The Tennessee Bar Association says contentions that a new state law makes corporate directors personally liable for corporate actions is “way off base,” reports the Times-Free Press.
TBA members who drafted the bill in question, make a similar assertion in the Nashville Business Journal, which initially posted a blog item by Nashville attorney Keith Dennen making the assertion. (Note: Previous post HERE.)
Excerpt from the TFP:
“He’s wrong,” said TBA Executive Director Allan Ramsaur in an interview this week. “The bill only applies to dissolved corporations. We’ve been tracking this and been trying to get in touch” with Dennen.
Ramsaur said the proposal came from the bar association as part of a multi-faceted update to state corporation laws and “came through a very careful process at TBA.
“It was vetted by this whole group of corporate lawyers” based on the Model Business Corporation Act, Ramsaur added.
…Dennen’s column spread through business circles prompting any number of concerned calls, attorneys said.
B. Riney Green, a partner at the Nashville-based law firm Bass, Berry and Sims and who specializes in corporate law, served as head of the state bar association’s revision committee making the recommendation.
“Unfortunately, he is mistaken, has a misunderstanding of what the bill did,” Green said of Dennen. “All the 2015 act did with respect to this this issue is Tennessee just incorporated into its corporate busines act the same provision that’s in 10 other states.”
From the TBA’s rebuttal in the Business Journal:
Mr. Dennen claims the new law could result in directors being “held personally liable for the debts of the corporation”. This bold interpretation is not supported by the text of the law, the sound judgment of many respected business lawyers and legislators across the country or by the experience in other states that have a similar provision in their corporate codes.
…The new 2015 amendment by its terms only applies to a company that has elected to undergo an official dissolution and liquidation; not, as Mr. Dennen describes, to any Tennessee company in financial difficulty operating outside of the dissolution process. Contrary to Mr. Dennen’s interpretation, the 2015 amendment has no effect on and does not change any laws affecting corporations (or their directors) not engaged in the dissolution process. Unaffected by the 2015 amendment, directors of active Tennessee corporations, just like directors of companies incorporated in other states, will continue to have the benefit of the fundamental shield from personal liability for corporate debts that is established by other Tennessee corporate code provisions and settled case law as they make financial decisions outside of an official dissolution.