Tennessee § 45-2-401 - Directors and officers — Qualifications of directors — Election — Terms.

§ 45-2-401. Directors and officers — Qualifications of directors — Election — Terms.

The affairs of a state bank must be managed by a board of directors, which shall exercise its powers and be responsible for the discharge of its duties. The charter or bylaws may establish a variable range for the size of the board of directors by fixing a minimum of not less than five (5) members and a maximum of not more than twenty-five (25) members. If a variable range is established, then the number of directors may be fixed or changed from time to time, within the minimum and maximum, by the shareholders or the board of directors; however, unless the charter or bylaws provide otherwise, only the shareholders may change the range for the size of the board or change from a fixed to a variable-range size board or vice versa. Each bank director must, during each director's whole term of service, be a citizen of the United States. A majority of the directors must reside in a state in which the bank has a branch location or within one hundred (100) miles of the location of any branch, for at least one (1) year immediately preceding their election and during their term of service as a director. However, the commissioner may waive the residency requirement of this subdivision (a)(4) if the commissioner finds that: The business experience and ability of each proposed director is relevant to the bank, its market, and the type of services the bank provides or intends to provide; and The waiver of the residency requirement will support the safety and soundness of the bank. The bylaws of the bank may specify other qualifications for directors. Any director who becomes disqualified shall resign the office, but, upon removal of the disqualification, is eligible for election. The board of directors or the commissioner may remove a director who is disqualified. An action taken by a director prior to resignation or removal is not subject to attack on the ground of the director's disqualification. Except in cases of disqualification, directors shall serve until their successors are elected and qualified. Directors shall be elected by the stockholders at the first meeting and thereafter at the annual meeting or at a special meeting called for the purpose. If the charter provides for cumulative voting, the votes of each share may be cast for one (1) person or divided among two (2) or more, as the stockholders may choose. The person or persons (to the number of directors to be elected) having the largest number of votes shall be elected. The term of office of directors shall be one (1) year or, if the bylaws so provide, three (3) years, in which case one-third (1/3) of the directors, or as nearly one-third (1/3) as possible, shall be elected for each year following the first election of directors. Vacancies at any one time to the number of one-third (1/3) of the board may be filled by vote of the board of directors until the next meeting of the stockholders. The officers designated by the bylaws shall be elected by the board of directors. The bank shall have only one (1) officer designated as president and the president shall be a member of the board of directors. No officer shall be elected or a contract executed for employment for a period longer than three (3) years. An officer may be removed by the board of directors at any time but removal shall not prejudice any rights that the officer may have to damages for breach of contract of employment. Acts 1969, ch. 36, § 1 (3.315); 1971, ch. 77, § 1; 1973, ch. 294, § 6; T.C.A., § 45-226; Acts 1989, ch. 57, § 1; 1994, ch. 551, § 10; 1996, ch. 768, §§ 15, 16; 2001, ch. 54, § 11; 2020, ch. 605, § 3. Compiler's Notes. Acts 1996, ch. 768, which amended this section, is known and may be cited as the Bank Reform Act of 1996. Amendments. The 2020 amendment reorganized (a) as (a)(1)–(a)(6); substituted “must” for “shall” in present (a)(1); inserted “then” in the second sentence of present (a)(2); in present (a)(4), deleted “both” preceding “for at least”, added the second sentence, and added (a)(4)(A) and (a)(4)(B); and rewrote the former last three sentences of (a) as present (a)(6), which read: “Any director who becomes disqualified shall forthwith resign the office, but, upon removal of the disqualification, shall be eligible for election. A director who is disqualified may be removed by the board of directors or by the commissioner. No action taken by a director prior to resignation or removal shall be subject to attack on the ground of the director's disqualification.” Effective Dates. Acts 2020, ch. 605, § 10. March 20, 2020. Cross-References. Bank deposits and collections, title 47, ch. 4. Funds transfers, title 47, ch. 4A. Letters of credit, title 47, ch. 5. Negotiable instruments, title 47, ch. 3. Textbooks. Tennessee Jurisprudence, 5 Tenn. Juris., Banks and Banking, §§ 15, 19. Law Reviews. A Realistic Duty of Care for Outside Bank Directors, 51 Tenn. L. Rev. 569 (1984).