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(a) Members' action respecting a director's or officer's conflicting interest transaction is effective for purposes of § 48-58-702(b)(2) if a majority of the votes cast by the holders of all qualified memberships are in favor of the transaction after:
(1) Notice to members describing the action to be taken respecting the transaction;
(2) Provision to the corporation of the information referred to in subsection (b); and
(3) Communication to the members entitled to vote on the transaction of the information that is the subject of required disclosure, to the extent the information is not known by them.
(b) A director or officer who has a conflicting interest respecting the transaction shall, before the members' vote, inform the secretary or other officer or agent of the corporation authorized to tabulate votes, in writing, of the number of memberships that the director or officer knows are not qualified memberships under subsection (c), and the identity of the holders of those memberships.
(c) For purposes of this section:
(1) “Beneficial member” means the person who is a beneficial owner of a membership interest held by a nominee as the record member;
(2) “Holder” means, and “held by” refers to, memberships held by both a record member and a beneficial member;
(3) “Qualified memberships” means all memberships entitled to be voted with respect to the transaction except for memberships that the secretary or other officer or agent of the corporation authorized to tabulate votes either knows, or under subsection (b) is notified, are held by:
(A) A director or officer who has a conflicting interest respecting the transaction; or
(B) A related person of the director or officer (excluding a person described in § 48-58-701(7)(F)); and
(4) “Record member” means the person in whose name a membership interest is registered in the records of a corporation or the beneficial owner of the membership interest to the extent of the rights granted by a nominee certificate or other document on file with the corporation.
(d) A majority of the votes entitled to be cast by the holders of all qualified memberships constitutes a quorum for purposes of compliance with this section. Subject to subsection (e), members' action that otherwise complies with this section is not affected by the presence of holders, or by the voting, of memberships that are not qualified memberships.
(e) If a member's vote does not comply with subsection (a) solely because of a director's or officer's failure to comply with subsection (b), and if the director or officer establishes that the failure was not intended to influence and did not in fact determine the outcome of the vote, the court may take such action respecting the transaction and the director or officer, and may give such effect, if any, to the members' vote, as the court considers appropriate in the circumstances.
(f) Where members' action under this section does not satisfy a quorum or voting requirement applicable to the authorization of the transaction by reason of the charter, the bylaws or a provision of law, independent action to satisfy those authorization requirements must be taken by the members, in which action memberships that are not qualified memberships may participate.
Cite this article: FindLaw.com - Tennessee Code Title 48. Corporations and Associations § 48-58-704 - last updated January 01, 2020 | https://codes.findlaw.com/tn/title-48-corporations-and-associations/tn-code-sect-48-58-704/
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