Code of the District of Columbia

§ 29–801.07. Operating agreement; scope, function, and limitations.

(a) Except as otherwise provided in subsections (b) and (c) of this section, the operating agreement shall govern:

(1) Relations among the members as members and between the members and the limited liability company;

(2) The rights and duties under this chapter of a person in the capacity of manager;

(3) The activities and affairs of the company and the conduct of those activities and affairs; and

(4) The means and conditions for amending the operating agreement.

(b) To the extent the operating agreement does not otherwise provide for a matter described in subsection (a) of this section, this chapter shall govern the matter.

(c) An operating agreement shall not:

(1) Vary a limited liability company’s capacity under § 29-801.05 to sue and be sued in its own name;

(2) Vary the law applicable under § 29-801.06;

(3) Vary the provisions of § 29-802.04;

(4) Subject to subsections (d) through (g) of this section, eliminate the duty of loyalty, the duty of care, or any other fiduciary duty;

(5) Eliminate the contractual obligation of good faith and fair dealing under § 29-804.09(d), but the operating agreement may prescribe the standards, if not manifestly unreasonable, by which the performance of the obligation is to be measured;

(6) Unreasonably restrict the duties and rights stated in § 29-804.10;

(7) Vary the causes of dissolution specified in § 29-807.01(a)(4) and (5);

(8) Vary the requirement to wind up a limited liability company’s activities and affairs as specified in § 29-807.02;

(9) Unreasonably restrict the right of a member to maintain an action under Subchapter 8 of this chapter;

(10) Restrict the right to approve a merger or domestication under § 29-809.10 or Chapter 2 of this title of a member that will have personal liability with respect to a surviving, converted, or domesticated organization;

(11) Except as otherwise provided in § 29-801.08 or 29-801.09(b), restrict the rights under this chapter of a person other than a member or manager.

(12) Vary any requirement, procedure, or other provision of this title pertaining to:

(A) Registered agents; or

(B) The Mayor, including provisions pertaining to records authorized or required to be delivered to the Mayor for filing under this chapter;

(13) Relieve or exonerate a person from liability for conduct involving bad faith, willful or intentional misconduct, or knowing violation of the law; or

(14) Vary the provisions of § 29-808.05, except that the operating agreement may provide that the company may not have a special litigation committee.

(15) [(15)]Vary the power of a person to dissociate under § 29-807.01, except to require that notice of dissociation be in a record.

(d) Subject to subsection (c) of this section, without limiting other terms that may be included in an operating agreement, the following rules apply:

(1) The 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.

(2) 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 chapter 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.

(3) If not manifestly unreasonable, the operating agreement may:

(A) Restrict or eliminate the aspects of the duty of loyalty stated in § 29-804.09;

(B) Identify specific types or categories of activities and affairs that do not violate the duty of loyalty;

(C) Alter the duty of care, but may not authorize willful or intentional misconduct or knowing violation of law; and

(D) Alter or eliminate any other fiduciary duty.

(e) Repealed.

(f) Repealed.

(g) Repealed.

(h) The Superior Court shall decide, as a matter of law, any claim under subsection (c)(5) or (d)(3) of this section that a term of an operating agreement is manifestly unreasonable. The court:

(1) Shall make its determination as of the time the challenged term became part of the operating agreement and by considering only circumstances existing at that time; and

(2) May invalidate the term only if, in light of the purposes and activities and affairs of the limited liability company, it is readily apparent that:

(A) The objective of the term is unreasonable; or

(B) The term is an unreasonable means to achieve the provision’s objective.