(a) A member may assign the member’s full membership interest only by assigning all of the member’s governance rights coupled with an assignment to the same assignee of all the member’s financial rights. A member’s governance rights are assignable only as provided in this section. A member or holder of a financial right has no power to assign all or any part of the member’s membership interest or financial rights, except as provided in § 43-38-503 and this section.
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Terms Used In Tennessee Code 43-38-504

  • 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
  • Financial rights: means a member's right to:
    (A) Share in profits and losses as provided in §. See Tennessee Code 43-38-103
  • Governance rights: means a right to vote on one (1) or more matters and all a member's rights as a member in the cooperative other than financial rights. See Tennessee Code 43-38-103
  • Liabilities: The aggregate of all debts and other legal obligations of a particular person or legal entity.
  • Lien: A claim against real or personal property in satisfaction of a debt.
  • Majority: means , with respect to a vote of the members, if voting on a per capita basis, a majority in number of the members entitled to vote on a specific matter, or if the voting is determined otherwise, a majority of the voting interest, which may be expressed as a percentage, entitled to vote on a specific matter, and with respect to a vote of the directors, a majority in number of the directors entitled to vote on a specific matter. 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
  • Membership interest: means a member's interest in a cooperative consisting of a member's financial rights, a member's right to assign financial rights, a member's governance rights and a member's right to assign governance rights. See Tennessee Code 43-38-103
  • Person: includes a corporation, firm, company or association. See Tennessee Code 1-3-105
  • Signed: means that the signature of a person has been written on a document, and, with respect to a document required by this chapter to be filed with the secretary of state, means that the document has been signed by a person authorized to do so by this chapter, the articles or bylaws, or by a resolution approved by the directors or the members. See Tennessee Code 43-38-103
  • written: includes printing, typewriting, engraving, lithography, and any other mode of representing words and letters. See Tennessee Code 1-3-105
(b)

(1) Except as otherwise provided in the articles or the bylaws, a member may, without the consent of any other member, assign governance rights to another member.
(2)

(A) Except as provided in subdivisions (b)(2)(B) and (b)(2)(C), any other assignment of any governance rights is effective only if all the directors, other than the director who is also a member seeking to make the assignment, approve the assignment by unanimous consent or otherwise if the articles or bylaws so permit. The consent may be evidenced in any manner specified in the articles or bylaws, but in the absence of specification, consent shall be evidenced by a written instrument, dated and signed by the person. The giving of consent is at the discretion of the consenting party and may be unreasonably withheld.
(B) If the articles or bylaws so provide, the directors who are members may approve, by a majority or greater in number of the nonassigning directors who are members, the assignment of governance rights to a nonmember. In the event there are no nonassigning governors who are members, the assignment must be approved by unanimous consent of the governors, or, if the articles or bylaws so permit, the assignment shall be approved by at least a majority vote of the members, exclusive of the member seeking to make the assignment.
(C) If permitted in the articles or bylaws, the governance rights associated with membership interests or classes of membership interests may be assigned without the consent of the members or the directors who are members.
(c) When an assignment of governance rights is effective under subsection (b):

(1) The assignee becomes a member, if not already a member; and
(2) An assignee who has become a member has, to the extent assigned, the rights and powers and is subject to the restrictions and liabilities, of a member under the articles, any bylaws and this chapter.
(d) When an assignment is effective under subsection (a):

(1) The assignee is liable for any obligations of the assignor existing at the time of transfer, except to the extent that, at the time the assignee became a member, the liability was unknown to the assignee, and could not be ascertained from the required records of the cooperative;
(2) Notwithstanding subdivision (d)(1), the assignee shall not be liable for the obligations of the assignor under § 43-38-904; and
(3) The assignor is not released from liability to the cooperative for obligations of the assignor existing at the time of transfer, except as provided in subdivision (d)(1).
(e) Unless otherwise provided in the articles or bylaws, the pledge or granting of a security interest, lien or other encumbrance in or against any or all of the membership interest of a member is not an assignment and shall not cause the member to cease to be a member or to cease to have the power to exercise any rights or powers of a member.
(f) If any purported or attempted assignment of governance rights is ineffective for failure to obtain the consent required in subsection (b):

(1) The purported or attempted assignment is ineffective in its entirety; and
(2) Any assignment of financial rights that accompanied the purported or attempted assignment of governance rights is void.
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