LLC Reimbursement, Indemnification, Advancement, and Insurance Requirements in Tennessee
At a glance
| Governing LLC law and scope | Tenn. Code Ann. § 48-249-115 governs ordinary LLC indemnity, advances, decision routes, and insurance |
|---|---|
| Covered people and capacities | Responsible person includes present/former governing member, manager, director, requested outside service, and representative; separate officer/employee/agent routes (§ 48-249-115(a),(g)) |
| Company-payment reimbursement | § 48-249-115(d) permits pre-disposition proceeding expense payment/reimbursement; (i)(3) preserves witness-expense payments; no general mandatory company-bill formula |
| Indemnification and conduct limits | May cover proceeding liability on good-faith/best-interest/criminal-law tests; shall cover wholly successful defense expenses; adjudged liability exclusions and final-adjudication bars apply (§ 48-249-115(b),(c),(i)) |
| Expense advancement and repayment | May advance reasonable party expenses on written good-faith affirmation, unlimited written repayment undertaking, and favorable known-facts determination; security/solvency not required (§ 48-249-115(d)) |
| Insurance purchase authority | May insure current/former covered personnel and requested outside service even where LLC lacks power to indemnify same liability (§ 48-249-115(h)) |
| Approval and court procedure | Case-specific nonparty quorum/committee, special counsel, or eligible member vote; court may order relief, with expenses for mandatory route (§ 48-249-115(e)-(f)) |
| Agreement control and survival | Document/contract rights nonexclusive but final-adjudicated loyalty, bad-faith, knowing-law, or § 48-249-307 liability bars responsible-person indemnity; former status covered (§ 48-249-115(a),(i)) |
| What the statute does not decide | Capacity, proceeding outcome, conduct finding, advance papers, decision maker, documents, and policy terms affect a case (§ 48-249-115) |
Requirements one by one
Covered people and indemnity
Tenn. Code Ann. § 48-249-115(a) defines a “responsible person” to include current or former governing directors, managers, and member-managed members, certain people serving another entity at the LLC's request, and the responsible person's estate or representative. Tenn. Code § 48-249-115(g) adds routes for officers, employees, independent contractors, and agents who are not responsible persons.
Under § 48-249-115(b), an LLC may indemnify a responsible person against proceeding liability if the person acted in good faith, reasonably believed official-capacity conduct served the LLC's best interest (or other conduct was at least not opposed), and had no reasonable cause to believe criminal conduct was unlawful. It generally bars company or derivative claims in which the person was adjudged liable to the LLC and improper-benefit claims in which liability was adjudged on that basis. Tenn. Code § 48-249-115(c) separately requires reasonable expense indemnity when a responsible person was wholly successful in defending a proceeding because of that status.
Advances and reimbursement
Tenn. Code § 48-249-115(d) permits payment or reimbursement of reasonable proceeding expenses before final disposition only after a written good-faith affirmation, a written repayment undertaking, and a determination that known facts do not preclude indemnity. The undertaking is an unlimited general obligation but need not be secured, and the LLC may accept it without checking ability to repay. Tenn. Code § 48-249-115(i)(3) also preserves the LLC's power to pay witness expenses when a person has not been named as a defendant or respondent. These provisions do not create a general mandatory company-bill reimbursement formula.
Insurance
Tenn. Code § 48-249-115(h) permits insurance for current or former responsible people, officers, employees, independent contractors, and agents, including specified service for another entity at the LLC's request. The LLC may buy it “whether or not” it could indemnify the same liability under subsections (b), (c), or (g). Policy terms still determine actual coverage.
What trips people up
For optional responsible-person indemnity, § 48-249-115(f) requires a case-specific conduct determination and authorization. The statute uses a nonparty quorum, a nonparty committee if a quorum is unavailable, special legal counsel, or an eligible member vote, with party-owned votes excluded on that member route. Separately, § 48-249-115(e) lets a court order indemnity. A wholly successful person's court application includes reasonable costs of obtaining that relief; a person adjudged liable who receives equitable court relief is limited to reasonable expenses. Tenn. Code § 48-249-115(i) preserves other document and agreement rights but bars indemnity after the specified final adverse adjudications for loyalty, bad faith or knowing law violation, or the unlawful-distribution liability addressed by § 48-249-307(a).
Common questions
Is success on one issue enough for mandatory expenses? The statute says “wholly successful” in defense of the proceeding. A partial result calls for the optional or court routes instead of assuming subsection (c) applies.
Can a nonmember officer seek mandatory indemnity? Section 48-249-115(g)(1) gives an officer who is not a responsible person the subsection (c) mandatory route and the subsection (e) court route to the same extent.
Must an advance be secured? No. Subsection (d)(2) says the unlimited repayment obligation need not be secured and may be accepted without a financial-ability check.
Statutes and sources
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Tenn. Code Ann. § 48-249-307(a), enacted by 2005 Pub. Ch. 286, § 1: liability for approving an impermissible distribution, cross-referenced by § 48-249-115(i). Official enacted text, accessed 2026-09-23.
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Tenn. Code Ann. § 48-249-115(a)-(i), enacted by 2005 Pub. Ch. 286, § 1: definitions, indemnity, successful-defense expenses, advances, court relief, decision makers, nonmember protection, insurance, and nonexclusivity limits. Official enacted text, accessed 2026-09-23.
Source links
Every statute quoted above, linked, with the date we checked it.
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