(a) A director who votes for or assents to a distribution made in violation of § 48-16-401 or the charter is personally liable to the corporation for the amount of the distribution that exceeds what could have been distributed without violating such section or the charter if it is established that the director did not perform such director’s duties in compliance with § 48-18-301. In any proceeding commenced under this section, a director has all of the defenses ordinarily available to a director.
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Terms Used In Tennessee Code 48-18-302

  • Charter: includes amended and restated charters and articles of merger. See Tennessee Code 48-11-201
  • Corporation: A legal entity owned by the holders of shares of stock that have been issued, and that can own, receive, and transfer property, and carry on business in its own name.
  • 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 an LLC to or for the benefit of any of its members in respect of membership interests. See Tennessee Code 48-202-101
  • Proceeding: includes civil suit and criminal, administrative, and investigatory action. See Tennessee Code 48-202-101
  • Shareholder: means the person in whose name shares are registered in the records of a corporation or the beneficial owner of shares to the extent of the rights granted by a nominee certificate on file with a corporation. See Tennessee Code 48-11-201
(b) A director held liable under subsection (a) for an unlawful distribution is entitled to contribution from:

(1) Every other director who could be held liable under subsection (a) for the unlawful distribution; and
(2) Each shareholder for the amount the shareholder accepted knowing the distribution was made in violation of § 48-16-401 or the charter.
(c) A proceeding under this section is barred unless it is commenced within two (2) years after the date on which the effect of the distribution was measured under § 48-16-401.
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