Management

Tenn. Code Ann. tit. 48, ch. 249, pt. 4

in effect

Tenn. Code Ann. § 48-249-401 Management of LLC.

48-249-401. Management of LLC. (a) Member-managed LLC. In a member-managed LLC: (1) Each member has equal rights in the management and conduct of the LLC's business; and (2) Except as otherwise provided in subsection (e) or (f), any matter relating to the business of the LLC shall be decided by a majority vote of the members. (b) Manager-managed LLC. In a manager-managed LLC: (1) Each manager has equal rights in the management and conduct of the LLC's business; (2) Except as otherwise provided in subsection (e) or (f), any matter relating to the business of the LLC shall be exclusively decided by the manager, or, if there is more than one (1) manager, by a majority vote of the managers; and (3) A manager: (A) Shall be designated, appointed, elected, removed, or replaced by a majority vote of the members; (B) Holds office until a successor has been designated, appointed or elected and qualified, unless the manager sooner resigns or is removed; and (C) Need not be a member of the LLC. (c) Director-managed LLC. In a director-managed LLC: (1) All LLC powers shall be exercised under the authority of, and the business and affairs of the LLC shall be managed under the direction of, its board of directors; (2) Except as otherwise provided in subsection (e) or (f), any matter relating to the business of the LLC shall be exclusively decided by the director, or, if there is more than one (1) director, by a majority vote of the directors; and (3) A director: (A) Shall be designated, appointed, elected, removed, or replaced by a majority vote of the members; (B) Holds office until a successor has been designated, appointed or elected and qualified, unless the director sooner resigns or is removed; and (C) Need not be a member of the LLC. (d) President of director-managed LLC. A director-managed LLC shall have a president who is appointed or elected by a majority vote of the directors and is authorized to act as an agent of the LLC under § 48-249-402(d). (e) Delegation. The LLC documents or the members, managers or directors of an LLC, by a resolution or other writing, may delegate rights and powers to manage and control the business and affairs of the LLC to one (1) or more officers, agents or employees, who need not be members of the LLC; provided, that such delegation is reasonable under the circumstances and made in good faith. (f) When unanimous consent required. The only matters of an LLC's business requiring the consent of all of the members are: (1) The amendment of an LLC's operating agreement, if the LLC documents do not provide for the method by which the operating agreement may be amended, as provided in § 48-249-204(c); (2) Any amendment of an LLC's articles of organization that requires approval of all the members under § 48-249-204(c); (3) The compromise of an obligation to make a contribution under § 48-249-302(a); (4) The compromise, as among members, of an obligation of a member to make a contribution or return money or other property paid or distributed in violation of this chapter; (5) The admission of a new member, including without limitation by transfer of any of a member's governance rights to any person not a member, as provided in § 48-249-508(b)(3); (6) The use of the LLC's property to redeem an interest subject to a charging order; and (7) An election by an LLC formed prior to January 1, 2006, to be governed by this chapter, as provided in § 48-249-1002(b). (g) Proxies. A member or manager may appoint a proxy to vote or otherwise act for the member or manager, by signing an appointment instrument. Acts 2005, ch. 286, § 1; 2006, ch. 620, § 28.

Tenn. Code Ann. § 48-249-402 Agency of members, managers, directors and officers.

48-249-402. Agency of members, managers, directors and officers. (a) Member-managed LLC. Subject to subsections (d) and (e), in a member-managed LLC: (1) Each member is an agent of the LLC for the purpose of its business, and an act of a member, including the signing of an instrument in the LLC's name, that is apparently for carrying on in the ordinary course the LLC's business, or business of the kind carried on by the LLC, binds the LLC, unless the member had no authority to act for the LLC in the particular matter, and the person with whom the member was dealing knew or had notice that the member lacked authority; and (2) An act of a member that is not apparently for carrying on in the ordinary course the LLC's business, or business of the kind carried on by the LLC, binds the LLC only if the act was authorized by the other members. (b) Manager-managed LLC. Subject to subsections (d) and (e), in a manager-managed LLC: (1) A member is not an agent of the LLC for the purpose of its business solely by reason of being a member. Each manager is an agent of the LLC for the purpose of its business, and an act of a manager, including the signing of an instrument in the LLC's name, that is apparently for carrying on in the ordinary course the LLC's business, or business of the kind carried on by the LLC, binds the LLC, unless the manager had no authority to act for the LLC in the particular matter, and the person with whom the manager was dealing knew or had notice that the manager lacked authority; and (2) An act of a manager that is not apparently for carrying on in the ordinary course the LLC's business, or business of the kind carried on by the LLC, binds the LLC only if the act was authorized under § 48-249-401. (c) Director-managed LLC. Subject to subsections (d) and (e), in a director-managed LLC, no member or director is an agent of the LLC for the purpose of its business solely by reason of being a member or a director. The president and any other authorized officers of a director-managed LLC shall be agents of the LLC, as described in subsection (d). (d) Authority of officers. In a director-managed LLC, or any other LLC with a president, the president is an agent of the LLC for the purpose of its business, and an act of the president, including the signing of an instrument in the LLC's name, that is apparently for carrying on in the ordinary course the LLC's business, or business of the kind carried on by the LLC binds the LLC, unless the president had no authority to act for the LLC in the particular matter, and the person with whom the president was dealing knew or had notice that the president lacked authority. If, under § 48-249-401(e), any other officer of the LLC is authorized by the LLC documents or by the members, managers or directors, as applicable, of an LLC, by a resolution or other writing, then the authorized officer is an agent of the LLC for the purpose of its business, and an act of the authorized officer, including the signing of an instrument in the LLC's name, that is apparently for carrying on in the ordinary course the LLC's business, or business of the kind carried on by the LLC, binds the LLC. (e) Real property authority. The articles may contain a grant of authority to one (1) or more members, managers, directors or officers to execute instruments for the transfer of real property, and any restrictions and conditions with respect to such authority. In the event the articles name one (1) or more persons who are granted authority to execute instruments for the transfer of real property with any restrictions and conditions with respect to such authority so listed, such grant shall be conclusive in favor of a person who gives value, unless the person knew or had notice that such grant of authority had been rescinded by the LLC. However, such designation, unless it expressly states that it is exclusive, shall not override subsection (a), (b), (c) or (d). (f) Knowledge; notice. For purposes of this section: (1) A person knows a fact if the person has actual knowledge of it; (2) A person has notice of a fact, if: (A) The person knows the fact; (B) The person has received a notification of the fact; (C) The person has reason to know the fact exists from all of the facts known to the person at the time in question; or (D) The fact is contained in the articles of organization; (3) A person notifies or gives a notification of a fact to another, by taking steps reasonably required to inform the other person in ordinary course, whether or not the other person knows the fact; (4) A person receives a notification of a fact when the notification: (A) Comes to the person's attention; or (B) Is duly delivered at the person's place of business, or at any other place held out by the person as a place for receiving communications; and (5) An entity knows, has notice, or receives a notification of a fact for purposes of a particular transaction, when the individual conducting the transaction for the entity knows, has notice or receives a notification of the fact, or, in any event, when the fact would have been brought to the individual's attention had the entity exercised reasonable diligence. An entity exercises reasonable diligence if it maintains reasonable routines for communicating significant information to the individual conducting the transaction for the entity, and there is reasonable compliance with the routines. Reasonable diligence does not require an individual acting for the entity to communicate information unless the communication is part of the individual's regular duties, or the individual has reason to know of the transaction and that the transaction would be materially affected by the information. Acts 2005, ch. 286, § 1.

Tenn. Code Ann. § 48-249-403 General standards of conduct for members, managers, directors and officers.

48-249-403. General standards of conduct for members, managers, directors and officers. (a) Member-managed LLC. The only fiduciary duties a member owes to a member-managed LLC and the LLC's other members and holders are the duty of loyalty and the duty of care imposed by subsections (b) and (c). A holder of financial rights owes no duties to the LLC, or to the other members or holders, solely by reason of being a holder of financial rights. (b) Duty of loyalty. A member's duty of loyalty to a member-managed LLC and the LLC's other members and holders of financial rights is limited to the following: (1) To account to the LLC and to hold as trustee for it any property, profit or benefit derived by the member in the conduct or winding up of the LLC's business, or derived from a use by the member of the LLC's property, including the appropriation of any opportunity of the LLC; (2) Subject to § 48-249-404, to refrain from dealing with the LLC in the conduct or winding up of the LLC's business as, or on behalf of, a person having an interest adverse to the LLC; and (3) To refrain from competing with the LLC in the conduct of the LLC's business before the termination of the LLC. (c) Duty of care. A member's duty of care to a member-managed LLC, and the LLC's other members and holders of financial rights in the conduct of and winding up of the LLC's business, is limited to refraining from engaging in grossly negligent or reckless conduct, intentional misconduct or a knowing violation of law. (d) Good faith and fair dealing. A member shall discharge the member's duties to a member-managed LLC and its other members and holders of financial rights under this chapter or under the LLC documents, and shall exercise any rights with respect to the LLC consistently with the obligation of good faith and fair dealing. (e) Furtherance of member's own interest. A member of a member-managed LLC does not violate a duty or obligation under this chapter or under the LLC documents, merely because the member's conduct also furthers the member's own interest. (f) Dealings with LLC. A member of a member-managed LLC may lend money to and transact other business with the LLC. As to each loan or transaction, the rights and obligations of the member are the same as those of a person who is not a member, subject to other applicable law. (g) Representative of surviving member. This section applies to a person winding up the LLC's business as the personal representative of the last surviving member, as if the person were a member. (h) Manager-managed LLC. In a manager-managed LLC: (1) A member owes no duties to the LLC, or to the other members or holders of financial rights, solely by reason of being a member; (2) A manager is held to the same standards of conduct prescribed for members in subsections (b)-(f); (3) A member that, under the LLC documents, exercises some or all of the rights of a manager in the management and conduct of the LLC's business is held to the standards of conduct prescribed for a member in subsections (b)-(f) to the extent that the member exercises the managerial authority vested in a manager by this chapter; and (4) A manager is relieved of liability imposed by law for violation of the standards prescribed by subsections (b)-(f) to the extent of the managerial authority delegated to the members by the LLC documents. (i) Director-managed LLC. In a director-managed LLC: (1) A member owes no duties to the LLC, or to the other members or holders of financial rights, solely by reason of being a member; (2) A member that, under the LLC documents, exercises some or all of the rights of a director in the management and conduct of the LLC's business is held to the standards of conduct prescribed for a director in this subsection (i), to the extent that the member exercises the managerial authority vested in a director by this chapter; (3) A director is relieved of liability imposed by law for violation of the standards prescribed by this subsection (i), to the extent of the managerial authority of the director delegated to the members by the LLC documents; and (4) A director shall discharge all duties as a director, including duties as a member of a committee of the board of directors of the LLC: (A) In good faith; (B) With the care an ordinarily prudent person in a like position would exercise under similar circumstances; and (C) In a manner the director reasonably believes to be in the best interests of the LLC. (j) Officers. An officer of an LLC shall discharge all duties as an officer: (1) In good faith; (2) With the care an ordinarily prudent person in a like position would exercise under similar circumstances; and (3) In a manner the officer reasonably believes to be in the best interests of the LLC. (k) Reliance on others. In discharging the duties described in this section, a member, manager, director or officer is entitled to rely on information, opinions, reports or statements, including financial statements and other financial data, if prepared or presented by: (1) One (1) or more officers or employees of the LLC whom the member, manager, director or officer reasonably believes to be reliable and competent in the matters presented; (2) Legal counsel, public accountants or other persons as to matters the member, manager, director or officer reasonably believes are within the person's professional or expert competence; or (3) In the case of a director only, a committee of the board of directors of which the director is not a member, if the director reasonably believes the committee merits confidence. (l) Unwarranted reliance. A member, manager, director or officer is not acting in good faith, if the member, manager, director or officer has knowledge concerning the matter in question that makes reliance otherwise permitted by subsection (k) unwarranted. (m) Limitation on liability. A member, manager, director or officer is not liable for any action taken as a member, manager, director or officer, or any failure to take any action, if the member, manager, director or officer performs its duties in compliance with this section. (n) Effect of delegation. Any officer, agent or employee who exercises some or all of the rights of a member, manager, or director, pursuant to a delegation of rights and power under § 48-249-401(e) is held to the same standards of conduct set forth in this section, for members, managers or directors, as applicable, to the extent that such officer, agent or employee exercises the delegated rights and powers. A member, manager or director is relieved of liability imposed by law for the standards prescribed in this section to the extent that such person's managerial authority is vested in an officer, agent or employee, pursuant to a delegation of rights and power under § 48-249-401(e). Acts 2005, ch. 286, § 1.

Tenn. Code Ann. § 48-249-404 Conflict of interest transactions.

48-249-404. Conflict of interest transactions. (a) Definition. A conflict of interest transaction is a transaction with the LLC in which a member, manager, director or officer, as applicable, of the LLC has a direct or indirect interest. A conflict of interest transaction is not void and is not voidable by the LLC, and does not violate the duty of loyalty in § 48-249-403(b)(2), solely because of the interest of a member, manager, director or officer in the transaction, if any one (1) of the following is true: (1) The material facts of the transaction and the interest of the member, manager, director or officer, as applicable, were disclosed or known to the managers or board of directors, as applicable, and the managers or board of directors, as applicable, authorized, approved or ratified the transaction; (2) The material facts of the transaction and the interest of the member, manager, director or officer, as applicable, were disclosed or known either to: (A) The members entitled to vote and they authorized, approved or ratified the transaction; or (B) All the members and all the members authorized, approved or ratified the transaction, even if one (1) or more, or all, the members have a conflict of interest; (3) The transaction was fair to the LLC; or (4) The transaction was of such a nature that the conflict of interest is waived by the LLC documents. Such waiver shall be upheld, unless manifestly unreasonable under the circumstances. (b) Indirect interest. For purposes of this section, a member, manager, director or officer of the LLC has an indirect interest in a transaction, if, but not only if: (1) Another entity in which the member, manager, director or officer has a material financial interest, or in which the member, manager, director or officer, as applicable, is a general partner, is a party to the transaction; or (2) Another entity for which the member, manager, director, or officer is a member, governor, director, manager, officer or trustee is a party to the transaction, and the transaction is, or should be, considered by the members, managers or directors, as applicable, of the LLC. (c) Approval by managers or directors. For purposes of subdivision (a)(1), a conflict of interest transaction is authorized, approved or ratified, if it receives the affirmative majority vote of the managers or of the directors on the board of directors, as applicable, who have no direct or indirect interest in the transaction, and a transaction may be authorized, approved or ratified under this section by a single manager or director, as applicable. If a majority of the managers or the directors, as applicable, who have no direct or indirect interest in the transaction vote to authorize, approve or ratify the transaction, a quorum is present for the purpose of taking action under this section. The presence of, or a vote cast by, a manager or director, as applicable, with a direct or indirect interest in the transaction, does not affect the validity of any action taken under subdivision (a)(1), if the transaction is otherwise authorized, approved or ratified as provided in that subdivision (a)(1). (d) Approval by members. For purposes of subdivision (a)(2)(A), a conflict of interest transaction is authorized, approved or ratified, if it receives a majority vote of the membership interests entitled to be counted under this subsection (d). Membership interests owned by or voted under the control of a member, director or manager who has a direct or indirect interest in the transaction, and membership interests owned by or voted under the control of an entity described in subdivision (b)(1), may not be counted in a vote of members to determine whether to authorize, approve or ratify a conflict of interest transaction under subdivision (a)(2)(A). The vote of those membership interests, however, shall be counted in determining whether the transaction is approved under other provisions of this chapter. (e) Approval by sole member of single-member LLC. For purposes of subdivision (a)(2)(B), a conflict of interest transaction may be authorized, approved or ratified by the sole member of a single-member LLC. Acts 2005, ch. 286, § 1.

Tenn. Code Ann. § 48-249-405 Voting and meetings.

48-249-405. Voting and meetings. (a) Voting power. Each member, manager or director, as applicable, of an LLC shall have equal voting power per capita with each other member, manager or director. (b) Procedures. The LLC documents may set forth provisions relating to notice of the time, place or purpose of any meeting at which any matter is to be voted on, consented to or approved by any members, managers or directors, as applicable, waiver of any such notice, action by consent without a meeting, the establishment of a record date, quorum requirements, voting in person or by proxy, in the case of members or managers, or any other matter with respect to the exercise of any such right to vote. (c) Action on written consent. (1) On any matter that, under this chapter or under the LLC documents, is to be voted on, consented to or approved by members, managers or directors, as applicable, the members, managers or directors, as applicable, may take such action without a meeting, without prior notice and without a vote, if consent or consents in writing, setting forth the action so taken is signed: (A) In the case of the members or managers, by the members or managers, as applicable, having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all members or managers, as applicable, entitled to vote on the matter were present and voted; or (B) In the case of the directors, by all directors entitled to vote on the matter. (2) A consent transmitted by electronic transmission by a member, manager or director, or by a person or persons authorized to act for the member or manager, as applicable, shall be deemed to be written and signed for purposes of this subsection (c). For purposes of this subsection (c), the term “electronic transmission” means any form of communication not directly involving the physical transmission of paper that creates a record that may be retained, retrieved and reviewed by a recipient of the communication, and that may be directly reproduced in paper form by such a recipient through an automated process. Prompt notice of the taking of LLC action without a meeting by less than unanimous written consent of the members or managers, as applicable, shall be given to any member or manager, as applicable, entitled to vote on the matter that did not sign such written consent; provided, however, that the failure to give such notice shall not affect the validity of the action taken. Acts 2005, ch. 286, § 1.

Tenn. Code Ann. § 48-249-406 Required records.

48-249-406. Required records. An LLC shall keep, at its principal executive office or at another place or places within the United States determined by the members of a member-managed LLC, the managers of a manager-managed LLC, or the directors of a director-managed LLC: (1) A current list of the full name and last known business, residence or mailing address of each member, each manager or director, as applicable, and each officer, if any, of the LLC, together with the taxpayer identification number of each member of the LLC; (2) A current list of the full name and last known business, residence or mailing address of each holder of financial rights of the LLC, and a description of the financial rights held, together with the taxpayer identification number of each holder of financial rights of the LLC; (3) A copy of the articles of the LLC and all amendments to the articles; (4) A copy of any currently effective written operating agreement of the LLC; (5) Copies of the LLC's federal, state and local income tax returns and reports, if any, for the three (3) most recent years; (6) Financial information sufficient to provide true and full information regarding the status of the business and financial condition of the LLC for the three (3) most recent fiscal years; (7) Records of all proceedings of the members and of the holders, if any, of the LLC; (8) Any written consents obtained from the members or from the holders, if any, of the LLC; (9) Records of all proceedings of the managers or board of directors, as applicable, of the LLC for the last three (3) years; (10) A statement of all contributions accepted by the LLC under § 48-249-301, the identity of the contributor and the agreed value of each contribution; (11) A copy of all contribution agreements created under § 48-249-301 to which the LLC is bound; and (12) A copy of the LLC's most recent annual report filed with the secretary of state under § 48-249-1017. Acts 2005, ch. 286, § 1.

Tenn. Code Ann. § 48-249-407 Limitation on actions for breach of fiduciary duties.

48-249-407. Limitation on actions for breach of fiduciary duties. Any action alleging breach of fiduciary duties by members, managers, directors or officers, including alleged violations of the standards established in § 48-249-403 or § 48-249-404, must be brought within one (1) year from the date of the breach or violation; provided, that in the event the alleged breach or violation is not discovered nor reasonably should have been discovered within the one-year period, the period of limitation shall be one (1) year from the date the alleged breach or violation was discovered or reasonably should have been discovered. In no event shall any such action be brought more than three (3) years after the date on which the breach or violation occurred, except where there is fraudulent concealment on the part of the defendant, in which case the action shall be commenced within one (1) year after the alleged breach or violation is, or should have been, discovered. Acts 2006, ch. 620, § 29.

Source: Tennessee Code (state release 76 via Public.Resource.Org) + public chapters (Tennessee Secretary of State)URL: https://archive.org/download/gov.tn.tca/release76.2021.05.21/gov.tn.tca.title.48.htmlFetched: 10/24/2026