(a) Unless the member or director complies with the applicable standards of conduct set forth in § 43-38-616, a member or director who votes for or assents to a distribution made in violation of § 43-38-903 or the articles or bylaws is personally liable to the cooperative for the amount of the distribution that exceeds what could have been distributed without violating § 43-38-903 or the articles or bylaws.
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Terms Used In Tennessee Code 43-38-904

  • Bylaws: means a written agreement described in §. See Tennessee Code 43-38-103
  • Cooperative: means an association organized under this title conducting business on a cooperative plan as provided under this chapter. See Tennessee Code 43-38-103
  • Distribution: means a direct or indirect transfer of money or other property, except its own membership interests, with or without consideration, or an incurrence or issuance of indebtedness, whether directly or indirectly, including through a guaranty, by a cooperative to or for the benefit of any of its members in respect of membership interests. See Tennessee Code 43-38-103
  • Member: means a person or entity reflected on the books of the cooperative as the owner of governance rights of a membership interest of the cooperative and includes patron and nonpatron members. See Tennessee Code 43-38-103
  • Obligation: An order placed, contract awarded, service received, or similar transaction during a given period that will require payments during the same or a future period.
(b) A director or member held liable for an unlawful distribution under subsection (a) is entitled to contribution:

(1) From every other director and member who voted for or assented to the distribution; and
(2) From each member for the amount the member accepted, knowing the distribution was made in violation of § 43-38-903 or the articles or bylaws.
(c) Subject to subsection (d), this section shall not affect any obligation or liability of a director or member under the articles or bylaws or other applicable law for the amount of a distribution.
(d) Unless otherwise agreed, a member who receives a distribution from a cooperative or an officer or director who votes for or assents to the distribution shall have no liability under this section or other applicable law for the amount of the distribution after the expiration of three (3) years from the date of the distribution.
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