, eff. Jan. 1, 2006.
§ 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, § 1, eff. Jan. 1, 2006.
§ 101.106. NATURE OF MEMBERSHIP INTEREST. (a) A
membership interest in a limited liability company is personal
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.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 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, § 1, eff. Jan. 1, 2006.
§ 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, § 1, eff. Jan. 1, 2006.
§ 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, § 1, eff. Jan. 1, 2006.
§ 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, § 1, eff. Jan. 1, 2006.
§ 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, § 1, eff. Jan. 1, 2006.
§ 101.112. JUDGMENT CREDITOR; CHARGE OF MEMBERSHIP
INTEREST. (a) On application by a judgment creditor of a member
of a limited liability company or any other owner of a membership
interest in a limited liability company, a court may charge the
membership interest of the member or owner, as appropriate, with
payment of the unsatisfied amount of 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 rights of an assignee of the membership interest.
(c) 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.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 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, § 1, eff. Jan. 1, 2006.
§ 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, § 1, eff. Jan. 1, 2006.
SUBCHAPTER D. CONTRIBUTIONS
§ 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, § 1, eff. Jan. 1, 2006.
§ 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, § 1, eff. Jan. 1, 2006.
§ 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, § 1, eff. Jan. 1, 2006.
§ 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, § 1, eff. Jan. 1, 2006.
§ 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, § 1, eff. Jan. 1, 2006.
§ 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, § 1, eff. Jan. 1, 2006.
SUBCHAPTER E. ALLOCATIONS AND DISTRIBUTIONS
§ 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 in accordance with the
member's percentage or other interest in the company on the date of
the allocation as stated in the company's records required under
Sections 3.151 and 101.501.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 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, § 1, eff. Jan. 1, 2006.
§ 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, § 1, eff. Jan. 1, 2006.
§ 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, § 1, eff. Jan. 1, 2006.
§ 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, § 1, eff. Jan. 1, 2006.
§ 101.206. PROHIBITED DISTRIBUTION; DUTY TO
RETURN. (a) 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
required to return the distribution to the company if 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.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 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, § 1, eff. Jan. 1, 2006.
SUBCHAPTER F. MANAGEMENT
§ 101.251. MEMBERSHIP. 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, § 1, eff. Jan. 1, 2006.
§ 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, § 1, eff. Jan. 1, 2006.
§ 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, § 1, eff. Jan. 1, 2006.
§ 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 or
agent 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, § 1, eff. Jan. 1, 2006.
§ 101.255. CONTRACTS OR TRANSACTIONS INVOLVING
INTERESTED GOVERNING PERSONS OR OFFICERS. (a) This section
applies only to a contract or transaction between a limited
liability company and:
(1) one or more of the company's governing persons or
officers; or
(2) an entity or other organization in which one or
more of the company's governing persons or officers:
(A) is a managerial official; or
(B) has a financial interest.
(b) An otherwise valid contract or transaction is valid
notwithstanding that a governing person or officer of the company
is present at or participates in the meeting of the governing
authority, or of a committee of the governing person's authority,
that authorizes the contract or transaction or votes to authorize
the contract or transaction, if:
(1) the material facts as to the relationship or
interest 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 affirmative vote 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.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
SUBCHAPTER G. MANAGERS
§ 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, § 1, eff. Jan. 1, 2006.
§ 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, § 1, eff. Jan. 1, 2006.
§ 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, § 1, eff. Jan. 1, 2006.
§ 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, § 1, eff. Jan. 1, 2006.
§ 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, § 1, eff. Jan. 1, 2006.
§ 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, § 1, eff. Jan. 1, 2006.
§ 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, § 1, eff. Jan. 1, 2006.
SUBCHAPTER H. MEETINGS AND VOTING
§ 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, § 1, eff. Jan. 1, 2006.
§ 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 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, § 1, eff. Jan. 1, 2006.
§ 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, § 1, eff. Jan. 1, 2006.
§ 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, § 1, eff. Jan. 1, 2006.
§ 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, § 1, eff. Jan. 1, 2006.
§ 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, an amendment to the certificate of formation
of a limited liability company must be approved by the affirmative
vote of all of the company's members.
(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).
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 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, if authorized by the company agreement, may vote:
(1) in person; or
(2) by a proxy executed in writing by the manager or
committee member, as appropriate.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
§ 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, § 1, eff. Jan. 1, 2006.
SUBCHAPTER I. MODIFICATION OF DUTIES; INDEMNIFICATION
§ 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, § 1, eff. Jan. 1, 2006.
§ 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, § 1, eff. Jan. 1, 2006.
SUBCHAPTER J. DERIVATIVE PROCEEDINGS
§ 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, § 1, eff. Jan. 1, 2006.
§ 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, § 1, eff. Jan. 1, 2006.
§ 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, § 1, eff. Jan. 1, 2006.
§ 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, § 1, eff. Jan. 1, 2006.
§ 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, § 1, eff. Jan. 1, 2006.
§ 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, § 1, eff. Jan. 1, 2006.
§ 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, § 1, eff. Jan. 1, 2006.
§ 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, § 1, eff. Jan. 1, 2006.
§ 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, § 1, eff. Jan. 1, 2006.
§ 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, § 1, eff. Jan. 1, 2006.
§ 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, § 1, eff. Jan. 1, 2006.
§ 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, § 1, eff. Jan. 1, 2006.
§ 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) Subject to Subsection (c), 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, § 1, eff. Jan. 1, 2006.
SUBCHAPTER K. SUPPLEMENTAL RECORDKEEPING REQUIREMENTS
§ 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 of each member of a class or group
of membership interests in the company;
(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 the 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, § 1, eff. Jan. 1, 2006.
§ 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, § 1, eff. Jan. 1, 2006.
SUBCHAPTER L. SUPPLEMENTAL WINDING UP AND TERMINATION PROVISIONS
§ 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, § 1, eff. Jan. 1, 2006.
§ 101.552. APPROVAL OF VOLUNTARY WINDING UP, REVOCATION,
CANCELLATION, OR REINSTATEMENT. A majority vote of all of the
governing 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;
(3) a cancellation of an event requiring the winding
up of the company under Section 11.152; or
(4) a reinstatement of a terminated company under
Section 11.202.
Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006.
