Agency of Members and Managers

  1. Law
  2. Georgia Code
  3. Corporations, Partnerships, and Associations
  4. Limited Liability Companies
  5. Agency; Management; Duties; Liability
  6. Agency of Members and Managers

Checkout our iOS App for a better way to browser and research.

  1. Except as provided in subsection (b) of this Code section, every member is an agent of the limited liability company for the purpose of its business and affairs, and the act of any member, including, but not limited to, the execution in the name of the limited liability company of any instrument for apparently carrying on in the usual way the business and affairs of the limited liability company of which he or she is a member, binds the limited liability company, unless the member so acting has, in fact, no authority to act for the limited liability company in the particular matter, and the person with whom he or she is dealing has knowledge of the fact that the member has no such authority.
  2. If the articles of organization provide that management of the limited liability company is vested in a manager or managers:
    1. No member, acting solely in the capacity as a member, is an agent of the limited liability company; and
    2. Every manager is an agent of the limited liability company for the purpose of its business and affairs, and the act of any manager, including, but not limited to, the execution in the name of the limited liability company of any instrument for apparently carrying on in the usual way the business and affairs of the limited liability company of which he or she is a manager, binds the limited liability company, unless the manager so acting has, in fact, no authority to act for the limited liability company in the particular matter, and the person with whom he or she is dealing has knowledge of the fact that the manager has no such authority.
  3. An act of a manager or a member that is not apparently for the carrying on in the usual way the business or affairs of the limited liability company does not bind the limited liability company unless authorized in accordance with a written operating agreement at the time of the transaction or at any other time.
  4. No act of a manager or member in contravention of a restriction on authority shall bind the limited liability company to persons having knowledge of the restriction.

(Code 1981, §14-11-301, enacted by Ga. L. 1993, p. 123, § 1.)

Law reviews.

- For article, "2008 Annual Review of Case Law Development," see 14 (No. 6) Ga. St. B. J. 28 (2009). For article, "2018 Georgia Corporation and Business Organization Case Law Developments," see 24 Ga. St. B.J. 36 (June 2019).

JUDICIAL DECISIONS

Creditors failed to prove the existence of a technical trust, either by contract or by O.C.G.A. §§ 14-11-301(1),14-11-305(1), or23-2-58, and, as a consequence, could not prove a fiduciary defalcation by the debtors. Thus, any debt arising from the debtors' management of a limited liability company was dischargeable under 11 U.S.C. § 523(a)(4). Tarpon Point, LLC v. Wheelus (In re Wheelus), Bankr. (Bankr. M.D. Ga. Feb. 11, 2008).

Acts of a member obligated limited liability corporation.

- Despite the fact that a limited liability corporation was not liable for acts of a member that were not apparently for the carrying on in the usual way the business or affairs of the corporation, because it was undisputed that the member had the authority to sign the promissory note as a guarantor, and to make draws under the loan, the member had the authority to bind the other guarantor under the note, to disburse the loan proceeds, and to withdraw loaned funds for personal use. Fielbon Dev. Co. v. Colony Bank, 290 Ga. App. 847, 660 S.E.2d 801 (2008).

As there was no statutory provision that permitted a limited liability company to bind its agents for the company's contractual obligations, a noncompetition clause in an asset purchase agreement between the company and a purchaser did not act as a bar to members of the company. Primary Invs., LLC v. Wee Tender Care III, Inc., 323 Ga. App. 196, 746 S.E.2d 823 (2013).

Limited liability company bound if other party unaware of manager's lack of authority to bind.

- Summary judgment in favor of a limited liability company (LLC) in the company's action to enjoin foreclosure of the company's property by lenders was reversed because an issue of fact remained whether the LLC was bound by the actions of the LLC's manager in taking out the loan due to the borrowers' lack of knowledge that the manager lacked authority to take the loan. Under O.C.G.A. § 14-11-301(b)(2) and (d), even if the manager acted beyond the manager's authority, the LLC could still be bound if the borrowers did not know that the manager lacked such authority. Ly v. Jimmy Carter Commons, LLC, 286 Ga. 831, 691 S.E.2d 852 (2010).

Debtor failed to show persons with authority to act.

- Debtor failed to allege any facts from which the court could reasonably conclude that anyone other than the manager and sole owner of an LLC had the power to authorize others to act on behalf of the LLC in negotiating a settlement agreement. Nor did the debtor allege any course of dealings or special circumstances from which the court could reasonably infer that any other defendants, their employees, or their attorneys were acting with apparent authority. Rohrig Invs., LP v. Knuckle P'ship, LLLP (In re Rohrig Invs., LP), 584 Bankr. 382 (Bankr. N.D. Ga. 2018).

Company liable for officers' actions.

- Defendant company was ultimately jointly liable for actions taken by the company's officers who acted in the company's name. Jones Creek Investors, LLC v. Columbia County, F. Supp. 2d (S.D. Ga. Mar. 28, 2013).

Cited in .

RESEARCH REFERENCES

ALR.

- Construction and application of limited liability company acts - issues relating to liability of limited liability company for acts of its members, managers, officers, and agents, 46 A.L.R.6th 1.


Download our app to see the most-to-date content.