Court Ruling Offers New Consideration for LLC Corporate Executives, Directors and Managers | Kerr Russell

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LLC managers have similar duties to LLC members. A breach of these fiduciary duties may result in legal action and personal liability for LLC directors, officers and managers.

Frequently, lawsuits against corporate directors and officers and LLC officers are filed by the corporation in a derivative action brought by a shareholder or LLC member. Recently, however, the Michigan Supreme Court in Murphy v. Inman clarified that proceedings against directors and officers of companies (and by implication, managers of limited liability companies) may, in certain circumstances, be brought directly by a corporate shareholder. The Michigan Supreme Court further clarified that in addition to statutory obligations, corporate directors, officers, and LLC officers must also meet common law fiduciary duties.

This decision may increase the risk of personal liability for corporate directors and officers and LLC managers. By expressly allowing individual shareholders who have suffered damages to sue directors and officers of corporations directly, the Michigan Supreme Court increased the risk that directors, officers and directors of LLCs could be held personally liable for breaches of fiduciary obligations – including common law obligations. .

In light of this recent ruling, corporate directors, officers and LLC managers will want to be sure they are protected. In addition to the obvious practice of acting reasonably and ethically to promote the best interests of the company, directors, officers and managers will want to obtain a contractual promise from the company to indemnify the individual for any personal liability arising of his role for the company. Directors, officers, and managers will also want to insist that the company maintain strong directors’ and officers’ insurance.

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