(a) When a conversion of a domestic nonprofit corporation to a domestic business corporation becomes effective:

non profit

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Terms Used In Tennessee Code 48-61-120

  • Appraisal: A determination of property value.
  • 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
  • Liabilities: The aggregate of all debts and other legal obligations of a particular person or legal entity.
  • Member: means a person reflected in the required records of an LLC as the owner of some governance rights of a membership interest of the LLC. See Tennessee Code 48-202-101
  • 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
  • Property: includes both personal and real property. See Tennessee Code 1-3-105
  • 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.
  • 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 or foreign for-profit corporation becomes effective;
(5) The memberships of the corporation are reclassified into shares, interests, securities, obligations, rights to acquire shares or securities, or into cash or other property in accordance with the plan of for-profit conversion, and the members are entitled only to the rights provided in the plan of for-profit conversion or to any rights they may have under charter or organic documents of the corporation; and
(6) The corporation is deemed to:

(A) Be a domestic business 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 nonprofit corporation.
(b) When a conversion of a domestic nonprofit corporation to a foreign for-profit corporation becomes effective, the foreign for-profit 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 members who exercise appraisal rights in connection with the conversion; and
(2) Agree that it will promptly pay the amount, if any, to which such members are entitled under the charter or organic documents of the corporation.
(c) The owner liability of a member in a domestic nonprofit corporation that converts to a domestic business corporation shall be as follows:

(1) The conversion does not discharge any owner liability of the member as a member of the nonprofit corporation to the extent any such owner liability arose before the effective time of the articles of for-profit conversion;
(2) The member shall not have owner liability for any debt, obligation, or liability of the for-profit corporation that arises after the effective time of the articles of for-profit 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 business corporation were still a nonprofit corporation; and
(4) The member shall have whatever rights of contribution from other members 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 business corporation was still a nonprofit corporation.
(d) A member who becomes subject to owner liability for some or all of the debts, obligations, or liabilities of the business corporation shall have owner liability only for those debts, obligations, or liabilities of the business corporation that arise after the effective time of the articles of for-profit conversion.
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