Tennessee AG maps the narrow path to suing a nonprofit board
Tennessee AG maps the narrow path to suing a nonprofit board
2026-09-19 · Tennessee · Regulation
The Tennessee Attorney General has set out, in an official opinion, how narrow the route is to holding the directors of a mutual benefit nonprofit corporation accountable when that corporation has no members. Opinion 25-012 was issued on June 3, 2025 at the request of Representative Michele Reneau.1
The opinion does not mention homeowners' associations, condominiums or covenants anywhere in its three pages. Its subject is the Nonprofit Corporation Act at Title 48. It is relevant to Tennessee associations because of the corporate form the overwhelming majority of them take: Tennessee has no general planned-community statute, and an association that incorporates does so under that Act, ordinarily as a mutual benefit corporation.2 The application below is ours; the Attorney General drew it for nonprofits generally.
The three questions
Representative Reneau asked how, and by whom, directors of a memberless mutual benefit nonprofit can be held accountable when they breach fiduciary duties or act unlawfully; how the duties of good faith, loyalty and care are enforced in practice where affected individuals lack standing; and whether the Attorney General can intervene in cases alleging illegal action or abuse of authority by such a corporation.
The answer to the first is short:
“A court may hold accountable the memberless corporation's director or directors in a derivative action brought by another director on behalf of the corporation. Additionally, the Attorney General may ask a court in a direct action to dissolve the corporation or to provide other remedies in connection with claims that the corporation lacks or lacked the power to act.”
The answer to the second question is a cross-reference to the first. The answer to the third is yes, subject to a condition set out below.
The thresholds that do the work
The opinion's analysis turns on two limits, and the Attorney General states both flatly.
The first is the derivative-suit threshold. Claims that a director has harmed the corporation through mismanagement, waste or self-dealing are ordinarily derivative, because the injury is to the corporation. And:
“By statute, only members having at least five percent of the voting power or being at least fifty in number may bring a derivative suit. Tenn. Code Ann. § 48-56-401(a). Plaintiffs not meeting these requirements, on the other hand, are barred from bringing such suits.”
The second closes the direct route:
“Private citizens who are not members or directors of the corporation also have no direct right of action against a director for breach of fiduciary duty because generally a director's fiduciary duties are owed only to the corporation and its members.”
The opinion then records the consequence in the Attorney General's own words: these restrictions “may present problems in connection with policing directors' actions in a memberless corporation.” It also notes, in an aside, that “it would seem unusual for a mutual benefit corporation organized for the mutual benefit of its members to not actually have members.”
What the Attorney General can do instead
Having described what private parties cannot do, the opinion sets out two direct actions the Attorney General can bring, and a right of intervention.
Judicial dissolution. Under section 48-64-301(a)(1)(A)–(D), the Attorney General may seek dissolution of a mutual benefit nonprofit that obtained its charter through fraud, exceeded or abused the authority conferred on it by law, violated a provision of law resulting in forfeiture of its charter, or carried on its business or affairs in a persistently fraudulent or illegal manner. The venue rule for that proceeding was rewritten in March 2026, after this opinion was issued.
Ultra vires. Under section 48-53-104(b)–(c), the Attorney General may sue the corporation or a director directly where the corporation lacked the power to act as it did or proposes to act. The opinion frames the trigger as conduct “outside the scope of their authority under the corporation's charter or bylaws.”
Intervention. The Attorney General may intervene as of right in a proceeding brought by others under the Act where he was entitled to notice of the proceeding or was statutorily authorised to commence it, under section 48-51-701(b)(2). In practice that covers suits for judicial dissolution and ultra vires claims — the two he can bring himself.
Reading it against a Tennessee association
The opinion is addressed to memberless corporations, and a functioning association is not memberless: its members are the owners, and membership is ordinarily mandatory and tied to ownership under the recorded declaration. For such an association the five-percent-or-fifty threshold is the operative limit, not the absence of members.
That threshold is disjunctive, so it is met either by owners holding five percent of the voting power or by fifty members, whichever comes first. In a fifteen-lot subdivision a single owner can clear five percent. In a 900-unit condominium fifty members is the easier route. The awkward middle is the mid-sized community where one owner is well short of five percent and assembling fifty joining plaintiffs is impractical.
Two caveats matter and the opinion supports both. It does not address covenant-based claims at all — an owner suing to enforce or resist a restriction in a declaration is suing on the recorded instrument, not derivatively on the corporation's behalf, and nothing in the opinion touches that. And the derivative threshold governs derivative claims; the opinion expressly locates breach-of-fiduciary-duty claims against directors in that category, which is what pulls them behind the threshold.
What an opinion is, and is not
A Tennessee Attorney General opinion is not binding on any court. It is the state's formal legal position, issued at the request of a legislator or official, and Tennessee courts treat such opinions as persuasive at most. Opinion 25-012 was signed by Attorney General Jonathan Skrmetti, Solicitor General J. Matthew Rice and Deputy Attorney General Andrew C. Coulam.
It also breaks no new ground doctrinally. Every proposition in it is supported by existing authority — the Act's own text, Keller v. Estate of McRedmond, and Summers v. Cherokee Children & Family Services. Its significance is that the state has now said, on the record and in response to a legislator's question, that the statutory scheme leaves a gap.
What to watch next
The opinion does not recommend a legislative fix and the Attorney General has no power to create one. No bill amending the derivative-suit threshold at section 48-56-401(a) was filed in the 114th General Assembly, which adjourned sine die on April 23, 2026. The 115th convenes in January 2027.
What did change in the interval was the venue provision for the Attorney General's own dissolution suits, broadened by Public Chapter 590 in March 2026. The legislative record for that act contains no reference to this opinion, and the two cannot be connected on the available documents.
Related Tennessee HOA Topics
Stay on top of Tennessee HOA law
Every week: new Tennessee legislation, court rulings, and regulatory developments affecting condos, planned communities, and property managers. Free.
No spam. Unsubscribe anytime.