2010 Tennessee Code
Title 48 - Corporations And Associations
Chapter 249 - Tennessee Revised Limited Liability Company Act
Part 5 - Admission of Members Membership Interests Transferees and Creditors of Members
48-249-508 - Transfer of a membership interest or governance rights.

48-249-508. Transfer of a membership interest or governance rights.

(a)  Transferability of governance rights.  A member may transfer ownership of the member's full membership interest, only by transferring all of the member's governance rights, coupled with a transfer to the same transferee of all of the member's financial rights. A member's governance rights are transferable only as provided in this section. A member has no power to transfer all or any part of the member's membership interest, except as provided in §§ 48-249-505 48-249-507 and this section.

(b)  Consents required for transfer of governance rights. 

     (1)  A member may, without the consent of any other member, transfer governance rights to another member.

     (2)  With respect to a single-member LLC, the single member may freely transfer governance rights or membership interests, or both, in the LLC to any other person at any time.

     (3)  Any other transfer of any governance rights is effective only if all of the members, other than the member seeking to make the transfer, approve the transfer by unanimous consent. The consent of a member may be evidenced in any manner specified in the LLC documents, but, in the absence of such specification, consent shall be evidenced by a written instrument, dated and signed by such member. The giving of consent is at the sole discretion of the consenting party and may be unreasonably withheld.

     (4)  If any purported or attempted transfer of governance rights is ineffective for failure to obtain the required consents, the purported or attempted transfer is ineffective in its entirety, and any transfer of financial rights that accompanied the purported or attempted transfer of governance rights is null and void.

(c)  Effect of transfer of governance rights.  When a transfer, other than a transfer for security purposes, of governance rights is effective:

     (1)  The transferee becomes a member, if not already a member;

     (2)  If the transferor does not retain any governance rights, the transferor ceases to be a member;

     (3)  A transferee that has become a member has, to the extent transferred, the rights and powers, and is subject to the restrictions and liabilities, of a member under the LLC documents and this chapter;

     (4)  Any obligations of the transferor existing at the time of transfer to make contributions to the LLC under § 48-249-302 are not binding on a transferee without knowledge of such obligations at the time the transferee became a member;

     (5)  Any obligations of the transferor under § 48-249-307 to return wrongful distributions are not binding on a transferee without knowledge of such obligations at the time the transferee became a member; and

     (6)  The transferor is not released from liability to the LLC for obligations of the transferor existing at the time of transfer under §§ 48-249-302 or 48-249-307.

(d)  Pledges of membership interests.  The pledge of, or granting of a security interest, lien or other encumbrance in or against all or any portion of the membership interest of a member, is not a transfer of ownership 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. The foreclosure of such a pledge, security interest, lien or other encumbrance shall have the effect of the transfer of the financial rights derived from such membership interest and is subject to the provisions of § 48-249-507(b).

(e)  Consensual restrictions on transfer of governance rights.  In addition to restrictions set forth in this part, restrictions on the transfer of governance rights may be imposed in accordance with the procedures and under the same conditions as stated in § 48-249-507, for restricting the transfer of financial rights.

(f)  Effective date of transfer.  Any permissible transfer of governance rights or membership interests under this section shall be effective as to and binding on the LLC, only when the transferee's name, address, taxpayer identification number and the nature and extent of the transfer are reflected in the LLC documents or the records of the LLC.

[Acts 2005, ch. 286, § 1; 2006, ch. 620, § 33.]