(1) As used in this section, the following terms and definitions apply:(a) A member or manager is “indirectly” a party to a transaction if that member or manager has a material financial interest in or is a director, officer, member, manager, or partner of a person, other than the limited liability company, who is a party to the transaction.
(b) A member or manager has an “indirect material financial interest” if a family member has a material financial interest in the transaction, other than having an indirect interest as a member or manager of the limited liability company, or if the transaction is with an entity, other than the limited liability company, which has a material financial interest in the transaction and controls, or is controlled by, the member or manager or another person specified in this subsection.
(c) “Fair to the limited liability company” means that the transaction, as a whole, is beneficial to the limited liability company and its members, taking into appropriate account whether it is:1. Fair in terms of the member’s or manager’s dealings with the limited liability company in connection with that transaction; and
2. Comparable to what might have been obtainable in an arm’s length transaction.
(d) “Family member” includes any of the following:1. The member’s or manager’s spouse.
2. A child, stepchild, parent, stepparent, grandparent, sibling, step sibling, or half sibling of the member or manager or the member’s or manager’s spouse.
(e) “Manager’s conflict of interest transaction” means a transaction between a limited liability company and one or more of its managers, or another entity in which one or more of the limited liability company’s managers is directly or indirectly a party to the transaction, other than being an indirect party as a result of being a member of the limited liability company, and has a direct or indirect material financial interest or other material interest.
(f) “Material financial interest” or “other material interest” means a financial or other interest in the transaction that would reasonably be expected to impair the objectivity of the judgment of the member or manager when participating in the action on the authorization of the transaction.
(g) “Member’s conflict of interest transaction” means a transaction between a limited liability company and one or more of its members, or another entity in which one or more of the limited liability company’s members is directly or indirectly a party to the transaction, other than being an indirect party as a result of being a member of the limited liability company, and has a direct or indirect material financial interest or other material interest.
(2) If the requirements of this section have been satisfied, a member’s conflict of interest transaction or a manager’s conflict of interest transaction between a limited liability company and one or more of its members or managers, or another entity in which one or more of the limited liability company’s members or managers have a financial or other interest, is not void or voidable because of that relationship or interest; because the members or managers are present at the meeting of the members or managers at which the transaction was authorized, approved, effectuated, or ratified; or because the votes of the members or managers are counted for such purpose.
(3) If a member’s conflict of interest transaction or a manager’s conflict of interest transaction is fair to the limited liability company at the time it is authorized, approved, effectuated, or ratified, the fact that a member or manager of the limited liability company is directly or indirectly a party to the transaction, other than being an indirect party as a result of being a member or manager of the limited liability company, or has a direct or indirect material financial interest or other interest in the transaction, other than having an indirect interest as a result of being a member or manager of the limited liability company, is not grounds for equitable relief and does not give rise to an award of damages or other sanctions.
(4)(a) In a proceeding challenging the validity of a member’s conflict of interest transaction or a manager’s conflict of interest transaction or in a proceeding seeking equitable relief, award of damages, or other sanctions with respect to a member’s conflict of interest transaction or a manager’s conflict of interest transaction, the person challenging the validity or seeking equitable relief, award of damages, or other sanctions has the burden of proving the lack of fairness of the transaction if:1. In a manager-managed limited liability company, the material facts of the transaction and the member’s or manager’s interest in the transaction were disclosed or known to the managers or a committee of managers who voted upon the transaction and the transaction was authorized, approved, or ratified by a majority of the disinterested managers even if the disinterested managers constitute less than a quorum; however, the transaction cannot be authorized, approved, or ratified under this subsection solely by a single manager; and
2. In a member-managed limited liability company, or a manager-managed limited liability company in which the managers have failed to or cannot act under subparagraph 1., the material facts of the transaction and the member’s or manager’s interest in the transaction were disclosed or known to the members who voted upon such transaction and the transaction was authorized, approved, or ratified by a majority-in-interest of the disinterested members even if the disinterested members constitute less than a quorum; however, the transaction cannot be authorized, approved, or ratified under this subsection solely by a single member; or
(b) If neither of the conditions provided in paragraph (a) has been satisfied, the person defending or asserting the validity of a member’s conflict of interest transaction or a manager’s conflict of interest transaction has the burden of proving its fairness in a proceeding challenging the validity of the transaction.
(5) The presence of or a vote cast by a manager or member with an interest in the transaction does not affect the validity of an action taken under paragraph (4)(a) if the transaction is otherwise authorized, approved, or ratified as provided in subsection (4), but the presence or vote of the manager or member may be counted for purposes of determining whether the transaction is approved under other sections of this chapter.
(6) In addition to other grounds for challenge, a party challenging the validity of the transaction is not precluded from asserting and proving that a particular member or manager was not disinterested on grounds of financial or other interest for purposes of the vote on, consent to, or approval of the transaction.
