Section 105 Operating Agreement; Scope, Function, & Limitations

SECTION 105. OPERATING AGREEMENT; SCOPE, FUNCTION, AND LIMITATIONS.

(a) Except as otherwise provided in subsections (c) and (d):

(1) The operating agreement governs:

(A) relations among the members as members and between the members and the limited liability company;

(B) the rights and duties under this act of a person in the capacity of manager;

(D) the means and conditions of amending the agreement.

(2) The operating agreement may contain any provision that is not contrary to law.

(3) In the event of a conflict between a provision of the operating agreement and this act, the provision of the operating agreement governs.

(b) To the extent the operating agreement does not provide for a matter described in subsection (a), this act governs the matter.

(1) vary the law applicable under Section 104;

(2) vary a limited liability company’s capacity under Section 109 to sue and be sued in its own name;

(3) vary any requirement, procedure, or other provision of this act pertaining to:

(A) statutory agents; or

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

(4) vary the provisions of Section 204;

(5) eliminate the contractual obligation of good faith and fair dealing or the duty to refrain from willful or intentional misconduct under Section 409;

(6) limit or eliminate a person’s liability for any violation of the contractual obligation of good faith and fair dealing or conduct involving willful or intentional misconduct;

(7) unreasonably restrict the duties and rights of members and managers under Section 410, but the operating agreement may impose reasonable restrictions on the availability and use of information obtained under that section and may define appropriate remedies, including liquidated damages, for a breach of any reasonable restriction on use;

(8) vary the causes of dissolution specified in Section 701(a)(4)(B) and 701(a)(6);

(9) unreasonably restrict the right of a member to maintain an action under Article 8, except that the operating agreement may require a member maintaining a direct action under Section 801 to plead and prove an actual or threatened injury that is not solely the result of any injury suffered or threatened to be suffered by the company;

(10) vary the provision of Section 805, but the operating agreement may provide that the company may not have a special litigation committee;

(11) vary the required contents of a plan of merger, a plan of interest exchange, a plan of conversion, a plan of domestication, or a plan of division under A.R.S. § 29-2101;

(13) except as otherwise provided in Sections 106 and 107(b), restrict the rights under this act of a person other than a member or manager; or

(14) reduce or eliminate the restrictions on distributions under Section 405(a).

(d) Subject to subsection (c)(5) and (c)(6), without limiting other terms that may be included in an operating agreement, the following rules apply:

(1) To the extent that, at law or in equity, a member or manager or other person has duties, including the duty of care, duty of loyalty, and any other fiduciary duty, to a limited liability company or to another member or manager or to another person that is a party to or is otherwise bound by an operating agreement, the member’s, manager’s, or other person’s duties may be expanded, limited, or eliminated by the operating agreement.

(2) An operating agreement may provide for the limitation or elimination of any or all liabilities for breach of the operating agreement or breach of duties, including the duty of care, duty of loyalty, and any other fiduciary duty, as expanded, limited, or eliminated in the operating agreement, of a member, manager, or other person to a company or to another member, manager, or another person who is a party to or is otherwise bound by the operating agreement.

(3) An operating agreement may specify a method by which a specific act, omission, or transaction, or a specific category of acts, omissions, or transactions, that would otherwise violate a duty, including the duty of care, duty of loyalty, and any other fiduciary duty, as expanded, limited, or eliminated in the operating agreement, may be authorized or ratified. A general provision in an operating agreement that provides for management by one or more members or managers, without more, is not sufficient to specify a method for authorization or ratification under this paragraph.

(4) An operating agreement may specify a method by which a member, manager, or other person may be reimbursed, indemnified, or held harmless, or by which the liability of a member, manager, or other person may be limited or eliminated, for a specific act, omission, or transaction, or a specific category of acts, omissions, or transactions, that would otherwise violate a duty, including the duty of care, duty of loyalty, and any other fiduciary duty, as expanded, limited, or eliminated in the operating agreement. A general provision in an operating agreement that provides for management by one or more members or managers, without more, is not sufficient to specify a method for reimbursing, indemnifying, or holding harmless a person or limiting or eliminating a person’s liability under this paragraph.

(e) Subject to the limitations of subsection (c)(5) and (c)(6), an operating agreement may define some or all of the fiduciary duties of a member, manager, or other person that is a party to or is otherwise bound by an operating agreement to be the same as the fiduciary duties of a director, officer, or shareholder of a corporation formed under the laws of this state, in which case, unless the operating agreement provides otherwise, all laws of evidence, evidentiary presumptions, and other laws that apply to the fiduciary duties of a director, officer, or shareholder of a corporation formed under the laws of this state shall apply to such duties.