§ 48-61-122 — Limitations on entities with which a public benefit corporation may be a party to a merger, membership exchange, entity conversion or for-profit conversion transaction

(a) Without the prior approval of a court of record of this state having equity jurisdiction in a proceeding of which the attorney general and reporter has been given written notice of a plan of merger or membership exchange, a plan of entity conversion, or a plan of for-profit conversion in accordance with § 48-61-123 ; or unless the attorney general and reporter, after receiving written notice to the attorney general in accordance with § 48-61-123 , has issued a written statement of no enforcement intent with respect to the plan, a public benefit corporation may be a party to a merger, membership exchange, entity conversion or for-profit conversion transaction described in this chapter only with: (1) A domestic nonprofit public benefit corporation; (2) A foreign nonprofit corporation which would qualify under chapters 51-68 of this title as a public benefit corporation; (3) A foreign or domestic corporation for profit; provided, that the public benefit corporation is the surviving corporation and continues to be a public benefit corporation after the transaction; or (4) A foreign or domestic corporation for profit that is the surviving corporation; provided that: (A) On or prior to the effective date of the transaction, assets with a value equal to the greater of the fair market value of the net tangible and intangible assets (including good will) of the public benefit corporation, or the fair market value of the public benefit corporation if it were to be operated as a business concern, are transferred or conveyed to one (1) or more persons who would have received its assets under § 48-64-106(a)(5) and (a)(6) had it dissolved; (B) It shall return, transfer or convey any assets held by it upon condition requiring return, transfer or conveyance, which condition occurs by reason of the transaction, in accordance with such condition; (C) The transaction is approved by a majority of directors of the public benefit corporation who are not and will not become shareholders in or officers, employees, agents or consultants of the for-profit corporation; and (D) A copy of the plan of transaction is submitted to the attorney general and reporter not less than forty-five (45) days prior to the effective date of the transaction. (b) A public benefit corporation must give written notice to the attorney general and reporter in accordance with § 48-61-123 . (c) In a transaction to which subdivisions (a)(1), (a)(2) or (a)(3) applies, when a public benefit corporation with members consummates the transaction, each member of the public benefit corporation may only receive or keep a membership or membership interest in the surviving public benefit corporation if the surviving public benefit corporation has memberships or membership interests in accordance with the plan. (d) Unless a public benefit corporation that is a party to a transaction under this chapter has obtained an order of a court of record in this state having equity jurisdiction to the extent required by the law of this state regarding cy pres or otherwise dealing with the nondiversion of charitable assets, the transaction may not alter, amend, or change the following: (1) Any restriction or limitation imposed on the public benefit corporation by its documents that may not be altered, amended or changed by its officers, board of directors, members or interest holders; (2) Any restriction imposed on any assets or property held by the public benefit corporation by virtue of any trust under which it holds the assets or property; or (3) The existing rights and interests of persons other than members or interest holders in the public benefit corporation. (e) In any transaction in which a public corporation is a party to a merger, membership exchange, entity conversion or for-profit conversion transaction under this chapter, the public benefit corporation must comply with § 48-62-103(a) with respect to the corporation's assets and property. (f) A person who is a member, interest holder or is otherwise affiliated with a public benefit corporation or an unincorporated entity with a charitable purpose may not receive a direct or indirect financial benefit in connection with a transaction under this chapter to which the public benefit corporation is a party unless the party is itself a public benefit corporation or a charitable corporation or unincorporated entity with a charitable purpose. This subsection (f) does not apply to the receipt of reasonable compensation for services rendered.

Legislative History

Added by 2014 Tenn. Acts, ch. 899, s 72, eff. 1/1/2015.