(a)Termination other than under § 48-249-503(a)(8). If a member‘s membership interest terminates for any reason other than as the result of an event specified in § 48-249-503(a)(8), then:

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Terms Used In Tennessee Code 48-249-505

  • Business: means every trade, occupation, profession, investment activity, and other lawful purpose for gain or the preservation of assets, whether or not carried on for profit. See Tennessee Code 48-249-102
  • Distribution: means a direct or indirect transfer of money or other property by an LLC, except for the issuance of its own membership interests or financial rights, with or without consideration, or an incurrence or issuance of indebtedness, whether directly or indirectly, including through a guaranty, to or for the benefit of any of its members or holders of financial rights, as applicable, in respect of membership interests or financial rights. See Tennessee Code 48-249-102
  • Financial rights: means a member's or holder's rights to:
    (A) Share in profits and losses, as provided in §. See Tennessee Code 48-249-102
  • Governance rights: means a member's right to vote on one (1) or more matters, all of a member's other rights as a member in the LLC under the LLC documents or this chapter, other than financial rights, and the right to transfer the voting and other rights described in this subdivision (13). See Tennessee Code 48-249-102
  • holder: means a person, other than a member, owning any financial rights in an LLC. See Tennessee Code 48-249-102
  • Interest: means either or both of the following rights under the organic law of an unincorporated entity:
    (A) The right to receive distributions from the entity either in the ordinary course or upon liquidation. See Tennessee Code 48-11-201
  • LLC: means a limited liability company, organized under chapters 201-248 of this title. See Tennessee Code 48-202-101
  • LLC documents: means either, or both:
    (A) An LLC's articles. See Tennessee Code 48-249-102
  • Member: means a person that has been admitted to an LLC as a member, as provided in §. See Tennessee Code 48-249-102
  • Membership: means the rights and obligations a member has pursuant to a corporation's charter, bylaws and chapters 51-68 of this title. See Tennessee Code 48-51-201
  • Membership interest: means a member's interest in an LLC, which shall consist of the member's financial rights and governance rights. See Tennessee Code 48-249-102
  • Personal representative: means , as to an individual, the executor, administrator, guardian, conservator, trustee or other legal representative of the individual, and, as to an entity, the legal representative or successor of the entity. See Tennessee Code 48-249-102
  • Representative: means , as to a foreign LLC, a director, manager, officer, employee or other agent of a foreign LLC. See Tennessee Code 48-249-102
  • Termination: means the end of an LLC's existence as a legal entity and occurs when the articles of termination are filed with the secretary of state under §. See Tennessee Code 48-202-101
  • written: means any information in the form of a document. See Tennessee Code 48-11-201
(1) If the existence and business of the LLC are continued, the member whose membership interest has terminated loses all governance rights and will be considered merely a holder of the financial rights owned before the termination of the membership interest, other than any financial rights transferred by the member in connection with the termination of the membership interest; and
(2) If the existence and business of the LLC are not continued, the member whose membership interest has terminated retains all governance rights owned before the termination, and may exercise those rights through the winding up and termination of the LLC, except as otherwise provided under § 48-249-504, in the case of termination in contravention of the LLC documents.
(b)Termination under § 48-249-503(a)(8). If the membership interest of a member terminates as a result of an event specified in § 48-249-503(a)(8):

(1) If the existence and business of the LLC are continued, then, effective as of the date of the applicable termination event, the governance rights associated with the affected membership interest are suspended and may not be exercised thereafter, unless and until restored under subdivision (b)(2). So long as such suspension remains in effect, such member, or the personal representative of such member, shall be considered merely the holder of the financial rights owned before the termination under § 48-249-503(a)(8);
(2) If the existence and business of the LLC are continued, for a period of sixty (60) days following the event specified in § 48-249-503(a)(8) that results in the suspension of governance rights under subdivision (b)(1), the personal representative of the affected member shall have the option, exercisable by giving written notice to the LLC, to require the LLC to purchase the membership interest of the member whose membership interest has terminated under subsection (c) and § 48-249-506. If the personal representative fails to make such election within such period, then the LLC shall have the option for a period of sixty (60) days following expiration of the personal representative’s option, or, if earlier, following the date of written notice from the personal representative that such option will not be exercised, to give written notice to the personal representative that the LLC will purchase the membership interest in accordance with subsection (c) and § 48-249-506. If neither the personal representative nor the LLC elects to exercise their respective options to cause the LLC to purchase the membership interest, the governance rights associated with the membership interest shall be restored, effective as of the first day following expiration of the LLC’s option period, and the personal representative shall be automatically admitted and substituted as a member of the LLC without further action. If either the personal representative or the LLC elects to cause the LLC to purchase the membership interest, the suspension of governance rights associated with such membership interest shall continue through the time the purchase is consummated; and
(3) If the existence and business of the LLC are not continued, the personal representative of the member whose membership interest has terminated retains all governance rights owned by the affected member before the termination of the membership interest, and may exercise those rights through the winding up and termination of the LLC, except as otherwise provided under § 48-249-504, in the case of termination in contravention of the LLC documents.
(c)Purchase at fair value. If the existence and business of the LLC are continued following the termination of a membership interest under § 48-249-503(a), other than terminations arising under § 48-249-503(a)(3), (a)(9), (a)(10) or (a)(11), then, regardless whether such termination of membership interest was wrongful, any member whose membership interest has so terminated, other than a member for whom a personal representative has been automatically substituted and admitted as a member under subdivision (b)(2), is entitled, subject to the offset provisions of § 48-249-504(2), to receive from the LLC the fair value of the terminated membership interest as of the date of termination of such membership interest, calculated as set forth in § 48-249-506, in consideration for all such membership interest.
(d)Distribution if business not continued. Subject to § 48-249-504(2), if the business and existence of the LLC are not continued, any member whose membership interest has terminated, regardless of whether such termination was wrongful or otherwise, is entitled to receive that member’s distribution under § 48-249-620.
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