LLC Reimbursement, Indemnification, Advancement, and Insurance Requirements in Rhode Island
At a glance
| Governing LLC law and scope | Current R.I. Gen. Laws ch. 7-16: §§ 7-16-17–18, -58 address manager liability and derivative expenses; 2026 ch. 246 replaces it January 1, 2028 |
|---|---|
| Covered people and capacities | Current §§ 7-16-17–18 concern managers; member-managed members are deemed managers (§ 7-16-14(1)); § 7-16-58 concerns derivative plaintiff/defendants; no current general former-status route in those sections |
| Company-payment reimbursement | No general company-payment reimbursement rule in surveyed current §§ 7-16-17–18, -58; future § 7-16.1-408(a) adds a qualifying member/manager rule in 2028 |
| Indemnification and conduct limits | Current § 7-16-17(d) protects compliant managers from liability; § 7-16-18 permits limited exculpation with exceptions, not company-paid indemnity; future § 7-16.1-408(b) adds conditional indemnity |
| Expense advancement and repayment | Current § 7-16-58 permits final derivative-suit expense awards, not a general interim advance; future § 7-16.1-408(c) permits reasonable advances on repayment promise |
| Insurance purchase authority | Current § 7-16-3.3(a) requires available liability insurance for professional-services LLCs; future § 7-16.1-408(d) will authorize member/manager liability insurance in 2028 |
| Approval and court procedure | Current § 7-16-58 gives derivative expense awards to court; § 7-16-19 defaults multi-manager action to majority; no general indemnity approval route in surveyed current sections |
| Agreement control and survival | Current articles/agreement may limit manager damages only within § 7-16-18(a)–(b) exceptions; future § 7-16.1-408(b)–(d) expressly covers former status and insurance |
| What the statute does not decide | Manager conduct, any contract or policy, derivative-suit result, and 2028 transition require case-specific review |
Without a general current-law indemnity provision
Current R.I. Gen. Laws § 7-16-17(a) states managers' conduct duties, and § 7-16-17(d) protects a manager from liability when those duties are met. Section 7-16-14(1) treats members as managers for chapter purposes when members manage the company. Those provisions concern personal liability; they do not direct the LLC to pay the manager's defense or claim. § 7-16-18(a) lets articles or the operating agreement limit certain manager damages, while § 7-16-18(b)(1)–(2) preserves liability for loyalty breaches, bad faith, intentional misconduct and knowing legal violations. That is exculpation, not indemnity.
The separate § 7-16-58(a) allows a court to award a successful derivative plaintiff reasonable expenses, including legal fees, and § 7-16-58(b) can shift defense expenses to a plaintiff whose action lacked reasonable cause after final judgment. Neither is a general interim defense-cost advance. § 7-16-19 supplies the ordinary majority vote for multiple managers unless the chapter or company documents say otherwise. Section 7-16-3.3(a) requires reasonably available liability insurance for a professional-services LLC; that specialized requirement does not define an ordinary LLC's indemnity-insurance policy.
What trips people up
The current official Chapter 7-16 index has no general reimbursement or indemnity section; its expense provision is the derivative-action rule above. The enacted replacement is not yet effective. 2026 R.I. Pub. Laws ch. 246, § 4 states: “Section 2 and 3 of this act shall take effect on January 1, 2028.” That is when the new LLC Chapter 7-16.1 begins. Its § 7-16.1-408(a)–(d) adds company-payment reimbursement, capacity-linked indemnity, an undertaking-based defense-expense advance and insurance power. In particular, future § 7-16.1-408(c) conditions reasonable claim-expense advances on a promise to repay if the person is ultimately ineligible for indemnity. Those future rules are not the current-law answer.
Common questions
Does a successful derivative suit automatically repay the plaintiff's legal fees? Section 7-16-58(a) says the court “may” award reasonable expenses after the stated successful result.
Does professional-services insurance satisfy a manager's personal claim? Section 7-16-3.3(a) concerns coverage for specified professional negligence, wrongful acts or misconduct. Actual coverage follows the policy's terms and the facts.
Statutes and sources
- R.I. Gen. Laws § 7-16-3.3(a): a professional-services LLC “shall carry, if reasonably available, liability insurance” of the stated kind. Official current statute, accessed 2026-09-23.
- R.I. Gen. Laws §§ 7-16-14(1), 7-16-17(a), (d), 7-16-18(a)–(b), 7-16-19: current member-management, manager-duty, liability and default decision provisions. Official current chapter index and cited section pages, accessed 2026-09-23.
- R.I. Gen. Laws § 7-16-58(a)–(b): the court “may award the plaintiff reasonable expenses, including legal fees” after the stated derivative outcome. Official current statute, accessed 2026-09-23.
- 2026 R.I. Pub. Laws ch. 246, § 7-16.1-408 and § 4: the enacted replacement includes “Reimbursement, Indemnification, Advancement, Insurance” and takes effect January 1, 2028. Official enacted act, accessed 2026-09-23.
Source links
Every statute quoted above, linked, with the date we checked it.
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