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

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

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: In the usual and regular course of business of the LLC; 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 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. 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. Banking Authority not Granted. This section does not grant any authority to act as a bank or to carry on the business of banking. Requisite Approval. Except as otherwise provided in this section, for purposes of this section, “requisite approval” means: 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 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. For purposes of this section, a “disinterested person” is a person other than: A person who receives a direct or indirect benefit from receipt of the loan or guarantee; The spouse, parents, children and spouses of children, brothers and sisters, other lineal descendants and spouses of brothers and sisters of such person; or 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. 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. 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.