48-242-101 - Loans, guarantees and suretyship. - Tennessee Statutes

48-242-101. Loans, guarantees and suretyship.

(a)  Prerequisites.  Unless otherwise provided in chapters 201-248 of this title or the articles or operating agreement, an LLC may lend money to, guarantee an obligation of, become a surety for, or otherwise financially assist a person:

     (1)  In the usual and regular course of business of the LLC;

     (2)  With, or for the benefit of, a related LLC, an organization in which the LLC has a financial interest, an organization with which the LLC has a business relationship, or an organization to which the LLC has the power to make donations; or

     (3)  With, or for the benefit of, a manager or other employee of the LLC or a subsidiary, including a manager or employee who is a member but not a governor of the LLC or a subsidiary, and may reasonably be expected, in the judgment of the body giving the requisite approval, to benefit the LLC. In the case of a loan or guarantee which is with, or for the benefit of, a person who is a governor, approval by a majority of the membership interests of disinterested members entitled to vote is required.

(b)  Interest and Security.  A loan, guaranty, surety contract, or other financial assistance under subsection (a) may be with or without interest and may be unsecured or may be secured in any manner, including, without limitation, a grant of a security interest in a member's financial rights in the LLC.

(c)  Banking Authority not Granted.  This section does not grant any authority to act as a bank or to carry on the business of banking.

(d)  Requisite Approval. 

     (1)  Except as otherwise provided in this section, for purposes of this section, “requisite approval” means:

          (A)  If the LLC is board-managed, an action taken at a duly held meeting and approved by a majority of the disinterested governors or by a majority of the disinterested members at a duly held meeting of the members; or

          (B)  If the LLC is member-managed, an action taken at a duly held meeting and approved by a majority of the voting interest of members entitled to vote which are held by disinterested persons.

     (2)  For purposes of this section, a “disinterested person” is a person other than:

          (A)  A person who receives a direct or indirect benefit from receipt of the loan or guarantee;

          (B)  The spouse, parents, children and spouses of children, brothers and sisters, other lineal descendants and spouses of brothers and sisters of such person; or

          (C)  Any entity in which any of the people, or any combination of the people, in subdivisions (d)(2)(A) and (B) have a material financial interest.

(e)  Validity of Obligation of Borrower.  The fact that a loan or guarantee is made in violation of this section does not affect the borrower's liability on the loan.

(f)  Exception for Sales on Credit.  A sale on credit in the ordinary course of business shall not be subject to the restrictions of this section.

[Acts 1994, ch. 868, § 1; 1995, ch. 403, §§ 66, 67.]