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2017 Tennessee Code
Title 48 - Corporations and Associations
Limited Liability Companies
Chapter 249 - Tennessee Revised Limited Liability Company Act
Part 4 - Management
§ 48-249-402. Agency of members, managers, directors and officers.
Universal Citation: TN Code § 48-249-402 (2017)
- (a) Member-managed LLC. Subject to subsections (d) and (e), in a member-managed LLC:
- (1) Each member is an agent of the LLC for the purpose of its business, and an act of a member, including the signing of an instrument in the LLC's name, that is apparently for carrying on in the ordinary course the LLC's business, or business of the kind carried on by the LLC, binds the LLC, unless the member had no authority to act for the LLC in the particular matter, and the person with whom the member was dealing knew or had notice that the member lacked authority; and
- (2) An act of a member that is not apparently for carrying on in the ordinary course the LLC's business, or business of the kind carried on by the LLC, binds the LLC only if the act was authorized by the other members.
- (b) Manager-managed LLC. Subject to subsections (d) and (e), in a manager-managed LLC:
- (1) A member is not an agent of the LLC for the purpose of its business solely by reason of being a member. Each manager is an agent of the LLC for the purpose of its business, and an act of a manager, including the signing of an instrument in the LLC's name, that is apparently for carrying on in the ordinary course the LLC's business, or business of the kind carried on by the LLC, binds the LLC, unless the manager had no authority to act for the LLC in the particular matter, and the person with whom the manager was dealing knew or had notice that the manager lacked authority; and
- (2) An act of a manager that is not apparently for carrying on in the ordinary course the LLC's business, or business of the kind carried on by the LLC, binds the LLC only if the act was authorized under § 48-249-401.
- (c) Director-managed LLC. Subject to subsections (d) and (e), in a director-managed LLC, no member or director is an agent of the LLC for the purpose of its business solely by reason of being a member or a director. The president and any other authorized officers of a director-managed LLC shall be agents of the LLC, as described in subsection (d).
- (d) Authority of officers. In a director-managed LLC, or any other LLC with a president, the president is an agent of the LLC for the purpose of its business, and an act of the president, including the signing of an instrument in the LLC's name, that is apparently for carrying on in the ordinary course the LLC's business, or business of the kind carried on by the LLC binds the LLC, unless the president had no authority to act for the LLC in the particular matter, and the person with whom the president was dealing knew or had notice that the president lacked authority. If, under § 48-249-401(e), any other officer of the LLC is authorized by the LLC documents or by the members, managers or directors, as applicable, of an LLC, by a resolution or other writing, then the authorized officer is an agent of the LLC for the purpose of its business, and an act of the authorized officer, including the signing of an instrument in the LLC's name, that is apparently for carrying on in the ordinary course the LLC's business, or business of the kind carried on by the LLC, binds the LLC.
- (e) Real property authority. The articles may contain a grant of authority to one (1) or more members, managers, directors or officers to execute instruments for the transfer of real property, and any restrictions and conditions with respect to such authority. In the event the articles name one (1) or more persons who are granted authority to execute instruments for the transfer of real property with any restrictions and conditions with respect to such authority so listed, such grant shall be conclusive in favor of a person who gives value, unless the person knew or had notice that such grant of authority had been rescinded by the LLC. However, such designation, unless it expressly states that it is exclusive, shall not override subsection (a), (b), (c) or (d).
- (f) Knowledge; notice. For purposes of this section:
- (1) A person knows a fact if the person has actual knowledge of it;
- (2) A person has notice of a fact, if:
- (A) The person knows the fact;
- (B) The person has received a notification of the fact;
- (C) The person has reason to know the fact exists from all of the facts known to the person at the time in question; or
- (D) The fact is contained in the articles of organization;
- (3) A person notifies or gives a notification of a fact to another, by taking steps reasonably required to inform the other person in ordinary course, whether or not the other person knows the fact;
- (4) A person receives a notification of a fact when the notification:
- (A) Comes to the person's attention; or
- (B) Is duly delivered at the person's place of business, or at any other place held out by the person as a place for receiving communications; and
- (5) An entity knows, has notice, or receives a notification of a fact for purposes of a particular transaction, when the individual conducting the transaction for the entity knows, has notice or receives a notification of the fact, or, in any event, when the fact would have been brought to the individual's attention had the entity exercised reasonable diligence. An entity exercises reasonable diligence if it maintains reasonable routines for communicating significant information to the individual conducting the transaction for the entity, and there is reasonable compliance with the routines. Reasonable diligence does not require an individual acting for the entity to communicate information unless the communication is part of the individual's regular duties, or the individual has reason to know of the transaction and that the transaction would be materially affected by the information.
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