Are There De Facto Corporations In Tennessee?
There is a good argument that the de facto corporation doctrine has been revived in Tennessee. In Thompson & Green v. Music City Library Co., 683 S.W.2d 340, 345 (Tenn. Ct. App. 1984) the Tennessee Court of Appeals found that the de facto corporation doctrine had been abolished by the enactment of the Tennessee General Corporations Act of 1968. However, the specific provision of the Act referred to by the court, T.C.A. 48-1-1405, has since been repealed. Alternatively, T.C.A. 48-12-104 now provides that any person who holds themselves out on behalf of a corporation while knowing that the corporation has not been properly formed, is jointly and severally liable for debts incurred. The obvious corollary appears to be that one who acts on behalf of a corporation without knowledge that there is a defect in the corporate form, is not liable for obligations entered into in the name of the corporation. This is basically the same principle behind the de facto corporation doctrine. While there are no reported cases that address the question of whether or not the doctrine has been revived, it is certainly something to think about if the de facto corporation theory would be a helpful defense for your client.