What is the Fiduciary Responsibility of an LLC as Obligor?
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In a LLC, the manager owes to the members of the company the duty of care, loyalty, and disclosure, and the members may owe a similar duty to the manager. Each party is expected to always act in the best interest of the company as a whole and avoid any potential conflicts of interest with the company.
It will be a matter of subjective determination for the court to determine whether there was a breach of fiduciary duty, based on all the facts and circumstances involved. Some of the factors that may be considered include, among others, whether the fiduciary personally benefitted at the expense of the LLC, or failed to disclose information to the LLC's detriment. For example, were funds diverted to personal use? Was there knowledge of financial misdealings or risk factors that weren't disclosed by the fiduciary? In applying the statutory standards for the duty of care owed by a managing member of a LLC, the court will need to determine whether there was gross negligence, reckless conduct, intentional misconduct, or a knowing violation of law. The standards of care are measured against the subjective interpretation of how a "reasonable" person would act in similar circumstances.
An obligor is someone bound to perform an act or deed, such as paying money on a promissory note or contract. It is a party who is contractually or legally, committed or obliged, to providing something to another person. Whether there was a breach of contract will depend on the terms of the contracts involved. An unjustifiable failure to perform all or some part of a contractual duty is a breach of contract. A legal action for breach of contract arises when at least one party's performance does not live up to the terms of the contract and causes the other party to suffer economic damage or other types of measurable injury. A lawsuit for breach of contract is a civil action and the remedies awarded are designed to place the injured party in the position they would be in if not for the breach. Remedies for contractual breaches are not designed to punish the breaching party. The five basic remedies for breach of contract include the following: money damages, restitution, rescission, reformation, and specific performance. A money damage award includes a sum of money that is given as compensation for financial losses caused by a breach of contract. Parties injured by a breach are entitled to the benefit of the bargain they entered, or the net gain that would have accrued but for the breach. The type of breach governs the extent of damages that may be recovered.
I am prohibited from giving a legal opinion, as this service provides information of a general legal nature. I suggest you discuss the matter with your attorney, who can review all the facts and documents involved.