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2017 Tennessee Code
Title 48 - Corporations and Associations
For-Profit Business Corporations
Chapter 21 - Merger, Share Exchange and Conversion
§ 48-21-114. Effect of entity conversion.
Universal Citation: TN Code § 48-21-114 (2017)
- (a) When a conversion under § 48-21-111 takes effect:
- (1) All title to real and personal property, both tangible and intangible, of the converting entity remains in the survivor without reversion or impairment;
- (2) All obligations and liabilities of the converting entity continue as obligations and liabilities of the survivor;
- (3) An action or proceeding pending against the converting entity continues against the survivor as if the conversion had not occurred;
- (4) In the case of a survivor that is a filing entity, its charter or public organic document and its private organic document become effective;
- (5) In the case of a survivor that is a nonfiling entity, its private organic document becomes effective;
- (6) The shares or interests of the converting entity are reclassified into shares, interests, other securities, obligations, rights to acquire shares, interests, or other securities, or into cash or other property in accordance with the plan of conversion; and the shareholders or interest holders of the converting entity are entitled only to the rights provided to them under the terms of the conversion and to any dissenters' rights they may have under chapter 23 of this title or under the applicable organic law of the converting entity if it is other than a corporation; and
- (7) The survivor is deemed to:
- (A) Be incorporated or organized under and subject to the organic law of the converting entity for all purposes;
- (B) Be the same corporation or unincorporated entity without interruption as the converting entity; and
- (C) Have been incorporated or otherwise organized on the date that the converting entity was originally incorporated or organized.
- (b) When a conversion of a domestic business corporation to a foreign other entity becomes effective, the surviving entity is deemed to:
- (1) Appoint the secretary of state as its agent for service of process in a proceeding to enforce the rights of shareholders who exercise dissenters' rights in connection with the conversion; and
- (2) Agree that it will promptly pay the amount, if any, to which such shareholders are entitled under chapter 23 of this title.
- (c) A shareholder who becomes subject to owner liability for some or all of the debts, obligations, or liabilities of the survivor shall be personally liable only for those debts, obligations, or liabilities of the survivor that arise after the effective time of the articles of entity conversion.
- (d) The owner liability of an interest holder in an unincorporated entity that converts to a domestic business corporation shall be as follows:
- (1) The conversion does not discharge any owner liability under the organic law of the unincorporated entity to the extent any such owner liability arose before the effective time of the articles of entity conversion;
- (2) The interest holder shall not have owner liability under the organic law of the unincorporated entity for any debt, obligation, or liability of the corporation that arises after the effective time of the articles of entity conversion;
- (3) The provisions of the organic law of the unincorporated entity shall continue to apply to the collection or discharge of any owner liability preserved by subdivision (d)(1), as if the conversion had not occurred; and
- (4) The interest holder shall have whatever rights of contribution from other interest holders are provided by the organic law of the unincorporated entity with respect to any owner liability preserved by subdivision (d)(1), as if the conversion had not occurred.
- (e) The converting entity shall not be required to wind up its affairs or pay its liabilities and distribute its assets, and such conversion shall not be deemed to constitute a dissolution of such entity.
- (f) The interests of the interest holders of the converting entity, unless otherwise agreed, shall be cancelled and become of no effect whatsoever, with respect to the survivor, and the former holders of such interests shall be entitled only to the rights provided in the plan of conversion or the organic documents for the conversion of shares into interests in the survivor.
- (g) A conversion shall take effect upon the date the articles of conversion are filed, as provided in § 48-21-112, or on such later date as may be specified in the plan of conversion.
- (h) Notwithstanding any other law to the contrary, this section and § 48-21-109 shall have no effect on the application of title 67 and other state and federal tax statutes. Any tax consequences of the conversion as referenced herein shall continue to be controlled by applicable state and federal tax statutes as they may be amended from time to time.
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