§ 48-16-301 — Shareholders' preemptive rights

Tennessee § 48-16-301

• Jurisdiction: Tennessee
• Title: 48

Text

(a) The shareholders of a corporation, solely by virtue of their status as such, do not have a preemptive right to acquire the corporation's unissued shares except to the extent the charter so provides. (b) A statement included in the charter that "the corporation elects to have preemptive rights" (or words of similar import) means that the following principles apply except to the extent the charter expressly provides otherwise: (1) The shareholders of the corporation have a preemptive right, granted on uniform terms and conditions prescribed by the board of directors to provide a fair and reasonable opportunity to exercise the right, to acquire proportional amounts of the corporation's unissued shares upon the decision of the board of directors to issue them; (2) A shareholder may waive this preemptive right. A waiver evidenced by a writing is irrevocable even though it is not supported by consideration; (3) There is no preemptive right with respect to: (A) Shares issued as compensation to directors, officers, agents, or employees of the corporation, its subsidiaries or affiliates; (B) Shares issued to satisfy conversion or option rights created to provide compensation to directors, officers, agents, or employees of the corporation, its subsidiaries or affiliates; (C) Shares authorized in the charter that are issued within six (6) months from the effective date of incorporation; or (D) Shares sold otherwise than for cash; (4) Holders of shares of any class without general voting rights but with preferential rights to distributions or assets have no preemptive rights with respect to shares of any class; (5) Holders of shares of any class with general voting rights but without preferential rights to distributions or assets have no preemptive rights with respect to shares of any class with preferential rights to distributions or assets unless the shares with preferential rights are convertible into or carry a right to subscribe for or acquire shares without preferential rights; and (6) Shares subject to preemptive rights that are not acquired by shareholders may be issued to any person for a period of one (1) year after being offered to shareholders at a consideration set by the board of directors that is not lower than the consideration set for the exercise of preemptive rights. An offer at a lower consideration or after the expiration of one (1) year is subject to the shareholders' preemptive rights. (c) For purposes of this section, "shares" includes a security convertible into or carrying a right to subscribe for or acquire shares. (d) This section does not limit or otherwise affect the ability of a corporation to grant by contract to one (1) or more of its shareholders the right to acquire shares on a preemptive or other priority basis.

Legislative History

Acts 1986, ch. 887, § 6.30; 1989, ch. 451, § 8; 1994, ch. 776, §§ 16, 17.