(a) When a conversion of a domestic businesscorporation to a domestic nonprofit corporation becomes effective:
Terms Used In Tennessee Code 48-21-120
Business: includes every trade, occupation, profession, investment activity and other lawful purpose for gain or the preservation of assets whether or not carried on for profits. See Tennessee Code 48-202-101
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.
domestic business corporation: means a corporation for profit, which is not a foreign corporation, incorporated under or subject to chapters 11-27 of this title. See Tennessee Code 48-11-201
domestic nonprofit corporation: means a corporation incorporated under the laws of this state and subject to the Tennessee Nonprofit Corporation Act, compiled in chapters 51-68 of this title. See Tennessee Code 48-11-201
Foreign nonprofit corporation: means a corporation incorporated under a law other than the law of this state, which would be a nonprofit corporation if incorporated under the laws of this state. See Tennessee Code 48-11-201
Liabilities: The aggregate of all debts and other legal obligations of a particular person or legal entity.
Obligation: An order placed, contract awarded, service received, or similar transaction during a given period that will require payments during the same or a future period.
Proceeding: includes civil suit and criminal, administrative, and investigatory action. See Tennessee Code 48-202-101
Secretary of state: means the person who holds the office of secretary of state of Tennessee. See Tennessee Code 48-202-101
Service of process: The service of writs or summonses to the appropriate party.
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
State: when applied to the different parts of the United States, includes the District of Columbia and the several territories of the United States. See Tennessee Code 1-3-105
(1) The title to all real and personal property, both tangible and intangible, of the corporation remains in the corporation without reversion or impairment;(2) The liabilities of the corporation remain the liabilities of the corporation;(3) An action or proceeding pending against the corporation continues against the corporation as if the conversion had not occurred;(4) The charter of the domestic nonprofit corporation becomes effective;(5) The shares of the corporation are reclassified into memberships, securities, obligations, rights to acquire memberships, or securities, or into cash or other property in accordance with the plan of conversion, and the shareholders are entitled only to the rights provided in the plan of nonprofit conversion or to any rights they may have under chapter 23 of this title; and(6) The corporation is deemed to:
(A) Be a domestic nonprofit corporation for all purposes;(B) Be the same corporation without interruption as the corporation that existed prior to the conversion; and(C) Have been incorporated on the date it was originally incorporated as a domestic business corporation.(b) When a conversion of a domestic business corporation to a foreign nonprofit corporation becomes effective, the foreign nonprofit corporation 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) The owner liability of a shareholder in a domestic business corporation that converts to a domestic nonprofit corporation shall be as follows:
(1) The conversion does not discharge any owner liability of the shareholder as a shareholder of the business corporation to the extent any such owner liability arose before the effective time of the articles of nonprofit conversion;(2) The shareholder shall not have owner liability for any debt, obligation, or liability of the nonprofit corporation that arises after the effective time of the articles of nonprofit conversion;(3) The laws of this state shall continue to apply to the collection or discharge of any owner liability preserved by subdivision (c)(1), as if the conversion had not occurred and the nonprofit corporation was still a business corporation; and(4) The shareholder shall have whatever rights of contribution from other shareholders are provided by the laws of this state with respect to any owner liability preserved by subdivision (c)(1), as if the conversion had not occurred and the nonprofit corporation was still a business corporation.(d) A shareholder who becomes subject to owner liability for some or all of the debts, obligations, or liabilities of the nonprofit corporation shall have owner liability only for those debts, obligations, or liabilities of the nonprofit corporation that arise after the effective time of the articles of nonprofit conversion.
