Tennessee § 48-242-101 Loans, guarantees and suretyship

Tennessee Statutes

§ 48-242-101 — Loans, guarantees and suretyship

Tennessee § 48-242-101

Title48

This text of Tennessee § 48-242-101 (Loans, guarantees and suretyship) is published on Counsel Stack Legal Research, covering Tennessee primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook

Tenn. Code Ann. § 48-242-101 (2026).

Text

(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 requis

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(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.