United States: It May Be Time To Tune Up Your Connecticut LLC Operating Agreement

As Day Pitney reported a year ago, the new Connecticut Uniform Limited Liability Company Act (New Act) is poised to replace the existing Connecticut Limited Liability Company Act (Old Act) effective July 1. Last year, we highlighted some of the changes made in the New Act and encouraged clients to review their limited liability company operating agreements (LLC agreements) with us to determine whether any modifications were warranted. In this Alert, we consider some of the issues that may arise in the course of such a review.


The New Act was written to minimize the number of changes an existing Connecticut LLC might have to make to an existing LLC agreement. The discussion below points out what we believe are some common drafting issues. Provisions can vary significantly among operating agreements, so LLC managers and members are advised to consult with counsel.

New Terminology

The New Act changes some of the defined terms for LLCs. For example, the LLC's "articles of organization" will now be called the "certificate of organization." By themselves, such changes in terminology do not warrant an amendment to an operating agreement. In fact, the New Act accounts for this by providing that for an LLC formed prior to July 1, its "articles of organization" are deemed to be its "certificate of organization."[1]

Beware of New Gap-Fillers

The New Act does not automatically account for all such changes, however. In areas where an operating agreement is silent, the New Act provides default provisions that will act as "gap-fillers." The question for existing LLCs is whether such filler provisions will be consistent with the managers' and members' expectations where New Act provisions diverge from those of the Old Act. For example, under the Old Act, if an operating agreement was silent on the vote of members required to admit a new member, the vote of a majority in interest of current members is required. Under the New Act, the default vote is unanimous consent of the members. Consequently, if the members want to retain the majority-in-interest vote, the operating agreement will need to be amended.

Another example is the vote required to amend the operating agreement. The Old Act requires the approval of two-thirds in interest of the members for an amendment, if the operating agreement is silent, whereas the New Act requires unanimous member approval.

An important area of change is the default rules on standards of conduct for members and managers. The New Act spells out the fiduciary duties of loyalty and care owed by a member and a manager to the LLC and its other members.[2] However, the New Act also provides that so long as it is not "manifestly unreasonable" an operating agreement may (i) alter or eliminate certain aspects of the duty of loyalty, (ii) identify specific behaviors that do not violate the duty of loyalty, (iii) alter but not eliminate the duty of care and (iv) alter or eliminate any other fiduciary duty.[3] The ultimate arbiter of what is "manifestly unreasonable" is the Connecticut courts.[4] Members and managers of Connecticut LLCs should consider with counsel the merits of modifying or eliminating these fiduciary duties to the maximum extent permitted.

The gap-filler provision for making distributions also makes an important change. Unless the operating agreement provides otherwise, the New Act requires that distributions be made to the members based on their capital contributions, rather than percentage ownership. This could be significant if, for example, one member receives an LLC interest as "sweat equity" and another contributes cash or property.[5]

Prohibited Terms Under the New Act

In general, the New Act gives a great deal of latitude to an LLC to modify its operating agreement. However, the New Act specifies 14 situations in which the operating agreement is prohibited from overriding the statutes or limited in its ability to do so.[6] An important area is the liability for breach of fiduciary duties by members and managers. One of the New Act's prohibitions is that an operating agreement may not relieve or exonerate a person from liability for conduct involving bad faith, willful or intentional misconduct, or knowing violation of the law.[7] A similar prohibition found in many operating agreements limits such liability excepting only "fraud, gross negligence or willful misconduct." To the extent the statutory prohibition and an existing prohibition in an operating agreement are inconsistent, the members should consider harmonizing these terms.

The right of members to access and inspect LLC records and information is another area controlled by the statute. Under the New Act, an operating agreement may not impose unreasonable restrictions on information rights, but it may impose reasonable restrictions on the availability and use of such information (such as requiring confidentiality agreements) and may define certain remedies for breaches of reasonable restrictions on use.[8]

Modifying Provisions of the New Act

Some options exist for the operating agreement to vary the gap-fillers in the New Act that result from terms entirely new to Connecticut LLC statutes by virtue of the New Act. Among these are the new provisions that impose solvency tests on an LLC's ability to make distributions.[9] Taking advantage of specific provisions in the New Act allows an LLC to apply more liberal solvency measures.[10]

Superfluous Provisions From the Old Act

Although most of the provisions of the Old Act have analogs in the New Act, the Old Act contains certain requirements for LLC operating agreements that no longer apply under the New Act. A prime example of this is Section 34-144 of the Old Act, which requires an LLC to maintain certain specified records. Those specific requirements no longer exist under the New Act. An LLC may well want to maintain the records specified in the Old Act in order to facilitate compliance with the new record inspection provisions described above, but the change in law makes this a provision worth reviewing.

No Operating Agreement?

A Connecticut LLC that has never had an operating agreement does not necessarily need one now, but the LLC will now be subject to the default provisions of the New Act, which can be different in some significant respects.

The New Act continues the "freedom of contract" provision in the Old Act, stating, "It is the policy of the act to give maximum effect to the principle of freedom of contract and to enforceability of LLC agreements."[11] This important provision will allow LLCs to structure their operating agreements in the manner best suited to grow their business, subject to the prohibitions on certain provisions described above.

Our attorneys are prepared to review existing LLC operating agreements and advise on any issues raised by application of the New Act as well as provide recommendations for potential modifications.


[1] Conn. Gen. Stat. § 34-243i(b)

[2] Conn. Gen. Stat. § 34-255h

[3] Conn. Gen. Stat. § 34-243d(d)(3)

[4] Conn. Gen. Stat. § 34-243d(e)

[5] Conn. Gen. Stat. § 34-255c(a)

[6] Conn. Gen. Stat. § 34-243d(c)

[7] Conn. Gen. Stat. § 34-243d(c)(7)

[8] Conn. Gen. Stat. § 34-243d(c)(8)

[9] Conn. Gen. Stat. § 34-255d(a)

[10] Conn. Gen. Stat. § 34-243d(d)(1)(B)

[11] Conn. Gen. Stat. § 34-283d(a)

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

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.


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.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

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.


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.


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.


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.


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.