¶ 1401
Overview
Scope of the chapter. A Cook Islands limited liability company is managed either by its members or by one or more managers named under the operating agreement. In the usual structure the LLC is wholly owned by the trustee of a Cook Islands international trust and is managed by a licensed trustee company, by a person nominated by the settlor, or, before any claim arises, by the settlor personally. Each of these managers holds power over property that belongs to others, and each is exposed to claims by the LLC, by its members and, where the LLC is insolvent, by its creditors. This chapter examines the duties those managers owe, the extent to which the operating agreement may define or limit them, and the protection a manager may obtain through exculpation, indemnification, advancement of expenses and insurance. It closes with the remedies for breach, the procedure for enforcing them in the Cook Islands, model provisions and a drafting checklist.
Relation to other chapters. The Limited Liability Companies Act 2008, its formation provisions and the Registrar are examined in chapter 12 (see supra ch. 12). The allocation of management between members and managers, the authority of managers and the content of the operating agreement are examined in chapter 13 (see supra ch. 13). The rights of a member's creditors, including the charging order, are examined in chapter 15 (see infra ch. 15), and dissolution and transfer of domicile in chapter 16 (see infra ch. 16). The committee proposal of 2026 to amend the Act, which would add protectors to the operating agreement and would direct members and managers to disregard compelled instructions, is examined in full in chapter 17 (see infra ch. 17). Where a licensed trustee company serves as manager, its regulatory obligations under the Trustee Companies Act 2014 are examined in chapter 4 (see supra ch. 4), and its duties as trustee of the international trust that owns the LLC in chapter 7 (see supra ch. 7).
The Statutory text. The Limited Liability Companies Act 2008 (No. 7) received the assent of the Queen's Representative in June 2008. It has been amended once, by the Limited Liability Companies Amendment Act 2013 (No. 16), which inserted a non-waivable obligation to keep accounts in the form required by a new section 31A, added those accounts to the records kept under section 32, and added a ground of involuntary dissolution. The 2013 Act did not touch the management provisions in sections 26 to 31 examined in this chapter. No consolidated text has been published, and the provisions are quoted here from the Act as printed by the Cook Islands Government in 2008 and the 2013 amending Act. The committee proposal submitted to the Cook Islands government on April 1, 2026 has not been enacted, and every reference in this chapter to a proposed provision describes a proposal and not the law.
Why the subject matters. The duties of an LLC's manager decide three questions that arise in almost every Cook Islands structure. The first is whether a trustee company that manages an LLC owned by a trust it also administers may charge fees, place the LLC's assets with an affiliate or act on the instructions of the settlor without exposing itself to claims. The second is whether the settlor, if he or she serves as manager, owes duties that a foreign court can use to compel the return of assets, and whether the operating agreement can reduce those duties. The third is what protection a manager can count on when it refuses a foreign court's demand and is then sued. The Act answers each question only in part. It states a standard of good faith and care that the operating agreement cannot reduce, says nothing about the duty of loyalty, requires the LLC to indemnify its managers in limited circumstances and contains no provision on exculpation. The rest is left to the general law, which in the Cook Islands is English equity as received in 1840 and developed by the courts of England, New Zealand and the Privy Council (see supra ch. 2).