United States: The Duty Of Loyalty Under The New Jersey Revised Uniform Limited Liability Company Act

Gianfranco A. Pietrafesa, a partner in the firm's Corporate Practice Group, analyzes the duty of loyalty of managers and members of New Jersey limited liability companies. In an article in New Jersey Lawyer Magazine, he explains the duty of loyalty, to whom it applies, and how an LLC operating agreement may restrict or eliminate the duty.

On March 1, 2014, the New Jersey Limited Liability Company Act was repealed1 and replaced by the New Jersey Revised Uniform Limited Liability Company Act (NJRULLCA).2 On that date, NJRULLCA began to govern all limited liability companies (LLCs) in New Jersey.3

NJRULLCA has made significant changes in New Jersey's LLC law.4 Among them are specific statutory fiduciary duties for managers and members of LLCs.5 One such fiduciary duty is the duty of loyalty.

What is the Duty of Loyalty?

The statutory duty of loyalty is comprised of the following specific duties:

  1. to account to the company and to hold as trustee for it any property, profit, or benefit derived by the member:

    1. in the conduct or winding up of the company's activities;
    2. from a use by the member of the company's property; or
    3. from the appropriation of a company opportunity;
  2. to refrain from dealing with the company in the conduct or winding up of the company's activities as or on behalf of a person having an interest adverse to the company [i.e., self-dealing]; and
  3. to refrain from competing with the company in the conduct of the company's activities before the dissolution of the company.6

Thus, a member or manager must account to the LLC for any profits derived from: 1) conducting the business of the LLC and dissolving the LLC, 2) using the LLC's property, and 3) appropriating business opportunities of the LLC. Also, a member or manager must refrain from engaging in self-dealing and competing with the LLC. The prohibitions against self-dealing and competing with the LLC may present problems for certain LLCs, but any problems can be addressed in an operating agreement.

To Whom Does the Duty Apply?

An LLC may be managed by its members or by one or more managers,7 and who manages the LLC determines who is bound by the duty of loyalty. Thus, the duty applies to the members of a member-managed LLC8 or to the managers (but not the members) of a manager-managed LLC.9 Note that in a member-managed LLC, a member has a duty to refrain from competing with the LLC before the dissolution of the LLC, whereas in a manager-managed LLC, a manager has a duty to refrain from competing with the LLC until the completion of the winding up of the LLC.10

Comparison to Prior New Jersey LLC Law

New Jersey's prior statute did not include a duty of loyalty.11 In fact, the term "fiduciary duty" was mentioned once, at the end of the statute.12 In addition, there is virtually no New Jersey case law discussing the duty of loyalty in the context of an LLC. The sparse case law that does exist is contradictory and, as a result, not helpful.13

Some have argued that, unless otherwise expressed in an operating agreement, managers and members did not have any fiduciary duties, including the duty of loyalty.14 Others assumed that managers and controlling members must have had fiduciary duties.15

Comparison to Other New Jersey Entity Laws

The duty of loyalty imposed by NJRULLCA is substantially similar to the duty of loyalty under New Jersey's general partnership and limited partnership statutes.16 This should come as no surprise since all three laws were drafted by the uniform law commissioners.17

However, the duty of loyalty for managers and members of an LLC is broader than the comparable duty for partners of a general partnership or general partners of a limited partnership. First, the general partnership statute states that "[t]he only fiduciary duties a partner owes to the partnership and the other partners are the duty of loyalty and the duty of care set forth in [the statute]."18 By comparison, NJRULLCA does not include such a limiting term.19 Second, NJRULLCA implies that managers and members may be subject to other fiduciary duties,20 meaning fiduciary duties developed by the courts under the common law.21

By contrast, New Jersey's corporate statute does not include a duty of loyalty. Instead, the duty of loyalty of directors and officers to a corporation and its shareholders is determined by the courts under the common law. Although the duty of loyalty is determined on a case-by-case basis, and thus cannot be defined with precision, it includes a duty to act in the best interests of the corporation, without self-dealing and usurping corporate opportunities.22

Comparison to Delaware LLC Law

While NJRULLCA clearly specifies the duty of loyalty in New Jersey LLCs, the duty of loyalty for managers and members of Delaware LLCs is not so certain. In fact, the issue of fiduciary duties caused a significant disagreement between the Delaware Supreme Court and the chancery court (which decides disputes involving the internal affairs of LLCs, corporations and other business entities).

In Jan. 2012, the chancery court held that the manager of an LLC had default fiduciary duties to the LLC and its members, which confirmed the common understanding under prior case law that a manager had fiduciary duties unless contradicted by an operating agreement.23 In Nov. 2012, the Delaware Supreme Court disagreed and held that the chancery court's pronouncement about default fiduciary duties was "improvident and unnecessary" and "dictum without precedential value."24 A few weeks later, the chancery court again held that default fiduciary duties apply to managers of an LLC.25

The Delaware Legislature ended the controversy by amending its LLC statute.26 Thus, managers and controlling members of Delaware LLCs have a duty of loyalty to the LLC and its members. However, the nature and scope of the duty is still determined through case law.

Alter or Eliminate the Duty

The statutory duty of loyalty is a default provision that will apply if the LLC's operating agreement does not modify the duty. Fortunately, NJRULLCA provides an LLC with several methods to alter, or even eliminate, the duty. These methods are contained in Sections 11 and 39 of NJRULLCA.27 The provisions appear complex and even contradictory, and thus confusing, but as explained below, they do provide LLCs with great flexibility to deal with the duty of loyalty to suit the circumstances of each particular LLC.

Section 11 of NJRULLCA initially states that "[a]n operating agreement may not...(4) subject to subsections d. through g. of this section, eliminate the duty of loyalty, the duty of care, or any other fiduciary duty."28 But in subsections d. through g., NJRULLCA provides several methods to address the duty of loyalty.

First, Section 11(d) of NJRULLCA provides in part that, "[i]f not manifestly unreasonable, the operating agreement may (1) restrict or eliminate the duty as required in [N.J.S.A. 42:2C-39(b)(1)-(3) & (i)],"29 which is the duty of loyalty. Thus, as long as it is not manifestly unreasonable, an operating agreement may restrict, and even eliminate, all or parts of the duty of loyalty.30

For example, an operating agreement in a member-managed LLC31 may eliminate the duty of loyalty, as follows:

No Duty of Loyalty. No Member owes any fiduciary duty of loyalty to the Company or the other Members.

Or, an operating agreement may restrict the duty of loyalty; for example, by limiting it to some of the statutory duties and thus eliminating others:

Duty of Loyalty. A Member's duty of loyalty to the Company and the other Members is limited to accounting to the Company and holding as trustee for it any property, profit or benefit derived by the Member (A) in conducting and winding up the Company's business, (B) from using the Company's property, and (C) from appropriating a business opportunity of the Company. No Member owes any other fiduciary duty of loyalty to the Company or the other Members.

Under the above example, the duties against self-dealing and competing with the LLC are eliminated. For further clarification, the last sentence can be modified with the addition of the following phrase at the end of the sentence: ", including the duty against self-dealing and competing with the Company."

Identify Acts Not Violating the Duty

Next, Section 11(d) of NJRULLCA provides in part that, "[i]f not manifestly unreasonable, the operating agreement may...(2) identify specific types or categories of activities that do not violate the duty of loyalty."32 This method may be used when the managers or members of an LLC are active in the specific business of the LLC through other companies, positions, etc. For example, the members of a real estate holding company may currently or in the future want to own commercial real estate individually or with others, and not be required to own such other real estate through the LLC or even with the same members.

Thus, an operating agreement for a real estate holding company may identify certain types or categories of activities that do not violate the duty of loyalty, such as:

Other Interests. A Member may, directly or indirectly, own and/or manage other real estate. Neither the Company nor any other Members shall have any right, by virtue of this Agreement, to share or participate in the ownership or management of such other real estate of the Member or to the income or proceeds derived therefrom.33

An operating agreement for an operating company may include the following provision:

Other Interests. Each Member acknowledges that the other Members may, directly or indirectly, own and/or manage other businesses, including businesses that may compete with the Company. Each Member agrees that a Member shall not be prohibited from engaging or investing in any other business, including a business that may compete with the Company, and that a Member shall not be required to present such business opportunities to the Company or the other Members, even if such business opportunities are similar to the business of the Company. Neither the Company nor any other Members shall have any right, by virtue of this Agreement, to share or participate in the ownership of such business opportunities of the Member or to the income or proceeds derived therefrom.

Such a provision should be useful in attracting experienced businesspeople to join the LLC as members, which they might not otherwise do because of the duty against competing with the LLC and appropriating business opportunities of the LLC.

Not Manifestly Unreasonable

As noted, a provision restricting or eliminating the duty of loyalty or identifying acts that do not violate the duty must not be manifestly unreasonable.34 NJRULLCA provides that whether a term is manifestly unreasonable is an issue for the court.35 A court may invalidate a term as manifestly (i.e., clearly or obviously) unreasonable only if it is readily apparent the objective of the term is unreasonable or the term is an unreasonable means to achieve its objective.36 This determination is made as of the date the term was added to the operating agreement, based on the specific facts and circumstances of the LLC existing at that time,37 and in light of the LLC's purpose and business.38 In making its determination, the court should also consider that NJRULLCA, like the prior statute, "is to be liberally construed to give the maximum effect to the principle of freedom of contract and to the enforceability of operating agreements."39

An operating agreement can include a provision where the members agree the provisions altering fiduciary duties are reasonable and provides for the court to modify any such provisions deemed manifestly unreasonable by the court:

Reasonable Provisions. Each Member acknowledges and agrees that the provisions in Section X are reasonable, important and necessary for the success of the Company. If a court determines that any provision in Section X is manifestly unreasonable, the Members agree that the court shall have the power to modify any such unreasonable provision to the extent deemed necessary by the court to render it reasonable and enforceable (and that comes closest to expressing the intention of the unreasonable provision), and that such modified provision shall be enforced by the court.

Independent Authorization or Ratification

Section 11(e) of NJRULLCA provides that an operating agreement "may specify the method by which a specific act or transaction that would otherwise violate the duty of loyalty may be authorized or ratified by one or more disinterested and independent persons after full disclosure of all material facts."40 This method is intended to be used for self-dealing; that is, for transactions between the LLC and its managers and members.41

For example, an operating agreement may provide for a special committee, an advisory board, or any disinterested and independent person, such as a retired judge or a person with experience in the particular industry of the LLC. Under this method, one or more disinterested and independent persons would review all material facts: 1) before an act or transaction to authorize it, or 2) after an act or transaction to ratify it. This method 'cleanses' the act or transaction otherwise violating the duty of loyalty.

A simple provision for such a method would be the following:

Independent Authorization or Ratification. After full disclosure of all material facts, the majority vote of the Company's special committee, which shall be comprised of disinterested and independent persons (e.g., persons that are not Members or Managers or affiliates of Members or Managers), may authorize or ratify an act or transaction violating the duty of loyalty.

No Duty for Non-Managing Members

An operating agreement of a member-managed LLC may appoint certain members as the managing members of the LLC. In such a situation, the nonmanaging members may not want to owe any duty of loyalty to the LLC or the other members because they are not managing the LLC and do not have the authority to legally bind the LLC. Section 11(f) of NJRULLCA allows an operating agreement to relieve non-managing members from fiduciary duties, including the duty of loyalty:

To the extent the operating agreement of a member-managed limited liability company expressly relieves a member of a responsibility that the member would otherwise have under this act and imposes the responsibility on one or more other members, the operating agreement may, to the benefit of the member that the operating agreement relieves of the responsibility, also eliminate or limit any fiduciary duty that would have pertained to the responsibility.42

Thus, an operating agreement may provide as follows:

No Duty of Loyalty for Non-Managing Members. The LLC is member-managed by the Managing Member, who shall have the authority to legally bind the LLC. As a result, none of the other Members shall owe any duty of loyalty to the Company or the other Members.

Authorization or Ratification by Members

In the event an operating agreement does not eliminate, restrict or otherwise deal with the duty of loyalty, NJRULLCA provides that "[a]ll of the members... may authorize or ratify, after full disclosure of all material facts, a specific act or transaction that would otherwise violate the duty of loyalty."43 This provision applies to both member-managed and manager-managed LLCs, but it is always the members (not the managers) who have the power of authorization and ratification.44

There is nothing in NJRULLCA that prohibits the members from including a provision in an operating agreement allowing less than all members to authorize or ratify an act or transaction violating the duty of loyalty. Thus, a majority or super-majority of the members, but not including the interested member, may authorize or ratify an act or transaction violating the duty of loyalty. For example:

Authorization or Ratification by Members. A majority of the Members, not including the Member violating the duty of loyalty, may authorize or ratify, after full disclosure of all material facts, a specific act or transaction by a Member that otherwise violates the duty of loyalty.

Defense to Self-Dealing

As noted, the duty of loyalty requires managers and members "to refrain from dealing with the company in the conduct or winding up of the company's activities as or on behalf of a person having an interest adverse to the company."45 Self-dealing sounds bad, but is common in many closely held and family- owned businesses.46 It includes lending money and leasing real property to an LLC.

As noted, the duty of loyalty may be restricted or eliminated in an operating agreement, but if it is not, NJRULLCA provides a defense to a claim that a transaction violates the duty prohibiting self-dealing. If a transaction is fair to the LLC, then there is no violation of the duty of loyalty.47 Examples of transactions that are fair to the LLC include loans to the LLC at market interest rates and leases of real property to the LLC at fair market rents.48

An operating agreement may permit self-dealing (as provided under the prior law) or it may include a provision addressing self-dealing to reflect NJRULLCA, as follows:

Related Transactions. Each Member and the Affiliates of a Member may, without violating the duty of loyalty, loan monies, lease real and personal property, sell goods and provide services to, and transact other business with, the Company, provided that such transactions are on terms commercially fair and reasonable to the Company and no less favorable to the Company than those generally being provided to or available from unrelated third parties.

No Indemnification or Exculpation

NJRULLCA provides both indemnification of members and managers,49 and allows an operating agreement to limit or even eliminate the personal liability of a member or manager for money damages.50 However, a member or manager breaching the duty of loyalty is not entitled to indemnification or exculpation of liability for money damages.51 Yet, as noted, an operating agreement may restrict or entirely eliminate the duty of loyalty.52

Specific Purpose

An LLC may also reduce or even eliminate claims of a breach of the duty of loyalty by including a specific purpose for the LLC in its certificate of formation.53 Alternatively, the operating agreement may include a specific, narrow purpose rather than a general, broad purpose for the LLC. For example:

Purpose. The purpose of the Company shall be to produce, sell and distribute gluten-free cookie products.

Presumably, a member or manager involved in other businesses producing other food products, perhaps even non-gluten-free cookies, would not be violating the duty of loyalty because the LLC and the other businesses would not be competitors.

Conclusion

It can be argued that New Jersey's LLC law has been improved by having the duty of loyalty specifically defined in its statute rather than being determined on a case-by-case basis by the courts under the common law. In any event, such a statutory duty of loyalty is a significant change in New Jersey LLC law. However, the statute provides LLCs with many different methods to deal with the duty of loyalty, including the complete elimination of the duty.

Footnotes

1. P.L. 2013, c.276, §10 (clarifying that the repeal date is March 1, 2014); P.L. 2012, c.50, §95 (repealed).

2. At the writing of this article, New Jersey is one of 10 states and districts enacting RULLCA. The others are California, Idaho, Utah, Wyoming, Nebraska, Iowa, Minnesota, Florida and the District of Columbia. RULLCA legislation has been introduced in other states. See www.uniformlaws.org.

3. N.J.S.A. 42:2C-91(b).

4. See, e.g., Gianfranco A. Pietrafesa, New LLC Law Became Effective on March 1, 215 N.J.L.J. 619 (March 3, 2014).

5. N.J.S.A. 42:2C-39.

6. N.J.S.A. 42:2C-39(b). In the context of an LLC formed for business purposes, the term "activities" means "business." NJRULLCA uses "activities" instead of "business" because an LLC may also be formed for non-profit purposes. See N.J.S.A. 42:2C- 4(b).

7. N.J.S.A. 42:2C-37.

8. If the operating agreement appoints one or more managing members, it may also relieve the remaining non-managing members from the duty of loyalty. See N.J.S.A. 42:2C-11(f), discussed infra at "No Duty for Non- Managing Members."

9. N.J.S.A. 42:2C-39(a), (b) & (i). Note that there is nothing in the statute that precludes an operating agreement from imposing a duty of loyalty on the members of a manager-managed LLC. It may be appropriate to impose such a duty on the members when a controlling majority member appoints or 'elects' the manager of a manager-managed LLC. In such a situation, the majority member controls the LLC through the manager, but is able to take actions that violate the duty of loyalty, such as appropriating business opportunities belonging to the LLC.

10. See N.J.S.A. 42:2C-39(i)(1).

11. The prior statute did, however, address self-dealing, which was permitted unless otherwise provided in an operating agreement. See N.J.S.A. 42:2B-9.

12. See N.J.S.A. 42:2B-66(b) (repealed) ("To the extent that, at law or in equity, a member or manager has duties (including fiduciary duties) and liabilities[,]...the member's or manager's duties and liabilities may be expanded or restricted by provisions in an operating agreement."). The prior statute did, however, include a duty of care. See N.J.S.A. 42:2B-26 & -30 (repealed).

13. See In re Robert Hickman, 2014 Bankr. LEXIS 437, *22 (Bankr. D.N.J. Jan. 31, 2014) ("Absent a duty provided for in the Operating Agreement of the LLC, the NJ LLC Act does not impose a fiduciary duty on LLC members."); In re Anthony P. D'Amore III, 472 B.R. 679, 688 (Bankr.D.N.J. 2012) ("[A]bsent a contrary provision in an LLC's operating agreement, managing members of an LLC owe the traditional fiduciary duties of loyalty and care to non-managing members of that LLC."); Antolino v. Quinn, 2009 N.J. Super. Unpub. LEXIS 1181, *2 (App. Div. May 18, 2009) (There is no basis in law "for imposing such a [fiduciary] duty upon one member of an LLC in relation to others who stand on equal footing."). Obviously, none of this case law is binding on a New Jersey court and should not be considered authoritative.

14. Recently retired Delaware Supreme Court Chief Justice Myron T. Steele believed that managers of Delaware LLCs do not have any fiduciary duties unless expressly imposed by an operating agreement. See Myron T. Steele, Judicial Scrutiny of Fiduciary Duties in Delaware Limited Partnerships and Limited Liability Companies, 32 Del. J. Corp. L. 1 (2007). New Jersey's prior LLC statute was modeled after Delaware's LLC statute.

15. See Lawrence A. Goldman and Alyce C. Halchak, New Jersey Limited Liability Company: Forms and Manual, §7.10 at 7-40 (Data Trace 2014) [hereinafter Goldman]. See also Peter D. Hutcheon, The New Jersey Limited Liability Company Statute: Background and Concepts, 18 Seton Hall. Legis. J. 111, 146-146 (1993) (suggesting that if the facts warrant, a court has the equitable power to impose a duty on managers or members and hold them personally liable).

16. See N.J.S.A. 42:1A-24(b); N.J.S.A. 42:2A-3 (mandating that in the absence of a specific provision, the general partnership law will apply to a limited partnership).

17. See www.uniformlaws.org. The term "uniform law commissioners" is the alternate name for the National Conference of Commissioners on Uniform State Laws (NCCUSL).

18. N.J.S.A. 42:1A-24(a) (emphasis added).

19. See N.J.S.A. 42:2C-39(a) ("A member [and manager]...owes to the company and...the other members, the duties of loyalty and care stated in [N.J.S.A. 42:2C-39(b) and (c)].").

20. NJRULLCA refers to the phrase "any other fiduciary duty" in N.J.S.A. 42:2C-11(c)(4) & (d)(4).

21. Limiting fiduciary duties, as in the partnership act, is known as 'cabining' fiduciary duties. See Daniel S. Kleinberger and Carter G. Bishop, The Next Generation: The Revised Uniform Limited Liability Company Act, 62 The Business Lawyer 615, 522-524 (2007) (explaining why the uniform law commissioners changed their approach from cabining to "un-cabining" fiduciary duties). The late Larry E. Ribstein was not a fan of the un-cabining approach. He thought it "opens a Pandora's Box of potential uncertainty about what other duties members and managers may have" and "explicitly invites courts to create new duties." Larry E. Ribstein, An Analysis of the Revised Uniform Limited Liability Company Act, 3 Va. L. & Bus. Rev. 35, 62-63 (2008) [hereinafter Ribstein]. Other commentators believe the un-cabining approach allows the courts to address novel or egregious conduct. See, e.g., Rutheford B. Campbell Jr., The 'New' Fiduciary Standards Under the Revised Uniform Limited Liability Company Act: More Bottom Bumping from NCCUSL, 61 Me. L. Rev. 28, 48 n.98-99 (2009).

22. See, e.g., AYR Composition, Inc. v. Rosenberg, 261 N.J. Super. 495, 501 (App. Div. 1993). See generally John R. MacKay II, et al., New Jersey Corporations and other Business Entities (3d ed.), §§12.07[5] (officer's duty of loyalty) and 12.08[6] (director's duty of loyalty) (Matthew Bender & Co., 2013).

23. Auriga Capital Corp. v. Gatz Props., LLC, 40 A.3d 839, 849 (Del. Ch. 2012).

24. Gatz Properties, LLC v. Auriga Capital Corp., 59 A.3d 1206, 1218 (Del. 2012). At that time, the Supreme Court was led by Chief Justice Myron T. Steele, who recently retired.

25. Feeley v. NHAOCG, LLC, 62 A.3d 649, 659-653 (Del. Ch. 2012).

26. 6 Del. Code 18–1104.

27. N.J.S.A. 42:2C-11 and -39.

28. N.J.S.A. 42:2C-11(c)(4) (emphasis added). As part of its effort toward the harmonization of business entity acts, NCCUSL has revised the provisions in subsequent drafts of NJRULLCA in an attempt to clarify them. See Harmonization of Business Entity Acts RULLCA Draft dated Jan. 14, 2013, §§ 105(c)(5) & (d)(3), at www.uniformlaws.org.

29. N.J.S.A. 42:2C-11(d)(1) (emphasis added).

30. Under New Jersey's prior LLC law, fiduciary duties, such as the duty of loyalty, could be restricted, but not eliminated. See N.J.S.A 42:2B-66(b). Thus, although the ability to restrict the duty of loyalty under NJRULLCA may be stricter than under the prior LLC law because such restriction must not be manifestly unreasonable, a standard not included in the prior law, NJRULLCA also allows the elimination of the duty, whereas the prior law did not. Compare N.J.S.A. 42:2C-11(d)(1) with N.J.S.A. 42:2B-66(b). Note that Delaware has amended its LLC statute to allow the elimination of fiduciary duties. 6 Del. Code 18-1101(c).

31. For convenience, all examples in this article will be for member-managed LLCs and have been kept simple to illustrate the principle or concept being addressed.

32. N.J.S.A. 42:2C-11(d)(2) (emphasis added).

33. For a more comprehensive provision, see Goldman, supra, Form 7-25 (§5.4.2).

34. See N.J.S.A. 42:2C-11(d)(1) & (2).

35. N.J.S.A. 42:2C-11(h).

36. N.J.S.A. 42:2C-11(h)(2).

37. N.J.S.A. 42:2C-11(h)(1).

38. N.J.S.A. 42:2C-11(h)(2).

39. N.J.S.A. 42:2C-11(i). For a further discussion of the "not manifestly unreasonable standard," see Gianfranco A. Pietrafesa, The Manifestly Unreasonable Standard under RULLCA, Vol. 30 No. 1 NJSBA Business Law Section Newsletter (June 2014).

40. N.J.S.A. 42:2C-11(e).

41. See NCCUSL commentary to RULLCA Section 110(e), available at www.uniformlaws.org.

42. N.J.S.A. 42:2C-11(f). In seminars, the author has described the statutory provision as a 'savings clause' to save acts from violating the duty of loyalty.

43. N.J.S.A. 42:2C-39(f).

44. N.J.S.A. 42:2C-39(i)(3).

45. N.J.S.A. 42:2C-39(b)(2).

46. It is perhaps for this reason that New Jersey's prior LLC law permitted self-dealing unless otherwise provided in an operating agreement. See N.J.S.A. 42:2B-9 (repealed).

47. N.J.S.A. 42:2C-39(g).

48. Note that even if the transaction is fair to the LLC, it may not be fair to the other members. For example, the controlling member may make a loan to the LLC at a market interest rate, but the other members do not have the opportunity to make a similar loan. The operating agreement can address this situation by providing that when the LLC is in need of a loan, all members shall have the opportunity to make a loan to the LLC based on their respective LLC interests.

49. N.J.S.A. 42:2C-38.

50. N.J.S.A. 42:2C-11(g).

51. N.J.S.A. 42:2C-11(g)(1) & -38(c). See also NCCUSL commentary to NJRULLCA Section 110(g) ("The restrictions...apply both to indemnification and exculpation.").

52. One commentator has asked: If the members can eliminate the duty of loyalty, why can't they eliminate liability for a breach of the duty of loyalty? See Ribstein, supra, at 68-69.

53. N.J.S.A. 42:2C-18(c) ("a certificate of formation may also contain statements as to matters other than those required by [N.J.S.A. 42:2C- 18(b)])."

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

    Registration

    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

    Cookies

    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

    Links

    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

    Mail-A-Friend

    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

    Emails

    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .

    Security

    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at enquiries@mondaq.com.

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions